australianethical
ANNUAL REPORT
TO SHAREHOLDERS
Year ended 30 June 2011
1800 021 227 • www.australianethical.com.au
australianethical
investment + superannuation
®
Contents
Chair and Managing Director’s report
Financial summary to 30 June 2011
Community grants
Corporate governance statement 2011
Directors’ report
Directors’ particulars
Directors’ meetings
Remuneration report
Financial statements
Shareholder information
Corporate directory
3
6
7
8
13
15
16
19
29
62
63
Chair and Managing Director’s report
Over the course of the past year we have put in motion
a number of changes that are all about repositioning the
company to operate in this changing environment. None
of these changes affect the core vision of the business and
what we represent as an ethical organisation.
These are challenging times for all financial services
companies. However, these are also times in which many
opportunities are presenting themselves. Australian Ethical
is a unique ‘true to label’ company with a special point of
difference that sets it apart from others. We are confident
that with the right skills and attitude we will continue to
carve out a special place in the investment and retirement
landscape.
Financial results
Australian Ethical recorded a net profit after tax of $1.3
million for the year to 30 June 2011, 25% higher than that
recorded in the previous comparable period. Funds under
Management (FUM) increased 4.9% to $644 million at 30
June 2011.
A final fully franked dividend of $1.00 per share was paid
on Friday 7 October 2011, resulting in a full year dividend of
$1.45. In addition, following a review of the balance sheet,
the future capital requirements of the business and other
issues, the Board paid a special dividend of $0.25 per share.
Funds under management
Total revenue
Total expenses
Operating profit
Community grants
Depreciation/amortisation/
rights/options
Tax
Net profit after tax
Dividends paid
Earnings per share
2010
Change
2011
$M
644
15.1
(12.4)
2.7
(0.153)
(0.677)
$M
614
14.1
(11.7)
2.4
(0.125)
(0.676)
(0.665)
(0.583)
1.3
$1.70
$1.29
1.0
$2.00
$1.03
5%
8%
(6%)
15%
22%
0%
(14%)
25%
Comments on financial results
As described above, funds management and
superannuation companies currently face one of their most
challenging environments for many years due to the following
external factors:
• global markets continue to be volatile leading to
subdued valuations of portfolios and hence revenues
based on funds under management;
• net flows to managed funds are under pressure across
the industry due to investors’ continued nervousness
with investing in the market as well as a trend generally
toward investing directly and outside of the managed
fund environment;
3
Phillip Vernon
Managing Director
André Morony
Chair
Dear Shareholders
We are delighted to present the ninth annual company report
of Australian Ethical.
Australian Ethical continues to be the most deeply
committed ethical fund manager in Australia with all of our
business and investment activities guided by the principles
of the Australian Ethical Charter. Our clients save and invest
with us knowing that they are putting their money to work for
a better world. Having strong ethical principles at the core of
everything we do is a powerful uniting and motivating force
for our clients, our staff and our shareholders.
The market in which we operate is going through
extraordinary change. Global markets continue to be
extremely volatile and uncertain whilst at the same time
regulatory change in financial services is impacting fees,
revenues and how firms package and sell their products and
services. These forces are significantly influencing how we
operate and how we plan for the future.
The way in which the company has operated in the past has
served it well. However we need to be aware of the forces
at work around us and adapt our business accordingly to
mitigate the risks and take advantage of opportunities that
present themselves. First and foremost, we need to grow.
Growing our business will make us much more influential
to bring about change in the world as well as giving us the
scale we need to prosper in a rapidly evolving environment.
In order to grow we need to increase our reach and access
to our investors. There are many potential investors who
wish to invest with us but can’t because they cannot access
us. And in order to give us this reach we need to be far more
connected to the markets in which we operate.
These are largely external considerations. Internally we
need to simplify our business as we are far too complex a
business for our size. We need to continue to invest to make
our business more robust. We manage nearly $700 million
of investors’ funds which requires systems, processes and
skills of both staff and board members that are appropriate
for that level of responsibility. Therefore we need to invest
in the skills and talent of our people and reward them
appropriately as it is our people that will get us to where we
need to go.
AUSTRALIAN ETHICAL INVESTMENT LTD •
regulatory changes are leading to an environment where
up-front fees are disappearing and the relationship with
advisers is evolving.
The following summary of the company’s results should be
read with these dynamics in mind.
• Funds under management increased by $30.3 million,
$21.6 million due to net inflows and $8.7 million due to
market movements.
• Net inflows of $21.6 million reflected positive inflows
of $31.4 million to our superannuation fund (up from
$27.9 million last year) offset by $9.8 million of net
outflows from our managed funds products ($4.9 million
net inflow last year). This pressure on managed funds
outflows is occurring across the industry.
• Revenues increased by $1.1 million representing an
increase of 8% over the previous year. A significant
impact on revenue for the year was the acquisition fee
paid by the Australian Ethical Property Trust for the
purchase of Lawley House. Removing this transaction
leads to underlying revenue growth of 1%, which is
lower than the growth in funds under management. This
slower revenue growth is due to a reduction in fees on
inflows and an overall reduction in our average revenue
margin due to a greater portion of our business coming
from the wholesale investment market.
• Operating expenses increased by $0.7 million, an
increase of 6% over the previous year. Total expenses
included costs associated with employment restructures
during the year of $445,000.
• After adjusting for employment restructure costs,
employment costs increased by 2% being largely due
to a general wages and salary increase provided to staff
half way through the year.
• Superannuation administration costs increased by 17%.
This reflects a 4% increase in average member numbers
and a 7% increase in administration charges under the
contract.
• Other increases in expenses reflect increased investment
in information technology and connectivity to more
efficiently perform our core investment management and
client service functions. Increased depreciation related to
office fit outs and video conferencing facilities have also
impacted on the result.
Community grants
Under our constitution 10% of operating profit (after notional
tax) is donated to charitable, benevolent and conservation
causes. In 2011 grants of $152,802 will be made bringing
our total community grants to almost $1.3 million. We
continue to be very proud of our commitment to our
community and strive to increase our level of non-financial
involvement also.
Investment performance
The broad Australian share market was positive for the
year to 30 June 2011, returning 11.7%. International share
markets also performed well, but the strong Australian dollar
diminished our overseas returns. These positive returns
were despite continued market volatility caused by the debt
concerns in Europe and the US.
Although we are pleased that the majority of our funds
achieved positive returns, it was a tough year for ethical
investments due to the outperformance of sectors not
typically in the portfolios such as resources and few
outperformed their respective mainstream benchmarks.
However, our long term performance remains very strong
and we continue to be well positioned within investment
markets and, with an increased awareness of ethical issues
such as climate change, there is a growing recognition
amongst investors of the need to invest and save in a more
ethically positive way.
Comments on business operations
Restructure of Sales and Marketing
Our sales and marketing area has been successfully
restructured with the employment of two new executives
in the senior management team and a realignment of
team responsibilities to enhance synergies between sales,
marketing and client relationship management.
Adam Kirk joined us in August 2011 to lead the business
development and client relationship team. Adam has a
background in leading similar teams with Colonial First
State, Skandia and Catholic Super. Paul Smith joined us
in July 2011 to lead our product strategy, marketing and
communications. Paul has a background in asset consulting,
investment analysis and marketing with the likes of
Schroders, Invesco and Carbon Planet.
Founders
During the year two of the founders of Australian Ethical,
Howard Pender and James Thier left their executive
positions after many years of service. James and Howard
were both involved with the company when it was founded in
1986 and have each contributed enormously to its success
over the years. We thank them for all their contribution and
efforts.
Client service improvements
We continue to make improvements to our client service
function, a core area of the business. During the course of
the year we commenced a proactive sales follow up and
relationship management program. We also in-sourced our
superannuation call centre from our service provider, Pillar. All
initial calls are now managed by Australian Ethical leading to
a more consistent client service experience.
4
AUSTRALIAN ETHICAL INVESTMENT LTD Outlook, strategy and focus
Despite the uncertainty in investment markets and the
changing regulatory environment, we remain positive and
optimistic for the future for Australian Ethical. We have
responded to this new environment with some internal
restructurings and have maintained good profitability through
this period of change.
Our three year focus is to strengthen the growth of our
superannuation product, retain our position within non-super
investments, broaden our client reach and simplify and
streamline our business and ensure that it is operationally
robust. We aim for a culture that is excellent inz our four
core areas of ethical analysis, client service, investment
performance and operational support.
We thank all shareholders for your continued support and
look forward to the coming year with a clear strategy, strong
focus and optimism.
Phillip Vernon
Managing Director
André Morony
Chair
Marketing improvements
We have made a number of improvements in the way in
which we market and service our products to clients. We
have made significant improvements to the interactivity and
ease of use of the website including allowing individuals and
employers to join our superfund online. This has resulted in
an almost doubling of our new client uptake on a monthly
basis. We are implementing a co-ordinated social media
strategy and improved the targeting of advertising to our
audience, which has led to better coverage at lower cost;
halving our marketing acquisition cost per new client.
Climate Advocacy Fund
Our Climate Advocacy Fund had its first full year of operation
and put three resolutions to companies to improve their
carbon emissions disclosure and performance. Resolutions
were put to Aquila, Paladin and Woodside. The Climate
Advocacy Fund also engaged with Oil Search but did not
formally put a resolution to Oil Search’s AGM. Of these,
we consider we obtained a positive outcome from Aquila,
Paladin and Oil Search. Whilst Woodside didn’t accede
to our request we obtained a 6% vote in support of our
resolution, far in excess of our investment.
Implementation of Garradin system
During the year we substantially completed the
implementation of the Garradin portfolio administration
system with further phases of integration continuing. This
project was a significant project for the company and was
part of an ongoing program to replace legacy in-house
developed systems and improve the robustness of our
operations to a level appropriate for a regulated funds
management and superannuation organisation.
5
AUSTRALIAN ETHICAL INVESTMENT LTD Funds under management
Years
$ million
2007
2008
2009
2010
2011
610
572
547
614
644
Financial summary to 30 June 2011
Revenue
Years
$ million
2007
2008
2009
2010
2011
12.5
14.1
13.1
14.1
15.1
Funds under management
Funds under management
610
614
644
572
547
n
o
i
l
l
i
Revenue
Revenue
14.1
13.1
14.1
12.5
15.1
16
14
12
10
8
660
640
620
600
580
560
540
520
500
480
$ million
n
Profit after tax
o
i
l
l
i
Years
m
$
2007
2008
2009
2010
2011
Basic earnings per share
Years
1
i
l
l
i
n
o
$
m
$
2007
2008
2009
2010
2011
0.5
0
1.95
1.70
1.22
1.03
1.29
2007
1.8
1.7
1.2
1.0
2007
1.3
2008
2009
2010
2011
As at 30 June
Profit after tax (NPAT)
Profit after tax (NPAT)
1.8
1.7
2
1.5
1.2
1.0
1.3
m
$
Dividends Paid
Years
4
$
6
1.92
1.65
1.47
2.00
1.70
2007
2008
2009
2010
2011
Year ending 30 June
Dividends paid
Dividends paid
1.92
1.65
1.47
2.00
1.70
2
0
2007
2008
2009
2010
2011
2.00
1.50
$
1.00
Return on equity
0.50
%
Years
2008
2009
2010
2011
Year ending 30 June
0.00
2007
2008
2009
2010
2011
26.1
20.6
18.8
12.5
17.1
2007
2008
2009
2010
2011
Year ending 30 June
Basic earnings per share
Return on equity
Basic earnings per share
Return on equity
1.95
1.70
1.22
1.29
1.03
2.00
1.50
$
1.00
0.50
0.00
26.1
20.6
18.8
17.1
12.5
30.0
25.0
20.0
$
15.0
10.0
5.0
0.0
2007
2008
2009
2010
2011
2007
2008
2009
2010
2011
Year ending 30 June
Year ending 30 June
Community grants
0
0
0
5
3
$
0
0
0
5
$
Carpets for communities
Men of the Trees
Children’s Hospital Westmead
ACT Eden Monaro Cancer Support Group
Brighter Future 4 Kids Foundation
Room to Read Australia Foundation
Royal Guide Dogs for the Blind Assoc
Bikes for Humanity
0
0
0
4
$
Dhimurru Aboriginal Corporation
Australian Afghan Hassanian Youth Assoc
Diamond Valley Foodshare
Rainforest Rescue
Liverpool Plains Land Management
0
0
6
3
$
Arthritis & Osteoporosis Assn of NT
Animal Rescue Qld
Barefoot Economy
Kokoda Track Foundation
Free the Bears Foundation
Environment Victoria
Cranbourne Police Senior Citizens Register
Australia Zoo Wildlife Warriors
Australian Platypus Conservancy
A full description of all the grant
recipients is available on the website
www.australianethical.com.au
Grants to community organisations
As prescribed in Australian Ethical’s constitution, 10 per
cent of our profit is donated to charitable, benevolent and
conservation purposes as part of our contribution to a
positive and sustainable society.
Australian Ethical has donated more than $150,000 to 22
charities as part of its 2011 community grants scheme. This
brings the total amount gifted to communities over the last
11 years to more than $1.28 million.
Australian Ethical donates 10 per cent of its company profit
each year through its community grants scheme. This is one
of the highest levels of corporate giving in Australia based on
percentage of profits.
This year’s grants range in size from $3600 to $35,000 and
include donations to charities that work across Australia and
overseas. The successful organisations were chosen from
more than 300 applicants.
Volunteers planting in the Morbinning wheatbelt
A family in Poipet, Cambodia involved in the Carpets for Communities scheme
7
AUSTRALIAN ETHICAL INVESTMENT LTD Corporate governance statement 2011
This statement has been prepared with reference to the
second edition of the ASX Corporate Governance Council’s
Corporate Governance Principles and Recommendations
with 2010 Amendments (“Principles and Recommendations”)
and discloses the extent to which Australian Ethical
Investment Ltd (“Company”) has followed the Principles and
Recommendations during the reporting period.
The principles and recommendations provide a framework
for good governance set out in eight core principles and 33
specific recommendations.
This statement will be placed on the corporate governance
section of the Company’s website.
Principle 1 - Lay solid foundations for
management and oversight
The Company has formalised the functions reserved to the
Board and those delegated to management.
Board responsibilities
The Board is directly responsible for the following activities.
• Setting the strategic direction of Australian Ethical
• Annual appraisal of the Board
• Approval of Board committee fees
• Recommendation to shareholders on the aggregate level of
directors’ fees
• Approval of individual director fees
• Appointment and removal of the CEO
• Annual appraisal of the CEO
• Authorisation of the issue of the Trust PDS
• Approval of risk management and compliance programs
• Approval of significant company policies
• Approval of indemnity, crime, director and officer and
similar insurance programs
• Protection and promotion of the Australian Ethical Charter
The Board makes the following general delegations.
Chair of the Board
The Chair is delegated with all necessary authority to carry out
the following functions:
Inside the boardroom
• Acting as the link between the board and the company
when the CEO is unable to perform this role;
• Establishing and maintaining an effective working
relationship with the CEO;
• Setting the tone for the board, including the establishment
of a common purpose;
• Chairing board meetings efficiently and shaping the
agenda in relation to goals, strategy, budget and executive
performance;
• Work with the Company Secretary and CEO to ensure that
appropriate information is presented to the Board;
• Ensuring contributions by all board members and reaching
consensus when making decisions;
• Motivating board members and where appropriate dealing
with underperformance;
• Approval of the annual operational and capital expenditure
budget and any material revisions
•
Instituting the process for appraising board members
individually and the board as a whole;
• Approval of major contracts, acquisitions or disposals
• Overseeing conducting and finalising negotiations for the
which have not been approved in the budget
CEO’s employment and evaluating the CEO’s performance;
• Authorisation of Board project expenditure
• Assisting with the selection of board committee members.
• Accept and sign-off of the annual audited accounts and
directors’ report for the Australian Ethical group
Outside the boardroom
• Approval of the issue of shares and options
• Communicating with shareholders on matters of corporate
• Approval of significant changes to unit trust fees, including
discount programs
• Approval of significant changes to products or product
offerings
• Approval of the constitutional bonus and tithe amounts
• Approval of the terms and conditions for any employee
share ownership scheme, or if shareholder approval is
required, approval of recommendations to shareholders
• Approval of employee performance based remuneration
programs
• Approval of dividend payments and any DRP
8
governance;
• Chairing shareholder meetings – annual and extraordinary
general meetings (AGMs and EGMs);
• Ensuring compliance with ASX Listing Rules and
continuous disclosure requirements;
•
•
Increasingly, being available to speak with large institutional
investors;
In conjunction with the CEO, communicating Board views
to staff.
AUSTRALIAN ETHICAL INVESTMENT LTD Board Committees
Board committees are delegated with all necessary authority
to carry out their functions as set out in Board committee
charters.
• where remuneration is subject to the achievement of
performance hurdles, the achievement of those hurdles
is reviewed and the amount of any performance based
remuneration is determined.
CEO
The CEO is delegated with all necessary authority to run
Australian Ethical on an ongoing, day to day basis other than:
•
those responsibilities reserved to the Board;
• delegations (general or specific) made by the Board to
the Chair, Board committees, Directors or other senior
executives,
Specifically the CEO is delegated with responsibility and
authority for the following:
•
•
Implementing the strategic direction set by the Board;
Implementing the risk management and compliance
programs approved by the Board;
• Approval and maintenance of Expenditure and Payment
Guidelines;
• Approval and maintenance of Employee Authorisations;
• Employment, termination and suspension of staff;
• Employee remuneration;
• Employee policies and procedures.
The above responsibilities and delegations are made public
through the publication of this statement and its inclusion in the
corporate governance section of the Company’s website.
Evaluating the performance of senior
executives
The performance of executives is evaluated in accordance with
the Company’s annual performance review guidelines. For the
CEO, the review is conducted by the Chair. For other senior
executives, the review is undertaken by the CEO.
The process is as follows:
•
•
•
the CEO completes a draft annual performance review and
provides it to the executive;
the CEO and the executive then discuss the draft
annual performance review. The discussion covers key
responsibilities, overall performance, key behaviours, a
review of achievements against the year’s objectives,
objectives for the coming year, aspirations and areas for
improvement;
competencies and qualifications are also reviewed to
ensure they remain applicable to the position. If not, a
training program is developed to bring the executive to the
appropriate level; and
¹As defined in section 9 of the Corporations Act 2001
Director
Status
James Thier
Howard Pender
Naomi Edwards
(Chair)
Non-independent/
Executive
Non-independent/
Executive
Independent/NED
Justine Hickey
Independent/NED
Les Coleman
Non independent/
NED
André Morony
Independent/NED
Phillip Vernon
Stephen
Newnham
Non-independent/
Executive
Independent/NED
Retired at the
conclusion of
the AGM – 17
November 2010
Resigned on 23
March 2011
Appointed Chair
from 23 March 2011
Appointed to Board
and Managing
Director on 27 July
2010
Appointed 20
December 2010
An evaluation of the performance of senior executives was
undertaken in the financial year in accordance with the process
described above.
In respect of the CEO, the process is for the Chair to present
the results of the review to the Board. The Board then has an
opportunity to provide feedback to the CEO and to consider
recommendations from the Chair on the CEO’s remuneration
package.
Principle 2 - Structure the board to
add value
Independent directors
The Company regards an independent director as a director
who is not a member of management (i.e. a non-executive
director) and who:
1.
is not a substantial shareholder or an officer of, or
otherwise associated directly with, a substantial
shareholder of the Company;
2. has not within the last three years been employed in an
executive capacity by the Company or another group
member, or been a director after ceasing to hold any such
employment;
3. 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;
9
AUSTRALIAN ETHICAL INVESTMENT LTD 4.
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;
5. has no material contractual relationship with the Company
or another group member other than as a director of the
Company;
6. 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;
7.
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.
The list above reflects the relationships set out as relevant in the
Principles and Recommendations.
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 classification of directors who held office during or since
the end of the financial year is as follows:
The Board was evenly balanced between independent and
non-independent directors during the reporting period and thus
did not comprise a majority of independent. On 1 July 2010
the Board comprised four non executive directors (however,
only three are considered independent) and two executive
directors. Over the course of the reporting period, whilst the
Board’s composition changed, the overall mix remained at
four non executive directors (three of whom are considered
independent) and two executive directors.
Les Coleman serves on an investment committee that has
responsibilities for funds invested by related parties of SMF
Funds Management Limited, which is a substantial shareholder
in the Company. As such he is associated with a substantial
shareholder (albeit in a limited way), and therefore given the
above criteria is not classified as an independent director.
Over time the board has moved from one dominated by
executives to one more consistent with the ASX guidelines.
The board’s approach to composition is to maintain a good
long term balance between executive and non-executive /
independent directors, with the right mix of independence,
competence and alignment with the Australian Ethical Charter.
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
Both Naomi Edwards and Andre Morony, the two Chairs
during the reporting period, are considered to be independent
directors.
Nomination committee
The Board has a People, Remuneration and Nominations
committee. Naomi Edwards and Justine Hickey were the
members of the committee at the commencement of the
reporting period. Following Naomi’s resignation the committee
is now comprised of Andre Morony and Justine Hickey.
Attendance at meetings is detailed in the directors’ report.
A summary of the committee’s charter is available from the
corporate governance section of the Company’s website.
Board and director evaluation
The directors undertake an annual self-assessment of their
collective and individual performance and seek feedback from
the senior management team.
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 Chair. The
Board as a whole then considers and discusses the results of
the questionnaire at a Board meeting. The 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 the minutes.
An assessment in accordance with the above process was
undertaken in the relevant period.
Director skills and experience
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.
Selection and appointment of directors and re-appointment of
incumbents
The People, Remuneration and Nominations committee has the
following responsibilities:
•
•
assess the necessary and desirable competencies of
directors;
ensure the directors have the appropriate mix of
competencies to enable the Board to discharge its
responsibilities effectively;
• develop Board succession plans to ensure an appropriate
balance of skills, diversity, experience and expertise is
maintained;
• make recommendations to the Board relating to the
appointment and retirement of directors.
The People, Remuneration and Nominations committee
considers the above responsibilities, the current Board
composition, any nominations or suggestions for directorship
and the assessment of incumbent directors when making
recommendations to the Board on composition on an annual
basis.
10
AUSTRALIAN ETHICAL INVESTMENT LTD 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 occurs in accordance with the
rotation requirements of the Corporations Act 2001.
Principle 5 - Make timely and
balanced disclosure
The Company has written policies and procedures designed
to ensure compliance with the ASX Listing Rule disclosure
requirements and accountability at senior executive level for
compliance. The disclosure policy appears in the corporate
governance section on the Company’s website.
Principle 6 - Respect the rights of
shareholders
The Company does not have a separately documented
policy for shareholder communication. However, the website
includes comprehensive and informative sections which provide
shareholders (and others) with up-to-date information about
corporate activities, including company announcements. A
facility is available to shareholders to be advised via e-mail
when announcements are made. The Company’s website
also provides shareholders with guidance on a range of issues
concerning the management of their shareholdings.
The Company has a regular sequence of communication points
with investors and members including a newsletter, Aim High,
for trust and superannuation investors, and since listing the
Company has also produced 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.
The Company also produces a sustainability report for
shareholders and other stakeholders on its triple bottom line
performance (available on the Company’s website). The
sustainability report is produced using the Global Reporting
Initiative guidelines.
The Company complies with the corporate governance
guidelines for notices of meeting.
Principle 3 - Promote ethical and
responsible decision making
Code of conduct
The Company has a code of conduct which applies to directors
and staff. It is available on the Company’s website.
Share trading
The Company has a share trading policy which applies
to directors and staff. It was released to the ASX on 22
December 2010 and is available on the Company’s website.
Diversity
The Company has a draft diversity policy that will include
measurable objectives for achieving gender diversity and
require annual assessment against the objectives and progress
in achieving them. It is anticipated that this draft policy will be
finalised by the Board in November 2011.
Principle 4 - Safeguard integrity in
financial reporting
Audit committee
Throughout the period, the Board had an Audit committee
consisting of three members being one external member (Ruth
Medd, chair), one independent director (Naomi Edwards) and
one non-executive director (Les Coleman). Ms Medd is the
independent chair of the Company’s subsidiary, Australian
Ethical Superannuation Pty Ltd. Stephen Newnham, an
independent director, replaced Naomi on the Audit committee
after her resignation on 23 March 2011.
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 committee does not consist of only non-executive directors
of the Company (it has one external member, Ruth Medd who
is a non executive director of the Company’s subsidiary).
A summary of the 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 consistent with the
spirit of the recommendations and the committee is able to
perform its functions with independence and diligence. In
particular:
•
•
the committee is comprised only of non-executives;
at a number of meetings the committee speaks directly
to the external auditor in the absence of executive
management.
The committee considers the performance and independence
of the external auditor over the course of a reporting period.
11
AUSTRALIAN ETHICAL INVESTMENT LTD Details of remuneration
Details of remuneration paid to directors and executives during
the reporting period are set out in the directors’ report. The
report distinguishes the structure of non-executive director
remuneration and that of executive directors. Non-executive
directors receive fees for serving as a director in the form of
cash payments, plus mandated superannuation contributions.
They do not participate in bonus or equity schemes designed
for the remuneration of executives.
Principle 7 - Recognise and manage
risk
Policies for the oversight and management of
material business risks and internal controls
The Company has established policies for the oversight and
management of material business risks. The company’s risk
management guide is available from the corporate governance
section of its website.
The Board has required management to implement a risk
management system consistent with the Company’s risk
management guide. The Board has required management
to report to it on whether material business risks are
being appropriately managed. During the relevant period,
management has reported to the board’s Audit, Compliance
and Risk committee and directly to the Board as to the
effectiveness of the entity’s management of its material
business risks.
The CEO and risk management officer certify to the Board that
its internal control and risk management systems are operating
efficiently and effectively throughout the group.
CEO and CFO sign-off of financial reports
The Company requires the CEO and the CFO to state in writing
to the Board that the 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.
The CEO and CFO certify to the Board that the integrity of
the financial statements is founded on a sound system of
risk management and internal control, and that the system
is operating effectively in all material respects in relation to
financial reporting risks.
Principle 8 - Remunerate fairly and
responsibly
Remuneration committee
The Board has a People, Remuneration and Nominations
committee. The members of the committee at the
commencement of the relevant period were Naomi Edwards
and Justine Hickey. As noted above, Andre Morony replaced
Naomi Edwards on this committee following her resignation
on 23 March 2011. Details of attendance at meetings of the
committee are provided in the directors’ report. The charter
for the committee is available in the corporate governance
section of the Company’s website. The Board is aware of the
recommendation that the Remuneration committee should
have three members; it is anticipated that a further independent
will be appointed in calendar year 2012.
12
AUSTRALIAN ETHICAL INVESTMENT LTD Directors’ report
The directors of Australian Ethical Investment Limited, the
controlling entity, present their report on the company and its
controlled entity for the financial year ended 30 June 2011.
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 2011 and to the date of this report
are:
Review of operations
The consolidated entity, Australian Ethical (Australian
Ethical Investment Limited and its wholly owned subsidiary,
Australian Ethical Superannuation Pty Ltd), has recorded a
consolidated net profit after income tax expense for the year
ending 30 June 2011 of $1,282,533, a 25% increase on the
result of the previous financial year.
Return on equity for the year is 17.1%, up from 12.5% in
2009-10. Earnings per share has increased 25% to 128.8
cents per share and the cost to income ratio has reduced
slightly to 87%.
Name
James Thier
Howard Pender
Naomi Edwards
Justine Hickey
Les Coleman
André Morony
Phillip Vernon
Time in
office
19 years
19 years
5 years
4 years
3 years
3 years
1 year
Directorship ceased 17
November 2010
Average funds under management (FUM) grew by 5.5% with
the year end FUM (before distribution) being $644 million
compared to $614 million for the prior year end.
Resigned 23 March
2011
Our inflows have remained resilient in a tough managed
funds market and grown by 2% for the year ended 30
June 2011. Inflow growth has been centred around our
superannuation fund. Inflow growth has been offset by a
reduction in our entry fee margin as we adjust our business
model to accommodate regulatory change (entry fee
changes to our superannuation fund, implemented in May
2010).
Stephen Newnham
< 1 year
Appointed 20
December 2010
The reported result has been affected by two significant one-
off issues:
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
Gary Leckie
Principal activities
The principal activity of the controlling entity during the
financial year was to manage seven public offer ethical
managed funds (registered managed investment schemes).
The controlling entity’s wholly owned subsidiary, Australian
Ethical Superannuation Pty Limited, was trustee of the
Australian Ethical Retail Superannuation Fund during the
financial year.
Other than as described in this report, there were no
significant changes in the nature of the controlling entities
activities during the year.
• Employment restructure expenses of $445,000; and
• Acquisition fee revenue of $651,000 paid by the
Australian Ethical Property Trust as per the trust
constitution in relation to the purchase of Lawley House.
In a challenging market we continue to work on and improve
our client service and marketing initiatives. During the year
we in-sourced our superannuation call centre with all initial
calls managed by Australian Ethical, enabling a better
client service experience. We also made improvements to
our website and introduced an online joining facility for our
superfund, virtually doubling our new client numbers.
During the year our sales and marketing area was
restructured and addressing the challenges facing our
industry is a high priority.
Financial position
At the year end, Australian Ethical net assets are
$7,628,812. The company has no debt and is generating
positive returns and cash flow.
13
AUSTRALIAN ETHICAL INVESTMENT LTD 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 to
insure the directors (named above), the company secretary
and all officers of the company and of any related body
corporate against a liability incurred as 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 or maintained
deeds of indemnity, insurance and access (The Deed) 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 or officer is
actually reimbursed for legal costs as they fall due under an
insurance policy or otherwise.
The company has not otherwise, during or since the financial
year, indemnified or agreed to indemnify a director, officer
or auditor of the company or of any related body corporate
against a liability incurred as such director, officer or auditor.
Dividends
Dividends paid or declared by the company to members
since the end of the previous financial year were:
Cents
per
share
Total
amount $
Franked/
unfranked
Date of
payment
Declared and paid during the financial year
Final 2010
50
496,570
Franked
15/10/2010
Special 2010
100
993,141
Franked
15/10/2010
Interim 2011
45
449,061
Franked
25/03/2011
Total
1,938,772
Declared after end of year
After balance sheet date, the directors declared the
following dividend:
Final 2011
997,913
Franked
100
7/10/2011
Special 2011
25
249,478
Franked
7/10/2011
Events subsequent to reporting date
Since reporting date the global equity markets have
experienced significant volatility as aresult of uncertainties
related to European sovereign debt and United States
debt and budget management. A large proportion of the
FUM managed by the company is linked to domestic and
international securities markets. This could potentially have
a detrimental impact on company revenue for the coming
financial 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 2011, other than as outlined in this
report.
Likely developments and business
strategies
Further information about likely developments and business
strategies in the operations of the consolidated entity and
the expected results of those operations in future financial
years has been addressed in the ASX announcement
accompanying our Appendix 4E disclosures.
14
AUSTRALIAN ETHICAL INVESTMENT LTD Directors’ particulars
André Morony
B.Ec.(Hons), M.Ec.,
Non-Executive Chairperson
André started his 40 years
in the finance sector at the
Commonwealth Treasury,
where he worked in a number
of financial policy areas.
Here he also represented
Australia for three years
at the Organisation for
Economic Cooperation
and Development in Paris. Subsequent roles include chief
economist and chief investment officer at Bankers Trust
Australia (BT), and chief investment officer at Australian
Reward Investment Alliance (ARIA). He currently sits on the
investment committee of GESB, the Western Australian
Government employees superannuation fund. André chairs
the remuneration and nominations committee and is also a
member of the investment committee.
Howard Pender
B.A.(Hons),
Executive Director
Howard received a university
medal in economics from
the Australian National
University. He worked at the
Commonwealth Treasury and
then as senior economist
at Bankers Trust in Sydney.
From 1992 to 1997, he was
a visiting fellow in the Centre
for International and Public Law at the Australian National
University. Howard has been a director of two other ASX-
listed companies. Howard is a director of Australian Ethical
Superannuation Pty Ltd and is a member of the investment
committee.
Dr Les Coleman
BEng(Hons), BSc(Hons), MEc,
PhD
Non-Executive Director
Les has been a trustee of
two superannuation funds;
a director of ten companies
involved in finance, retail and
distribution; and has over 20
years experience in senior
management positions with
resources, manufacturing and finance companies in Australia
and overseas. Since 2004, Les has been a senior lecturer
at the Finance Department of the University of Melbourne.
His particular research interests are corporate risk and non-
financial indicators of superior firm performance, especially
ethics and sustainability. He is a regular contributor to print
and broadcast media, including four years as a weekly
columnist with The Australian. Les is a member of the audit,
compliance and risk committee.
Justine Hickey
B.Com, GAICD, SAFin, ASIP,
Non-Executive Director
Justine has 20 years
experience as a senior
executive and director in
the investment and funds
management industry. As
an executive she worked
at Suncorp Investment
Management in Brisbane
and Flemings Investment Management (now JP Morgan) in
London. Justine is a director of Rio Tinto Staff Super Fund
Pty Ltd and member of the investment committees of Dalton
Nicol Reid and the University of Melbourne. Justine has an
active interest in philanthropy, chairing the Evolve Foundation
and is a director of RSPCA QLD. At Australian Ethical,
Justine chairs the investment committee and is a member of
the people, remuneration and nominations committee.
Stephen Newnham
Non-Executive Director
Steve has over 20 years
experience in marketing and
distribution in the financial
industry. He comes from
Lonsec Ltd as a consultant
on the marketing and
distribution of their research
and stockbroking services.
Prior to this, Steve was head
of distribution at Zurich Financial Services, chairman of a
financial planning dealer group, director of a wrap platform
and an administration business, and executive vice president
of BT Financial Group. Steve has had significant involvement
with community and social justice activities, having worked
on homeless shelter support schemes, indigenous fellowship
programs, environmental and drought relief projects and
mental health awareness initiatives. Steve is on the audit,
compliance and risk committee.
Phillip Vernon
BEc, MCom, MBA, FCPA
Managing Director
Phil has 25 years experience
in financial services covering
funds management,
superannuation and capital
markets. He was a member
of the Executive Committee
of Perpetual Limited heading
up its Corporate Trust division
and has extensive experience in corporate governance
and industry regulation including a long involvement with
the Australian Securitisation Forum, Australia’s peak body
representing the securitisation industry in Australia acting
as Chairman of its National Committee, Education and
Regulatory Committees. Phil has a long involvement in
sustainability and corporate social responsibility and is
a Director of Planet Ark, a not for profit environmental
organisation.
15
AUSTRALIAN ETHICAL INVESTMENT LTD 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 set out below.
Director
Board
Investment
Remuneration and
nominations
Audit, compliance
and risk
Eligible
Attend
Eligible
Attend
Eligible
Attend
Eligible
Attend
James Thier
Howard Pender
Naomi Edwards
Justine Hickey
André Morony
Les Coleman
Phillip Vernon
Stephan Newnham
3
7
4
7
7
7
7
4
3
7
4
7
7
7
7
4
-
4
-
4
4
-
-
-
-
4
-
4
4
-
-
-
-
-
1
2
1
-
-
-
-
-
1
2
1
-
-
-
-
-
4
-
-
6
-
3
-
-
4
-
-
6
-
3
Directorships held in other listed entities in the last three years
Name
Justine Hickey
André Morony
Entity
Period of directorship
Hyperion Flagship Investments Limited
Macquarie Private Capital Group Limited
3 years
1 years
Directors’ relevant interests in securities of the company
Parent entity
directors
Fully paid ordinary
shares numbers
Share option numbers
Performance rights
2011
2010
2011
2010
2011
2010
Directors continuing at 30 June 2011
Howard Pender
Justine Hickey
Phillip Vernon
49,852
1,200
-
49,852
1,326
2,839
700
-
--
-
-
-
-
-
2,798
Directors not - continuing at 30 June 2011
James Thier
51,367
51,367
1,364
2,881
-
Directors’ holdings in registered schemes made available by the company
None of the current directors have holdings in the registered schemes made available by the company.
Several directors are members of the Australian Ethical Retail Superannuation Fund.
320
-
317
316
Employment contracts of directors and senior managers
For each individual whose remuneration has been disclosed in this report and is currently employed under an employment
contract, the details of the employment contract are as follows:
Name
Duration of contract
Period of termination notice
required
Phillip Vernon
Gary Leckie
Philip George
James Jordan
Ongoing
Ongoing
Ongoing
Ongoing
12 weeks
12 weeks
12 weeks
12 weeks
Termination payment
provided for under the
contract
None except for accrued
leave and any payment in lieu
of notice.
16
AUSTRALIAN ETHICAL INVESTMENT LTD Options and rights as at the date of this report
Options/rights over unissued shares as at the date of this report are as follows:
Options reference
Number of options
on issue
Exercise period
Exercise price
AEFAU
AEFAV
Totals
29,704
2,690
32,394
14/10/11 to 13/1/12
14/10/11 to 13/1/12
$32.27
$32.27
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.
Performance rights reference
Number of rights on issue
AEFAW
AEFAY
AEFAZ
Totals
7,914
19,624
4,760
32,298
All performance rights are over unissued shares in the company. Performance rights expire if the performance conditions
are not met at the end of the performance period. No holder of performance rights is entitled to, by virtue of holding the
performance rights, to participate in any other share issue of the company or of any other entity.
Shares issued upon the exercise of options
4,772 ordinary shares of the company were issued during the year ended 30 June 2011 on the conversion of performance
rights 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.
Non-director committee members and company secretary particulars
Name
Ruth Medd
Qualifications
Experience
B.Sc., Dip Comp
Science, CPA,
MAICD
Philip George
BSc LLB ACIS
Gary Leckie
BEc CA
Tom May
BA LLB MBA
Ruth is currently on the board of the NFAW Ltd (National Foundation for
Australian Women) and WOB Pty Ltd. Ruth is Chair of the company’s wholly-
owned subsidiary Australian Ethical Superannuation Pty Ltd. Ruth also chairs
the company’s audit, compliance and risk committees. Ruth started in IT in
the 1970s. Since then she has been a senior public servant, a broadcasting
regulator, the inaugural Company Secretary at Telstra and the Executive
Director of an industry association.
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 seven years. He was a senior associate at the national law
firm Minter Ellison and conducted a commercial legal practice in partnership
for two years.
Gary is a Chartered Accountant who is responsible for the fiscal management
and operational activities of the Australian Ethical group. Gary has more than
ten years experience in the financial services industry. Prior to working in the
financial services industry Gary was employed with big four accounting firm
Deloitte.
Tom has experience in the superannuation and distribution aspects of financial
services law. He has been a lawyer since 1990 when he was a legal officer
in the federal government. He subsequently worked in house with funds
management and life insurance companies before working in private practice
in London and Tokyo.
17
AUSTRALIAN ETHICAL INVESTMENT LTD The company’s earnings over the last five years are as
follows:
Year
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
Earnings
$1,362,612
$1,819,177
$1,651,790
$1,202,752
$1,022,555
$1,282,533
Other specific information has been disclosed in the
attached financial report as referenced in the table below:
Disclosure
Dividends
Rights – issued during the
financial year and since the
end of the financial year²
Financial Statement
Reference
Note 5
Note 25
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.
Other specific information
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
Closing daily price¹
17 December 2002
30 June 2003
30 June 2004
30 June 2005
30 June 2006
30 June 2007
30 June 2008
30 June 2009
30 June 2010
30 June 2011
$12.50
$11.30
$13.00
$17.20
$28.50
$48.00
$34.00
$22.00
$23.20
$19.10
¹ Where shares were not traded on the day specified, the price quoted is the closing daily price when trades did occur on the day earlier than and closest to
the date specified.
² The financial statements show rights issued during the financial year. No rights have been issued since the end of the financial year to the date of this
report.
18
AUSTRALIAN ETHICAL INVESTMENT LTD Remuneration report
The Remuneration Report is subject to audit by the Company’s external auditor.
Names and positions of key management personnel (directors and named
executives) at any time during the financial year
Parent Entity Directors
Name
James Thier
Retired
Position
Director, non-executive
17 November 2010
Howard Pender
Director, executive
Naomi Edwards
Chairperson, non-executive
Resigned 23 March 2011
Justine Hickey
Director, non-executive
Les Coleman
Director, non-executive
André Morony
Director, non-executive
Phillip Vernon
Director, executive
Appointed 27 July 2010
Stephen
Newnham
Executives
Name
James Jordan
Philip George
Gary Leckie
Director, non-executive
Appointed 20 December 2010
Position
Chief investment officer
Head of client services and product
Chief financial officer / chief operatingofficer
Paul Harding–Davis
Head of distribution
Tim Xirakis
Head of client relationships
Employment ended on 5 January 2011
Employment ended on 8 August 2011
The Corporations Act 2001 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 also requires disclosure of the remuneration of:
1. each of the five named company executives who receive the highest remuneration for that year; and
2.
if consolidated financial statements are required – each of the five named relevant group executives who receive the
highest remuneration for that year.
The above named directors and executives are key management personnel of the consolidated entity.
19
AUSTRALIAN ETHICAL INVESTMENT LTD Remuneration policy
Directors
The aggregate amount of remuneration payable to non-
executive directors for the performance of their duties as
directors is set by the company in a general meeting.
In proposing any motions on non-executive director
remuneration to a general meeting, the Board has regard
to market rates for directorships in comparable companies
operating in similar industries. It also takes into account
recommendations from the Remuneration and Nominations
Committee.
Within the approved aggregate amount, fees paid to
individual non-executive directors for services as a non-
executive director are determined by the Board. During the
relevant period, the Chair received a higher amount, with
other non-executive directors all receiving equal amounts.
Under the constitution, non-executive directors are also
entitled to be paid reasonable expenses, remuneration for
additional services and superannuation contributions. In
particular, non-executive directors are paid for serving on
board committees.
Non executive director remuneration is not linked to
company performance.
Executive directors receive remuneration as employees of
the company.
There are no arrangements to pay any director a retirement
benefit.
Other key management personnel
Board policy:
The Board’s policy for determining the nature and amount
of remuneration for key management personnel of the
consolidated group is covered by the same policy that
applies to all staff and includes the following:
“Flexible remuneration strategies will be developed
as required to meet specific employee requirements,
facilitate retention/maintenance of a high quality work
force and to ensure employees are rewarded relative to
their input to the organisation.
Important points are:
• Participation in specific remuneration arrangements
may be on an individual or team basis.
• Eligibility to participate in specific remuneration
arrangements is dependant on the role,
responsibilities, scope and impact of individual
employees orteams in the case of a team based
scheme.
• Recommendations for individual employees or teams
to participate in such schemes will be made by
individual Section Managers.
• Details will be negotiated on an individual basis with
relevant employees or teams.
Flexible remuneration strategies may include cash or
share based rewards.”
Assessment of the Managing Director’s performance and
whether performance conditions are met is completed by
the Chair and is overseen by the Board with input from
the Remuneration and Nominations Committee. In turn,
the Managing Director is responsible for assessing senior
management and whether performance conditions are met.
In all reviews, both quantitative and qualitative data is used
to determine whether performance criteria are achieved.
During the year remuneration arrangements for a number
of KMP were reviewed and updated. New key performance
indicators (KPI) and related individual STIs were established
centred around criterion including achievement of individual
performance goals, performance of the company’s managed
funds, net flows, relationship development, earnings per
share growth and achievement of budget.
For these revised arrangements assessment of KMP
performance will be based on results for the current year and
any STI payments or grant of rights will be made after year
end based on these assessments.
Hedging policy
Directors and executives participating in the company’s
equity-based plans are prohibited from entering into any
transaction which would have the effect of hedging or
otherwise transferring to any other person the risk of any
fluctuation in the value of any unvested entitlement in the
company’s securities.
Performance-based remuneration and
company performance
The Board policy and remuneration arrangement review is
generally aiming to:
• Achieve some level of market parity on remuneration
packages;
• Establish performance incentives for KMP which are
outcomes focused and aligned with company goals;
• Establish alignment of KMP remuneration with
shareholder value and interests; and
• Provide a retention aspect for high performing
managers.
More specifically performance criteria were chosen to ensure
alignment between the strategic priorities of the organisation,
as established by the Board and individual objectives. The
aim was to provide senior employees of the Company with
an ownership of AEI’s strategic direction, greater job clarity,
flexibility to plan individual goals and objectives, and an
opportunity to develop in their roles.
20
AUSTRALIAN ETHICAL INVESTMENT LTD b) Individual Category
• Employment must continue until 1 July 2011
• The number of shares that will be issues to each
employee in respect of their performance rights under
this category will be adjusted up or down by a maximum
20%, dependent of the absolute performance of the
company’s managed investment schemes, for which
the employee has responsibility or provides significant
input. The nominated managed investment scheme has
been agreed between the company and the employee.
Performance will be measured over a performance
period of 1 July 2010 to 30 June 2011.
Performance rights issued under the general category
(above) are performance-based in two ways. Firstly, they are
subject to a three year employment condition and secondly,
shares will only be issued in respect of the performance
rights where return on equity meets the levels described
above.
Performance rights issued under the individual category are
linked to the performance of the company’s managed funds,
as described above.
Staff bonus plan
All permanent staff are eligible to participate in an annual
staff bonus. Under the company’s constitution, before the
directors recommend or declare a dividend to be paid out
of profits of any one year, they must pay a bonus to current
employees which is set by reference to the profit of the
company for that year and can be up to thirty percent of the
company profit. All staff across the organisation, irrespective
of position (and including KMP), receives the same set
amount (pro-rated for part time staff).
Individual bonuses
During the current year two KMP were paid specific “at risk”
components in remuneration. The payments are shown in
the following tables. The service and performance criteria
used to determine the amount of the payments were
established prior to the current yearand are generally as
follows:
1. James Thier – seminar, speaking and media penetration
targets; engagement with dealer groups and advisors;
and promotion of the new Climate Advocacy Fund;
2. Paul Harding-Davis – managing to budget; net
inflow targets; engagement with dealer groups and
engagement with asset consultants;
3. James Jordan – stock research objectives and fund
investment performance.
Employee share incentive schemes
Under the employee incentive schemes, a pool of
performance rights which would, if exercised, amount to 5%
of the company’s existing ordinary share capital, was made
available. This scheme was approved at the 2008 Annual
General meeting.
The corporate employee share incentive scheme (ESIS) is
split into two categories: general and individual.
All employees, including KMP, participate in the general
ESIS. The number of performance rights issued to each
employee is based on their relative remuneration.
The individual ESIS is utilised for senior and professional
employees. The number of performance rights issued is
based more specifically on individual performance and KPIs.
Subject to the terms and conditions of the scheme rules, the
performance rights that have been issued during the current
year have the following attributes determining whether
shares will be issued in respect of the rights:
a) General Category
• Employment must continue until 30 June 2013
• The arithmetic average return on equity over the
performance period (AROE) must exceed 15% per
annum or no shares shall be awarded at the end of the
performance period
•
•
If the AROE exceeds 15% per annum but is less than
20% per annum, half the maximum number of shares
shall be awarded
If the AROE is equal to or greater than 20% per annum
the maximum number of shares shall be awarded
• AROE is determined as the arithmetic average of return
on equity over six month periods calculated using
audited half-year financial statements
• The performance period is three financial years being
2010-11, 2011-12, 2012-13
21
AUSTRALIAN ETHICAL INVESTMENT LTD Remuneration details for the year ended 30 june 2011
Parent entity directors’ remuneration
Short-term benefits
Post
employment
benefits
Long-
term
benefits
Equity-
settled
share-based
payments
Parent entity
director’s
remuneration
Salary,
fees
and
leave
Cash
bonus
Other Super-
annuation
Long
service
leave
Termination
benefits
Rights
Total
$
$
James Thier
2011
122,525
2010
122,576
14,440
14,150
Howard Pender
2011
135,444
2,978
2010
132,334
2,626
Naomi Edwards
2011
47,410
2010
81,000
Justine Hickey
2011
28,593
2010
31,950
Anne O’Donnell
2011
-
-
-
-
-
-
2010
95,938
4,000
André Morony
2011
30,259
2010
25,000
Les Coleman
2011
26,084
2010
26,000
Stephen Newnham 2011
13,234
2010
-
-
-
-
-
-
-
Phillip Vernon
2011
272,330
2,251
2010
154,135
-
Total parent
entity director’s
remuneration
2011
675,879
19,669
2010
668,933
20,776
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
12,221
12,874
12,189
12,652
4,273
7,290
2,578
2,876
-
8,718
2,729
2,250
2,352
2,340
1,193
-
23,429
12,799
60,964
61,799
$
3,477
3,604
11,251
3,856
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
2,927
235,000
-
-
-
-
-
-
5,483
2,981
20,211
13,368
-
-
-
-
-
-
-
-
-
-
$
11,196
9,439
11,960
9,469
-
-
-
-
-
-
-
-
-
-
-
-
$
163,859
162,643
173,822
160,937
51,683
88,290
31,171
34,826
-
346,583
32,988
27,250
28,436
28,340
14,427
-
40,316
8,204
63,472
27,112
343,809
178,119
840,194
1,026,988
22
AUSTRALIAN ETHICAL INVESTMENT LTD Named executives remuneration (including other key management personnel)
Short-term benefits
Post
employment
benefits
Long-
term
benefits
Equity-
settled
share-based
payments
Named
executives
(including
other KMP)
remuneration
Salary,
fees
and
leave
Cash
bonus
Other Super-
annuation
Long
service
leave
Termination
benefits
Rights
Total
$
$
Philip George
2011
196,182
4,000
Ruth Medd
Gary Leckie
Tim Xirakis
2010
179,638
4,000
2011
31,101
2010
42,350
-
-
2011
204,509
2010
179,309
4,000
4,000
2011
181,756
2010
184,881
4,000
4,000
Paul Harding Davis 2011
101,316
10,250
2010
196,696
21,500
Martin Halloran
2011
-
-
2010
245,064
3,366
James Jordan
2011
256,524
3,259
2010
150,951
3,200
2011
971,388
25,509
2010
1,178,889 40,066
Named executives
(including other
KMP)
remuneration
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
17,797
15,836
2,804
3,690
18,244
16,206
16,191
15,779
11,502
19,491
-
15,017
23,285
14,013
$
5,680
(8,483)
-
-
(8,277)
1,510
5,129
1,510
$
-
-
-
-
-
-
-
-
(9,812)
57,459
3,989
-
4,937
6,143
4,179
-
-
-
-
-
$
16,006
14,825
-
-
16,380
14,973
15,958
14,588
-
15,712
-
48,066
15,327
40,471
$
239,665
205,816
33,905
46,040
234,856
215,998
223,034
220,758
170,715
257,388
-
316,450
304,538
212,814
89,823
100,032
(1,137)
57,459
7,642
-
63,671
148,635
1,206,713
1,475,264
23
AUSTRALIAN ETHICAL INVESTMENT LTD Cash bonus compensation benefits
Details of cash bonuses paid to key management personal are included in the remuneration tables set out above. The annual
staff cash bonuses of $4,000 per full time employee were paid on 15 September 2010. The nature of the cash bonuses and
the criteria used to determine the amount of the payments are detailed in the remuneration policy and in the discussion on
performance based remuneration and company performance.
Analysis of bonuses included in remuneration
The vesting profile of short term-incentive bonuses are detailed below. No amounts vest in future financial years in respect of
the short term-incentive bonuses for the 2011 year.
Parent entity directors
James Thier
Howard Pender
Phillip Vernon
Named executives
(including other KMP)
Philip George
Gary Leckie
Tim Xirakis
Paul Harding–Davis
James Jordan
Cash
bonus¹
$
3,503
2,978
2,251
4,000
4,000
4,000
4,000
3,259
Performance
bonus
$
10,937
-
-
-
-
-
6,250
-
Share
bonus
Vested in
year
$
-
-
-
-
-
-
-
-
%
88
100
100
100
100
100
25
100
Forfeited in
year²
%
12
-
-
-
-
-
75
-
¹ Details of cash and performance bonus have been provided in the director’s report under remuneration policy
² The amounts forfeited are due to the performance or service criteria not being met in relation to the current financial year
As mentioned earlier in this report criteria for cash based bonuses were established for key management personnel. These
criteria are assessed against the results for the year and relevant cash bonuses paid subsequent to year end. The maximum
and minimum possible total value of the cash bonuses for financial years after the financial year to which the report relates is
set out in the table below:
Parent entity director
Phillip Vernon
Named executives
(including other KMP)
Timothy Xirakis
Phillip George
Gary Leckie
James Jordan
Minimum
$
-
-
-
-
-
Maximum
$
100,000
13,000
7,407
11,334
48,069
Equity based remuneration
Equity based remuneration consists of grants of options and rights under the company’s employee share ownership plan and
employee share incentive scheme. Details of the share plans (including the service and performance criteria) are provided in
the section on remuneration policy above and in Note 25 of the attached financial report.
Set out in the following table are the holdings of equity instruments granted to the KMP that existed during the reporting
period and includes details of vesting profiles of options/rights granted as compensation.
24
AUSTRALIAN ETHICAL INVESTMENT LTD Option holdings
KMP option
holdings
Option
class
Grant
date
Fair
value at
grant
date ($)
No.
granted
No.
vested &
excercised
% of
grant
vested
No.
expired
% of
grant
forfeited
Financial
year in
which grant
vests
$
James Thier
AEFAT
24-Sep-07
AEFAV
1-Dec-08
8.40
3.65
1 ,517
1 ,364
2011 Total
2010 Total
-
-
Howard
Pender
AEFAT
24-Sep-07
8.40
1 ,513
AEFAV
1-Dec-08
3.65
1 ,326
2011 Total
2010 Total
-
-
Philip George
AEFAT
24-Sep-07
AEFAU
14-Oct-08
8.40
3.65
2 ,469
2 ,169
2011 Total
2010 Total
-
-
Gary Leckie
AEFAT
24-Sep-07
AEFAU
14-Oct-08
8.40
3.65
1 ,767
1 ,919
2011 Total
2010 Total
-
-
Tim Xirakis
AEFAT
24-Sep-07
AEFAU
14-Oct-08
8.40
3.65
1 ,776
1 ,895
2011 Total
2010 Total
-
-
Paul Harding
Davis
AEFAU
14-Oct-08
3.65
1 ,060
2011 Total
2010 Total
-
-
James Jordan
AEFAT
24-Sep-07
AEFAU
14-Oct-08
8.40
3.65
1 ,146
1 ,243
2011 Total
2010 Total
-
-
-
100%
( 1,517)
100%
24-Sep-10
-
-
-
-
-
-
-
-
-
-
( 2,356)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
( 1,517)
( 1,432)
-
-
-
14-Oct-11
100%
( 1,513)
100%
24-Sep-10
-
-
-
-
( 1,513)
( 1,469)
-
-
-
14-Oct-11
100%
( 2,469)
100%
24-Sep-10
-
-
-
-
( 2,469)
-
-
-
-
14-Oct-11
100%
( 1,767)
100%
24-Sep-10
-
-
-
-
( 1,767)
( 1,443)
-
-
-
14-Oct-11
100%
( 1,776)
100%
24-Sep-10
-
-
-
-
-
-
-
( 1,776)
( 1,387)
-
-
-
14-Oct-11
14-Oct-11
-
-
-
-
-
-
100%
( 1,146)
100%
24-Sep-10
-
-
-
-
( 1,146)
-
-
-
-
14-Oct-11
25
AUSTRALIAN ETHICAL INVESTMENT LTD Rights holdings
Rights
class
Grant
date
Fair value
at grant
date ($)
No.
granted
Value of
rights
granted ($)
No.
vested &
excercised
% of
grant
vested
No.
expired
No.
lapsed
% of
grant
lapsed
Value
of
rights
lapsed
($)
AEFAY
19-Apr-11
$16.25
2011 Total
2010 Total
AEFAY
19-Apr-11
$16.25
2010
Total
2011 Total
2010 Total
689
689
319
736
736
320
$11,196
$11,196
$9,439
$11,960
$11,960
$9,469
AEFAY
19-Apr-11
$16.25
2481
$40,316
2011 Total
2010 Total
AEFAY
19-Apr-11
$16.25
2011 Total
2010 Total
2481
317
985
985
501
$40,316
$8,204
$16,006
$16,006
$14,825
AEFAY
19-Apr-11
$16.25
1,008
$16,380
2011 Total
2010 Total
1,008
506
AEFAY
19-Apr-11
$16.25
2011 Total
2010 Total
AEFAY
19-Apr-11
$16.25
AEFAX
30-Nov-09
AEFAX
23-Nov-10
$32.91
$26.00
2011 Total
2010 Total
982
982
493
868
-
47
915
1271
$16,380
$14,973
$15,958
$15,958
$14,588
$14,105
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(862)
100%
$1,222
$15,327
$40,471
(47)
100%
(909)
-
-
-
KMP
rights
holdings
James
Thier
Howard
Pender
Phillip
Vernon
Philip
George
Gary
Leckie
Tim
Xirakis
James
Jordan
26
AUSTRALIAN ETHICAL INVESTMENT LTD 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 structures and performance conditions for executive directors and other key management personnel are
outlined earlier in this report. People in these positions were entitled to participate in the staff bonus and employee share
schemes described above. Rights granted during the financial year, when valued at grant date, make up a small proportion of
the overall remuneration of people holding these positions.
The following table illustrates the proportion of remuneration that was performance and non–performance based and the
proportion of remuneration received in the form of options/ rights during the financial year
Proportion of elements of
remuneration related to performance
Proportion of elements of
remuneration not related to
performance
Non-salary
cash-based
incentives
Shares
Options/
rights
Fixed salary/
fees
Total
Parent entity directors’ remuneration
%
%
%
%
%
James Thier
Howard Pender
Naomi Edwards
Justine Hickey
André Morony
Les Coleman
Phillip Vernon
Named executives (including other KMP)
Philip George
Ruth Medd
Gary Leckie
Tim Xirakis
Paul Harding–Davis
James Jordan
7
-
-
-
-
-
-
-
-
-
-
6
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7
7
-
-
-
-
11
7
-
7
7
-
5
86
93
100
100
100
100
89
93
100
93
93
94
95
100
100
100
100
100
100
100
100
100
100
100
100
100
This directors’ report, incorporating the remuneration report, is signed in accordance with a resolution of the Board of
Directors.
Phillip Vernon
Managing Director
Dated: 31 August 2011
27
AUSTRALIAN ETHICAL INVESTMENT LTD
Australian Ethical Investment Limited A.B.N. 47 003 188 930 and controlled entity
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 2011 there have been:
(i)
no contraventions of the auditor independence requirements as set out in the Corporations
Act 2001 in relation to the audit; and
(ii)
no contraventions of any applicable code of professional conduct in relation to the audit.
THOMAS DAVIS & CO.
J.G. RYAN PARTNER
Date 31 August 2011
Liability limited by a scheme approved under Professional Standards Legislation
19
28
AUSTRALIAN ETHICAL INVESTMENT LTD
Australian Ethical Investment Limited A.B.N. 47 003 188 930 and controlled entity
Financial statements
Statement of financial position
as at 30 June 2011
Notes
Consolidated entity
Parent entity
2011
$
2010
$
2011
$
2010
$
7
8
9
13
10
11
12
9
13
14
15
16
15
16
2,554,689
3,245,297
496,423
-
232,306
1,892,734
3,050,029
998,441
24,474
337,195
2,298,126
2,698,177
496,423
-
189,988
435,037
2,604,874
998,441
213,987
297,283
6,528,715
6,302,873
5,682,714
4,549,622
4,040,747
45,355
61,820
607,503
4,215,168
46,297
100,505
435,083
4,040,747
45,355
377,820
606,108
4,215,168
46,297
416,505
433,688
4,755,425
4,797,053
5,070,030
5,111,658
11,284,140
11,099,926
10,752,744
9,661,280
2,587,710
443,545
533,024
2,495,424
-
451,046
2,339,705
443,545
533,024
2,659,060
-
451,046
3,564,279
2,946,470
3,316,274
3,110,106
34,926
56,123
34,805
62,923
34,926
56,123
34,805
62,923
91,049
97,728
91,049
97,728
3,655,328
3,044,198
3,407,323
3,207,834
7,628,812
8,055,728
7,345,421
6,453,446
17
5,915,219
974,402
739,191
5,791,147
869,149
1,395,432
5,915,219
974,402
455,800
5,791,147
869,149
( 206,850)
7,628,812
8,055,728
7,345,421
6,453,446
Current assets
Cash and cash equivalents
Trade and other receivables
Financial assets
Current tax assets
Other current assets
Total current assets
Non-current assets
Property, plant & equipment
Intangible Assets
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
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
20
20
29
AUSTRALIAN ETHICAL INVESTMENT LTD
Australian Ethical Investment Limited A.B.N. 47 003 188 930 and controlled entity
Statement of comprehensive income
for the year ended 30 June 2011
Notes
Consolidated entity
Parent entity
2011
$
2010
$
2011
$
2010
$
Revenue
3
15,143,951
14,067,899
14,328,858
11,891,805
Commissions paid to advisers
( 175,660)
( 194,080)
( 15,048)
( 32,394)
External services
( 2,424,539)
( 2,358,711)
( 718,427)
( 898,684)
Employee benefits expense
( 7,471,015)
( 7,339,724)
( 7,453,632)
( 7,316,108)
Depreciation
Occupancy costs
Communication costs
Other expenses
( 421,258)
( 358,491)
( 421,258)
( 358,491)
( 271,218)
( 245,823)
( 262,184)
( 232,939)
( 748,853)
( 774,633)
( 747,597)
( 774,633)
( 1,531,231)
( 1,065,991)
( 1,440,464)
( 994,545)
Profit before community grants and income tax expense
2,100,177
1,730,446
3,270,248
1,284,011
Community grants expense
1 (l)
( 152,802)
( 124,941)
( 152,802)
( 124,941)
Profit before income tax
1,947,375
1,605,505
3,117,446
1,159,070
Income tax expense
Profit for the year
Other comprehensive income
Other comprehensive income
4
( 664,842)
( 582,950)
( 516,024)
90,168
1,282,533
1,022,555
2,601,422
1,249,238
Net gain/(loss) on revaluation of available-for-sale
investments
Other comprehensive income for the period, net of tax
( 26,580)
( 26,580)
18,645
18,645
( 26,580)
( 26,580)
18,645
18,645
Total comprehensive income for the period
1,255,953
1,041,200
2,574,842
1,267,883
Profit attributable to members of the parent entity
1,282,533
1,022,555
2,601,422
1,249,238
Total comprehensive income attributable to
members of the parent entity
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
1,255,953
1,041,200
2,574,842
1,267,883
6
6
128.8
127.9
103.0
102.0
The accompanying notes form part of these financial statements
30
21
21
AUSTRALIAN ETHICAL INVESTMENT LTD
Australian Ethical Investment Limited A.B.N. 47 003 188 930 and controlled entity
Consolidated entity
Balance at 1 July 2009
Profit attributable to members of the group
Other comprehensive income for the period
Total comprehensive income for the period
Transactions with owners in their capacity as
owners:
Shares issued during the period
Dividends paid or provided for
Share-based payment expense
Balance at 30 June 2010
Balance at 1 July 2010
Profit attributable to members of the group
Other comprehensive income for the period
Total comprehensive income for the period
Transactions with owners in their capacity as
owners:
Shares issued during the period
Dividends paid or provided for
Share-based payment expense
Balance at 30 June 2011
Parent entity
Statement of changes in equity
for year ended 30 June 2011
Note
Issued capital
ordinary
$
Asset
revaluation
reserve
$
Share-based
payment
reserve
$
5,739,635
-
-
-
51,512
-
-
5,791,147
5,791,147
-
-
-
( 59,322)
-
18,645
18,645
-
-
-
( 40,677)
( 40,677)
-
( 26,580)
( 26,580)
594,591
-
-
-
-
-
315,235
909,826
909,826
-
-
-
Retained
earnings
$
2,178,301
1,022,555
-
1,022,555
Total
$
8,453,205
1,022,555
18,645
1,041,200
-
( 1,805,424)
-
1,395,432
51,512
( 1,805,424)
315,235
8,055,728
1,395,432
1,282,533
-
1,282,533
8,055,728
1,282,533
( 26,580)
1,255,953
124,072
-
-
5,915,219
-
-
-
( 67,257)
( 124,072)
-
255,905
1,041,659
-
( 1,938,772)
-
739,191
-
( 1,938,772)
255,905
7,628,812
17
5
17
5
Note
Issued capital
ordinary
$
$
Asset
revaluation
reserve
$
$
Share-based
payment
reserve
$
$
Retained
earnings
$
$
Total
$
$
Balance at 1 July 2009
Profit attributable to members of the parent entity
Other comprehensive income for the period
Total comprehensive income for the period
Transactions with owners in their capacity as
owners:
Shares issued during the period
Dividends paid or provided for
Share-based payment expense
Balance at 30 June 2010
Balance at 1 July 2010
Profit attributable to members of the parent entity
Other comprehensive income for the period
Total comprehensive income for the period
Transactions with owners in their capacity as
owners:
Shares issued during the period
Dividends paid or provided for
Share-based payment expense
Balance at 30 June 2011
17
5
17
5
The accompanying notes form part of these financial statements.
5,739,635
-
-
-
( 59,322)
-
18,645
18,645
594,591
-
-
-
349,336
1,249,238
-
1,249,238
6,624,240
1,249,238
18,645
1,267,883
51,512
-
-
5,791,147
5,791,147
-
-
-
-
-
-
( 40,677)
( 40,677)
-
( 26,580)
( 26,580)
-
-
315,235
909,826
909,826
-
-
-
-
( 1,805,424)
-
( 206,850)
51,512
( 1,805,424)
315,235
6,453,446
( 206,850)
2,601,422
-
2,601,422
6,453,446
2,601,422
( 26,580)
2,574,843
124,072
-
-
5,915,219
-
-
-
( 67,257)
( 124,072)
-
255,905
1,041,659
-
( 1,938,772)
-
455,800
-
( 1,938,772)
255,905
7,345,421
22
22
31
AUSTRALIAN ETHICAL INVESTMENT LTD
Australian Ethical Investment Limited A.B.N. 47 003 188 930 and controlled entity
Statement of cash flows
for the year ended 30 June 2011
Notes
Consolidated entity
Parent entity
2011
$
2010
$
2011
$
2010
$
21,360,606
( 18,429,046)
-
95,885
( 357,731)
( 184,026)
( 125,396)
14,111,414
( 12,274,001)
-
130,785
( 812,425)
( 170,904)
( 135,644)
18,497,823
( 16,282,198)
1,665,953
76,271
( 87,001)
( 184,026)
( 125,396)
9,906,897
( 10,558,223)
1,797,057
101,847
( 161,346)
( 170,904)
( 135,644)
22 (b)
2,360,292
849,225
3,561,426
779,684
656,109
( 273,142)
( 191,352)
-
48,820
1,847,723
( 500,035)
( 1,133,628)
( 49,889)
18,783
656,109
( 273,142)
( 191,352)
-
48,820
1,847,723
( 500,035)
( 1,133,628)
( 49,889)
18,783
Cash flows from operating activities
Receipts from operations
Payment to suppliers & employees
Dividends received
Interest/distributions received
Income tax paid
Bonus
Community grants
Net cash provided by (used in) operating
activities
Cash flows from investing activities
Proceeds from sale of investments
Purchase of property, plant & equipment
Purchase of investments
Loans to Staff
Repayment of loans
Net cash provided by (used in) investing activities
240,435
182,954
240,435
182,954
Cash flows from financing activities
Proceeds from share issue
Share buy-back payment
Dividends paid
-
-
( 1,938,772)
51,512
-
( 1,805,424)
-
-
( 1,938,772)
51,512
-
( 1,805,424)
Net cash provided by (used in) financing activities
( 1,938,772)
( 1,753,912)
( 1,938,772)
( 1,753,912)
Net increase (decrease) in cash held
661,955
( 721,733)
1,863,089
( 791,274)
Cash at beginning of financial year
1,892,734
2,614,467
435,037
1,226,311
Cash at end of financial year
22 (a)
2,554,689
1,892,734
2,298,126
435,037
The accompanying notes form part of these Financial Statements
32
23
23
AUSTRALIAN ETHICAL INVESTMENT LTD
Australian Ethical Investment Limited A.B.N. 47 003 188 930 and controlled entity
Notes to the financial statements for the year ended 30 June 2011
Note 1 - Statement of significant accounting policies
Basis of preparation
The financial statements are general purpose financial statements that have been prepared in
accordance with Australian Accounting Standards, Australian Accounting Interpretations,
other authoritative pronouncements of the Australian Accounting Standards Board and the
Corporations Act 2001.
Australian Accounting Standards set out accounting policies that the AASB has concluded
would result in a financial report containing relevant and reliable information about
transactions, events and conditions. Compliance with Australian Accounting Standards
ensures that the financial statements and notes also comply with International Financial
Reporting Standards.
The financial statements have been prepared on an accruals basis and are based on
historical costs, modified, where applicable, by the measurement at fair value of selected non-
current assets, financial assets and financial liabilities.
The financial report covers the consolidated entity of Australian Ethical Investment Limited
and its wholly owned entity Australian Ethical Superannuation Pty Ltd and Australian Ethical
Investment Limited as an individual parent entity. Australian Ethical Investment Limited is a
listed public company and both the parent and wholly owned entity are incorporated and
domiciled in Australia.
The following is a summary of the material accounting policies adopted by the consolidated
entity in the preparation of the financial statements. The accounting policies have been
consistently applied, unless otherwise stated.
Accounting policies
a) Principles of consolidation
A controlled entity is any entity Australian Ethical Investment Limited has the power to control
the financial and operating policies of so as to obtain benefits from its activities.
All controlled entities have a June financial year-end.
All inter-company balances and transactions between entities in the 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 Limited and its wholly owned entity Australian Ethical Superannuation Pty Limited.
b) Income tax
The charge for current income tax expenses is based on the profit for the year adjusted for
any non-assessable or disallowed items. It is calculated using tax rates that have been
enacted or are substantively enacted by the reporting date.
24
33
AUSTRALIAN ETHICAL INVESTMENT LTD Australian Ethical Investment Limited A.B.N. 47 003 188 930 and controlled entity
Notes to the financial statements for the year ended 30 June 2011
Note 1 - Statement of significant accounting policies - continued
b) Income tax - continued
Deferred tax is accounted for using the statement of financial position 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 statement of
comprehensive income 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 Limited 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 Limited is responsible for recognising the
current and deferred tax assets and liabilities for the tax consolidated group. The group
notified the Australian Tax Office (ATO) on 24 March 2004 that it had formed an income tax
consolidated group to apply from 1 July 2002. The tax consolidated group has entered a tax
sharing agreement whereby each company in the group contributes to the income tax
payable in proportion to their contribution to the net profit before tax of the tax consolidated
group. Under the tax sharing agreement Australian Ethical Superannuation Pty Ltd agrees to
pay its share of the income tax payable to Australian Ethical Investment Limited on the same
day that Australian Ethical Investment Limited pays the ATO for group tax liabilities.
c) Property, plant and equipment
Each class of property, plant and equipment is carried at cost or fair value less, where
applicable, any accumulated depreciation and impairment losses.
Property
Leasehold land and buildings are 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
34
25
AUSTRALIAN ETHICAL INVESTMENT LTD Australian Ethical Investment Limited A.B.N. 47 003 188 930 and controlled entity
Notes to the financial statements for the year ended 30 June 2011
Note 1 - Statement of significant accounting policies - continued
c) Property, plant and equipment - continued
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
Furniture, fittings and equipment
Software
Straight line
2.5%-20%
10% to 37.5%
Straight line/diminishing value
18.75% to 40% Straight line/diminishing value
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each
reporting 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 statement of comprehensive income.
When re-valued assets are sold, amounts included in the revaluation reserve relating to that
asset are transferred to retained earnings.
d) Intangible assets
The development of the company’s website was capitalised as an intangible asset and carried
at cost less accumulated amortisation and accumulated impairment losses. Amortisation is
recognised on a straight-line basis over its estimated useful live at two and half years. The
estimated useful life and amortisation method are reviewed at the end of each annual
reporting period, with the effect of any changes in estimates being accounted for on a
prospective basis.
e) Financial instruments
Recognition
Financial instruments are initially measured at cost on trade date, which includes transaction
costs, when the related contractual rights or obligations exist. Subsequent to initial recognition
these instruments are measured as set out below.
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.
26
35
AUSTRALIAN ETHICAL INVESTMENT LTD
Australian Ethical Investment Limited A.B.N. 47 003 188 930 and controlled entity
Notes to the financial statements for the year ended 30 June 2011
Note 1 - Statement of significant accounting policies – continued
e) Financial instruments– continued
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 assesses 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 statement of comprehensive
income.
f) 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 statement
of comprehensive income.
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.
g) Employee benefits
Provision is made for the company’s liability for employee benefits arising from services
rendered by employees to reporting date. Employee benefits that are expected to be settled
within one year have been measured at the amounts expected to be paid when the liability is
settled, plus related on-costs. Employee benefits payable later than one year have been
measured at the present value of the estimated future cash outflows to be made for those
benefits.
Share options and rights
Share based compensation benefits are provided to employees via the Australian Ethical
Investment Limited employee share ownership plan. Share options and rights have been
granted annually to employees and details are disclosed in the annual financial report.
Share options granted before 7 November 2002 and/or vested before 1 January 2005
No expense is recognised in respect of these options. The shares are recognised when the
options are exercised and the proceeds received allocated to share capital.
Share options granted on or after 7 November 2002 and vested after 1 January 2005
The fair value of options granted under the Australian Ethical Investment Limited employee
share ownership plan is recognised as an employee benefit expense with a corresponding
increase in equity. The fair value is measured at grant date and recognised over the vesting
period.
At each reporting date, the entity revises its estimate of the number of options and rights that
are expected to become exercisable. The employee benefit expense recognised each period
takes into account the most recent estimate.
36
27
AUSTRALIAN ETHICAL INVESTMENT LTD Australian Ethical Investment Limited A.B.N. 47 003 188 930 and controlled entity
Notes to the financial statements for the year ended 30 June 2011
Note 1 - Statement of significant accounting policies – continued
g) Employee benefits - continued
Upon the exercise of options and rights 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.
h) Provisions
Provisions are recognised when the group has a legal or constructive obligation, as a result of
past events, for which it is probable that an outflow of economic benefits will result and that
outflow can be reliably measured.
i) Cash and cash equivalents
Cash and cash equivalents include cash on hand and deposits held at call with banks.
j) 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).
k) Goods and services tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except where the
amount of GST incurred is not recoverable from the Australian Taxation Office. In these
circumstances the GST is recognised as part of the cost of acquisition of the asset or as part
of an item of the expense. Receivables and payables in the statement of financial position are
shown inclusive of GST.
Cash flows are presented in the statement of cash flows on a gross basis, except for the GST
component of investing and financing activities, which are disclosed as operating cash flows.
l) Community grants expense
The Company’s Constitution states that "the directors before recommending or declaring any
dividend to be paid out of the profits of any one year must have first:-
(i)
paid or provisioned for payment to current employees, or other persons
performing work for the company, a work related bonus or incentive payment, set
at the discretion of the directors, but to be no more than 30 percent (30%) of what
the profit for that year would have been had not the bonus or incentive payment
been deducted"
28
37
AUSTRALIAN ETHICAL INVESTMENT LTD Australian Ethical Investment Limited A.B.N. 47 003 188 930 and controlled entity
Notes to the financial statements for the year ended 30 June 2011
Note 1 - Statement of significant accounting policies - continued
l) Community grants expense - continued
(ii)
"gifted or provisioned for gifting an amount equivalent to ten percent (10%) of
what the profit for that year would have been had not the above mentioned bonus
and amount gifted been deducted".
m) Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of
the company, by the weighted average number of ordinary shares outstanding during the
financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per
share to take into account the after income tax effect of the interest and other financing costs
associated with dilutive potential ordinary shares and the weighted average number of shares
assumed to have been issued for no consideration in relation to dilutive potential ordinary
shares.
n) Comparative figures
Where required comparative figures have been adjusted to conform with changes in
presentation for the current financial year.
Critical accounting estimates and judgements
The directors evaluate estimates and judgments incorporated into the financial report based
on historical knowledge and best available current information. Estimates assume a
reasonable expectation of future events and are based on current trends and economic data,
obtained both externally and within the group.
Key estimates – annual leave and long service leave provision
In estimating the annual leave and long service leave provision, an average salary increase of
four percent has been incorporated.
Key judgements
Australian Ethical Investment Limited has a loan receivable from the Centre for Australian
Ethical Research recorded as an asset on its statement of financial position for $69,091, and
a staff loan for $12,250. The directors have determined that no provision for impairment is
required for these loans.
Accounting Standards not previously applied
The AASB has issued new, revised and amended accounting standards and interpretations
that have mandatory application dates for future reporting periods. The group has decided
against early adoption of these standards. A discussion of those future requirements and their
impact on the group follows:
• AASB 9: Financial Instruments and AASB 2009-11: Amendments to Australian Accounting
Standards arising from AASB 9 [AASB 1, 3, 4, 5, 7, 101, 102, 108, 112, 118, 121, 127, 128,
131, 132, 136, 139, 1023 & 1038 and Interpretations 10 & 12] (applicable for annual reporting
periods commencing on or after 1 January 2013). These standards are applicable
retrospectively and amend the classification and measurement of financial assets. The group
has not yet determined the potential impact on the financial statements.
38
29
AUSTRALIAN ETHICAL INVESTMENT LTD Australian Ethical Investment Limited A.B.N. 47 003 188 930 and controlled entity
Notes to the financial statements for the year ended 30 June 2011
• AASB 124: Related Party Disclosures (applicable for annual reporting periods commencing
on or after 1 January 2011). This standard removes the requirement for government related
entities to disclose details of all transactions with the government and other government related
entities and clarifies the definition of a related party to remove inconsistencies and simplify the
structure of the standard. No changes are expected to materially affect the group.
• AASB 1053: Application of Tiers of Australian Accounting Standards and AASB2010-2:
Amendments to Australian Accounting Standards arising from Reduced Disclosure
Requirements [AASB 1, 2, 3, 5, 7, 8, 101, 102, 107, 108, 110, 111, 112, 116, 117, 119, 121,
123, 124, 127, 128, 131, 133, 134, 136, 137, 138, 140, 141, 1050 & 1052 and Interpretations 2,
4, 5, 15, 17, 127, 129 & 1052] (applicable for annual reporting periods commencing on or after
1 July 2013).
AASB 1053 establishes a revised differential financial reporting framework consisting of two
tiers of financial reporting requirements for those entities preparing general purpose financial
statements:
− Tier 1: Australian Accounting Standards; and
− Tier 2: Australian Accounting Standards - Reduced Disclosure Requirements.
Tier 2 of the framework comprises the recognition, measurement and presentation
requirements of Tier 1, but contains significantly fewer disclosure requirements.
The following entities are required to apply Tier 1 reporting requirements (i.e. full IFRS):
− for-profit private sector entities that have public accountability; and
− the Australian Government and state, territory and local governments.
Since the group is a for-profit private sector entity that has public accountability, it does not
qualify for the reduced disclosure requirements for Tier 2 entities.
• AASB 2009-12: Amendments to Australian Accounting Standards [AASBs 5, 8, 108, 110,
112, 119, 133, 137, 139, 1023 & 1031 and Interpretations 2, 4, 16, 1039 & 1052] (applicable for
annual reporting periods commencing on or after 1 January 2011). This standard makes a
number of editorial amendments to a range of Australian Accounting Standards and
Interpretations, including amendments to reflect changes made to the text of International
Financial reporting Standards by the IASB. The standard also amends AASB 8 to require
entities to exercise judgement in assessing whether a government and entities known to be
under the control of that government are considered a single customer for the purposes of
certain operating segment disclosures. These amendments are not expected to impact the
group.
30
39
AUSTRALIAN ETHICAL INVESTMENT LTD Australian Ethical Investment Limited A.B.N. 47 003 188 930 and controlled entity
Notes to the financial statements for the year ended 30 June 2011
• AASB 2010-4: Further amendments to Australian Accounting Standards arising from the
Annual Improvements Project [AASB 1, AASB 7, AASB 101 & AASB 134 and Interpretation 13]
(applicable for annual reporting periods commencing on or after 1 January 2011).
This Standard details numerous non-urgent but necessary changes to Accounting Standards
arising from the IASB's annual improvements project. Key changes include:
− clarifying the application of AASB 108 prior to an entity's first Australian-Accounting-
Standards financial statements;
− adding an explicit statement to AASB 7 that qualitative disclosures should be made in the
context of the quantitative disclosures to better enable users to evaluate an entity's exposure to
risks arising from financial instruments;
− amending AASB 101 to the effect that disaggregation of changes in each component of
equity arising from transactions recognised in other comprehensive income is required to be
presented, but is permitted to be presented in the statement of changes in equity or in the
notes;
− adding a number of examples to the list of events or transactions that require disclosure
under AASB 134; and
− making sundry editorial amendments to various Standards and Interpretations.
This Standard is not expected to impact the group.
40
31
AUSTRALIAN ETHICAL INVESTMENT LTD Australian Ethical Investment Limited A.B.N. 47 003 188 930 and controlled entity
Notes to the financial statements for the year ended 30 June 2011
Note 2 - Auditors' remuneration
Remuneration of the auditors for:
Audit services
- Auditing the financial report
- Auditing the sustainability report
Non-audit services
Consolidated entity
Parent entity
2011
$
2010
$
$
2011
$
2010
$
39,188
5,900
38,279
5,750
34,538
5,900
33,629
5,750
- Tax and other accounting advice
3,462
3,371
3,462
3,371
Note 3 - Revenue
Operating activities
- Management fees net of rebates
- Entry fees
- Member & Withdrawal Fees
- Other fees
- Dividend from wholly owned subsidiary
- Interest/distributions
- Wholly owned entity fee
- Other revenue
11,235,864
1,107,289
697,654
1,219,025
-
98,246
-
785,873
15,143,951
10,801,006
1,349,887
536,221
1,162,694
-
123,949
-
94,142
14,067,899
4,602,218
80,839
-
998,442
1,665,953
78,632
6,167,594
735,180
14,328,858
4,701,333
157,969
-
1,162,694
1,797,057
95,011
3,892,705
85,037
11,891,805
Total revenue
Total revenue
15,143,951
15,143,951
14,067,899
14,067,899
14,328,858
14,328,858
11,891,805
11,891,805
32
41
AUSTRALIAN ETHICAL INVESTMENT LTD
Australian Ethical Investment Limited A.B.N. 47 003 188 930 and controlled entity
Notes to the financial statements for the year ended 30 June 2011
Note 4 - Income tax expense
a) The components of tax expense comprise:
- Current tax
- Deferred tax
b) The prima facie tax payable on profit from
ordinary activities before income tax is reconciled
to the income tax expense as follows:
Prima facie tax payable on profit from ordinary
activities before income tax at 30% (2010:30%)
- 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
- Franking and foreign tax credits
- Tax allowance on capital investment
Consolidated entity
Parent entity
2011
$
2010
$
$
2011
$
2010
$
828,581
(163,739)
664,841
560,819
22,131
582,950
679,763
(163,739)
516,024
(109,344)
19,176
(90,168)
584,212
-
481,651
-
-
935,233
-
347,721
-
-
148,818
673,118
2,130
76,772
2,483
665,597
1,891
94,570
5,582
583,694
2,076
76,772
2,483
1,165,382
1,820
94,570
5,582
1,122,811
-
( 755 )
-
-
( 744 )
-
( 499,785 )
( 755 )
-
( 539,117)
( 744)
-
Income tax expense attributable to entity
664,842
582,950
664,842
582,950
Allocation of income tax expense to wholly owned
entity under the tax sharing agreement
-
-
( 148,818)
( 673,118)
Income tax expense attributable to entity
664,842
582,950
516,024
( 90,168)
The applicable weighted average effective tax
rates are as follows:
34%
36%
17%
-8%
42
33
2
AUSTRALIAN ETHICAL INVESTMENT LTD
Australian Ethical Investment Limited A.B.N. 47 003 188 930 and controlled entity
Notes to the financial statements for the year ended 30 June 2011
Note 5 - Dividends
(a) Distributions paid
Final fully franked dividend of 50 (2010: 132 )
cents per share franked at the tax rate of 30%
(2010:30%)
Special fully franked dividend of 100 (2010: 0)
cents per share franked at the tax rate of 30%
(2010:30%)
Interim fully franked dividend of 45 (2010: 50)
cents per share franked at the tax rate of 30%
(2010:30%)
(b) Distributions declared
Final fully franked dividend of 100 (2010: 50) cents
per share franked at the tax rate of 30% (2010:
30%)
Special fully franked dividend of 25 (2010: 100)
cents per share franked at the tax rate of 30%
(2010:30%)
(c) Franking account
Balance of franking account at year end adjusted
for franking credits which will arise from income
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:
Note 6 - Earnings per share
Consolidated entity
Parent entity
2011
$
2010
$
$
2011
$
2010
$
496,570
1,308,854
496,570
1,308,854
993,141
-
993,141
-
449,061
1,938,772
496,570
1,805,424
449,061
1,938,772
496,570
1,805,424
997,913
496,570
997,913
496,570
249,478
993,141
249,478
993,141
1,380,710
1,418,530
534,596
846,114
638,448
780,082
(a) Earnings used to calculate basic EPS and
dilutive EPS
1,282,533
1,022,555
(b) Weighted average number of ordinary shares
outstanding during the year used in calculation of
basic EPS
Weighted average number of rights outstanding
Weighted average number of ordinary shares
outstanding during the year used in calculation of
dilutive EPS
Note 7 - Cash and cash equivalents
Cash on hand
Cash at bank
Deposits at call
996,004
6,886
992,385
9,516
1,002,890
1,001,901
300
171,559
2,382,830
2,554,689
300
1,020,195
872,239
1,892,734
300
10,000
2,287,826
2,298,126
300
6,842
427,895
435,037
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.
34
43
AUSTRALIAN ETHICAL INVESTMENT LTD
Australian Ethical Investment Limited A.B.N. 47 003 188 930 and controlled entity
Notes to the financial statements for the year ended 30 June 2011
Note 8 - Trade and other receivables
Trade receivables
Other
Amounts receivable - wholly owned entity
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
- Listed securities at fair value
- Units in unit trust at fair value
- Shares in wholly owned entity at cost
Consolidated entity
Parent entity
2011
$
2010
$
$
2011
$
2010
$
3,238,499
6,798
-
3,245,297
3,039,901
10,128
-
3,050,029
2,623,778
6,798
67,601
2,698,177
2,516,422
10,128
78,324
2,604,874
476,902
81,341
558,243
61,820
496,423
973,096
125,850
1,098,946
100,505
998,441
792,902
81,341
874,243
377,820
496,423
1,289,096
125,850
1,414,946
416,505
998,441
-
-
137,036
339,866
-
476,902
500,000
144,616
2,558
325,922
-
973,096
-
-
137,036
339,866
316,000
792,902
500,000
144,616
2,558
325,922
316,000
1,289,096
b. Loans comprise
- Loan to other entity
- Loan to staff
69,091
12,250
81,341
82,492
43,358
125,850
69,091
12,250
81,341
82,492
43,358
125,850
The first loan is provided to an independent entity with a fixed interest rate of 9.0% and matures 1 August 2015..
Loan to staff is provided to one staff member with the FBT interest rate set by the ATO.
Note 10 - Other current assets
Other
Prepayments
11,857
220,449
232,306
11,914
325,281
337,195
11,858
178,130
189,988
11,914
285,369
297,283
44
35
AUSTRALIAN ETHICAL INVESTMENT LTD
Australian Ethical Investment Limited A.B.N. 47 003 188 930 and controlled entity
Notes to the financial statements for the year ended 30 June 2011
Note 11 - Property, plant and equipment
Land and buildings
Leasehold land
At cost
Total land
Buildings
At cost
Accumulated depreciation
Total buildings
Consolidated entity
Parent entity
2011
$
2010
$
$
2011
$
2010
$
230,000
230,000
230,000
230,000
230,000
230,000
230,000
230,000
2,784,117
( 368,642 )
2,415,475
2,784,117
( 297,085 )
2,487,032
2,784,117
( 368,642)
2,415,475
2,784,117
( 297,085)
2,487,032
Total land and buildings
2,645,475
2,717,032
2,645,475
2,717,032
Plant and equipment
At cost
Accumulated depreciation
Total plant and equipment
2,809,022
( 1,413,750)
1,395,272
2,680,113
( 1,181,977)
1,498,136
2,809,022
( 1,413,750)
1,395,272
2,680,113
( 1,181,977)
1,498,136
Total property, plant and equipment
4,040,747
4,215,168
4,040,747
4,215,168
Movements in carrying amounts
Land
Balance at the beginning of year
Additions
Disposals
Carrying amount at the end of year
Buildings
Balance at the beginning of year
Additions
Disposals
Depreciation expense
Carrying amount at the end of year
Plant and equipment
Balance at the beginning of year
Additions
Disposals
Depreciation expense
Carrying amount at the end of year
230,000
-
-
230,000
230,000
-
-
230,000
230,000
-
-
230,000
230,000
-
-
230,000
2,487,032
-
-
( 71,557)
2,415,475
2,558,589
-
-
( 71,557)
2,487,032
2,487,032
-
-
( 71,557)
2,415,475
2,558,589
-
-
( 71,557)
2,487,032
1,498,136
256,948
( 36,793)
( 323,019)
1,395,272
1,350,992
430,862
( 10,286)
( 273,431)
1,498,136
1,498,136
256,948
( 36,793)
( 323,019)
1,395,272
1,350,992
430,862
( 10,286)
( 273,431)
1,498,136
Total
4,040,747
4,215,168
4,040,747
4,215,168
An independent valuer was contracted to value the land and buildings at 30 June 2009. Independent valuation
will be conducted on a three year cycle in order to comply with accounting standard requirements on impairment.
Based on the valuation conducted in 2009 and assessment of the market since that date, the cost value of land
and building disclosed above is below the commercial valuation and therefore no impairment has occurred.
36
45
AUSTRALIAN ETHICAL INVESTMENT LTD
Australian Ethical Investment Limited A.B.N. 47 003 188 930 and controlled entity
Notes to the financial statements for the year ended 30 June 2011
Note 12 - Intangible Assets
Website development costs
At cost
Accumulated amortisation
Total intangibles
Website development costs
Balance at the beginning of year
Additions
Disposals
Amortisation expense
Carrying amount at the end of year
Note 13 - Tax assets
Current Tax assets
Tax refund receivable due to income tax overpayment
Deferred Tax assets
The balance comprises temporary differences
attributable to:
Amounts recognised in profit or loss
Employee benefits
Community grants
Audit fees
Amounts recognised directly in equity
Financial asset revaluations
Movements
Opening balance at 1 July
Opening balance at 1 July
Credited (charged) to the statement of
comprehensive income
Credited (charged) to equity
Closing balance at 30 June
Note 14 - Trade and other payables
Trade payables
Sundry payables and accrued expenses
Employee bonus
Amounts payable to wholly owned entity
Note 15 - Tax liabilities
Current tax liabilities
Income tax payable
Deferred tax liabilities
The balance comprises temporary differences
attributable to:
Amounts recognised in profit or loss:
Stamp duty on leasehold property:
Tax deferred income
Movements
Opening balance at 1 July
Credited/(charged) to the income statement
Credited/(charged) to equity
Closing balance at 30 June
Consolidated entity
Parent entity
2011
$
2010
$
$
2011
$
2010
$
85,540
( 40,185 )
45,355
59,800
( 13,503)
46,297
85,540
( 40,185)
45,355
59,800
( 13,503)
46,297
46,297
25,740
-
( 26,682)
45,355
-
59,800
-
( 13,503)
46,297
46,297
25,740
-
( 26,682)
45,355
-
59,800
-
( 13,503)
46,297
-
-
24,474
24,474
-
-
213,987
213,987
517,881
46,578
14,220
578,679
362,580
40,850
14,220
417,650
517,881
46,578
12,825
577,284
362,580
40,850
12,825
416,255
28,824
607,503
17,433
435,083
28,824
606,108
17,433
433,688
435,083
435,083
464,200
464,200
433,688
433,688
459,850
459,850
161,029
11,391
607,503
( 21,126)
( 7,991)
435,083
161,029
11,391
606,108
( 18,171)
( 7,991)
433,688
411,535
1,971,145
205,029
-
2,587,710
436,714
1,864,510
194,200
-
2,495,424
394,251
1,740,426
205,029
-
2,339,705
313,031
1,655,441
194,200
496,388
2,659,060
443,545
443,545
-
-
443,545
443,545
-
-
30,896
4,030
34,926
34,805
121
-
34,926
30,896
3,909
34,805
33,732
1,073
-
34,805
30,896
4,030
34,926
34,805
121
-
34,926
30,896
3,909
34,805
33,732
1,073
-
34,805
46
37
AUSTRALIAN ETHICAL INVESTMENT LTD
Australian Ethical Investment Limited A.B.N. 47 003 188 930 and controlled entity
Notes to the financial statements for the year ended 30 June 2011
Consolidated entity
Parent entity
2011
$
2010
$
$
2011
$
2010
$
533,024
533,024
451,046
451,046
533,024
533,024
451,046
451,046
56,123
56,123
62,923
62,923
56,123
56,123
62,923
62,923
5,791,147
5,739,635
5,791,147
5,739,635
Note 16 - Provisions
Current
Employee benefits - long service leave
Non-Current
Employee benefits - long service leave
Note 17 - Issued capital
Ordinary shares
Fully paid ordinary shares at the beginning of the
financial year 993,141 (2010 - 991,556) shares
Issue of share capital
Shares issued during the year under the employee
share ownership plan:
1,585 on 22 December 2009 (options exercised)
-
51,512
-
51,512
4,772 on 23 November 2010 (rights exercised)
124,072
-
124,072
-
Balance 30 June
997,913 (2010 - 993,141) shares
5,915,219
5,791,147
5,915,219
5,791,147
At 30 June 2011 there were 997,913 fully paid ordinary shares which have no par value.
Options/rights
Options/rights
(i) For detailed information relating to the Australian Ethical Investment Limited employee share ownership plan,
including details of options/rights issued, exercised and lapsed during the financial year and the options/rights outstanding
at year-end, refer to note 25 share-based payments.
(ii) For information related to share options and rights issued to key management personnel during the financial year
refer to the remuneration report contained within the Directors' report.
Ordinary shares
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, othewise each shareholder has one vote on a show of hands.
Capital management
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 in an investment
portfolio comprising Australian Ethical trusts and listed securities. Detail provided in Note 9 and 11.
Management effectively manages the group's capital by assessing the group's financial risks and adjusting its capital
structure in response to changes in these risks and in the market. These responses include the management of
distributions to shareholders and share issues.
Maintenance of a certain level of capital is a condition of the company’s Australian Financial Services Licence.
The company currently meets the $5.0M capital requirement above which no extra capital is required as a result of
increased funds under management.
38
47
AUSTRALIAN ETHICAL INVESTMENT LTD
Australian Ethical Investment Limited A.B.N. 47 003 188 930 and controlled entity
Notes to the financial statements for the year ended 30 June 2011
Consolidated entity
Parent entity
2011
$
2010
$
$
2011
$
2010
$
Note 18 – Events after the reporting date
Since the end of the financial year, no material events that may have an impact on these financial statements
have occurred.
The financial report was authorised for issue on the directors' declaration date by the board of directors.
Note 19 - Economic dependence
The 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 20 - Contingencies
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
3,249,481
18,472,200
21,721,681
29,220,186
11,719,003
40,939,189
1,957,613
17,710,906
19,668,519
28,346,164
10,539,437
38,885,601
Rights of indemnities for liabilities incurred by the
consolidated entity and parent entity not recorded
in the financial statements were:
21,721,681
40,939,189
19,668,519
38,885,601
The trusts and superannuation fund hold sufficient assets to meet these liabilities as and when they fall due.
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.
48
39
3
AUSTRALIAN ETHICAL INVESTMENT LTD Australian Ethical Investment Limited A.B.N. 47 003 188 930 and controlled entity
Notes to the consolidated financial statements for the half-year ended 30 June 2011
Note 21 - Operating segments
The group has identified its operating segments based on the internal reports that are reviewed and used by the board of directors (chief operating
decision makers) in assessing performance and determining the allocation of resources.
Reportable segments disclosed are:
1) public offer managed funds (managed funds); and
2) public offer retail superannuation fund (super)
(i) Segment performance
Revenue
External sale
Inter-segment sale
Interest revenue
30 June 2011
30 June 2010
Managed funds
$
Super
$
Total
$
Managed funds
$
Super
$
Total
$
6,416,679
6,167,594
78,632
8,629,026
-
19,614
15,045,705
6,167,594
98,246
6,107,033
3,892,705
95,011
7,836,917
-
28,938
13,943,950
3,892,705
123,949
Total segment revenue
12,662,905
8,648,640
21,311,545
10,094,749
7,865,855
17,960,604
Inter-segment eliminations
Total group revenue
(6,167,594)
15,143,951
(3,892,705)
14,067,899
Segment net profit before tax
2,622,030
795,165
3,417,195
588,405
2,243,491
2,831,896
Reconciliation of segment result to
group net profit/loss after tax
Income tax expense
(516,024)
(148,818)
(664,842)
90,168
(673,118)
(582,950)
Unallocated items
- Depreciation and amortisation
- Other corporate overheads *
- Other corporate overheads *
Group net profit after tax
(421,258)
(1,048,562)
(1,048,562)
1,282,533
(358,491)
(867,900)
(867,900)
1,022,555
* Other corporate overheads includes staff bonus, tithe expense, staff options/rights expense and the payment to the former Chief Executive Officer.
(ii) Segment assets
30 June 2011
30 June 2010
Managed funds
$
Super
$
Total
$
Managed funds
$
Super
$
Total
$
Assets
10,752,744
914,998
11,667,742
9,661,280
2,518,170
12,179,450
Inter-segment eliminations
Total group assets
(iii) Segment liabilities
(383,602)
11,284,140
(1,080,224)
11,099,226
Liabilities
3,407,323
315,606
3,722,929
3,207,834
600,589
3,808,423
Inter-segment eliminations
Total group liabilities
(67,601)
3,655,328
(764,225)
3,044,198
40
40
49
AUSTRALIAN ETHICAL INVESTMENT LTD
Australian Ethical Investment Limited A.B.N. 47 003 188 930 and controlled entity
Notes to the financial statements for the year ended 30 June 2011
Consolidated entity
Parent entity
2011
$
2010
$
$
2011
$
2010
$
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
171,559
2,382,830
2,554,689
300
1,020,195
872,239
1,892,734
300
10,000
2,287,826
2,298,126
300
6,842
427,895
435,037
(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
Non-cash flows in operating profit
Depreciation
Provisions
(Profit) loss on sale of property, plant & equipment
(Profit) loss on sale of property, plant & equipment
(Profit) loss on sale of investment
Share options/rights expensed
Changes in assets and liabilities
(Increase) decrease in trade & other receivables
(Increase) decrease in current tax assets
(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
1,282,533
1,022,555
2,601,422
1,249,238
421,258
75,178
27,246
27,246
( 6,449)
255,905
358,491
( 70,439)
19,659
19,659
-
315,235
421,258
75,178
27,246
27,246
( 6,449)
255,905
358,491
( 70,439)
19,659
19,659
-
315,235
( 199,654)
-
104,888
( 136,555)
92,276
443,545
121
( 1,248,023)
( 24,474)
( 57,829)
21,126
739,051
( 227,201)
1,074
(30,088)
-
107,296
52,958
(319,365)
375,944
121
( 1,485,227)
( 213,987)
( 62,022)
18,171
706,262
( 56,771)
1,074
Net cash provided by (used in) operating activities
2,360,292
849,225
3,561,426
779,684
50
41
AUSTRALIAN ETHICAL INVESTMENT LTD
Australian Ethical Investment Limited A.B.N. 47 003 188 930 and controlled entity
Notes to the financial statements for the year ended 30 June 2011
Consolidated entity
Parent entity
2011
$
2010
$
$
2011
$
2010
$
Note 23 – Related party transactions
Australian Ethical Investment Limited is the ultimate parent entity and owns 100% of Australian Ethical
Superannuation Pty Ltd.
Australian Ethical Investment Limited acts as the responsible entity for the Australian Ethical Trusts
(Australian Ethical Balanced Trust, Australian Ethical Smaller Companies Trust, Australian Ethical Income Trust,
Australian Ethical Larger Companies Trust, Australian Ethical International Equities Trust, Australian Ethical
World Trust, Australian Ethical Property Trust and the Climate Advocacy Fund).
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 Limited and its wholly owned entity, Australian Ethical
Superannuation Pty Ltd during the financial year consisted of:
(i) Transactions whereby Australian Ethical
Investment Limited provides management services
to the wholly owned entity on a cost recovery basis
(ii) Transactions between Australian Ethical
Investment Limited and its wholly owned entity
under the tax consolidation and related tax sharing
agreement referred to in note 1(b).
(iii) Transactions whereby Australian Ethical
(iii) Transactions whereby Australian Ethical
Investment Limited collects management fee
income on behalf of wholly owned entity and on-
pays this management fee income to the wholly
owned entity on a monthly basis.
(iv) Transactions whereby Australian Ethical
Investment Limited receives a dividend from the
wholly owned entity referred to in note 3.
b) Outstanding balances at end of period:
Amounts receivable from wholly owned entity:
Taxation and other
Amounts payable to wholly owned entity:
Management fee income
-
-
-
-
-
-
-
-
-
-
-
-
6,167,594
3,892,705
148,818
673,117
6,401,445
5,987,343
1,665,953
1,797,057
67,601
78,324
-
496,388
42
51
AUSTRALIAN ETHICAL INVESTMENT LTD
Australian Ethical Investment Limited A.B.N. 47 003 188 930 and controlled entity
Notes to the financial statements for the year ended 30 June 2011
Consolidated entity
Parent entity
2011
$
2010
$
$
2011
$
2010
$
Note 23 – Related party transactions - continued
Australian Ethical Trusts
a) Transactions between Australian Ethical Investment Limited, as responsible entity, and the Australian
Ethical Trusts during the financial year consisted of:
(i) Transactions whereby Australian Ethical
Investment Limited provides investment services
to the Australian Ethical Trusts in accordance with
the trust deed.
- Australian Ethical Balanced Trust
- Australian Ethical Smaller Companies Trust
- Australian Ethical Income Trust
- Australian Ethical Larger Companies Trust
- Australian Ethical International Equities Trust
- Australian Ethical World Trust
- Australian Ethical Property Trust
- Climate Advocacy Fund
(ii) Transactions whereby Australian Ethical
Investment Limited provides accounting services
to the Australian Ethical Trusts in accordance with
the trust deed.
- Australian Ethical Balanced Trust
- Australian Ethical Smaller Companies Trust
- Australian Ethical Income Trust
- Australian Ethical Larger Companies Trust
- Australian Ethical International Equities Trust
- Australian Ethical World Trust
- Australian Ethical World Trust
- Australian Ethical Property Trust
(iii) Transactions whereby Australian Ethical
Investment Limited seeks expense reimbursement
from the Australian Ethical Trusts in accordance
with the trust deed.
- Australian Ethical Balanced Trust
- Australian Ethical Smaller Companies Trust
- Australian Ethical Income Trust
- Australian Ethical Larger Companies Trust
- Australian Ethical International Equities Trust
- Australian Ethical World Trust
- Australian Ethical Property Trust
3,459,096
4,039,271
360,548
1,717,663
1,442,241
-
296,802
23,775
3,563,536
3,842,863
327,041
1,964,631
1,017,719
14,026
136,068
510
3,459,096
4,039,271
360,548
1,717,663
1,442,241
-
296,802
23,775
3,563,536
3,842,863
327,041
1,964,631
1,017,719
14,026
136,068
510
253,495
204,500
88,251
130,247
102,249
-
-
34,201
274,208
220,101
94,591
140,969
110,550
15,572
15,572
18,362
253,495
204,500
88,251
130,247
102,249
-
-
34,201
274,208
220,101
94,591
140,969
110,550
15,572
15,572
18,362
26,885
32,012
1,963
20,885
4,502
-
121
40,599
46,764
3,873
30,272
1,933
2,808
9
26,885
32,012
1,963
20,885
4,502
-
121
40,599
46,764
3,873
30,272
1,933
2,808
9
(iv) Transaction whereby Australian Ethical
Investment Limited received a distribution payment
from the Australian Ethical Balanced Trust
4,665
2,695
4,665
2,695
52
43
AUSTRALIAN ETHICAL INVESTMENT LTD
Australian Ethical Investment Limited A.B.N. 47 003 188 930 and controlled entity
Notes to the financial statements for the year ended 30 June 2011
Consolidated entity
Parent entity
2011
$
2010
$
$
2011
$
2010
$
Note 23 – Related party transactions - continued
b) Outstanding balances at end of period:
Amounts receivable from the Australian Ethical
Trusts in relation to investment services,
accounting services and reimbursable expenses:
- Australian Ethical Balanced Trust
- Australian Ethical Smaller Companies Trust
- Australian Ethical Income Trust
- Australian Ethical Larger Companies Trust
- Australian Ethical International Equities Trust
- Australian Ethical World Trust
- Australian Ethical Property Trust
- Climate Advocacy Fund
Value of units held by Australian Ethical
Investment Limited in the Australian Ethical
Balanced Trust
Value of units held by Australian Ethical
Investment Limited in the Climate Advocacy Fund
Distribution receivable from Australian Ethical
Balanced Trust
Distribution receivable from Climate Advocacy
Fund
Fund
438,059
491,102
93,853
235,973
168,801
6,501
64,300
6,992
85,327
304,836
62,394
150,125
156,617
5,908
63,816
191
438,059
491,102
93,853
235,973
168,801
6,501
64,300
6,992
85,327
304,836
62,394
150,125
156,617
5,908
63,816
191
233,479
227,064
233,479
227,064
106,386
98,858
102,452
98,858
3,316
3,482
3,482
6,057
718
718
3,316
3,482
3,482
6,057
718
718
44
53
AUSTRALIAN ETHICAL INVESTMENT LTD
Australian Ethical Investment Limited A.B.N. 47 003 188 930 and controlled entity
Notes to the financial statements for the year ended 30 June 2011
Consolidated entity
Parent entity
2011
$
2010
$
$
2011
$
2010
$
Note 23 – Related party transactions - continued
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 Limited and the Australian
Ethical Retail Superannuation Fund related to
investment services/ (rebate of investment
services.)
(ii) Transactions between Australian Ethical
Superannuation Pty Limited and the Australian
Ethical Retail Superannuation Fund related to
contribution fee/ (rebate of contribution fee)
(iii) Transactions between Australian Ethical
Superannuation Pty Limited and the Australian
Ethical Retail Superannuation Fund related to
member admin fee/ (rebate of member admin fee)
(iv) Transactions between Australian Ethical
Superannuation Pty Limited and the Australian
Ethical Retail Superannuation Fund related to
other reimbursables/ (rebate of other
reimbursables)
Outstanding balances at end of period:
Outstanding balances at end of period:
Amounts receivable from/ (payable to ) the
Australian Ethical Retail Superannuation Fund:
(i) Investment services/ (rebate of investment
services fee)
232,201
112,330
1,026,450
1,191,919
697,654
536,221
226,299
50,839
52,372
14,415
(ii) Contribution fee/ (rebate of contribution fee)
175,916
236,967
(iii) Member admin fee/ (rebate of member admin
fee)
(iv) Other reimbursables/ (rebate of other
reimbursables)
350,798
268,872
37,623
762
Terms and conditions
No provision for doubtful debts has 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.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
54
45
AUSTRALIAN ETHICAL INVESTMENT LTD
AUSTRALIAN ETHICAL INVESTMENT LIMITED A.B.N. 47 003 188 930 AND CONTROLLED ENTITY
Notes to the financial statements for the year ended 30 June 2011
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
James Thier
Howard Pender
Naomi Edwards
Justine Hickey
Les Coleman
Stephen Newnham
André Morony
Phillip Vernon
Position
Director, executive
Director, executive
Director, non-executive
Director, non-executive
Director, non-executive
Director, non-executive
Chairperson, non-executive
Managing Director ,executive
Other key management personnel
Name
Gary Leckie
Tim Xirakis
Philip George
Paul Harding Davis
James Jordan
Position
Chief Financial Officer
Head of Client Relationships
Head of Product & Client Services
Head of Distribution
Chief Investment Officer
b) Key management personnel compensation
Retired 17 November 2010
Resigned 23 March 2011
Appointed 20 December 2010
Appointed 27 July 2010
Resigned 8 August 2011
Resigned 5 January 2011
Short term employment benefits
Post-employment benefits
Other long-term benefits
Termination benefits
Share-based payments
Total compensation
Economic Entity
2011
$
1,698,879
151,363
19,073
57,459
127,143
2,053,917
2010
$
1,866,314
158,141
21,010
235,000
175,747
2,456,212
Parent Entity
2011
$
1,661,759
148,016
19,073
57,459
127,143
2,013,450
2010
$
1,809,139
153,731
21,010
235,000
175,747
2,394,627
Further key management personnel remuneration details are included in the Remuneration Report section of the Directors' Report.
c) Equity instrument disclosures relating to key management personnel
Option holdings
Number of options held by key management personnel.
KMP options holdings
Option Class
Balance at
beginning of year No. granted
No. expired
No. vested &
excercised
Balance at end of
year
Vested at
end of year
Vested &
excercisable at
end of year
Vested & un-
excercisable at
end of year
Parent entity directors
James Thier
Howard Pender
Named executives (including other key
management personnel)
Philip George
Gary Leckie
Tim Xirakis
Paul Harding Davis
James Jordan
AEFAT
AEFAV
2011 Total
2010 Total
AEFAT
AEFAV
2011 Total
2011 Total
2010 Total
AEFAT
AEFAU
2011 Total
2010 Total
AEFAT
AEFAU
2011 Total
2010 Total
AEFAT
AEFAU
2011 Total
2010 Total
AEFAU
2011 Total
2010 Total
AEFAT
AEFAU
2011 Total
2010 Total
1,517
1,364
2,881
4,313
1,513
1,326
2,839
2,839
4,308
2,469
2,169
4,638
6,994
1,767
1,919
3,686
5,129
1,776
1,895
3,671
5,058
1,060
1,060
1,060
1,146
1,243
2,389
2,389
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
( 1,517)
( 1,517)
( 1,432)
( 1,513)
( 1,513)
( 1,513)
( 1,469)
( 2,469)
( 2,469)
-
( 1,767)
( 1,767)
( 1,443)
( 1,776)
( 1,776)
( 1,387)
( 1,146)
( 1,146)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
( 2,356)
-
1,364
1,364
2,881
-
1,326
1,326
1,326
2,839
-
2,169
2,169
4,638
-
1,919
1,919
3,686
-
1,895
1,895
3,671
1,060
1,060
1,060
-
1,243
1,243
2,389
1,517
-
1,517
1,432
1,513
-
1,513
1,513
1,469
2,469
-
2,469
2,356
1,767
-
1,767
1,443
1,776
-
1,776
1,387
-
-
-
1,146
-
1,146
-
1,517
-
1,517
1,432
1,513
-
1,513
1,513
1,469
2,469
-
2,469
2,356
1,767
-
1,767
1,443
1,776
-
1,776
1,387
-
-
-
1,146
-
1,146
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
46
46
55
AUSTRALIAN ETHICAL INVESTMENT LTD
AUSTRALIAN ETHICAL INVESTMENT LIMITED A.B.N. 47 003 188 930 AND CONTROLLED ENTITY
Notes to the financial statements for the year ended 30 June 2011
Note 24 - Key management personnel compensation - continued
Rights holdings
Number of Rights held by key management personnel.
KMP Rights Holdings
Rights Class
Balance at
beginning of year No. granted
No.forfeited
No. vested &
excercised
Balance at end of
year
Vested at
end of year
Vested &
excercisable at
end of year
Vested & un-
excercisable at
end of year
Parent entity directors
James Thier
Howard Pender
Phillip Vernon
Named executives (including other key
management personnel)
Philip George
Gary Leckie
Tim Xirakis
Paul Harding Davis
James Jordan
AEFAY
AEFAW
2011 Total
2010 Total
AEFAY
AEFAW
2011 Total
2010 Total
AEFAY
AEFAW
2011 Total
2010 Total
AEFAY
AEFAW
2011 Total
2010 Total
AEFAY
AEFAW
2011 Total
2010 Total
AEFAY
AEFAW
2011 Total
2010 Total
AEFAY
AEFAW
2011 Total
2010 Total
AEFAY
AEFAW
AEFAX
2011 Total
2010 Total
Share holdings
Number of shares held by key management personnel.
-
-
-
-
-
319
319
320
320
317
317
-
501
501
-
506
506
-
493
493
-
-
-
531
531
-
-
409
862
1,271
-
689
-
689
319
736
-
736
320
2,481
-
2,481
317
985
-
985
501
1,008
-
1,008
506
982
-
982
493
-
-
-
531
868
-
47
915
1,271
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
( 531)
( 531)
-
-
-
-
-
-
( 909)
( 909)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
689
319
1,008
319
736
320
1,056
320
2,481
317
2,798
317
985
501
1,486
501
1,008
506
1,514
506
982
493
1,475
493
-
-
-
531
868
409
-
1,277
1,271
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
909
909
-
909
909
-
909
909
-
Balance at
beginning of year
Acquired /
Granted as
Remuneration
On exercise of
options/ rights
Net Change
other (1)
Balance at end of
year (2) & (3)
Parent entity directors
James Thier
James Thier
Howard Pender
Justine Hickey
2011
2011
2010
2011
2010
2011
2010
65,846
65,846
65,846
51,883
52,283
700
700
Named executives (including other key management personnel)
Philip George
Gary Leckie
Paul Harding Davis
James Jordan
2011
2010
2010
2009
2011
2010
2011
2010
-
-
1,104
489
1,598
78
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,387
909
-
-
-
730
730
( 1,200)
( 400)
500
-
615
( 1,387)
( 838)
1,520
-
-
66,576
66,576
65,846
50,683
51,883
1,200
700
-
-
1,104
1,104
760
1,598
909
-
(1) "Net change other" incorporates changes resulting from purchases, sales, forfeitures during the year.
(2) Shares issued are fully paid
(3) Balance represents shareholdings by key management personnel including their
related parties as required by AASB 124 Related Party Disclosures
Key management personnel loans
Balance at
beginning of year
Interest charged
Interest not
charged
Write-off
Balance at end
of year
No. of Individuals
at end of year
Key management personnel
$
$
$
$
$
2011
2010
43,358.14
1,860.30
-
1,697.65
-
-
-
-
12,250.11
43,358.14
1
2
(a) The Loan is repayable on 30 November 2013 and currently bears interest at 7.8 % per annum that is the FBT interest rate set by the ATO.
(b) In the 2010 -11 reporting period, there were no loans to individuals that exceeded $100,000 at any time.
56
47
47
AUSTRALIAN ETHICAL INVESTMENT LTD
AUSTRALIAN ETHICAL INVESTMENT LIMITED A.B.N. 47 003 188 930 AND CONTROLLED ENTITY
Notes to the financial statements for the year ended 30 June 2011
Note 25 - Share based payments
The following share-based payment arrangements existed at 30 June 2011:
On 14 October 2008, 41,937 share options were granted to non-probationary employees under the Australian Ethical Investment Limited employee share ownership plan and on 1
December 2008, 2,690 share options were granted to executive directors. The options were issued for nil consideration, are exercisable from 14 October 2011, have an exercise
price of $32.27 each and a three month window in which to be exercised. In most circumstances the options will lapse if the holder is no longer an employee of Australian Ethical
Investment Limited. The options hold no voting or dividend rights.
During this reporting period, Australian Ethical Investment Limited issued 4,772 ordinary shares on conversion of 4,772 AEFAX performance rights for nil consideration issued under
its employee share incentive scheme in November 2009 .This conversion of performance rights resulted in an increase in ordinary shares of 4,772.
During the 2010 reporting period, 10,819 performance rights (identifier: AEFAW) were granted. Under the Australian Ethical Investment Limited employee share incentive scheme
(ESIS) participants are granted performance rights to ordinary shares, subject to meeting specified performance criteria over the performance period. The number of shares that the
participant will ultimately receive will depend on the extent to which the performance criteria are met by the company and the individual employee. These rights were issued for nil
consideration. These rights hold no voting or dividend rights. Subject to the terms and conditions of the ESIS rules, the performance rights have the following attributes determining
whether shares will be issued in respect of the rights.
- employment must continue until 30 June 2012
- the arithmetic average return on equity over the performance period (‘AROE’) must exceed 15% p.a. or no shares shall be awarded at the end of the performance period;
- if the AROE exceeds 15% p.a. but is less than 20% p.a., half the maximum number of shares shall be awarded;
- if the AROE is equal to or greater than 20% p.a. the maximum number of shares shall be awarded.
- AROE is determined as the arithmetic average of return on equity over six month periods calculated using audited half-year financial statements
- The performance period is the financial years 2009/10, 2010/11 and 2011/12
During the reporting period 25,432 performance rights in two classes (identifiers: AEFAY and AEFAZ) were granted. Under the Australian Ethical Investment Limited employee share
incentive scheme (ESIS) participants are granted performance rights to ordinary shares, subject to meeting specified performance criteria over the performance period. The number
of shares that the participant will ultimately receive will depend on the extent to which the performance criteria are met by the company and the individual employee. These rights
were issued for nil consideration. These rights hold no voting or dividend rights. Subject to the terms and conditions of the ESIS rules, the performance rights have the following
attributes determining whether shares will be issued in respect of the rights.
ASX Code
AEFAY
Number Granted
20,582
AEFAZ
4,760
Attributes
- employment must continue until 30 June 2013 -
the arithmetic average return on equity over the performance period (‘AROE’) must
exceed 15% p.a. or no shares shall be awarded at the end of the performance period;
- if the AROE exceeds 15% p.a. but is less than 20% p.a., half the maximum number of
shares shall be awarded; - if the
AROE is equal to or greater than 20% p.a. the maximum number of shares shall be
awarded. -
AROE is determined as the arithmetic average of return on equity over six month periods
calculated using audited half-year financial statements. - The
performance period is the financial years 2010/11, 2011/2012 and 2012/2013.
- employment must continue until 1 July 2011;
- the number of shares that will be issued to each employee in respect of their
performance rights under this category will be adjusted up or down by a maximum 20%,
dependent on the absolute performance of one of the company's managed investment
schemes, for which the employee has responsibility or provides significant input; a
managed investment scheme has been agreed between the company and the employee.
Performance will be measured over a performance period of 1 July 2010 to 30 June 2011
Performance rights reconciliation
Outstanding at the beginning
of the financial year
Granted
Forfeited
Exercised
Expired
Outstanding at year-end
Exercisable at year-end
Fair value - Rights
Consolidated Entity
2011
2010
Number
of
Rights
Number
of
Rights
14,476
25,569
( 2,857)
( 4,772)
-
-
16,330
( 1,854)
-
-
32,416
14,476
-
-
-
-
Parent Entity
2011
2010
Number
of
Rights
Number
of
Rights
14,476
25,569
( 2,857)
( 4,772)
-
32,416
-
-
16,330
( 1,854)
-
-
14,476
-
All rights were calculated at grant date based on the underl;ying share prices minus estimated net present value of future dividends that the holders
of rights are not entitled to.
Weighted average fair value - Options
Consolidated Entity
Parent Entity
2011
2010
2011
2010
Number
of
Options
Weighted
Average
Exercise
Price
$
Number
of
Options
Weighted
Average
Exercise
Price
$
Number
of
Options
Weighted
Average
Exercise
Price
$
Weighted
Average
Exercise
Price
$
Number
of
Options
Outstanding at the beginning
of the financial year
Granted
Forfeited
Exercised
Expired
68,682
-
( 4,435)
-
( 31,853)
44.00
-
32.27
-
57.57
116,777
-
( 16,956)
( 1,585)
( 29,554)
40.76
32.27
42.78
31.00
31.00
68,682
44.00
116,777
-
( 4,435)
-
( 31,853)
-
32.27
-
57.57
-
( 16,956)
( 1,585)
( 29,554)
Outstanding at year-end
32,394
32.27
68,682
44.00
32,394
32.27
68,682
Exercisable at year-end
-
-
-
-
-
-
-
40.76
32.27
42.78
31.00
31.00
44.00
-
The options outstanding at 30 June 2011 had a weighted average exercise price of $32.27 and a weighted average remaining
contractual life of 0.54 years. Exercise price for options outstanding at 30 June 2011 is $32.27
Included under employee benefits expense in the income statement is :
$75,860 (2010: $190,602) relating to options issued under the employee share ownership plan.
$180,045 (2010: $124,633) relating to rights issued under the employee share ownership plan.
48
48
57
AUSTRALIAN ETHICAL INVESTMENT LTD
AUSTRALIAN ETHICAL INVESTMENT LIMITED A.B.N. 47 003 188 930 AND CONTROLLED ENTITY
Notes to the financial statements for the year ended 30 June 2011
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 14).
The main purpose of these financial instruments is to finance the consolidated entity’s operations. The consolidated entity has various other financial assets and liabilities such as
trade receivables and trade payables, which arise directly from its operations.
(b) Interest rate risk
The 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:
Weighted average
effective interest rate
Floating interest rate
Fixed interest
rate within 1 year
2011
%
2010
%
2011
$
2010
$
2011
$
2010
$
5
5
4
5
2,554,389
1,892,434
481,764
485,040
3,036,153
2,377,474
-
-
-
-
-
-
14,659
14,659
-
-
-
-
513,401
513,401
-
-
Fixed interest rate
within 1 to 5 years
Non-interest bearing
Total
2011
$
2010
$
2011
$
2010
$
2011
$
2010
$
-
-
61,820
61,820
-
-
-
-
100,505
300
3,245,297
-
300
3,050,029
-
2,554,689
3,245,297
558,243
1,892,734
3,050,029
1,098,946
100,505
3,245,597
3,050,329
6,358,229
6,041,709
-
-
2,587,710
2,495,424
2,587,710
2,495,424
2,587,710
2,495,424
2,587,710
2,495,424
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 impairment of
those assets, as disclosed in the balance sheet and notes to the financial statements.
Quantitative details related to financial assets is contained in note 9.
Quantitative details related to financial assets is contained in note 9.
In relation to the financial asset – loan to independent entity – disclosed at note 9, the loan agreement between the parent entity and the independent entity provides for the parent to enforce a security
over the independent entity’s assets should a default in loan payments occur. The independent entity has not defaulted in loan payments over the six years of the loan.
Consideration of credit risk in relation to financial assets is incorporated into executive management risk considerations. The defined investment parameters governing the approval of financial asset
investments incorporates a sliding scale of risk exposure as follows:
- The maximum exposure to any one issuer is to be no greater than twenty five per cent of the portfolio;
- Minimum amount to be held in cash, AAA securities or senior bank debt is fifty per cent of the portfolio; and
- Minimum amount to be held in cash, AAA securities, senior bank debt, rated corporate debt or subordinated bank debt to be eighty per cent of the portfolio.
(d) Liquidity risk
The group carries no borrowing debt on the balance sheet and has sufficient reserves of cash, cash equivalents and liquid investments to assess the liquidity risk as low. The cash position and cash
flows are reviewed by executive management to ensure regulatory and future operational requirements are catered for.
Trade and other payables are expected to be paid as follows:
Less than 6 months
6 months to 1 year
1 to 5 years
Consolidated Entity
2011
$
2010
$ $
Parent Entity
2011
$
2010
$
2,019,037
535,327
-
2,554,364
1,994,991
500,433
-
2,495,424
1,806,802
535,327
-
2,342,129
2,158,627
500,433
-
2,659,060
58
49
49
AUSTRALIAN ETHICAL INVESTMENT LTD
AUSTRALIAN ETHICAL INVESTMENT LIMITED A.B.N. 47 003 188 930 AND CONTROLLED ENTITY
DIRECTORS' DECLARATION
The Directors of Austalian Ethical Investment Limited declare the following:
1. the financial statements and notes, as set out on pages 20 to 50 and the additional disclosures in
the directors' report designated as audited are in accordance with the Corporations Act 2001 :
(a) comply with accounting standards, which, as stated in accounting policy note 1 to the financial statements,
constitutes explicit and unreserved compliance with international financial reporting standards (IFRS); and
(b) give a true and fair view of the financial position as at 30 June 2011 and of the performance for the financial
year ended on that date of the company and consolidated entity;
2. the Chief Executive Officer and Chief Finance Officer have each declared that:
(a) the financial records of the company for the financial year have been properly maintained in accordance with
section 286 of the Corporations Act 2001 ;
(b) the financial statements and notes for the financial year comply with the Accounting Standards; and
(c) the financial statements and notes for the financial year give a true and fair view.
3. in the directors’ opinion there are reasonable grounds to believe that the company will be able to pay its
debts as and when they become due and payable.
This declaration is made in accordance with a resolution of the Board of Directors.
Phillip Vernon
Managing Director
Dated this 31 August 2011
5151
59
AUSTRALIAN ETHICAL INVESTMENT LTD INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF AUSTRALIAN ETHICAL
INVESTMENT LIMITED
ABN: 47 003 188 930
Report on The Financial Report
We have audited the accompanying financial report of Australian Ethical Investment Limited,
which comprises the statement of financial position as at 30 June 2011, and the statement of
comprehensive income, statement of changes in equity and statement of cash flows for the
year then ended, notes comprising a summary of significant accounting policies, other
explanatory information and the directors' declaration of the company and the consolidated
entity comprising the company and the entity it controlled at the year- end or from time to
time during the financial year.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation of the financial report that
gives a true and fair view in accordance with Australian Accounting Standards and the
Corporations Act 2001 and for such internal control as the directors determine is necessary
to enable the preparation of the financial report that is free from material misstatement,
whether due to fraud or error. In Note 1 the directors also state, in accordance with
Accounting Standard AASB 101: Presentation of Financial Statements, that the financial
statements comply with International Financial Reporting Standards.
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. Those 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.
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 of the financial report that gives
and true and fair view 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.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the
Corporations Act 2001.
60
52
AUSTRALIAN ETHICAL INVESTMENT LTD
Opinion
In our opinion:
(a) the financial report of Australian Ethical Investment Limited 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 2011 and of their performance for the year
ended on that date; and
complying with Australian Accounting Standards and the Corporations
Regulations 2001; and
(b) the financial report also complies with International Financial Reporting Standards as
disclosed in Note 1.
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 10 to 18 of the directors’ report for
the year ended 30 June 2011. The directors of the Company are responsible for the
preparation and presentation of the Remuneration Report in accordance with Section 300A
of the Corporations Act 2001. Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in accordance with Australian Auditing
Standards.
Opinion
In our opinion, the Remuneration Report of Australian Ethical Investment Limited for the year
ended 30 June 2011, complies with Section 300A of the Corporations Act 2001.
THOMAS DAVIS & CO.
J G RYAN PARTNER
Chartered Accountants
SYDNEY,
31 August 2011
Liability limited by a scheme approved under Professional Standards Legislation.
53
61
AUSTRALIAN ETHICAL INVESTMENT LTD
Twenty largest shareholders
Ordinary shares
Number
of
ordinary
shares
%
Substantial
shareholder
Yes
Yes
196,472
19.59
51,367
49,852
49,436
36,933
33,683
31,797
24,462
24,447
5.12
4.97
4.93
3.68
3.36
3.17
2.44
2.44
20,140
2.01
Name
Select Managed
Funds Pty Ltd
J A Thier
H Pender
C M Le Couteur
T R Lee
J M Boag
Citicorp Nominees
Pty Ltd
J I Ajani
B A & A M
McGregor
HB Sarjeant &
Asscoc Pty Ltd
E A Iceton
D Thier
P A, M W & K A
Anderson
16,500
14,474
10,833
1.65
1.44
1.08
1.05
0.96
0.96
0.93
0.73
0.71
Garrett Smythe Ltd
10,562
M & A Beuchat
A M O'Donnell
A S Cook
R M Myer
UBS Wealth
Management
Australia Nominees
Pty Ltd
9,667
9,630
9,342
7,332
7,160
J Groessler
6,622
0.66
Shareholder information
All information as at 30 September 2011
Distribution of shareholdings
Ordinary shares
Holdings
ranges
1-1,000
1,001-5,000
5,001-10,000
10,001-
100,000
100,001+
Totals
Holders
Units
%
730
82
9
13
1
835
184,810
180,090
66,928
374,486
18.430
17.959
6.674
37.345
196,472
1,002,786
19.593
100.000
Distribution of shareholdings
Ordinary shares
Holdings
ranges
1-1,000
1,001-5,000
5,001-10,000
10,001-
100,000
100,001+
Totals
Holders
Units
%
730
82
9
13
1
835
184,810
180,090
66,928
374,486
18.430
17.959
6.674
37.345
196,472
1,002,786
19.593
100.000
62
AUSTRALIAN ETHICAL INVESTMENT LTD Corporate directory
Australian Ethical Investment Ltd
ABN 47 003 188 930
Company secretary
Tom May
Telephone:
Email:
02 6201 1953
tmay@australianethical.com.au
Postal address
GPO Box 2435
Canberra ACT 2601
Head office
Trevor Pearcey House (Block E)
Traeger Court
34 Thynne Street
Bruce ACT 2617
www.australianethical.com.au
Share registry
Boardroom Pty Limited
ABN 14 003 209 836
Street: Level 7, 207 Kent Street
Sydney NSW 2000
Telephone:
Facsimile:
Post: GPO Box 3993
1300 737 760
01300 653 459
Sydney NSW 2001
Email: enquiries@boardroomlimited.com.au
www.boardroomlimited.com.au
Using the Boardroom 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
63
AUSTRALIAN ETHICAL INVESTMENT LTD
australianethical
investment + superannuation
®
www.australianethical.com.au | 1800 021 227 |
64