Australian Ethical Investment Limited
Annual Report 2015
Contents
Chair and Managing Director’s Report ______________________________________________ 2
Financial Summary ___________________________________________________________________ 8
Community Grants __________________________________________________________________11
Director’s Report_____________________________________________________________________13
Remuneration Report _______________________________________________________________18
Corporate Governance Statement __________________________________________________33
Financial Statements ________________________________________________________________39
Auditor’s Independence Declaration _______________________________________________81
Independent Auditor’s Report ______________________________________________________82
Shareholder Information ____________________________________________________________85
Contact Us
Phone: 02 8276 6288
Fax: 02 9252 1987
Email: enquiries@australianethical.com.au
Web: australianethical.com.au
Post: Australian Ethical Investment Ltd
Reply Paid 3993, Sydney NSW 2001
Registered address: Level 12, 225 George St
Sydney NSW 2000
Chair & Managing Director’s Report
Dear shareholder,
We are very pleased to write to you with our update for
the year.
Financial performance
The past year has been a significant year on many fronts.
There is a sense that we are at a real tipping point
regarding climate action with so many positive moves
around the globe toward a hopefully positive outcome
in Paris in November. Add to that breakthroughs in
technology such as battery storage and grid technology
and there is real cause for optimism on the climate front.
More generally people are increasingly making ethical
choices in their daily consumer purchases as well as their
investment and savings decisions. Our research confirms
an increasing demand from investors for ethical product
and a greater confidence that it will produce the same or
better returns than unscreened investing.
And the evidence continues to strengthen that this is
the case. The recently released Benchmark Report of
the Responsible Investment Association of Australia
showed that money invested in ethical investment
funds had doubled in the past two years. Moreover, the
investment performance of ethical investment funds had
outperformed mainstream funds across all asset classes
over most time periods.
This growth and performance of the sector is reflected in
our own returns with strong performance over the past
year across many metrics:
• Funds under management (FuM) of $1,167m (up 32%
on previous year)
• Net inflows of $179m (up 96%)
• Superannuation membership at 21,196 (up 20%)
• Top quartile investment performance of a number of
our funds
• Record of over 700 philanthropic grant applications
We are living proof that businesses and investment
funds can operate to give consideration to social and
environmental factors as well as financial returns and
deliver on each equally as well.
Net profit
Net profit after tax for the financial year to 30 June 2015
was $1.97m compared to the prior year of $2.54m.
The 23% decrease on the previous year is due to three
main factors: a reduction in fees at the beginning of the
financial year on our superannuation fund as part of an
ongoing fee reduction strategy, issues arising from the
transition to a new remuneration structure, and a further
impairment on the Company’s property in Canberra.
Revenues
Revenue increased 6% to $21.2 million, up from $20
million recorded for the previous corresponding period.
Revenue is mostly driven by funds under management
which is, in turn, influenced by market movements and
net inflows.
Funds under management increased 32% to
$1,167 million, up from $887 million in the previous
corresponding period. Net inflows almost doubled to
$179 million for the year, up 96% on last year’s net inflows
of $92 million.
The progressive reduction of superannuation fees
over the medium term continues to have a significant
impact on revenues. This strategy is aimed at sharing the
benefits of growth with our members and improving our
competitiveness, taking into account shareholder returns
and the long term sustainability of the business.
Our goal for fees is to be at the 75th percentile of
comparable MySuper funds by 2020. Consistent with this
strategy, on 30 June 2014 we reduced the fees on our
superannuation fund by 0.67% and by a further 0.30% on
31 July 2015.
Whilst net flows are impacted by many factors, their
significant increase over the past year supports our
contention that these planned fee reductions will lead
to growth that will, ultimately, offset the reduction and
lead to a better, long term, sustainable business with far
greater impact.
2
Annual Report 2015 Final Dividend
A fully franked final dividend of $1.20 per share was
declared for the full year ended 30 June 2015, bringing
the total dividend for the year to $2.00 per share. The
record date for the dividend will be 16 September 2015
with payment due on 30 September 2015.
We are pleased to maintain our dividend during a period
where profit has been impacted by changes aimed at
building a stronger business over the long term, namely
the fee reductions and remuneration changes.
Expenses
Operating expenses increased by $2.0m, an increase of
14% over the previous year, due to the following:
• Employee costs: Employee costs have increased
by $1.9m or 27% over the prior year. This increase
comprises a number of significant items including:
ᵒ bonuses in general have been high due to
outperformance on most key performance indicators
including investment performance, net inflows and
new clients.
ᵒ under our revised incentive scheme we will now be
paying Short Term Incentives entirely in cash rather
than a mix of cash and performance rights, as was
previously the case. Thus we have accrued 100% of
the bonus payable for the current period as well as
the amortised performance rights attributable to the
previous year.
ᵒ increased provision for employee share rights as a
result of significant increases in the share price over
the year. The total expense for rights issued under
the previous remuneration model this year was
$1.4m.
ᵒ an adjustment of $0.23m was made in respect of
bonuses under-accrued in the previous year.
Non-operating expenses were impacted by:
• Property impairment: A full year impairment of
$484,249 has been incurred on our property held in
Bruce in Canberra. This has been due to the further
deterioration of the Canberra property market
particularly for secondary grade properties. We
continue to seek a purchaser for the property and
have recently secured a tenant for half of the available
floor space. Further detail is provided in Note 11 of the
financial statements.
• Income tax expense: Tax expense increased despite the
lower profit due to items that are not deductible for tax
purposes which are detailed in Note 8b of the financial
report. The effective tax rate was 45%, an increase on
the prior year rate of 38%.
The above increases in expenses have been partially
offset by the following decreases:
3
• External services: costs to outsource providers have
reduced by $0.3m as a result of reduced use of
consultants this year following significant projects
completed in 2014; and
• Marketing: marketing costs have decreased by $0.25m
over the prior year due to a reduction in the cost of
acquisition of new clients.
Financial Position
The Company retains a strong balance sheet position with
no debt. Net assets increased by $1.7m over the year to
$11.2m.
The majority of assets are held in cash to meet the
Company’s Australian Financial Services Licence
conditions. The only significant non-cash asset is the
property held in Canberra which is discussed in detail in
Note 11 of the financial statements.
Funds Under Management
Funds under management has grown from $887m to
$1,167m over the past year (a 32% increase).
$1 billion milestone passed
In November 2014 we hit a significant milestone in our 28
year history by reaching $1bn. This result follows strong
growth over the past year which defies industry averages.
We are extremely proud of the Company’s performance
in reaching this milestone. It marks a coming of age and
maturing of the Company to be a stable and substantial
player in the financial services landscape.
Since reaching this milestone our funds under
management has continued to grow reaching $1.167bn
at 30 June despite some recent market falls.
Net inflows
Over the year we achieved $179m in net flows almost
double (96% increase) the flows for the prior year of
$92m.
Many factors contributed to the improved flows including
an increasing awareness of ethical investing and of
Australian Ethical, website optimisation making the joining
process more client friendly and a more efficient process
in consolidating members benefits from other super
funds.
New clients
Our new client growth continues to be strong due to
active sales and marketing strategies, a rapidly growing
social media community and continued improvements to
our digital and online processes removing the barriers for
members to join. New clients averaged 439 per month
compared to 375 per month in the previous year.
Australian Ethical Investment performance
Performance across our funds and superannuation options has been strong with a number of our funds and
investment options delivering above median performance over the year according to the regular survey published by
consulting firm Mercer1.
Managed Fund
Cash
Fixed Interest
Balanced
Diversified Shares
Advocacy
Australian Shares
International
Shares
Superannuation
Accumulation
Options
Defensive
Conservative
Balanced
Growth
Smaller Companies
International
Advocacy
1 year
Quartile
3 years
Quartile
5 years
Quartile
7 years
Quartile
10 years
Quartile
3rd
3rd
3rd
1st
1st
1st
4th
2nd
-
3rd
1st
1st
1st
2nd
1st
-
4th
1st
1st
1st
4th
1st
-
2nd
1st
-
1st
3rd
1st
-
2nd
1st
-
1st
-
1 year
Quartile
3 years
Quartile
5 years
Quartile
7 years
Quartile
10 years
Quartile
3rd
4th
3rd
1st
1st
4th
3rd
3rd
4th
3rd
1st
1st
4th
3rd
2nd
4th
4th
4th
1st
4th
3rd
2nd
-
3rd
4th
1st
4th
-
2nd
-
3rd
4th
1st
-
-
Our flagship Australian Shares fund recently celebrated its 20th anniversary having delivered consistent upper quartile
performance over the whole period. Its exceptional track record ranks it first over every reported time period. The
fund has returned 10% per annum over its 20 year history, far exceeding its benchmark index. Similarly our Diversified
Shares fund, ranks first over all periods.
1 Based on Mercer’s Peer Group Category as at 30 June 2015.
4
Annual Report 2015 Product Improvements
We continue to review our product suite to ensure
competitiveness in an increasingly changing and
competitive environment.
Superannuation fees
As communicated previously, the superannuation
environment has become increasingly competitive and
we have a medium term strategy for our fees to be at the
75th percentile of comparable My Super funds by 2020.
Consistent with this strategy on 30 June 2014 we reduced
the fees on our superannuation fund by 0.67% and by a
further 0.30% on 31 July 2015.
The reductions to date have moved us some way toward
our goal however we still have some way to go and
shareholders should expect further reductions in the
future.
Launch of the Australian Ethical Emerging
Companies Fund
On 1 July 2015 we launched a new fund, the Australian
Ethical Emerging Companies Fund which invests in a
diversified portfolio of shares in small capitalisation
companies on the basis of their social, environmental and
financial credentials. The Fund utilises an active stock-
picking management style with stocks selected for growth
rather than income.
There is increased interest in small capitalisation
companies and we have a demonstrated strength in
selecting growth stocks. Inflows in the first month have
been very positive.
Improved access to our managed funds
We also made a number of changes aimed at making our
managed funds more accessible to both retail investors
and advisers.
These were:
• listing on the ASX mFunds platform - a number of
our funds were listed on the ASX mFunds platform,
a platform that provides easier access for both retail
investors and advisers
• more funds with wholesale units - we increased the
number of our funds with a wholesale unit providing
lower fees for clients with large balances
• product name changes - we changed the names of a
number of our investment funds to better reflect their
underlying portfolio and align with current industry
practice.
5
Awards
We continue to be regularly recognised by industry peers
through awards. The following awards were received over
the year:
• Ethical Fund of the Year - we were awarded the Ethical
Fund of the Year award from the financial magazine,
Money Management.
• International Fund of the Year - we were awarded
the International Fund of the Year by the Australian
Investment Management Association. This is significant
as it was rated against the market as a whole not just
purely ethical peers.
• United Nations Association of Aust. - we were awarded
two awards in the United Nations Association of
Australia World Environment Day: Excellence in Overall
Environmental Management (Business) and the
Leadership Award for Large Organisations.
• B Corp “Best for the World” - we were awarded
B Corp “Best for the World” status ranking us in the
top 10% of B Corps worldwide (a field of 1,300) for our
social and environmental credentials.
United Nations Association of Australia Awards
Australian Ethical Ethical leadership
We continue to be the leader in ethical investment
in Australia with the highest ethical conviction in our
investment selection coupled with taking a strong stand
in encouraging more ethical behaviour in the corporate
and broader community. The following are key initiatives
pursued through the course of the financial year:
Net zero emissions by 2050
To meet the urgent challenge of global warming,
investors, companies and governments need to commit
to decarbonise across all sectors of the economy not
just a single sector. Excluding high emissions fossil
fuel companies is important, but this needs to be
accompanied by action across the many other industry
sectors which are big direct and indirect emitters.
Alongside our exclusion of coal, oil and unconventional
gas, Australian Ethical has set a target to fully de-
carbonise all our portfolios (i.e. net zero portfolio
emissions) in the timeframe needed to limit warming to
2 degrees. To achieve this we need to reduce emissions
across our entire portfolio, from health care to food
production to manufacturing.
Our decarbonisation project has a dual purpose:
• to ensure that our investments are aligned with a clean
energy future; and
• to help create momentum to drive the mainstream
action needed to address climate change.
During the year we became the first Australian member
of the international Portfolio Decarbonisation Coalition,
a coalition of institutional investors launched at the 2014
United Nations Climate Summit to mobilise financial
markets to drive economic de-carbonisation.
The big banks: a force for good or bad in a
warming world?
During the year we collaborated with a number of
investors and NGOs to encourage the banks to better
disclose their exposure to carbon emissions. This
included:
• work with other institutional investors and the banks
to agree a more uniform approach to disclosure of
lending to fossil fuel and renewables sectors;
• supporting shareholder resolutions at bank AGMs; and
• working as an Australian ‘co-lead’ for an international
investor initiative focused on climate governance at 60
banks globally.
The Australian banks responded to this diverse activity at
the end of 2014 with significant new disclosure of fossil
fuel and clean energy exposures.
Support for climate expertise in the Boardroom
In 2014 we were proud to again have supported Ian
Dunlop for election as a director of BHP Billiton by being
one of his nominating shareholders via a shareholding
in our Advocacy Fund, in order that his climate expertise
could help BHPB show greater leadership in dealing with
the risks and opportunities created by climate change.
Although Ian was unsuccessful, we credit his campaigns
with raising public awareness of the issues at stake and
encouraging greater climate transparency from BHPB.
Climate lobbying
We are participating in two international investor
collaborations advocating for ‘responsible corporate
climate lobbying’, to encourage companies to play
a productive rather than destructive role in the
development of responsible climate policy.
Too often companies stand silent as their industry
associations promote media scare campaigns which are
not aligned with their privately stated views – or with long
term company, industry and societal interests.
Human rights
We are participating as a lead investor in a global investor
coalition to improve the way companies identify and
manage human rights risks in their supply chain and
other activities (http://www.ungpreporting.org/early-
adopters/investor-statement/). We are encouraging
both Australian investors and companies to use this
new reporting framework to improve the quality of their
internal discussions and external disclosure of the human
rights impacts of their activities.
Shell and BP shareholder resolutions
We were part of the “co-filing group” for shareholder
resolutions by a coalition of UK investors and NGOs
calling on energy and petrochemical giants BP and
Shell to say more about the preparation they are
making for a low carbon world. In particular we want
disclosure of operational emissions, their testing of the
resilience of their businesses to different global warming
scenarios and their work on low carbon energy R&D and
investment.
The resolutions were passed with overwhelming
shareholder support following recommendations from
both Shell and BP that shareholders vote in favour of the
resolutions.
The next step is to hold the companies to account to
provide meaningful reporting about how they are aligning
their businesses with the global changes needed to
deliver a low warming future.
6
Annual Report 2015 Global markets are currently going through a period
of considerable volatility and we expect that this will
continue for some time. This will impact our revenues
as the value of funds under management (which is in
turn influenced by the state of the markets) is the largest
driver of revenues.
Our Company is a very special company and truly serves
as a model of the future where social and environmental
outcomes are achieved alongside financial performance.
With our funds under management having passed
$1bn, we are of a size and capacity where we are a
significant player in the financial services landscape with a
substantial voice and influence.
With rising consumer awareness of the ethical impact of
their consumption choices and the need for better ways
of doing business, we are well placed to continue to grow
and have an even greater impact on achieving a better
world. We have our sights firmly set on reaching $5bn
by 2020 and with the passion, commitment and skills of
our people we have every reason to believe that we’ll get
there.
Steve Gibbs
Chairman
28 August 2015
Phil Vernon
Managing Director &
Chief Executive Officer
28 August 2015
Our People
Our people are our greatest asset – we say it often and
with good reason. It is only with the determination and
dedication of our people that we can serve our clients,
generate long-term value for our shareholders and
contribute to the community.
We focus on cultivating and sustaining a diverse work
environment and workforce, which is critical to meeting
the unique needs of our diverse client base and the
communities in which we operate.
Our goals are to maximise individual potential, increase
commercial effectiveness, reinforce the company’s
culture, expand our people’s professional opportunities,
and help them contribute positively to their greater
communities. Focusing on cultivating and sustaining a
diverse work environment and workforce supports these
goals.
2015 Community Grants
Each year 10% of the Company’s pre-tax profit is
donated to community organisations working to address
humanitarian, environmental and animal welfare needs,
one of the highest percentages of a listed company’s
profits donated to charity in Australia.
In the 2015 financial year $0.37m has been provisioned
for payment to charitable and conservation organisations
under our community grants program with over $2m
having now been paid or provisioned.
Recently we created the Australian Ethical Foundation
as a vehicle to distribute the community grants we make
each year. There are two drivers behind establishing a
Foundation:
• Flexibility: the Foundation will provide an investment
pool that would give greater flexibility in the types of
support we would be able to provide recipients;
• Leverage: in the future we would like to invite
shareholders and clients to contribute to the
Foundation and participate in the support of the many
worthwhile recipients.
Outlook
The growth in the ethical investment market is strong
as increasingly people are becoming more socially
conscious and realising that they can consume and invest
in alignment with their values without compromising on
quality and performance.
The regulatory environment for superannuation and
managed funds continues to evolve with increasing
compliance costs and downward pressure on fees. We
will continue to assess product fees against the market
balancing member interests, returns to shareholders and
the need to develop a long term, sustainable business.
7
Australian Ethical Financial Summary
Funds Under Management ($m)
Revenue ($m)
1,167
887
21.2
19.9
15.7
14.8
16.4
669
708
599
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
Profit After Tax ($m)
2.5
Dividends (cps)
200
200
2.0
170
Special
Ordinary
85
60
1.1
1.1
0.4
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
Basic Earnings Per Share ($)
2.49
1.90
Return On Equity (%)
33.0
21.5
1.13
1.05
15.0
15.4
0.40
5.7
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
8
Annual Report 2015 Funds under Management
Net Inflows
Managed Funds
Super
Net Flows
Managed
Funds
$390m
Super
$777m
$80
$70
$60
$50
$40
$30
$20
$10
$0
-$10
-$20
I
n
fl
o
w
s
O
u
t
fl
o
w
s
As at 30 June 15
Jun 13
Sep 13
Dec 13
Mar 14
Jun 14
Sep 14
Dec 14
Mar 15
Jun 15
Financial results for the year to 30 June 2015
Profit
Revenue
2014
($,000)
2015
($,000)
% change
19,889
21,171
Operating expenses
(14,476)
(16,478)
Non-operating expenses*
Net Profit After Tax (NPAT)
Adjustments (gross)
Add back employment restructure
Add back property revaluation
Tax on adjustments
Underlying Net Profit After Tax (UPAT)^
(2,871)
2,542
409
282
(122)
3,111
(2,723)
1,970
-
484
-
2,454
(21%)
6%
(14%)
6%
(23%)
* Non-operating costs include tax, depreciation, amortization, community grants, loss on disposal of assets and
property impairment.
^ Underlying profit is provided to assist shareholders in understanding the Company’s performance. Underlying profit excludes
certain items, as determined by the Board and management, that are either significant by virtue of their size and impact on Net
Profit After Tax, or are deemed to be outside normal operating activities. It reflects an assessment of the result for the ongoing
business of the Group. This table has been prepared in accordance with the Australian Institute of Company Directors (AICD)/
Finsia principles for reporting underlying profit and ASIC’s Regulatory Guide 230 Disclosing non-IFRS financial information.
Underlying profit after tax has not been reviewed or audited by our external auditors, however the adjustments to net profit have
been extracted from the books and records that have been audited.
9
Australian Ethical
Funds Under Management
Opening FuM
Super flows (net)
Managed Funds flows (net)
Net Flows
Market movement
Closing FuM
Dividends
Interim (fully franked)
Final (fully franked)
Total dividend
2014
($m)
2015
($m)
% change
708
78
14
92
87
887
132
47
179
100
887
1,167
25%
70%
240%
96%
14%
32%
2013/2014
(cents per
share)
2014/2015
(cents per
share)
% change
80
120
200
80
120
200
-
-
-
10
Annual Report 2015 Community Grants
Each year 10% of the Company’s pre-tax profit is donated to
community organisations working to address humanitarian,
environmental and animal welfare needs, one of the highest
percentages of a listed company’s profits donated to charity in
Australia.
In the 2015 financial year $0.37m has been provisioned for payment to
charitable and conservation organisations under our community grants
program with over $2m having now been paid or provisioned.
Image Courtesy of Mungalla Aboriginal Corporation for Business
11
Australian Ethical 2014 Community Grant Recipients
Tennant Creek Transport Inc. (NT)
Providing much-needed transport for one of the most socially-disadvantaged communities in Australia
Mungalla Aboriginal Corporation for Business (QLD)
Up-skilling unemployed indigenous youth for environmental outcomes
Port Phillip Housing Association (VIC)
Community garden project designed to build social connection and skills among rooming house tenants
Free to Shine (Cambodia)
Girls scholarship program to prevent sex trafficking
The Orangutan Project (Indonesia)
Funding Wildlife Protection Units of local people to patrol the national park and prevent poaching
The Exodus Foundation (NSW)
Sustainable Communities project to reduce the environmental impact of Exodus’ food programs for the homeless
The Pyjama Foundation (QLD)
Funding Pyjama Angels who provide individual attention and support to children in foster care
Jewish House (NSW)
Refurbishment of the homeless shelter to accommodate pets of the homeless
The Kokoda Track Foundation (PNG)
Microlending program for women to address poverty and provide clean energy alternatives
Kids Under Cover (VIC)
Scholarships for youth at risk of homelessness to complete their secondary education
Sir David Martin Foundation (NSW)
Contributing to 12 week rehabilitation programs for youth fighting addiction, mental health issues and homelessness
Timor Leste Vision (East Timor)
Project to install a reliable water system to deliver clean water to the remote village of Hatete
Australian Cervical Cancer Foundation (Kiribati)
HPV vaccination program to protect women in Kiribati against cervical cancer
The Deli Women & Children’s Centre (NSW)
Safe Healing project for women who have suffered domestic violence and abuse, especially those from Aboriginal or
CALD backgrounds
Animal Aid Abroad (Egypt)
Revitalisation of the Port Said Equine clinic and training a local team to treat working equines
Liberian Community Action for Unity, Social & Economic Development (VIC)
Establishment of a ‘Newlife Restaurant’ social enterprise to provide skills training and employment opportunities for the
West African community
Delivery Cycles (VIC)
A social enterprise providing employment opportunities for marginalised groups, especially refugees, through the
establishment of a food delivery business
Director’s Report
The Directors present their report together with the
consolidated financial report of Australian Ethical
Investment Limited (the Company) and its controlled
entity, Australian Ethical Superannuation Pty Limited
(together, the Group), for the year ended 30 June 2015
and the auditor’s report thereon.
2007 and 2014. Green Cross Australia is dedicated to
empowering resilience to the impacts of climate change
working with business, community and research networks
using digital engagement models. Mara currently is a
resilience strategist and is Non-Executive Director of
Green Cross Australia and Enova Community Energy.
Directors
The Directors of the Company at any time during or since
the end of the financial year are:
Stephen Gibbs BEc, MBA
Chair and Non-Executive Director
Stephen joined the Board in July 2012 as a Non-Executive
Director and on 4 February 2013 was appointed Chair.
He chairs the People, Remuneration and Nominations
Committee, is a member of the Audit, Compliance and
Risk Committee and is a director of Australian Ethical
Superannuation Pty Limited.
Stephen was formerly Chair of the Responsible
Investment Academy Advisory Council. From early 2000
he was CEO of ARIA, the trustee of the PSS and CSS –
the superannuation schemes for federal government
employees. When Stephen left ARIA in January 2008 it
had close to $A20 billion under management. Prior to
ARIA Stephen was the Executive Officer of the Australian
Institute of Superannuation Trustees (AIST). His earlier
career was in the trade union movement.
Tony Cole AO, BEc
Non-Executive Director
Tony was appointed as a Non-Executive Director on 4
February 2013. Tony is a member of the Investment
Committee and the People, Remuneration and
Nominations Committee.
For the past 17 years Tony has been a senior investment
consultant and executive in Mercer’s Investment
Consulting business, including heading the business in
the Asia Pacific region for more than five years. Tony
recently ceased working with Mercer.
Prior to joining Mercer, Tony held several senior positions
in the Commonwealth Public Service, including Secretary
to the Treasury, Secretary of the Department of Health
and Social Security, Deputy Secretary to the Department
of the Prime Minister and Cabinet and Chair of the
Industry Commission (now the Productivity Commission).
Tony served as an Alternative Director of the World Bank
and was Treasurer Paul Keating’s principal economic
adviser and head of office in the early years of the Hawke-
Keating government.
Other career highlights for Stephen include his personal
invitation from the then UN General Secretary to join
the steering committee and investor group which
developed what became the United Nations Principles
of Responsible Investment - UNPRI and membership of
the ASX Corporate Governance Council from its inception
until 2008.
Tony is currently a Trustee Director of the Commonwealth
Superannuation Corporation and a member of the
Advisory Board of the Northern Territory Treasury
Corporation. He Chaired the Advisory Board of the
Melbourne Institute for 10 years and was a longstanding
member of the Australian Office of Funds Management
Advisory Board.
Stephen is a director of Ecosystems Investment
Management (Australia) Pty Ltd and an Expert Panel
member of the Fair Work Commission.
Kate Greenhill BEc, FCA, GAICD
Non-Executive Director
Mara Bun BA
Non-Executive Director
Mara brings over 20 years of business and community
experience to Australian Ethical. She was born and
raised in Brazil, was educated in the US and was a
financial analyst in Morgan Stanley’s M&A and technology
banking groups before moving to Australia in 1991.
During the 1990s Mara was responsible for finance and
administration at Greenpeace Australia and was head
of policy and public affairs for Choice. She returned to
investment banking as Senior Equities Analyst covering
the Internet sector for Macquarie Bank during the
dotcom period. She has been a Director of The Allen
Consulting Group, head of research at Canstar, and
Director of Business Development at the CSIRO. Mara
was the founding CEO of Green Cross Australia between
13
Kate was appointed as a Non-Executive Director on 22
February 2013. Kate is Chair of the Audit, Compliance and
Risk Committee, a member of the People, Remuneration
and Nominations Committee and a director of Australian
Ethical Superannuation Pty Limited.
Kate was formerly a Partner with
PricewaterhouseCoopers assisting clients with advice
and assurance in relation to financial statement audit
opinions, accounting and regulatory developments,
capital raisings, accounting for complex transactions,
due diligence, valuations, compliance, risk management,
organisational structure and the operation of controls.
Kate is a director, and member of the finance committee,
for a not for profit organisation.
Australian Ethical United Funds Management (a subsidiary of IOOF Holdings
Limited), and since 2004 has taught in the Finance
Department of the University of Melbourne.
Changes to Subsidiary Board directors
subsequent to 30 June 2015
The following changes to Australian Ethical
Superannuation Pty Limited directorships occurred since
30 June and prior to the issue of this report:
• Les Coleman resigned as non-executive director on 26
August 2015;
• Tony Cole was appointed as a non-executive director
on 26 August 2015;
• Mara Bun was appointed as a non-executive director
on 26 August 2015;
Principal activities
The Group’s principal activities during the financial
year was to act as the responsible entity for a range
of public offer ethically managed investment schemes
and act as the Trustee of the Australian Ethical Retail
Superannuation Fund. Other than as described in this
report, there were no significant changes in the nature
of the controlling entity’s activities during the year. More
details on the Group’s principal activities are included in
the Shareholder Newsletter.
Changes in the state of affairs
There were no significant changes in the state of affairs of
the Company that occurred during the year not otherwise
disclosed in this report or the financial statements.
Operating and financial review
The consolidated profit for the year to 30 June 2015 is
$1.970m (2014: $2.543m). A review of operations for the
Group is set out in the Shareholder Newsletter.
Phil Vernon BEc, MCom, MBA, FCPA, FAICD
Executive Director and Managing Director
Phil joined the Company as Chief Executive Officer in
December 2009 and was appointed Managing Director
in July 2010. He is also a director of Australian Ethical
Superannuation Pty Limited.
Phil has over 30 years’ experience in financial services
including funds management, superannuation, corporate
governance and industry regulation. He has extensive
experience in strategy, people management and
leadership.
Phil is a Director of not for profit organisations Planet Ark
and Beyond Zero Emissions and of industry associations
Responsible Investment Association of Australia and the
Investor Group for Climate Change.
Company secretary
Tom May BA, LLB, MBA, FGIA
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.
Subsidiary Board directors and Board
committee members
Ruth Medd BSc, Dip Comp Science, CPA, MAICD
Chair and Non-Executive Director, Australian Ethical
Superannuation Pty Limited
Ruth is Chair of the Company’s wholly owned subsidiary
Australian Ethical Superannuation Pty Limited and a
member of the Company’s Audit, Compliance and Risk
Committee. Ruth is currently on the board of the NFAW
Ltd (National Foundation for Australian Women) and
WOB Pty Ltd (Women on Boards). 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.
Les Coleman B.Eng.(Hons), B.Sc.(Hons), M.Ec., PhD
Non-Executive Director, Australian Ethical Superannuation
Pty Limited
Les is a member of the Company’s Audit, Compliance
and Risk Committee and is also a director of Australian
Ethical Superannuation Pty Limited. Les has been a
trustee of two superannuation funds, and a director of
ten companies involved in finance, retail and distribution.
He has over 20 years’ experience in senior operational,
planning and finance roles in Australia and overseas. He
is currently a member of the investment committee of
14
Annual Report 2015 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 2014
Interim 2015
Total
Declared after end of year
120
80
200
1,246,676
Franked
3 October 2014
843,054
Franked
27 March 2015
2,089,730
Final 2015
120
1,264,582
Franked
30 September 2015^
^ Planned payment date
Events subsequent to reporting date
On 31 August 2015 the following share transactions
occurred:
• Vesting of 11,899 STI employee share rights (AEFAG);
• Vesting of 16,834 LTI employee share rights (AEFAC);
and
• Issue of 11,659 shares to the Employee Share Trust for
employee long term incentives.
On 31 July 2015 we reduced the fees on our
Superannuation fund by a further 0.30%. This
is part of a medium term strategy, discussed in
previous communications, to progressively make our
superannuation product fees more competitive.
On 28 July 2015 the Australian Ethical Foundation Ltd,
a company limited by guarantee, was registered. As
discussed in the Shareholder Newsletter the Foundation
will receive the donations from the Company each year
and manage the allocation of those grants.
Other than as outlined in this report, no matters or
circumstances have arisen since the end of the financial
year which have or may significantly affect the operations
of the Company and its controlled entity, the results of
those operations or the state of affairs of the Company in
financial years subsequent to the financial year ended 30
June 2015.
15
Outlook - Likely developments and business
strategies
The Group’s business strategy is discussed in the
Shareholder Newsletter.
Environmental Regulation
The Company acts as a responsible entity for the
Australian Ethical Property Trust and the Australian
Ethical Balanced Trust both of which own direct property
assets. These fiduciary operations are subject to
environmental regulations under both Commonwealth
and State legislation in relation to property developments.
Approvals for commercial property developments are
required by state planning authorities and environmental
protection agencies. The licence requirements relate
to air, noise, water and waste disposal. The responsible
entity is responsible for compliance and reporting under
the government legislation and engages professional
property managers to manage the properties.
The Company is not aware of any material non-
compliance in relation to these licences during the
financial year.
The Company has determined that it is not required to
register to report under the National Greenhouse and
Energy Reporting Act 2007, which is Commonwealth
environmental legislation that imposes reporting
obligations on entities that reach reporting thresholds
during the financial year.
The last property in the Australian Ethical Property Trust
was sold on 24 July 2015. Since that time the Trust has
invested in units of unlisted property trusts that meet the
investment criteria. The properties held in the Australian
Ethical Balanced Trust are not required to have a
minimum of Green star rating.
Australian Ethical 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.
Auditor’s Independence Declaration
A copy of the Auditor’s independence declaration as
required under section 307C of the Corporations Act
2001 is set out on page 81.
Indemnification of Directors’ and officers
The Company and its controlled entity indemnify the
current Directors and officers of the Company and the
controlled entity against all liabilities to another person
(other than the Company or a related body corporate)
that may arise from their position as Directors of the
Group, except where the liabilities arise out of conduct
involving a lack of good faith. The Company and its
controlled entity will meet the full amount of any such
liabilities, including costs and expenses.
Insurance
The constitution of the Company 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 (Deed) with
directors and officers which provides 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.
16
Annual Report 2015 Director’s 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
People,
remuneration and
nominations
Audit, compliance
and risk
Eligible
Attend
Eligible
Attend
Eligible
Attend
Eligible
Attend
Stephen Gibbs
Mara Bun
Tony Cole
Kate Greenhill
Phil Vernon
Ruth Medd
Les Coleman
5
5
5
5
5
-
-
5
5
5
5
5
-
-
3
-
3
-
3
-
-
3
-
3
-
2
-
-
4
-
4
4
4
-
-
4
-
4
4
4
-
-
7
-
-
7
7
7
6
7
-
-
7
7
6
6
Shares issued during the year and prior to the issue of the report
During the year and prior to the issue of this report the following shares were issued:
Date
Number of
shares Issued
Reason
1 July 2014
11,950 Conversion of STI performance rights (AEFAF)
1 September 2014
3,795 Conversion of LTI performance rights (AEFAA)
12 March 2015
14,924
Issued to the Employee Share Trust as long term incentives
31 August 2015
11,899 Conversion of STI performance rights (AEFAG)
31 August 2015
16,834 Conversion of LTI performance rights (AEFAC)
31 August 2015
11,659
Issued to the Employee Share Trust as long term incentives
No further shares have been issued or are planned from the date of this report. No amounts are unpaid on any of the
shares.
17
Australian Ethical Remuneration Report
Dear Shareholder,
On behalf of the Board, I am pleased to present our
Remuneration Report for 2015.
The 2015 financial year has further built on the excellent
result for 2014. We have delivered strong underlying
business performance against a background of market
and regulatory pressure on fees. We demonstrated
this through our strong investment performance and
improved net flows and our ability to deliver a strong
dividend payment for our shareholders.
In 2014 we introduced a new remuneration structure
aimed at providing better alignment between employees
and shareholders, a more direct link for employees
between effort and reward and better employee
retention. All permanent employees participate in our
employee share plan reflecting our Charter commitments.
In a small team such as Australian Ethical everyone plays
a part in delivering superior results and the remuneration
model applies to all employees with greater portions of
remuneration at risk for more senior employees. This
ensures we retain the team that is delivering strong
returns for shareholders as well as building long-term
value for our company.
We will continue to review our remuneration
arrangements to ensure they remain effective in
attracting and retaining the best talent to drive Australian
Ethical forward.
Stephen Gibbs
Chair
People, Remuneration & Nominations Committee
About this Report
This report deals with the remuneration arrangements for
Australian Ethical Investment Limited’s (“The Company”)
Key Management Personnel (KMP). This includes the
Non-Executive Directors, the Managing Director and the
Executives. The Report has been audited as required by
section 308(3C) of the Corporations Act 2001. Terms used
throughout the report are defined in the section “Key
Terms Used in this Report”.
Our Remuneration Policy and Structure
The Company’s remuneration policy is designed to create
a motivating and engaging environment for employees
where they feel appropriately paid and incentivised for
the contribution they make to the performance of the
Company.
General principles
The principles underpinning our remuneration framework
are:
• pay people fairly for the work that they do
• build long term ownership in the Company
• be motivating for employees
• align reward with contribution to the Company’s
performance
• align shareholder interests and the Company’s capacity
to pay
• attract and retain talented people
• promote the values of the Charter and be aligned with
the purpose of the Company
• be simple to administer and to communicate
The remuneration philosophy is also consistent with the
principles of the Company’s Constitution and Charter. In
particular:
• it is designed to ensure that the Company facilitates
“the development of workers participation in the
ownership and control of their work organisations and
places” - Charter element (a)
• it is designed so as to not “exploit people through the
payment of low wages or the provision of poor working
conditions” - Charter element (ix)
• the incentive structure meets the requirements of Rule
15.1(c) of the Constitution which provides that prior
to recommending or declaring any dividend, provision
must be made for a bonus or incentive for employees
to be paid of up to 30 percent (30%) of what the profit
for that year would have been had not the bonus or
incentive payment been deducted.
18
Annual Report 2015 Remuneration Framework Summary
Element
Key Driver
Quantum
How Paid
Criteria
Changes to prior year
Assessed against
market data
based on position
and skills and
experience brought
to the role. Target
remuneration is
based around
the Median of
the relevant
comparator group
for each job role.
Percentage of Fixed
Remuneration
based on market
assessment.
Paid fortnightly Continued
Unchanged
employment
Paid annually
on first pay
period after
1 November.
Timing
allows for
the inclusion
of financial
results in
performance
assessments.
Objectives include
(depending on role):
Changed to 100% cash. Previously a
combination of cash and 12 month
performance rights.
• Profit
• Growth
• Investment
performance
• Individual objectives
• Culture
Change to 100% cash provides a
more direct alignment for employees
between effort and reward. The
issue of performance rights had the
potential to impact profits if there
were significant changes in the share
price.
Percentage of Fixed
Remuneration
based on market
assessment.
Shares held in
trust and vest
after 3 years.
Shares subject to
3 year vesting as
follows:
• 50% based on
remaining employed
with the Company
• 50% based on
compound annual
growth in Earnings
per Share (EPS) and
remaining employed
with the Company
Changed to Shares held in Trust for
3 years subject to EPS vesting hurdle.
Previously performance rights issued
after 3 years subject to a Return on
Equity (RoE) vesting hurdle.
Changes provide:
• Greater alignment between
shareholders and employees due to
participation in the dividend
• Employee participation in the affairs
of the Company through the voting
rights
• A vesting hurdle (EPS) more directly
relevant to what employees can
influence (compared to RoE)
Fixed
remuneration
(FR)
Pay people
fairly.
Short Term
Incentive (STI)
Incentivises
and rewards
for achieving
annual
objectives.
Long Term
Incentive (LTI)
Retention
and fostering
an interest
in the
Company’s
long term
performance.
19
Australian Ethical Remuneration Framework
Short Term Incentive
The aim of the Short Term Incentive Scheme is to incentivise and reward employees for performance against annual
objectives.
The maximum incentive paid each year is based on a percentage of each employee’s Fixed Remuneration and their role
and responsibility and benchmarked against market data.
It is paid in cash in November of each year following the finalisation of annual results and performance reviews.
A number of changes have been made to the Short Term Incentive scheme over the past few years. These are:
• A number of schemes were in operation across the Company. These have now been amalgamated into one
consistent scheme;
• One scheme that applied just to management and the investment team previously paid bonuses as 50% cash and
50% performance rights with one year vesting. This has now been changed to 100% cash to offer a more direct link
between effort and reward and to simplify administration;
• The scheme that applied to remaining employees was previously not linked to market benchmarks. All employees are
now benchmarked to market; and
• The Company has progressively been moving employees to market equivalent remuneration.
Outcomes are assessed based on performance against a “balanced scorecard” of objectives. The actual objectives and
percentage vary depending on the role and cover the following:
Measure
Profit
Growth
Description
A portion of the incentive is based on meeting annual profit targets determined
by the board.
Focussed on building long term growth. Measures include growth in client
numbers and net inflows.
Investment performance
Assessed according to performance against investment benchmarks.
Individual objectives
Each employee will have certain project based objectives to achieve for the
year.
Culture
Employees have an obligation to adhere to certain cultural standards. These
include abiding by the Company’s values and risk management requirements.
20
Annual Report 2015 Long Term Incentive Scheme
The aim of the Long Term Incentive scheme is to foster an interest in the long term performance of the Company, to
encourage participation in the affairs of the Company and to encourage the retention of employees.
The maximum incentive paid each year is based on a percentage of each employee’s Fixed Remuneration and role,
benchmarked against market data.
Shares are issued at the commencement of each financial year and held in trust for 3 years. They vest in the name of
the employee after 3 years, provided that the employee remains employed and that long term financial performance
hurdles are met. Whilst the shares remain unvested, employees participate in dividends and have voting rights.
The performance hurdles have been determined as follows:
Portion
Performance hurdles
Rationale
50%
Based on remaining employed during the period
50%
Average EPS growth less than 5% pa
Zero
Average EPS growth between 5% and 10% pa
Pro rata
Average EPS growth exceeds 10%
Maximum
Aimed at retention and increasing
share ownership. Employee share
ownership is very low due to past
hurdles not being met.
EPS growth was chosen as a
hurdle as it is the measure which
employees can most directly
influence (see below).
Changes were made to the Long Term Incentive Scheme in the 2014 year as follows:
• Performance rights were replaced by shares held in trust. We believe this better aligns employee and shareholder
interests and better fosters an interest in the long term performance of the Company.
• The hurdle was changed from Return on Equity to Earnings per Share growth. This was done as we believe that
Earnings per Share is the measure that employees can most directly influence. We believe the hurdles set are both
attainable and challenging. Two alternatives were considered; Total Shareholder Return and Return on Equity.
Total Shareholder Return takes into account share price performance and dividend returns; it is subject to external
factors beyond employees’ influence and is not as effective for a stock with low liquidity. Return on Equity is heavily
influenced by balance sheet decisions and was considered insufficiently challenging and thus not aligning the
interests of employees and shareholders.
21
Australian Ethical A detailed comparison between the two schemes is as follows:
Performance rights (old scheme)
Deferred shares (new scheme)
Description
Rights issued at the commencement
of the 3 year performance period and,
subject to meeting performance hurdles,
vest into ordinary shares at the end of
the period based on the share price at
the end of the period.
Employees have placed limited value
on them in the past making them
ineffective as a retention mechanism.
Shares are issued or bought on market at the
commencement of the 3 year performance period
and held on trust. At the end of the period, subject to
performance hurdles being met, shares transfer into the
name of the employee.
Performance
hurdles
Vesting is subject to the following
hurdle:
50% will vest if the employee remains with the Company
after 3 years.
• If RoE is less than 15% over 3 years,
50% will vest on the following basis:
zero will vest.
• If RoE is greater than 20% over 3 years,
100% will vest.
• If RoE is between 15% and 20%, a pro
rata amount will vest.
• If EPS growth is less than 5% pa, on average, zero will vest.
• If EPS growth is greater than 10% pa, on average, 100%
will vest.
• If EPS growth is between 5% and 10% pa, on average, a
pro rata amount will vest.
EPS was chosen over RoE as it is more within the influence
of employees and is a driver of long term shareholder
value thereby providing better alignment between
employees’ effort and shareholder interests.
Dividends
No dividends paid on unvested rights.
Dividends paid on unvested shares. This:
Dividends are taken into account in the
calculation of rights to be issued.
Employees cannot vote on unvested
rights.
Rights are amortised over 3 years based
on an assessment of the share price at
the end of the 3 year period. A rising
share price leads to a greater expense.
• Provides real value that employees lose if they leave the
Company, making them an effective retention mechanism.
• Provides a direct real interest in the six monthly dividend
performance of the Company and hence alignment with
shareholders’ interests.
Employees can vote on unvested shares.
Cost of shares is fixed at time of issue and expensed over
a three year period giving greater certainty.
Not deductible.
Fully deductible in year of issue.
Tax crystallises on vesting which has
in some cases led to employees selling
their shares to fund their tax bill.
Tax crystallises only on exit from the employee share trust
and therefore the payment of tax is more in the control of
the employee.
Voting
Expense to
company
Tax impact on
company
Tax impact on
employees
^ Growth in EPS is defined as compound average annual growth in the Company’s earnings per share comprising basic
earnings per share (after tax). The Board may adjust EPS for items that do not reflect management and employee
performance and day-to-day business operations and activities.
22
Annual Report 2015
Actual Remuneration
Total remuneration paid and alignment with Company performance
STI rewards for KMPs are based on a range of key performance measures. Depending on the role these include a
portion linked to current year profit, for the investment team a portion linked to the performance of the investment
funds for which they’re responsible and for the sales and marketing team a portion linked to net flows. The profit
portion of these relate to the prior year to when it is paid. Other elements (e.g.: investment performance and net flows)
are focussed on building long term value and will impact profit performance over the longer term.
LTI is subject to average Earnings per Share Growth (“EPS”) performance hurdles over the three year vesting period
these are not met the shares are held in trust and reduce the amount that is required to be funded in future years.
1
. If
The following table shows how fixed remuneration, STI and LTI outcomes compared to the Company’s financial results
over the past five years. STI outcomes and company results are not expected to be perfectly correlated as the Company’s
STI performance assessment involves a broader consideration of the Company’s progress in generating future value for
shareholders (eg: non-financial performance and financial results relative to the targets set by the Board).
Five Year Performance
Fixed Remuneration
Directors fees
Bonus and rights expense
30 June
2011
30 June
2012
30 June
2013
30 June
2014
30 June
2015
Notes
6,642,648
6,544,510
5,902,946
5,611,929
5,699,239
156,226
177,993
217,305
280,381
293,175
STI constitutional bonus (old scheme)
194,855
85,846
66,926
65,000
-
STI cash payable
141,493
94,131
277,753
220,018
1,141,982
STI rights expense (old scheme)
-
-
164,857
473,191
479,943
LTI rights expense (old scheme)
255,905
231,478
70,696
436,139
928,557
LTI shares issued (new scheme)
Bonus & Rights under/over accrual
-
-
-
-
-
-
175,852
(69,348)
28,734
292,507
Total Bonus and Rights Expense
592,253
411,455
510,884
1,223,082
3,018,841
Other Employment Cost
242,030
(348,450)
29,739
32,309
39,392
Total remuneration
7,633,157
6,785,509
6,660,875
7,147,703
9,050,647
Net Profit After Tax ($’000)
Underlying Profit After Tax ($’000)
1,098
981
402
860
1,063
1,675
2,543
3,111
1,970
2,454
Return on Equity (3 year average)
14.1%
11.1%
12.1%
18.1%
23.4%
Earnings per share
113
40.1
104.84
248.51
190
Earnings per share growth (3 year average)
(2.4%)
(27.0%)
(2.5%)
83.7%
22.0%
Share price at end of period ($)
Dividends (c per share)
Total shareholder return (TSR)
Average FTE
19.1
170
(10%)
48.9
17.5
60
(5%)
41.5
19.5
85
16%
34.3
35.45
200
92%
28.6
58.8
200
72%
30.7
23
1
2
3
4
5
6
7
Australian Ethical Notes:
1. Fixed remuneration has decreased and stabilised over time as the business has become more efficient operating
with fewer people. Average salaries have increased as the Company has progressively moved people to market
equivalent remuneration.
2.
In 2015 the “Constitutional Bonus” paid to staff not in the STI scheme was discontinued as the STI scheme was
rolled out to all employees.
3. STI cash component has increased significantly due to three factors:
a. The inclusion of all employees in the Scheme
b. The move to pay STI as 100% cash rather than 50% cash and 50% performance rights. The current year cash
payable amount includes 100% of the current year STI expense compared to only 50% under the old scheme.
c. Accrual for expected bonuses in respect of meeting performance hurdles in the 2015 financial year which will
be paid in the 2016 financial year. These performance hurdles included investment performance and profit
targets.
4. Will reduce to zero in the 2016 financial year. This item is the residual 50% of the prior year STI under the old
scheme.
5. This has increased due to the following:
a. The increased share price. Performance rights are amortised based on the prevailing share price at the end of
the period
b.
Increased likelihood of meeting hurdles due to the increased RoE
This item will reduce to zero in the financial year ended 30 June 2017 as the new scheme (Note 6) increases.
6. This is one year’s amortisation of the first issue of shares under the new share scheme and will increase over time
as further issues are made. Once the shares have been purchased any future share price changes do not impact
expenses for the Company.
7. Over/under accruals are due to needing to finalise accounts prior to finalisation of performance assessments and
are accrued based on “target”
Non-financial outcomes
As described earlier, in addition to profit targets a number of non-financial objectives are used to determine incentive
outcomes. Many of these develop the long term sustainability of the business and so are not necessarily correlated to
short term financial performance. These objectives are applied in varying degrees depending on the role. Performance
against some of these objectives in the past financial year have been:
Measure
Growth
2015 performance
Total net flows of $179m, almost double the previous year.
Investment performance
Regular top quartile investment performance.
Culture
Employee engagement score considered to be in “Best Employer” range.
Competitiveness
Superannuation fees reduced by 0.67% over 12 months, virtually halving over
the past two years.
24
Annual Report 2015 Management Team Remuneration
The following tables show the fixed remuneration, maximum STI and LTI for each KMP as a proportion of total
remuneration. Actual amounts received are shown under the Statutory Reporting tables.
Position
Fixed
Remuneration
(%)
Maximum
Short-term
incentive (%)
Maximum
Long Term
incentive (%)
Managing Director & CEO
P Vernon
Managing Director & CEO
56%
28%
16%
Current Management
D Barton
A Kirk
D Macri
T May
CFO
Head of Business
Development & Client
Relations
CIO
General Counsel & Company
Secretary
S Palmer
Head of Ethics
Departed Management
77%
71%
50%
77%
77%
15%
21%
33%
15%
15%
P Smith
Head of Marketing
76%
16%
8%
8%
17%
8%
8%
8%
Contract terms
All KMP’s have formal contracts of employment and are permanent employees of the Company.
Term
Notice period
Managing
Director
3 years concluding on 31 March 2016.
Extended for further 3 years to
31 March 2019.
52 weeks before the Contract expiry date, the Company
may terminate the Managing Director’s employment
by giving 52 weeks’ notice in writing. In the event the
Contract has less than 52 weeks to run before the expiry
date, the Company may terminate the Managing Director’s
employment by giving notice to the expiry date.
Management
team
No fixed term
12 weeks
25
Australian Ethical Non-Executive Directors Remuneration
In addition to fixed remuneration, Non-Executive Directors (NEDs) are entitled to be paid reasonable expenses,
remuneration for additional services and superannuation contributions. Non-executive Directors are not eligible to
participate in employee incentive plans.
The total paid to non-executive directors of the Company is approved by shareholders at the Annual General Meeting.
The current pool of $360,000 was approved at the AGM in October 2014. A review of Non-executive Directors’
remuneration is undertaken annually by the Company Board, taking into account recommendations from the People,
Remuneration and Nominations committee.
The following table sets out the agreed remuneration for Non-Executive Directors by position:
Director
Chair
NED
Committee
Chair
Committee
member
Total**
Australian Ethical Investment Limited
Stephen Gibbs*
54,000
Tony Cole
Kate Greenhill*
Mara Bun
Total
20,000
36,000
56,000
36,000
2,185
5,463
19,665
12,018
1,639
1,639
88,203
43,102
77,304
36,000
54,000
148,000
27,313
15,296
244,609
Australian Ethical Superannuation Pty Ltd
Ruth Medd
30,000
Les Coleman
Total
30,000
20,000
20,000
8,740
8,740
-
17,480
38,740
28,740
67,480
Total Group
84,000
168,000
27,313
32,776
312,089
* Stephen Gibbs and Kate Greenhill are also Directors of Australian Ethical Superannuation Pty Ltd and members of the
Australian Ethical Superannuation Pty Ltd Audit, Compliance and Risk Committee.
** This table shows the Non-Executive Director remuneration for a full year, for actual remuneration received see
below.
26
Annual Report 2015 Statutory reporting
Management team remuneration
The table below outlines Executive reward as calculated in accordance with accounting standards and the Corporations
Act 2001 requirements. The amounts shown are equal to the amount expensed in the Company’s financial statements.
Short Term Benefits
Name
Year
Salary, Fees
and Leave
($)
Cash
Bonus
($)
Managing Director & CEO
Post
Employment
Benefits
Superannuation
($)
Equity
Long Term
Benefits
Settled
Share-based
payments
($)
Total
($)
Performance
Based
Proportion
($)
Long
Service
Leave
($)
P Vernon
2015
337,458
76,162
18,782
103,904
536,306
33.6%
2014
304,814
49,771
25,000
13,790
393,375
16.2%
Current Management
D Barton
2015
238,513
21,282
18,782
2014
228,627
-
21,146
-
-
278,577
7.6%
249,773
0%
A Kirk
2015
212,000
30,502
18,782
11,344
272,628
15.3%
2014
233,143
7,247
17,773
8,574
266,737
5.9%
10,842
7,623
5,915
5,068
5,778
4,858
D Macri
2015
280,124
67,179
18,782
100,574
466,659
35.9%
12,086
2014
243,850
43,623
24,999
T May
2015
193,356
17,696
18,782
2014
189,867
S Palmer
2015
164,307
2014
43,615
Departed Management
P Smith
2015
83,488
5,084
5,605
-
-
17,143
16,142
3,993
48,719
21,376
5,670
-
-
361,191
25.4%
251,210
15.6%
217,764
186,054
4.9%
3.0%
47,608
-
7,299
5,631
4,103
4,167
4,045
7,469
12,053
103,010
11.7%
-
2014
183,813
7,713
17,688
6,555
215,769
6.6%
Total
2015
1,509,246
218,426
117,521
249,251
2,094,443
22.3%
2014
1,431,729
113,438
127,742
83,308
1,752,217
11.2%
4,274
44,419
37,270
27
Australian Ethical Non-Executive Directors remuneration
Short Term Benefits
Post
Employment
Benefits
Equity
Long Term
Benefits
Name
Year
Salary,
Fees and
Leave ($)
Cash
Bonus
($)
Superannuation
($)
Settled
Share-based
payments
($)
Total ($)
Performance
Based
Proportion
($)
Long
Service
Leave (
$)
Non-Executive Director’s – Australian Ethical Investment Ltd
S Gibbs
2015
80,897
2014
77,559
T Cole
2015
39,531
2014
38,745
K Greenhill
2015
55,600
2014
41,714
M Bun
2015
33,018
2014
32,847
-
-
-
-
-
-
-
-
7,647
9,702
3,737
3,588
5,256
3,863
3,121
3,043
-
-
-
-
-
-
-
-
Non-Executive Director’s – Australian Ethical Superannuation Pty Ltd
R Medd
2015
35,531
2014
36,746
L Coleman
2015
23,278
2014
29,999
Departed Directors
A Morony
2015
-
2014
13,871
Total
2015
267,856
2014
271,481
-
-
-
-
-
-
-
-
3,359
3,404
2,200
2,778
-
1,287
25,319
24,261
-
-
-
-
-
-
-
88,544
87,261
43,268
42,333
60,856
45,578
36,139
35,889
38,890
40,150
25,479
32,777
-
15,158
293,175
299,146
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Notes in relation to the Non-Executive Directors and Management team remuneration:
1. The short term incentive bonus is for performance during the prior financial year using agreed KPI’s. The amount
was finally determined in September 2014 after performance reviews were completed and approved by the PRNC.
2. The value of share based payment is based on the market value of shares on the day they vest.
3. No non-monetary benefits were provided to any KMP’s.
28
Annual Report 2015 Unvested performance rights, unvested shares and ordinary shares
The movement during the reporting period in the number of rights over ordinary shares and ordinary shares in the
Company, held directly, indirectly or beneficially, by each key management person, including their related parties is as
follows:
Name
Rights/Shares Class
Balance at
beginning of
year
No. granted
No. forfeited/
Expired/ Sold
No. vested &
exercised
Balance at
the end of
year
Managing Director & CEO
P Vernon
AEFAA
AEFAC
AEFAE
AEFAF
AEFAG
Deferred Shares*
AEF Ordinary shares
2015 Total
2014 Total
Current Management
D Barton
AEFAG
A Kirk
Deferred Shares
2015 Total
2014 Total
AEFAC
AEFAE
AEFAF
AEFAG
Deferred Shares
AEF Ordinary shares
2015 Total
2014 Total
1,472
2,432
4,037
2,195
-
-
2,082
12,218
8,467
-
-
-
1,142
856
320
-
-
28
2,696
1,520
-
-
-
-
1,967
2,412
-
4,379
6,232
566
604
1,170
-
-
-
-
811
537
1,348
1,176
(736)
(736)
-
-
-
-
-
(736)
(2,481)
-
-
-
-
-
-
-
-
(320)
(320)
-
-
-
(2,195)
-
-
2,931
-
-
-
-
-
-
-
(320)
-
-
320
-
-
-
2,432
4,037
-
1,967
2,412
5,013
15,861
12,218
566
604
1,170
-
1,142
856
-
811
537
28
3,374
2,696
* Approval for this issue of securities was obtained under ASX Listing Rule 10.14 at the Company’s 2014 AGM.
29
Australian Ethical Name
Rights/Shares Class
Balance at
beginning of
year
No. granted
No. forfeited/
Expired/ Sold
No. vested &
exercised
Balance at
the end of
year
D Macri
AEFAA
T May
AEFAC
AEFAE
AEFAF
AEFAG
Deferred Shares
AEF Ordinary shares
2015 Total
2014 Total
AEFAA
AEFAC
AEFAE
AEFAF
AEFAG
Deferred Shares
AEF Ordinary shares
2015 Total
2014 Total
S Palmer
AEFAG
Deferred Shares
2015 Total
2014 Total
827
1,379
3,223
1,924
-
-
2,414
9,767
4,928
758
939
720
224
-
-
-
2,641
2,291
-
-
-
-
Management who have departed during the year
P Smith
AEFAC
AEFAE
AEFAF
AEF Ordinary shares
2015 Total
2014 Total
968
706
340
289
2,303
1,257
-
-
-
385
1,785
2,313
4,483
5,505
-
-
-
-
470
501
-
971
944
149
382
531
-
-
-
-
-
-
1,046
(413)
(414)
-
-
-
-
-
(5,137)
(5,550)
(666)
(379)
-
-
-
-
-
(603)
(982)
(594)
-
-
-
-
(968)
(706)
-
-
(1,674)
-
-
-
(2,309)
-
-
2,723
-
-
(379)
-
-
(224)
-
-
603
-
-
-
-
-
-
-
-
(340)
340
-
-
-
1,379
3,223
-
1,785
2,313
-
8,700
9,767
-
939
720
-
470
501
-
2,630
2,641
149
382
531
-
-
-
340
629
629
2,303
For details on the performance criteria for each tranche of performance rights and deferred shares refer to Note 26 of
the Notes to the Consolidated Financial Statements.
30
Annual Report 2015 Future vesting schedule
Type
Rights
Rights
Rights
Deferred Shares
Total
Issue year
Vesting year
Number
2012
2013
2014
2015
2015
2016
2017
2018
16,834
16,879
11,899
14,924
60,536
Governance
The Role of the People, Remuneration and
Nominations Committee
The role of the People, Remuneration and Nominations
Committee (PRNC) is to help the Board fulfil its
responsibilities to shareholders through a strong focus
on governance, and in particular, the principles of
accountability and transparency. The PRNC operates
under delegated authority from the Board.
The terms of reference include oversight of remuneration
as well as executive development, talent management
and succession planning.
The PRNC members for the 2014/15 financial year were:
• Stephen Gibbs (Chair);
• Kate Greenhill; and
• Tony Cole.
The PRNC met four times during the year.
A standing invitation exists to all Directors and the Chair
of Australian Ethical Superannuation Pty Ltd to attend
PRNC meetings. Attendance at these meetings is set out
in the Directors’ Report. At the PRNC’s invitation, the
Managing Director and the People and Culture Consultant
attended all meetings except where matters associated
with their own performance evaluation; development
and remuneration were to be considered. The PRNC
considers advice and views from those invited to attend
meetings and draws on services from a range of external
sources, including remuneration consultants.
Managing Director and KMP Performance
An annual assessment of the Managing Director is
completed by the Chairman and is overseen by the Board,
with input from the PRNC. The review includes a 360
review process, measurement of performance against
agreed KPI’s and Company performance.
The bonus received by the Managing Director during
2014/15 is shown in Statutory Reporting table and relates
to the previous financial year of 2013/2014. This flows
from a formula linking the bonus to year on year profit
changes and reflects an increase in the results for that
previous financial year.
The Managing Director is responsible for reviewing the
performance of Executives and determining whether their
performance requirements were met. Both quantitative
and qualitative data is used to determine whether
performance criteria are achieved.
Use of Remuneration Consultants
In May 2014, the PRNC appointed KPMG as its principal
remuneration consultant to provide specialist advice
on executive remuneration and other Group-wide
remuneration matters.
KPMG provided information to the PRNC to assist with
its review of the remuneration structure implemented in
2014/15.
The PRNC also utilised the services of Egan Associates
to advise on the Company’s non-executive director
remuneration arrangements.
31
Australian Ethical Hedging Policy
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.
Trading Restrictions and Windows
All directors and employees are constrained from trading
the Company during “blackout periods”. These periods
occur between the end of the half year and full year
and two days after the release of the half year and full
year results. This policy was adopted in May 2015 and
replaced the application of a shorter “trading window”.
The new policy gives more time for employees to trade
shares, minimising the potential impact on the share
price.
Outcomes of votes at Annual General Meetings
At the 2013 AGM, the Remuneration Report received
38.19% of the vote against it out of 70.1% of shareholders
that voted on the report. This result constituted a ‘first
strike’.
At the 2014 AGM, the Remuneration Report received
44.05% of the vote against it out of 62.97% of
shareholders that voted on the report. This result
constituted a ‘second strike’.
This required a spill motion being put to shareholders.
The outcome of this motion was that 63.0% of the votes
cast were against.
In setting the remuneration structure we have carefully
considered comments made by shareholders, sought
advice from remuneration consultants and reviewed
practises of our peers. We believe that the structure we
have adopted is the most appropriate for our people,
shareholders and the business providing the right
balance between motivation, retention and alignment of
interests between employees and shareholders.
The Directors report, incorporating the Remuneration
report, is signed is accordance with a resolution of the
Board of Directors.
Phil Vernon
Managing Director & Chief Executive Officer
Dated: 28 August 2015
32
Annual Report 2015 Corporate Governance Statement 2015
This Corporate Governance Statement 2015 has been
prepared under the ASX Corporate Governance Principles
and Recommendations (3rd edition) (“Principles and
Recommendations”) and discloses the extent to which
Australian Ethical Investment Ltd (“the Company”)
followed the Principles and Recommendations during the
financial year ended 30 June 2015 (“the reporting period”).
This statement will be available from the corporate
governance section on the Company’s website.
Lay Solid Foundations for Management and
Oversight (Principle 1)
The Company is governed by a Board of Directors
appointed by shareholders. The Board has three
committees; an Audit, Compliance and Risk Committee,
an Investment Committee and a People, Remuneration
and Nominations Committee. Each committee is
delegated with authority to fulfil certain obligations and
strengthen the overall governance framework.
The Company has formalised the functions reserved to
the Board and those delegated to Management.
The Company’s Constitution requires it to operate in a
way that promotes the tenets of the Australian Ethical
Charter. The Charter requires consideration of economic,
environmental and social impact.
Board Role and Responsibilities
The roles of the Board of Australian Ethical Investment
Limited are:
• For the AEI Group – to approve the overall objectives
and strategic direction of the AEI Group.
• As the Responsible Entity for the Australian Ethical
Managed Investment Funds – to seek assurance from
Management that the Funds are being operated within
the terms of their Constitutions and the requirements
of relevant legislation, regulatory obligations, licence
conditions, codes of conduct and policies and
procedures and in the best interests of all investors.
• As the owner of Australian Ethical Superannuation
Pty Ltd, the trustee of the Australian Ethical Retail
Superannuation Fund – to seek assurance from
the AES Board and Management that the Fund is
being operated within the terms of its Trust Deed
and Constitution and the requirements of relevant
legislation, regulatory obligations, licence conditions,
codes of conduct and policies and procedures and with
reference to the best interests of all members.
• To act in accordance with, and further the aims of, the
Australian Ethical Charter.
The responsibilities associated with each of these roles
are outlined in the Board Charter, which is available from
the Company’s website.
The Board delegates responsibility for the performance of
33
specific functions to the Chair, to the Board Committees
and to the Managing Director.
The Board Committees are delegated with all necessary
authority to carry out their functions as set out in
Board Committee Charters which are available from the
Company’s website.
The Managing Director is delegated with all necessary
authority to run the Company on an ongoing, day to day
basis other than those responsibilities reserved to the
Board and delegations (general or specific) made by the
Board to the Chair, Board committees, Directors or other
senior executives.
The division of functions between the Board, the
Committees and the Managing Director is reviewed
annually, as part of the review of the content of the
Charters, to ensure that the division of functions remains
appropriate to the needs of the Company.
Fit and Proper Checks for Directors
All candidates nominated for election as directors are
subject to a comprehensive competency and propriety
assessment process. As part of this process, candidates
are required to provide the Company with details of
their other commitments, and an indication of the time
involved, and specifically acknowledge that they will have
sufficient time to fulfil their responsibilities as a director.
The Company ensures that relevant and sufficient
information is provided to security holders to enable
them to make an informed decision on whether or not
to elect, or re-elect, a candidate for a directorship. This
information is provided in the notice of meeting issued in
relation to the meeting at which the vote will occur.
Terms of Appointment
A part of the appointment process, each Director is asked
to sign a letter of appointment, and each senior executive
is asked to sign an employment agreement, setting out
the terms, conditions, expectations and entitlements of
the appointment.
Independent Legal and other Professional
Advice
Directors have a 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, subject to the following qualifications:
• They must have the prior approval of the Chair to seek
the specific independent legal and other professional
advice;
• They must ensure that the costs are reasonable; and
• Any advice received must be made available to the rest of
the Board unless either the Chair or the Board agree that
the rest of the Board does not need to see the advice.
Australian Ethical Company Secretary
The Company Secretary is directly accountable to the
Board, through the Chair, on all matters associated with
the proper functioning of the Board. The Board is charged
with responsibility to appoint or remove the Company
Secretary. All Directors are able to communicate directly
with the Company Secretary.
Diversity Policy
The Company has agreed measurable objectives
for achieving gender diversity and requires annual
assessment against the objectives and progress in
achieving them.
The Board has charged the People, Remuneration and
Nominations Committee with responsibility for setting the
Company’s measurable objectives for achieving gender
diversity and annually reviewing these objectives and the
Company’s progress towards achieving them.
The Company’s Sustainability Report contains detailed
reporting in relation to diversity issues and in relation
to the status of employees generally. The Sustainability
Report is available from the Company’s website.
Evaluating the Performance of the Board, the
Committees and the Directors
An internal review of the performance of the Board was
undertaken during the reporting period. The Board has
appointed an external facilitator to conduct an evaluation
during the current reporting period. The Board intends
to continue to conduct annual evaluations and to
periodically work with an external facilitator.
Evaluating the Performance of Senior Executives
Executive performance is evaluated in accordance with
the Company’s performance review guidelines. The
Chair conducts the Managing Director’s performance
review. The Managing Director conducts the performance
reviews of the other senior executives.
An evaluation of the Managing Director and each of the
senior executives was undertaken in the reporting period.
From a nominations perspective, the PRN Committee is
responsible for the following matters.
a. Assessing the necessary and desirable competencies
of prospective Directors.
b. Ensuring that the current composition of the Board
demonstrates an appropriate mix of competencies
to allow the Board to discharge its responsibilities
effectively.
c. Ensuring that Directors have access to appropriate
continuing education which updates and enhances
their skills and knowledge.
d. Ensuring that the Board has developed a succession
plan which ensures that an appropriate balance of
skills, experience and expertise is maintained on the
Board at all times.
e. Making recommendations to the Boards in relation
to the appointment of, and retirement of, Directors.
f.
Seeking assurance from Management that:
ᵒ All prospective Directors meet the minimum fit
and proper requirements;
ᵒ There is a Director Induction Program in place
and that all new Directors have undertaken the
Program within three months of appointment.
The PRN Committee considers the above responsibilities,
the current Board composition, any nominations or
suggestions for directorship and the assessment of
incumbent directors.
The PRN Committee Charter is available from the
Company’s website.
Board Skills Matrix
The Company is comfortable that the Board collectively
held the appropriate skills to perform its roles during the
reporting period.
Independent Directors and Independent Chair
A director is an independent director if they are a non-
executive director and:
Structure the Board to Add Value (Principle 2)
a.
People, Remuneration and Nominations
Committee
The Board has a People, Remuneration and Nominations
(PRN) Committee comprising the Chair and two
Independent Non-Executive Directors. The qualifications
of those appointed to the PRN Committee are provided
in the Directors’ Report, as are the number of meetings of
the Committee and attendance at those meetings.
Is not a substantial shareholder (as defined in the
Corporations Act) or an officer of, or otherwise
associated directly with, a substantial shareholder of
the Company;
b. Within the last three years has not been employed
in an executive capacity by the Company or another
group member, or been a director after ceasing to
hold any such employment;
c. 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;
34
Annual Report 2015 d.
Is not a material supplier or customer of the
Company or another Group member, or an officer of
or otherwise associated directly or indirectly with a
material supplier or customer;
e. Has no material contractual relationship with the
Company or another Group member other than as a
director of the Company; and
f.
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 reflects the relationships set out in the Principles
and Recommendations.
The classification of directors who held office during the
reporting period is set out below.
Director
Status
Stephen Gibbs
(Chair)
Independent
Non Executive
Director
Mara Bun
Independent
Non Executive
Director
Tony Cole, AO
Independent
Non Executive
Director
Kate Greenhill
Independent
Non Executive
Director
Non
Independent
Executive
Director
Phillip Vernon
35
Appointed by the Board
on 25 July 2012.
Elected to a three year
term on 20 November
2012 at the 2012 AGM
and re-elected on 29
October 2014 at the 2014
AGM.
Appointed Chair on 1
March 2013.
Appointed by the Board
on 4 February 2013.
Elected to a three year
term on 22 November
2013 at the 2013 AGM.
Appointed by the Board
on 4 February 2013.
Elected to a three year
term on 22 November
2013 at the 2013 AGM
and re-elected on 29
October 2014 at the 2014
AGM.
Appointed by the Board
on 22 February 2013.
Elected to a three year
term on 22 November
2013 at the 2013 AGM.
Phillip is the Managing
Director and was
appointed on 26 July 2010.
Stephen Gibbs was appointed as a director by the Board
on 25 July 2012. Prior to his appointment Stephen was
the Chair of CAER Pty Ltd. At the time of his appointment,
CAER Pty Ltd was a material supplier of ethical research
services to the Company. CAER Pty Ltd is no longer
a material supplier to the Company and accordingly
Stephen is considered to be an Independent Non-
Executive Director.
There have been no changes to board membership
over the course of the reporting year and no changes
to the Independent Non-Executive Directors’ interests,
positions, associations or relationships that may bear on
their independence. The Board is comprised of a majority
of Independent Directors which is consistent with the
Principles and Recommendations; the Board intends
to keep this balance as it represents best corporate
governance and alignment with the Australian Ethical
Charter.
Director Induction and Ongoing Professional
Development
The Company requires new Directors to complete a
director induction on appointment. The program is
created for each individual as they are appointed to
reflect their knowledge of the company and the markets
in which the company operates.
The PRN Committee is responsible for ensuring that
the Directors as a group have the appropriate skills,
knowledge and familiarity with the Company and its
operating environment in order to be able to fulfil their
role on the Board and on Board committees effectively.
Where gaps are identified, the PRN Committee identifies
the training or professional development which could be
undertaken to fill those gaps, and organizes for individual
Directors to complete this training or professional
development within a reasonable timeframe. The PRN
Committee Charter is available from the Company’s
website.
The time in office, skills, experience and expertise of each
director in office during the reporting period is included
in the Directors’ Report.
Act Ethically and Responsibly (Principle 3)
The Company is an ethical investment company that
manages money in accordance with the Australian Ethical
Charter. The Charter is in the Company’s Constitution
and informs all aspects of the Company’s operations. The
Charter is available on the Company’s website.
Code of Conduct
The Company has a Code of Conduct that outlines what
the Company regards is acceptable business practices for
directors, senior executives and employees. The Code of
Conduct is addressed in induction training for new directors
and employees and is promoted to current directors and
employees during corporate and personal development
sessions. It is available on the Company’s website.
Australian Ethical Conflicts Management
The Company has a Conflicts Management Policy which
documents the procedures in place for identifying,
managing, monitoring and reporting situations giving
rise to actual, potential and perceived conflicts of duty
and interest for the Company and for its directors and
employees.
The Company maintains a Register of Relevant Duties
and a Register of Relevant Interests, which are tabled at
each meeting of the Board and the ACR Committee for
review. A Summary of the Conflicts Management Policy is
available on the Company’s website.
Safeguard Integrity in Corporate Reporting
(Principle 4)
Audit, Compliance and Risk Committee
The Board has an Audit, Compliance and Risk (ACR)
Committee consisting of two external members and two
Independent Non-Executive Directors. The Committee
is chaired by an Independent Chair who is not the Chair
of the Board. The qualifications of the members of the
ACR Committee are provided in the Directors’ Report,
as are the number of meetings of the Committee and
attendance at meetings.
From an audit and financial management perspective, the
ACR Committee is responsible for:
a. Overseeing compliance with AEI’s financial
management obligations, and in particular:
ᵒ Acting as a formal channel of communication
between the AEI Board, the External Auditor, the
Internal Auditor and the Chief Financial Officer;
ᵒ Seeking assurance from Management that the
stated policies of AEI in relation to statutory,
financial, tactical and accounting matters, internal
financial controls and discharge of ‘trading
company’ fiduciary obligations, are being carried
out and that the relevant accounting standards
and techniques have been applied.
b. Reviewing the final drafts of, and approving and
signing:
ᵒ The financial statements for the Schemes that
are required to be lodged with the ASX and ASIC;
ᵒ The Directors’ Declarations; and
ᵒ Any other associated documents or statements.
c. Reviewing the final drafts of, and making
recommendations to the AEI Board as to whether or
not the Directors should approve and sign:
ᵒ The financial statements for AEI that are required
to be lodged with the ASX and ASIC;
ᵒ The Directors’ Declarations; and
ᵒ Any other associated documents or statements.
d. Overseeing compliance with AEI’s external and
internal audit obligations, in particular:
ᵒ Appointing the External Auditor at least annually
and the Internal Auditor at least triennially;
ᵒ Reviewing the scope of the audit plans proposed
by the External Auditor and Internal Auditor
annually; and
ᵒ Reviewing the content of all audit reports and
monitoring the actions of Management to ensure
that identified issues are being appropriately
managed and rectified.
The ACR Committee considers the performance and
independence of the External Auditor over the course of
a reporting period. In selecting an External Auditor, the
ACR Committee seeks competence, industry experience,
integrity and independence. In normal circumstances,
appointment of the External Auditor will typically continue
for six years. Rotation of external audit engagement
partners occurs in accordance with the rotation
requirements of the Corporations Act 2001.
The ACR Committee Charter is available from the
Company’s website.
Managing Director and Chief Financial Officer
Sign-Off of Financial Reports
The Company requires the Managing Director and the
Chief Financial Officer 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 Managing Director and the Chief Financial Officer
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
identifying, managing and mitigating financial reporting
risks.
External Auditor Attends AGM
The External Auditor attends every AGM to answer audit-
related questions from security holders.
36
Annual Report 2015 Make Timely and Balanced Disclosure (Principle 5)
• Announces the date of the AGM as early as practicable;
Continuous Disclosure Policy
The Company has a Continuous Disclosure Policy
designed to ensure compliance with the ASX Listing Rule
disclosure requirements and accountability at senior
executive level for compliance. The Policy is available
from the corporate governance section on the Company’s
website.
• Ensures that the AGM is held at a location and
venue that is easily accessible to a large number of
shareholders;
• Provides a facility for shareholders to submit written
questions to the Board prior to an AGM; and
• Records AGM proceedings and makes the recordings
are available from the Company’s website.
Respect the Rights of Security Holders (Principle 6)
Information Provided on the Website
The Company’s website includes a Corporate Governance
Landing Page where security holders and other
stakeholders can access relevant corporate governance
information (including Company announcements).
Investor Relations Program
The Company is in the process of compiling all aspects
of its investor relations program into a single Investor
Relations Policy. In addition to the information contained
on the website:
• A facility is available to shareholders to be advised via
e-mail when ASX announcements are made;
• The Company has an active social media presence that
keeps shareholders and other stakeholders continually
updated on issues relevant to the Company and
responsible investments;
• Regular sequence of communication points with
investors and members is in place including a
newsletter, Good Money, for investors and a
shareholder newsletter;
• A Sustainability Report based on Global Reporting
Initiative Guidelines is produced annually and is
available from the Company’s website;
Electronic Communications
The Company encourages shareholders to receive
and send communications to it and the share registry
electronically.
Recognise and Manage Risk (Principle 7)
Audit, Compliance and Risk Committee
From a risk and compliance perspective, the ACR
Committee, described at Principle 4 above, is responsible
for:
a. Overseeing:
ᵒ Completion of compliance obligations and
controls identified in the Compliance Master
Plan;
ᵒ Matters relevant to AEI and the Scheme’s
compliance with applicable legislative and
regulatory requirements as brought to the
Committee’s attention by Management.
b. The identification, treatment and monitoring of
emerging and current material risks, incidents and
breaches and complaints relevant to the AEI and the
Schemes.
c. The lodgment of AEI and the Scheme’s statutory
reporting obligations.
• In the reporting period shareholders were surveyed for
their views on the Company’s Annual and Sustainability
Report; and
d. The findings of any examinations by regulatory
agencies and the timeliness and accuracy of
reporting to regulators.
• Shareholders are asked to vote on potential recipients
of grants under the Company’s community grants
program (the Company’s Constitution requires it to
distribute 10% of pre-tax profit to a range of non-profit
organisations for any useful charitable, benevolent
or conservation purpose before a dividend can be
declared).
Encouraging Participation at Meetings of
Security Holders
The Company recognises the importance of the AGM
to provide shareholders with the opportunity to ask
questions of the Board. To encourage participation at the
AGM, the Company:
e. Seeking assurance from Management that the
Group:
ᵒ Has in place systems, policies and procedures
designed to meet and monitor its audit,
compliance and risk management responsibilities
and that these policies and procedures are
appropriate and contemporaneous;
ᵒ Is complying with the conditions of its AFS
Licence; and
ᵒ Has a structured and methodical program in
place to monitor all material service providers.
The ACR Committee Charter is available from the
Company’s website.
37
Australian Ethical Risk Management Framework
The Company has an established framework for the
oversight and management of material risks.
The Board is charged with overall responsibility
for managing risk, including agreeing on the risk
management methodology and overseeing its
implementation, instilling a strong culture of risk
identification and management throughout the Company,
and reviewing the Company’s insurance program, having
regard to the business and the insurable risks associated
with the business.
The Board has delegated responsibility for overseeing
the continued implementation and maintenance of the
risk management framework to the ACR Committee. The
ACR Committee requires management to implement and
maintain the risk management framework and to report
to it on whether material risks are being appropriately
identified, managed and mitigated. During the reporting
period, regular reporting on risk was provided to the
ACR Committee and a wholesale review of the risk
management framework was completed.
The ACR Committee Charter is available from the
Company’s website.
Internal Audit Function
The Company appointed an external audit firm to
perform the internal audit function. The principal focus
of the internal audit function is the Australian Ethical
Superannuation Fund and related business processes.
However, the internal auditor also considers matters
relating to the Group as a whole. The internal audit
function has a direct reporting line to the ACR Committee.
Exposure to Economic, Environmental and Social
Sustainability Risks
Since listing the Company has produced a Sustainability
Report under the Global Reporting Initiative. In 2013
the Company started reporting under the GRI G4
sustainability reporting standard and participated
in the GRI G4 Pioneers program along with 83
other organisations from 38 countries in total. In
these sustainability reports exposure to economic,
environmental and social sustainability risks is addressed;
they are available from the Company’s website.
The Company is a certified B Corporation. B Corporations
are an emerging movement of companies that use the
power of business to create a positive impact on the
world and generate a shared and durable prosperity for
all.
In addition, the Australian Ethical Charter which informs
all aspects of the company’s operations and investment
philosophy is designed to engage with economic,
environmental and social sustainability risks in an open
and constructive manner.
Remunerate Fairly and Responsibly (Principle 8)
People, Remuneration and Nominations
Committee
From a remuneration perspective, the PRN Committee,
described in Principle 2 above, is responsible for:
a. Monitoring adherence to the guidelines set in
relation to remuneration arrangements;
b. Monitoring salary relatives through the AEI Group;
c. Undertaking an annual review of external
remuneration survey data;
d. Determining, with reference to Management’s
recommendation, the remuneration of AEI
employees and the payment of performance-based
pay;
e. Recommendations to the Board regarding directors’
fees and fees for Board Committees;
f. Considering industry benchmarks and comparators
for the Managing Director’s remuneration and
at least annually determining the remuneration
arrangements for the Managing Director.
The PRN Committee Charter is available from the
Company’s website.
Remuneration of Directors and Senior
Executives
Details of remuneration paid to directors and senior
executives during the reporting period are set out in the
Directors’ Report which is available from the Company’s
website. Non-Executive Directors receive fees for serving
as a director in the form of cash plus superannuation
contributions. They do not participate in bonus or equity
schemes designed for the remuneration of executives.
Equity Based Remuneration Scheme
The Company maintains equity based remuneration
schemes in which all permanent employees participate.
The Share Trading policy contains restrictions on the
transactions that employees can participate in that might
limit the economic risk of participating in these schemes.
The Share Trading Policy is announced to the ASX
whenever it is updated. Further information about the
Company’s equity based remuneration schemes is set out
in the Remuneration Report available from the Company’s
website.
38
Annual Report 2015 Financial Report
Financial Statements of Australian Ethical Investment
Limited and its Controlled Entities
For the year ended 30 June 2015
Consolidated Statements of Financial Position ____________________________________40
Consolidated Statements of Comprehensive Income _____________________________41
Consolidated Statements of Changes in Equity ____________________________________42
Consolidated Statements of Cash Flows ___________________________________________44
Notes to the Consolidated Financial Statements __________________________________45
Directors’ Declaration _______________________________________________________________80
39
Australian Ethical Australian Ethical Investment Limited and its Controlled Entities
Consolidated Statements of Financial Position
Australian Ethical Investment Limited and its Controlled Entities
As at 30 June 2015
Consolidated Statements of Financial Position
As at 30 June 2015
Notes
Notes
Consolidated entity
At
Consolidated entity
30 June
At
2015
30 June
$'000
2015
$'000
30 June
2014
30 June
$'000
2014
$'000
Parent entity
At
Parent entity
30 June
At
2015
30 June
$'000
2015
$'000
30 June
2014
30 June
$'000
2014
$'000
ASSETS
Current assets
ASSETS
Cash and cash equivalents
Current assets
Trade and other receivables
Cash and cash equivalents
Available-for-sale financial assets
Trade and other receivables
Other current assets
Available-for-sale financial assets
Assets classified as held for sale
Other current assets
Assets classified as held for sale
Total current assets
Non-current assets
Total current assets
Property, plant and equipment
Non-current assets
Intangible assets
Property, plant and equipment
Deferred tax assets
Intangible assets
Other non-current assets
Deferred tax assets
Total non-current assets
Other non-current assets
Total non-current assets
Total assets
LIABILITIES
Total assets
Current liabilities
LIABILITIES
Trade and other payables
Current liabilities
Current tax liabilities
Trade and other payables
Provisions
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Total current liabilities
Trade and other payables
Non-current liabilities
Deferred tax liabilities
Trade and other payables
Provisions
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Net assets
Issued capital
EQUITY
Reserves
Issued capital
Retained earnings/(accumulated losses)
Reserves
Retained earnings/(accumulated losses)
Total equity
Total equity
9
9
11
11
10
12
10
13
12
14
13
14
15
15
16
16
16
16
17
18(a)
17
18(b)
18(a)
18(b)
12,227
1,780
12,227
-
1,780
323
-
-
323
-
14,330
14,330
2,068
57
2,068
772
57
-
772
2,897
-
2,897
17,227
17,227
4,333
1,177
4,333
293
1,177
293
5,803
5,803
142
-
142
130
-
130
272
6,075
272
6,075
11,152
11,152
7,004
2,338
7,004
1,810
2,338
1,810
11,152
11,152
7,950
2,745
7,950
12
2,745
362
12
2,238
362
2,238
13,307
13,307
459
83
459
396
83
-
396
938
-
938
14,245
14,245
3,476
757
3,476
232
757
232
4,465
4,465
202
1
202
94
1
94
297
4,762
297
4,762
9,483
9,483
6,432
1,118
6,432
1,933
1,118
1,933
9,483
9,483
8,566
1,757
8,566
-
1,757
272
-
-
272
-
10,595
10,595
2,068
57
2,068
742
57
316
742
3,183
316
3,183
13,778
13,778
3,072
617
3,072
293
617
293
3,982
3,982
142
-
142
130
-
130
272
4,254
272
4,254
9,524
9,524
7,004
2,338
7,004
182
2,338
182
9,524
9,524
The above Consolidated Statements of Financial Position should be read in conjunction with the
accompanying notes.
The above Consolidated Statements of Financial Position should be read in conjunction with the
accompanying notes.
3,479
3,175
3,479
12
3,175
325
12
2,238
325
2,238
9,229
9,229
459
83
459
383
83
316
383
1,241
316
1,241
10,470
10,470
2,190
538
2,190
232
538
232
2,960
2,960
202
1
202
94
1
94
297
3,257
297
3,257
7,213
7,213
6,432
1,118
6,432
(337)
1,118
(337)
7,213
7,213
40
Annual Report 2015
Australian Ethical Investment Limited and its Controlled Entities
Consolidated Statements of Comprehensive Income
For the year ended 30 June 2015
Revenue from continuing operations
Expenses
External services
Employee benefits expense
Depreciation and amortisation expense
Occupancy costs
Marketing and communication costs
Fund related expenses
Loss on disposal of assets
Community grants expense
Impairment of property, plant and equipment
Other expenses
Profit before income tax
Income tax expense
Net profit for the year
Other comprehensive income
Items that will not be reclassified to profit or loss
Net loss on revaluation of available-for-sale financial
assets, net of tax
Net realised loss on available-for-sale financial assets,
net of tax
Other comprehensive income/(loss) for the year,
net of tax
Total comprehensive income for the year
Notes
6
7
7
7
7
7
7
7
8(b)
18(a)
18(a)
Consolidated entity
Parent entity
2015
$'000
21,171
(1,714)
(9,051)
(186)
(485)
(762)
(2,916)
(74)
(373)
(484)
(1,548)
(17,593)
3,578
(1,608)
1,970
-
-
-
1,970
2014
$'000
19,889
2015
$'000
18,240
2014
$'000
15,692
(2,018)
(7,148)
(272)
(439)
(1,007)
(2,770)
(15)
(302)
(282)
(1,503)
(15,756)
4,133
(1,590)
2,543
(1,330)
(8,956)
(186)
(485)
(748)
(952)
(74)
(373)
(484)
(1,435)
(15,023)
3,217
(605)
2,612
(1,667)
(7,026)
(272)
(439)
(995)
(800)
(15)
(302)
(282)
(1,400)
(13,198)
2,494
(810)
1,684
(1)
(7)
(8)
2,535
-
-
-
2,612
2015
Cents
(1)
(7)
(8)
1,676
2014
Cents
Earnings per share for profit attributable to the ordinary equity
holders of the Group:
Basic earnings per share
Diluted earnings per share
27(a)
27(b)
190.00
180.69
248.51
241.13
The above Consolidated Statements of Comprehensive Income should be read in conjunction with the
accompanying notes.
41
Australian Ethical
Australian Ethical Investment Limited and its Controlled Entities
Consolidated Statements of Changes in Equity
For the year ended 30 June 2015
Consolidated entity
Notes
Balance at 1 July 2013
Net profit for the year
Other comprehensive loss for the year
Total comprehensive income for the year
Transactions with owners in their capacity as
owners:
Shares issued during the year
Dividends provided for or paid
Employee share scheme - Rights
Balance at 30 June 2014
Balance at 1 July 2014
Net profit for the year
Other comprehensive loss for the year
Total comprehensive income for the year
Transactions with owners in their capacity as
owners:
Shares issued during the year
Dividends provided for or paid
Employee share scheme - Rights
Employee share plan - Deferred
Balance at 30 June 2015
Issued
capital
$'000
6,278
-
-
-
Asset
revaluation
reserve
$'000
4
-
(8)
(8)
Other
reserves
$'000
345
-
-
-
Retained
earnings
$'000
669
2,543
-
2,543
17(b)
19
18(a)
17(b)
19
18(a)
18(a)
154
-
-
154
6,432
6,432
-
-
-
572
-
-
-
572
7,004
-
-
-
-
(4)
(4)
-
4
4
-
-
-
-
-
-
(154)
-
931
777
1,122
1,122
-
-
-
(572)
-
1,472
316
1,216
2,338
-
(1,279)
-
(1,279)
1,933
1,933
1,970
(4)
1,966
-
(2,089)
-
-
(2,089)
1,810
The above Consolidated Statements of Changes in Equity should be read in conjunction with the
accompanying notes.
Total
$'000
7,296
2,543
(8)
2,535
-
(1,279)
931
(348)
9,483
9,483
1,970
-
1,970
-
(2,089)
1,472
316
(301)
11,152
42
Annual Report 2015
Australian Ethical Investment Limited and its Controlled Entities
Consolidated Statements of Changes in Equity
For the year ended 30 June 2015
(continued)
Parent entity
Notes
Balance at 1 July 2013
Net profit for the year
Other comprehensive loss for the year
Total comprehensive income for the year
Transactions with owners in their capacity as
owners:
Shares issued during the year
Dividends provided for or paid
Employee share scheme - Rights
Balance at 30 June 2014
Balance at 1 July 2014
Net profit for the year
Other comprehensive income for the year
Total comprehensive income for the year
Transactions with owners in their capacity as
owners:
Shares issued during the year
Dividends provided for or paid
Employee share scheme - Rights
Employee share plan - Deferred
Balance at 30 June 2015
Issued
capital
$'000
6,278
-
-
-
Asset
revaluation
reserve
$'000
4
-
(8)
(8)
Other
reserves
$'000
345
-
-
-
Accumulated
losses
$'000
(742)
1,684
-
1,684
17(b)
19
18(a)
17(b)
19
18(a)
18(a)
154
-
-
154
6,432
6,432
-
-
-
572
-
-
-
572
7,004
-
-
-
-
(4)
(4)
-
4
4
-
-
-
-
-
-
(154)
-
931
777
1,122
1,122
-
-
-
(572)
-
1,472
316
1,216
2,338
-
(1,279)
-
(1,279)
(337)
(337)
2,612
(4)
2,608
-
(2,089)
-
-
(2,089)
182
Total
$'000
5,885
1,684
(8)
1,676
-
(1,279)
931
(348)
7,213
7,213
2,612
-
2,612
-
(2,089)
1,472
316
(301)
9,524
The above Consolidated Statements of Changes in Equity should be read in conjunction with the
accompanying notes.
43
Australian Ethical
Australian Ethical Investment Limited and its Controlled Entities
Consolidated Statements of Cash Flows
For the year ended 30 June 2015
Notes
Consolidated entity
Parent entity
2015
$'000
2014
$'000
2015
$'000
2014
$'000
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Income taxes paid
Community grants paid
Net cash inflow from operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Proceeds from sale of property, plant and
equipment
Proceeds from buyback/sale of investments
Payments for intangibles
Dividends received from subsidiary
Net cash outflow from investing activities
Cash flows from financing activities
Dividends paid to the Company's shareholders
Net cash outflow from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the
year
Cash and cash equivalents at end of year
23
10
9
36,273
(28,399)
205
(1,426)
(200)
6,453
(67)
5
1
(26)
-
(87)
(2,089)
(2,089)
4,277
7,950
12,227
27,868
(21,210)
143
(1,321)
(117)
5,363
31,028
(25,940)
133
(746)
(200)
4,275
12,768
(10,980)
82
(486)
(117)
1,267
(87)
1
87
(29)
-
(28)
(67)
5
1
(26)
2,988
2,901
(87)
1
87
(29)
956
928
(1,279)
(1,279)
4,056
3,894
7,950
(2,089)
(2,089)
5,087
3,479
8,566
(1,279)
(1,279)
916
2,563
3,479
The above Consolidated Statements of Cash Flows should be read in conjunction with the accompanying notes.
44
Annual Report 2015
Australian Ethical Investment Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
30 June 2015
Contents of the Notes to the Financial Statements
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
General information
Summary of significant accounting policies
Financial risk management
Fair value measurements
Critical accounting estimates and judgements
Revenue
Expenses
Income tax expense
Current assets - Cash and cash equivalents
Non-current assets - Property, plant and equipment
Reclassification of assets classified as held for sale
Non-current assets - Intangible assets
Non-current assets - Deferred tax assets
Other non-current assets
Current liabilities - Trade and other payables
Provisions
Issued capital
Reserves and retained earnings
Dividends
Key management personnel disclosures
Remuneration of auditors
Related party transactions
Reconciliation of profit after income tax to net cash inflow from operating activities
Subsidiaries
Events occurring after the reporting period
Share-based payments
Earnings per share
Commitments and contingencies
Page
31
31
39
43
44
44
44
46
47
47
49
50
51
52
52
52
53
54
55
56
57
58
60
60
61
61
63
64
45
Australian Ethical
Australian Ethical Investment Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
30 June 2015
(continued)
1 General information
The financial report covers the consolidated entity of Australian Ethical Investment Limited and its wholly owned
subsidiaries (together referred to as the 'Group' and individually as 'Group entities') and Australian Ethical
Investment Limited as an individual parent entity. Australian Ethical Investment Limited is a listed public company
(ASX: AEF) and both the parent and wholly owned entities are incorporated and domiciled in Australia.
The Company's controlled entities are: Australian Ethical Superannuation Pty Limited and Australian Ethical
Investment Limited Employee Share Plan Trust.
The Group is a for-profit entity for the purposes of preparing financial statements. Australian Ethical Investment
Limited is the Responsible Entity (RE) for a range of ethically managed investment schemes. Australian Ethical
Superannuation Pty Limited is the Registrable Superannuation Entity (RSE) of Australian Ethical Retail
Superannuation Fund. Australian Ethical Investment Limited Employee Share Plan Trust is a newly established
employee deferred share plan trust.
The consolidated financial report for the consolidated entity as of and for the year ended 30 June 2015 is
available at www.australianethical.com.au.
The consolidated financial report was authorised for issue by the directors on 28 August 2015.
2 Summary of significant accounting policies
The principal accounting policies adopted in the preparation of these consolidated financial statements are set
out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
(a) Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting
Standards and interpretations issued by the Australian Accounting Standards Board and the Corporations Act
2001.
The consolidated financial statements are presented in Australian dollars, which is the Group's functional
currency.
(i) Compliance with IFRS
The consolidated financial statements of the Australian Ethical Investment Limited and its Controlled Entities and
the separate financial statements of Australian Ethical Investment Limited also comply with International Financial
Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
(ii) New and amended standards adopted by the Group
There are no standards, interpretations or amendments to existing standards that are effective for the first time
for the financial year beginning 1 July 2014 that have a material impact on the Group.
(iii) Historical cost convention
These financial statements have been prepared under the accruals basis and are based on historical cost
convention, as modified by the revaluation of available-for-sale financial assets and property, plant and
equipment.
(iv) Critical accounting estimates
The preparation of financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group's accounting policies. The areas
involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant
to the financial statements, are disclosed in Note 5.
46
Annual Report 2015
Australian Ethical Investment Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
30 June 2015
(continued)
2 Summary of significant accounting policies (continued)
(a) Basis of preparation (continued)
(v) New standards and interpretations not yet adopted
Australian Ethical Investment Limited and its Controlled Entities
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June
Notes to the Consolidated Financial Statements
2015 reporting periods and have not been early adopted by the Group. The Group’s assessment of the impact of
30 June 2015
these new standards and interpretations is set out below.
(continued)
There are no other standards that are not yet effective and that would be expected to have a material impact on
the Group in the current or future reporting periods and on foreseeable future transactions.
2 Summary of significant accounting policies (continued)
(b) Principles of consolidation
(a) Basis of preparation (continued)
(i) Subsidiaries
(v) New standards and interpretations not yet adopted
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June
an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and
2015 reporting periods and have not been early adopted by the Group. The Group’s assessment of the impact of
these new standards and interpretations is set out below.
has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date
that control ceases.
There are no other standards that are not yet effective and that would be expected to have a material impact on
The acquisition method of accounting is used to account for business combinations by the Group.
the Group in the current or future reporting periods and on foreseeable future transactions.
Intercompany transactions, balances and unrealised gains on transactions between Group companies are
(b) Principles of consolidation
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of
(i) Subsidiaries
the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls
Parent entity financial statements are now included in the financial report.
an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and
has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully
(ii) Employee Share Trust
consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date
that control ceases.
For reporting purposes the Australian Ethical Investment Limited Employee Share Plan Trust has been treated as
a branch of the Company. The assets and liabilities of the Trust are accounted for as assets and liabilities of the
The acquisition method of accounting is used to account for business combinations by the Group.
Company on the basis that the Trust is merely acting as an agent of the Company.
Intercompany transactions, balances and unrealised gains on transactions between Group companies are
(c) Revenue recognition
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of
Revenue is measured at the fair value of the consideration received or receivable.
the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
(i) Revenue from the provision of services
Parent entity financial statements are now included in the financial report.
Revenue is earned from provision of services to customers outside the consolidated entity. Revenue is
recognised when services are provided.
(ii) Employee Share Trust
(ii) Dividends
For reporting purposes the Australian Ethical Investment Limited Employee Share Plan Trust has been treated as
a branch of the Company. The assets and liabilities of the Trust are accounted for as assets and liabilities of the
Dividends are recognised as revenue when the right to receive payment is established.
Company on the basis that the Trust is merely acting as an agent of the Company.
(iii) Interest income
(c) Revenue recognition
Interest income is recognised using the effective interest method.
Revenue is measured at the fair value of the consideration received or receivable.
(i) Revenue from the provision of services
Revenue is earned from provision of services to customers outside the consolidated entity. Revenue is
recognised when services are provided.
(ii) Dividends
Dividends are recognised as revenue when the right to receive payment is established.
(iii) Interest income
Interest income is recognised using the effective interest method.
47
Australian Ethical
Australian Ethical Investment Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
30 June 2015
(continued)
2 Summary of significant accounting policies (continued)
(c) Revenue recognition (continued)
(iv) Profit or loss from sale of assets
Net gains or losses on disposal of non-current assets are included in profit or loss. The gain or loss arising from
disposal of an item of property, plant and equipment is determined as the difference between net disposal
proceeds, being the cash price equivalent where payment is deferred, and the carrying amount of the item.
Profit or loss on disposal of assets is brought to account at the date an unconditional contract of sale is signed.
(d) Income tax
(i) Current tax
The income tax expense or revenue for the period is the tax payable on the current period's taxable income
based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and
liabilities attributable to temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantially enacted at the
end of the reporting period. Management periodically evaluates positions taken in tax returns with respect to
situations in which applicable tax regulation is subject to interpretation. It establishes provisions where
appropriate on the basis of amounts expected to be paid to the tax authorities.
(ii) Deferred tax
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the
tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred
income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other
than a business combination that at the time of the transaction affects neither accounting nor taxable profit or
loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially
enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset
is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised only if it is probable that future taxable amounts will be available to utilise
those temporary differences and losses.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets
and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and
tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a
net basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax is recognised in profit or loss in the Consolidated Statements of Comprehensive
Income, except to the extent that it relates to items recognised in other comprehensive income or directly in
equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
(iii) Tax group
Australian Ethical Investment Limited and its wholly owned entities 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 tax consolidated group has 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 Limited 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 Australian Taxation Office for group tax liabilities.
48
Annual Report 2015
Australian Ethical Investment Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
30 June 2015
(continued)
2 Summary of significant accounting policies (continued)
(e) Leases
Lease income from operating leases where the Group is a lessor is recognised in income on a straight-line basis
over the lease term, except where another systematic basis is more representative of the time pattern in which
economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are
recognised as an expense in the period in which they are incurred. The respective leased assets are included in
the Consolidated Statements of Financial Position based on their nature.
In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a
liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line
basis, except where another systematic basis is more representative of the time pattern in which economic
benefits from the leased asset are consumed.
(f) Impairment of tangible assets
At the end of each reporting period, the Group reviews the carrying amounts of its tangible assets to determine
whether there is any indication that those assets have suffered an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).
The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use,
the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects
the current market assessments of the time value of money and the risks specific to the asset for which the
estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the
asset is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.
When an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised
estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss been recognised for the asset in prior years. A
reversal of an impairment loss is recognised immediately in profit or loss.
(g) Cash and cash equivalents
For the purpose of presentation in the Consolidated Statements of Cash Flows, cash and cash equivalents
includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments
with original maturities of three months or less that are readily convertible to known amounts of cash and which
are subject to an insignificant risk of changes in value.
(h) Financial instruments
Recognition and derecognition
The Group initially recognises financial instruments at fair value on the date that they are originated. All other
financial instruments are initially recognised on trade date, which is the date the Group becomes party to the
contractual rights or obligations. Subsequent to initial recognition these instruments are measured as set out
below.
(i) Available-for-sale financial assets
The Group holds available-for-sale financial assets, which are financial assets not classified as assets held at fair
value through profit or loss, loans and receivables or held-to-maturity investments. Available-for-sale financial
assets are initially recognised at fair value plus any directly attributable transaction costs. Subsequent to initial
recognition they are measured at fair value other than impairment losses and are recognised in other
comprehensive income and presented in the Asset Revaluation Reserve in equity.
49
Australian Ethical
Australian Ethical Investment Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
30 June 2015
(continued)
2 Summary of significant accounting policies (continued)
(h) Financial instruments (continued)
(ii) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. They are included in current assets, except for those with maturities greater than 12
months after the reporting period which are classified as non-current assets. Loans and receivables are included
in trade and other receivables in the Consolidated Statements of Financial Position.
Interest income is recognised by applying the effective interest rate, except for short-term receivables when the
effect of discounting is immaterial.
The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating
interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated
future cash receipts (including all fees on points paid or received that form an integral part of the effective interest
rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or,
where appropriate, a shorter period.
Determination of Fair Value
Fair value is determined based on current bid prices for all quoted investments. Investments in unlisted unit trusts
are valued at the redemption price as reported by the fund's responsible entity.
Impairment
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset
or a group of financial assets is impaired. A financial asset or a group of financial assets is impaired and
impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events
that occurred after the initial recognition of the asset (a 'loss event') and that loss event (or events) has an impact
on the estimated future cash flows of the financial asset or group of financial assets that can be reliably
estimated. In the case of equity investments classified as available-for-sale, a significant or prolonged decline in
the fair value of the security below its cost is considered an indicator that the assets are impaired.
The amount of impairment loss is recognised in the Consolidated Statements of Comprehensive Income within
other expenses.
(i) Other financial liabilities
Other financial liabilities, including borrowings and trade and other payables, are initially measured at fair value,
net of transaction costs.
Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with
interest expense recognised on an effective yield basis.
(j) Property, plant and equipment
Recognition and measurement
Property, plant and equipment are measured at cost less accumulated depreciation and impairment losses (see
accounting policy 2(f)). The carrying amount of property, plant and equipment is reviewed annually to ensure that
it is not in excess of the recoverable amount from these assets. Historical cost includes expenditure that is
directly attributable to the acquisition of the items. Cost of self-constructed assets includes cost of materials,
direct labour, an appropriate proportion of overheads, and where relevant, the initial estimates of the costs of
dismantling and removing the items and restoring the site on which they are located. Purchased software that is
integral to the functionality of the related equipment is capitalised as part of that equipment.
Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as
separate items of property, plant and equipment.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included
in profit or loss. When revalued assets are sold, it is Group policy to transfer any amounts included in other
reserves in respect of those assets to retained earnings.
50
Annual Report 2015
Australian Ethical Investment Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
30 June 2015
(continued)
2 Summary of significant accounting policies (continued)
(j) Property, plant and equipment (continued)
Subsequent costs
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits associated with the item will flow to the Group and the cost
of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset
is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the
reporting period in which they are incurred.
Depreciation
The depreciable amount of all fixed assets including buildings, is depreciated over their estimated useful lives on
a straight-line basis to the consolidated entity commencing from the time the asset is held ready for use.
Leasehold improvements are depreciated over the period of the lease or estimated useful life, whichever is the
shorter, using the straight line method.
The estimated useful lives for current and comparative periods are as follows:
Class of fixed asset
Buildings
Plant & Equipment
Estimated useful life
5 - 40 years
2.6 - 10 years
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each
reporting period.
(k) Intangible assets
The development of the Group's website has been capitalised as an intangible asset and carried at cost less
accumulated amortisation and accumulated impairment losses. Additional developments were made to the
website during the year ended 2015. Amortisation is recognised on a straight-line basis over the estimated useful
life of two and a 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.
(l) Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past
events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be
reliably estimated.
(m) Employee benefits
(i) Wages, salaries, annual leave, sick leave and non-monetary benefits
Liabilities for wages and salaries and annual leave that are expected to be settled within 12 months after the end
of the period in which the employees render the related service are recognised in respect of employees’ services
up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities
are settled. The liabilities are presented as current employee benefit obligations in the Consolidated Statements
of Financial Position and includes related on-costs, such as workers compensation insurance and payroll tax.
Non-accumulating benefits, such as sick leave, are not provided for but are expensed as the benefits are taken
by the employees.
A provision is recognised for the amount expected to be paid under short-term bonus or profit-sharing plans if the
consolidated entity has a present legal or constructive obligation to pay this amount as a result of past service
provided by the employee.
During the year ended 30 June 2014, employee benefits included an amount of $409,831 for redundancy costs
incurred during the year as a result of closure of the Canberra office.
There were no redundancy costs during the year ended 30 June 2015.
51
Australian Ethical
Australian Ethical Investment Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
30 June 2015
(continued)
2 Summary of significant accounting policies (continued)
(m) Employee benefits (continued)
(ii) Long service leave
The liability for long service leave is recognised in the provision for employee benefits and expected future
payments are discounted based on period of service.
(iii) Share-based payments
The grant-date fair value of share-based payment awards granted to employees is recognised as an employee
expense, with a corresponding increase in equity, over the period that the employees become unconditionally
entitled to the awards.
The amount recognised as an expense is adjusted to reflect the number of awards for which the related service
conditions are expected to be met and the prevailing share price. The objective is that the amount ultimately
recognised as an expense is based on the number of awards that meet the related service conditions at the
vesting date.
(iv) Employee share trust
Long term incentives for employees are held as shares in an employee share trust with various vesting
conditions.
(v) Employee bonus
The Group recognises a liability and an expense for bonuses based on individual key performance indicators.
Key staff key performance indicators include profit targets. The Group recognises a provision where contractually
obliged or where there is a past practice that has created a constructive obligation.
(n) 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:
• paid or provisioned for payment to current employees, or other persons performing work for the Group, a
work related bonus or incentive payment, set at the discretion of the directors, but to be no more than 30
percent (30%) of what the profit for that year would have been had not the bonus or incentive payment
been deducted.
• gifted or provisioned for gifting an amount equivalent to ten percent (10%) of what the profit for that year
would have been had not the above mentioned bonus and amount gifted been deducted.
Provision for community grants expense has been made in the current year.
(o) Issued capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax,
from the proceeds.
(p) Dividends
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the
discretion of the Company, on or before the end of the reporting period but not distributed at the end of the
reporting period.
52
Annual Report 2015
Australian Ethical Investment Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
30 June 2015
(continued)
2 Summary of significant accounting policies (continued)
(q) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing:
•
the profit attributable to owners of the Group, excluding any costs of servicing equity other than ordinary
shares
• by the weighted average number of ordinary shares outstanding during the financial year, adjusted for
bonus elements in ordinary shares issued during the year and excluding treasury shares.
(ii) 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 interest and other financing costs associated with dilutive potential ordinary
shares, and
the weighted average number of additional ordinary shares that would have been outstanding assuming
the conversion of all dilutive potential ordinary shares.
•
(r) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred
is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the
asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of
GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the
Consolidated Statements of Financial Position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or
financing activities which are recoverable from, or payable to the taxation authority, are presented as operating
cash flows.
All revenue are stated net of the amount of GST.
(s) Rounding of amounts
The Group is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments
Commission, relating to the 'rounding off' of amounts in the financial statements. Amounts in the financial
statements have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in
certain cases, the nearest dollar.
(t) Functional and presentation currency
The functional and presentation currency of the Company is Australian dollars.
(u) Comparatives
Where necessary, comparative information has been reclassified to be consistent with current reporting period.
As this is the first year that the Parent entity information has been presented, comparative information has been
provided.
53
Australian Ethical
Australian Ethical Investment Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
30 June 2015
(continued)
3 Financial risk management
The Group's activities expose it to a variety of financial risks: market risk (including currency risk, price risk,
management risk and interest rate risk), credit risk and liquidity risk. The Board of the Company has in place a
risk management framework to mitigate these risks.
Risk management framework
The Group recognises that risk is part of doing business and that the ongoing management of risk is critical to its
success. The approach to managing risk is articulated in the Risk Management Strategy and the Risk Appetite
Statement. The Risk & Compliance Manager is responsible for the design and maintenance of the risk and
compliance framework, establishing and maintaining group wide risk management policies, and providing regular
risk reporting to the Board, the Audit, Compliance & Risk Committee (ACRC). The Board regularly monitors the
overall risk profile of the group and sets the risk appetite for the group, usually in conjunction with the annual
planning process.
The Board is responsible for ensuring that management have appropriate processes in place for managing all
types of risk, ranging from financial risk to operational risk. To assist in providing ongoing assurance and comfort
to the Board, responsibility for risk management oversight has been delegated to the ACRC. The main functions
of this Committee are to oversee the consolidated entity’s accounting policies and practices, the integrity of
financial statements and reports, the scope, quality and independence of external audit arrangements, the
monitoring of the internal audit function, the effectiveness of risk management policies and the adequacy of
insurance programs. This Committee is also responsible for monitoring overall legal and regulatory compliance.
The activities of the Group expose it to the following financial risks: market risk, credit risk liquidity risk. These are
distinct from the financial risks borne by customers which arise from financial assets managed by the
consolidated entity in its role as fund manager, trustee and responsible entity.
The following discussion relates to financial risks exposure of the consolidated entity in its own right.
(a) Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of
changes in market prices.
(i) Currency risk
Exposure
The Group is not directly exposed to currency risk as all its monetary financial instruments are quoted in
Australian dollars.
(ii) Price risk
Exposure
The Group is exposed to price risk on equity securities listed or quoted on recognised exchanges. This arises
from investments held by the Group and classified in the Consolidated Statements of Financial Position as
available for sale financial assets.
There was no exposure to market securities price risk at 30 June 2015 and an insignificant exposure as at 30
June 2014.
54
Annual Report 2015
Australian Ethical Investment Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
30 June 2015
(continued)
3 Financial risk management (continued)
(a) Market risk (continued)
Sensitivity
Consolidated entity
Index
Change in variable +/- 10% (2014: +/-10%)
Parent entity
Index
Change in variable +/- 10% (2014: +/-10%)
Impact on other
components of equity
2014
$'000
1
2015
$'000
-
Impact on other
components of equity
2014
$'000
1
2015
$'000
-
(iii) Market risks arising from Funds under Management
Exposure
The Group’s revenue is significantly dependent on Funds Under Management (‘FUM’) which is influenced by
equity market movements. Management calculates that a 1% movement in FUM changes annualised revenue by
approximately $205,000 (2014: $164,000).
(iv) Cash flow and fair value interest rate risk
The Group's interest bearing financial assets expose it to risks associated with the effects of fluctuations in the
prevailing levels of market interest rates on its financial position and cash flows. The risk is measured using
sensitivity analysis.
The consolidated entity and parent entity’s exposure to interest rate risk arise predominantly on cash balances
held with banks. In order to manage the interest rate risk relating to bank deposits the CFO reviews the interest
rates on those deposits on a regular basis.
Sensitivity
Consolidated entity
Impact on post-tax profit
Interest rates - increase by 100 basis points (100 bps)
Interest rates - decrease by 100 basis points (100 bps)
Parent entity
Interest rates - increase by 100 basis points (100 bps)
Interest rates - decrease by 100 basis points (100 bps)
2015
$'000
122
(122)
2014
$'000
79
(79)
Impact on post-tax profit
2015
$'000
86
(86)
2014
$'000
35
(35)
55
Australian Ethical
Australian Ethical Investment Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
30 June 2015
(continued)
3 Financial risk management (continued)
(b) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or a counterparty to a financial instruction fails to
meet its contractual obligations.
The Group is predominantly exposed to credit risk on its deposits with banks and financial institutions, outstanding
receivables and committed transactions. The maximum exposure of the Group to credit risk on financial assets
which have been recognised on the Consolidated Statements of Financial Position is the carrying amount, net of
any provision for doubtful debts.
The Group manages this risk by settling the receivables from the managed investment schemes and
superannuation fund on a weekly or monthly basis and holding cash and cash equivalents at financial institutions
with a Standard & Poor’s rating of ‘A’ or higher.
The table below outlines the Group’s maximum exposure to credit risk as at reporting date.
Cash and cash equivalents
Trade and other receivables
Consolidated entity
Parent entity
2015
$'000
12,227
1,780
14,007
2014
$'000
7,950
2,745
10,695
2015
$'000
8,566
1,757
10,323
2014
$'000
3,479
3,175
6,654
There are currently no past due receivables as at 30 June 2015 (2014: nil).
(c) Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated with financial
liabilities.
The Group’s approach to managing liquidity is to maintain a level of cash or liquid investments sufficient to meet
its ongoing financial obligations. The Group manages liquidity risk by continually monitoring forecast and actual
cash flows, and by matching the maturity profiles of financial assets and liabilities. Surplus funds are generally
only invested in instruments that are tradeable in highly liquid markets. In addition, a twelve month forecast of
liquid assets, cash flows and balance sheet is reviewed by the Board annually as part of the budget process to
ensure there is sufficient liquidity within the Group.
Maturities of financial liabilities
The tables below analyse the Group's non-derivative financial liabilities into relevant maturity groupings based on
their contractual maturities at year end date.
The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months
equal their carrying balances as the impact of discounting is not significant.
Contractual maturities of financial liabilities
Less than 6
months
6 - 12
months
$'000
$'000
More than
12 months
$'000
Consolidated entity - at 30 June 2015
Trade and other payables
Provisions
3,964
-
3,964
309
293
602
-
130
130
56
Annual Report 2015
Australian Ethical Investment Limited and its Controlled Entities
Australian Ethical Investment Limited and its Controlled Entities
Australian Ethical Investment Limited and its Controlled Entities
Australian Ethical Investment Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
30 June 2015
30 June 2015
30 June 2015
30 June 2015
(continued)
(continued)
(continued)
(continued)
3 Financial risk management (continued)
3 Financial risk management (continued)
3 Financial risk management (continued)
3 Financial risk management (continued)
(c) Liquidity risk (continued)
(c) Liquidity risk (continued)
(c) Liquidity risk (continued)
(c) Liquidity risk (continued)
Consolidated entity - at 30 June 2014
Consolidated entity - at 30 June 2014
Consolidated entity - at 30 June 2014
Consolidated entity - at 30 June 2014
a
a
a
a
Trade and other payables
Trade and other payables
Trade and other payables
Trade and other payables
Provisions
Provisions
Provisions
Provisions
Parent entity - at 30 June 2015
Parent entity - at 30 June 2015
Parent entity - at 30 June 2015
Parent entity - at 30 June 2015
Trade and other payables
Trade and other payables
Trade and other payables
Trade and other payables
Provisions
Provisions
Provisions
Provisions
Less than 6
Less than 6
Less than 6
months
Less than 6
months
months
months
$'000
$'000
$'000
$'000
6 - 12
6 - 12
6 - 12
months
6 - 12
months
months
months
$'000
$'000
$'000
$'000
More than
More than
More than
12 months
More than
12 months
12 months
12 months
$'000
$'000
$'000
$'000
3,140
3,140
3,140
3,140
-
-
-
-
3,140
3,140
3,140
3,140
275
275
275
275
232
232
232
232
507
507
507
507
-
-
-
-
94
94
94
94
94
94
94
94
2,703
2,703
2,703
2,703
-
-
-
-
2,703
2,703
2,703
2,703
1,854
1,854
1,854
1,854
-
-
-
-
1,854
1,854
1,854
1,854
309
309
309
309
293
293
293
293
602
602
602
602
275
275
275
275
232
232
232
232
507
507
507
507
-
-
-
-
130
130
130
130
130
130
130
130
-
-
-
-
94
94
94
94
94
94
94
94
Parent entity - at 30 June 2014
Parent entity - at 30 June 2014
Parent entity - at 30 June 2014
Parent entity - at 30 June 2014
Trade and other payables
Trade and other payables
Trade and other payables
Trade and other payables
Provisions
Provisions
Provisions
Provisions
(d) Capital management
(d) Capital management
(d) Capital management
(d) Capital management
(i) Capital requirements
(i) Capital requirements
(i) Capital requirements
(i) Capital requirements
The Group manages its capital to ensure that the level of financial conservatism is appropriate for its businesses.
The Group manages its capital to ensure that the level of financial conservatism is appropriate for its businesses.
The Group manages its capital to ensure that the level of financial conservatism is appropriate for its businesses.
Capital is managed to provide business stability and accommodate the growth needs of the Group.
The Group manages its capital to ensure that the level of financial conservatism is appropriate for its businesses.
Capital is managed to provide business stability and accommodate the growth needs of the Group.
Capital is managed to provide business stability and accommodate the growth needs of the Group.
Capital is managed to provide business stability and accommodate the growth needs of the Group.
Part of the capital management of the Group is to determine the dividend policy. Dividends paid to shareholders
Part of the capital management of the Group is to determine the dividend policy. Dividends paid to shareholders
Part of the capital management of the Group is to determine the dividend policy. Dividends paid to shareholders
Part of the capital management of the Group is to determine the dividend policy. Dividends paid to shareholders
are typically in the range of 80-100 per cent of the Group’s net profit after tax attributable to members of the
are typically in the range of 80-100 per cent of the Group’s net profit after tax attributable to members of the
are typically in the range of 80-100 per cent of the Group’s net profit after tax attributable to members of the
are typically in the range of 80-100 per cent of the Group’s net profit after tax attributable to members of the
Company, which is in line with the historical dividend range paid to shareholders. In certain circumstances, the
Company, which is in line with the historical dividend range paid to shareholders. In certain circumstances, the
Company, which is in line with the historical dividend range paid to shareholders. In certain circumstances, the
Board may declare a dividend outside that range.
Company, which is in line with the historical dividend range paid to shareholders. In certain circumstances, the
Board may declare a dividend outside that range.
Board may declare a dividend outside that range.
Board may declare a dividend outside that range.
As at year end the Group had no long term debt arrangements.
As at year end the Group had no long term debt arrangements.
As at year end the Group had no long term debt arrangements.
As at year end the Group had no long term debt arrangements.
(ii) External requirements
(ii) External requirements
(ii) External requirements
(ii) External requirements
In connection with operating a funds management business in Australia the Parent entity is required to hold an
In connection with operating a funds management business in Australia the Parent entity is required to hold an
In connection with operating a funds management business in Australia the Parent entity is required to hold an
In connection with operating a funds management business in Australia the Parent entity is required to hold an
Australian Financial Services Licence (AFSL). As a holder of an AFSL, the Australian Securities & Investment
Australian Financial Services Licence (AFSL). As a holder of an AFSL, the Australian Securities & Investment
Australian Financial Services Licence (AFSL). As a holder of an AFSL, the Australian Securities & Investment
Commission (ASIC) requires the Company to:
Australian Financial Services Licence (AFSL). As a holder of an AFSL, the Australian Securities & Investment
Commission (ASIC) requires the Company to:
Commission (ASIC) requires the Company to:
Commission (ASIC) requires the Company to:
• prepare 12-month cash-flow projections which must be approved at least quarterly by directors, and reviewed
• prepare 12-month cash-flow projections which must be approved at least quarterly by directors, and reviewed
• prepare 12-month cash-flow projections which must be approved at least quarterly by directors, and reviewed
• prepare 12-month cash-flow projections which must be approved at least quarterly by directors, and reviewed
• hold at all times minimum Net Tangible Assets (NTA) the greater of:
• hold at all times minimum Net Tangible Assets (NTA) the greater of:
• hold at all times minimum Net Tangible Assets (NTA) the greater of:
• hold at all times minimum Net Tangible Assets (NTA) the greater of:
annually by auditors;
annually by auditors;
annually by auditors;
annually by auditors;
(a) $150,000
(a) $150,000
(a) $150,000
(a) $150,000
(b) 0.5% of the average value of scheme property (capped at $5 million); or
(b) 0.5% of the average value of scheme property (capped at $5 million); or
(b) 0.5% of the average value of scheme property (capped at $5 million); or
(b) 0.5% of the average value of scheme property (capped at $5 million); or
(c) 10% of the average responsible entity revenue (uncapped).
(c) 10% of the average responsible entity revenue (uncapped).
(c) 10% of the average responsible entity revenue (uncapped).
(c) 10% of the average responsible entity revenue (uncapped).
The Company must hold at least 50% of its minimum NTA requirement as cash or cash equivalents and hold at
The Company must hold at least 50% of its minimum NTA requirement as cash or cash equivalents and hold at
The Company must hold at least 50% of its minimum NTA requirement as cash or cash equivalents and hold at
The Company must hold at least 50% of its minimum NTA requirement as cash or cash equivalents and hold at
least $50,000 in Surplus Liquid Funds (SLF).
least $50,000 in Surplus Liquid Funds (SLF).
least $50,000 in Surplus Liquid Funds (SLF).
least $50,000 in Surplus Liquid Funds (SLF).
The Company has complied with these requirements at all times during the year.
The Company has complied with these requirements at all times during the year.
The Company has complied with these requirements at all times during the year.
The Company has complied with these requirements at all times during the year.
57
Australian Ethical
Australian Ethical Investment Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
30 June 2015
(continued)
4 Fair value measurements
The Group measures and recognises the following assets at fair value on a recurring basis:
• Available-for-sale financial assets
The Group has no assets or liabilities measured at fair value on a non-recurring basis in the current reporting
period.
(a) Fair value hierarchy
AASB 13 requires disclosure of fair value measurements by level of the following fair value measurement
hierarchy:
(a) quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1)
(b) inputs other than quoted prices included within level 1 that are observable for the asset or liability,
either directly (as prices) or indirectly (derived from prices) (level 2), and
(c) inputs for the asset or liability that are not based on observable market data (unobservable inputs)
(level 3).
The Consolidated Entity and Parent Entity did not have any available for sale investments at 30 June 2015.
Recurring fair value measurements
Consolidated entity - at 30 June 2014
Financial assets
Available-for-sale financial assets
Australian listed equity securities
Total financial assets
Recurring fair value measurements
Parent entity - at 30 June 2014
Financial assets
Available-for-sale financial assets
Australian listed equity securities
Total financial assets
Level 1
$'000
Level 2
$'000
Level 3
$'000
12
12
Level 1
$'000
12
12
-
-
Level 2
$'000
-
-
Level 3
$'000
-
-
-
-
Total
$'000
12
12
Total
$'000
12
12
There were no transfers between Level 1 and 2 in the year.
(i) Disclosed fair values
For all financial instruments other than those measured at fair value their carrying value approximates fair value.
The carrying amounts of trade and other receivables and payables are assumed to approximate their fair values
due to their short-term nature.
58
Annual Report 2015
Australian Ethical Investment Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
30 June 2015
(continued)
5 Critical accounting estimates and judgements
The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom
equal the actual results. Management also needs to exercise judgement in applying the Group’s accounting
policies.
(a) Significant estimates and judgements
The areas involving significant estimates or judgements are:
• Assessment of impairment of property, plant and equipment - Note 10
• Estimation of provisions - Note 16
• Recognition and measurement of share based payments- Note 26
• Recoverability of deferred tax assets - Note 13
Estimates and judgements are continually evaluated and are based on historical experience and other factors,
including expectations of future events that may have a financial impact on the Group and that are believed to be
reasonable under the circumstances.
6 Revenue
From continuing operations
Management fees (net of rebates)
Member and withdrawal fees
Dividends
Administration fees
Interest income
Other income
7 Expenses
External services
Ethical research
Audit
Consultants
Legal services
Other
Employee benefits expense
Staff remuneration
Directors fees
Bonus and rights amortisation
Other employment costs
59
Consolidated entity
Parent entity
2015
$'000
13,642
1,675
-
5,609
205
40
21,171
2014
$'000
9,452
1,443
-
8,835
143
16
19,889
Consolidated entity
2014
2015
$'000
$'000
164
318
379
126
727
1,714
5,699
293
3,019
40
9,051
292
358
770
194
404
2,018
5,612
280
1,223
33
7,148
2015
$'000
15,096
-
2,988
-
133
23
18,240
2015
$'000
164
241
293
109
523
1,330
5,699
198
3,019
40
8,956
2014
$'000
12,079
-
956
2,547
82
28
15,692
Parent entity
2014
$'000
291
279
716
146
235
1,667
5,606
173
1,223
24
7,026
Australian Ethical
Australian Ethical Investment Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
30 June 2015
(continued)
7 Expenses (continued)
Depreciation and amortisation expense
Depreciation
Amortisation
Occupancy costs
Premises
Rates and taxes
Electricity, gas & telephone
Other occupancy costs
Marketing and communication costs
Printing and stationery
Marketing
Fund related expenses
Administration and custody
Licence fees
PDS expense
APRA levy
Other fund related expenses
Other expenses
Insurance
IT
Travel
Subscriptions and listing
Other expenses
Total expenses
Consolidated entity
2014
2015
$'000
$'000
Parent entity
2014
$'000
2015
$'000
134
52
186
268
60
109
48
485
159
603
762
2,447
315
5
88
61
2,916
115
942
247
74
170
1,548
16,662
231
41
272
224
31
105
79
439
135
872
1,007
2,388
219
14
117
32
2,770
118
863
272
38
212
1,503
15,157
134
52
186
268
60
109
48
485
145
603
748
221
258
4
-
469
952
231
41
272
224
31
105
79
439
123
872
995
297
75
-
-
428
800
48
932
239
74
142
1,435
14,092
48
863
270
38
181
1,400
12,599
60
Annual Report 2015
Australian Ethical Investment Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
30 June 2015
(continued)
Income tax expense
8
(a) Income tax expense through profit or loss
Current tax expense
Under/(over) provision in prior year
Deferred tax benefit
Consolidated entity
Parent entity
2015
$'000
2,135
(44)
(483)
1,608
2014
$'000
1,669
-
(79)
1,590
2015
$'000
1,114
(44)
(465)
605
(b) Numerical reconciliation of income tax expense to prima facie tax payable
Consolidated entity
Parent entity
Profit from continuing operations before income tax
benefit
Tax at the Australian tax rate of 30.0% (2014 -
30.0%)
Tax effect of amounts which are not deductible
(taxable) in calculating taxable income:
Non-deductible share based provisions
Non-deductible impairment of property, plant and
equipment
Other non-taxable items
Non-taxable intercompany dividend from AES
Under/(over) provision in prior year
Net realised and unrealised losses on
available-for-sale assets
Income tax expense
2015
$'000
3,578
1,073
442
145
(8)
-
(44)
-
1,608
2014
$'000
4,133
1,240
279
85
(1)
-
(11)
(2)
1,590
2015
$'000
3,217
965
442
145
(7)
(896)
(44)
-
605
The applicable weighted average effective tax rates are as follows:
2014
$'000
889
(13)
(66)
810
2014
$'000
2,494
748
279
85
-
(287)
(13)
(2)
810
(c) Amounts recognised directly in equity
Deferred tax: Employee share plan
Deferred tax: Revaluation of available-for-sale
assets
45%
38%
19%
32%
Consolidated entity
Parent entity
2015
$'000
139
-
139
2014
$'000
-
(1)
(1)
2015
$'000
139
-
139
2014
$'000
-
(1)
(1)
The current tax liabilities for the Group represents income taxes payable in respect of the current financial year. In
accordance with tax consolidation legislation, the Company, as head entity of the Australian tax-consolidated
group, has assumed the current tax asset/(liability) recognised by members in the tax consolidated group.
61
Australian Ethical
Australian Ethical Investment Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
30 June 2015
(continued)
9 Current assets - Cash and cash equivalents
Current assets
Cash at bank
Deposits at call
Consolidated entity
At
30 June
2015
$'000
30 June
2014
$'000
Parent entity
At
30 June
2015
$'000
30 June
2014
$'000
20
12,207
12,227
10
7,940
7,950
15
8,551
8,566
5
3,474
3,479
Cash at bank earns interest at floating rates based on daily bank deposit rates.
Deposits at call is money invested in bank account earning interest. Interest is calculated daily based on daily
bank deposit rates. The average interest rate for the Consolidated entity was 2.04% (2014: 2.41%). The average
interest rate for the Parent entity was 2.21% (2014: 1.39%).
10 Non-current assets - Property, plant and equipment
Consolidated entity
At 30 June 2014
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2014
Opening net book amount
Additions
Disposals
Depreciation charge
Closing net book amount
Consolidated entity
At 30 June 2015
Cost
Accumulated depreciation
Net book amount
Land
$'000
Buildings
$'000
Leasehold
improvements
$'000
Plant and
equipment
$'000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
370
(36)
334
314
50
-
(30)
334
1,565
(1,440)
125
306
37
(92)
(126)
125
Land
$'000
Buildings
$'000
Leasehold
improvements
$'000
Plant and
equipment
$'000
230
-
230
1,785
(546)
1,239
1,117
(554)
563
374
(338)
36
Total
$'000
1,935
(1,476)
459
620
87
(92)
(156)
459
Total
$'000
3,506
(1,438)
2,068
62
Annual Report 2015
Australian Ethical Investment Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
30 June 2015
(continued)
10 Non-current assets - Property, plant and equipment (continued)
Land
$'000
Buildings
$'000
Leasehold
improvements
$'000
Plant and
equipment
$'000
-
-
230
-
-
-
230
-
-
1,728
(25)
(464)
-
1,239
334
8
280
(39)
(20)
-
563
125
59
-
(70)
-
(78)
36
Land
$'000
Buildings
$'000
Leasehold
improvements
$'000
Plant and
equipment
$'000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
370
(36)
334
314
50
-
(30)
334
1,565
(1,440)
125
306
37
(92)
(126)
125
Land
$'000
Buildings
$'000
Leasehold
improvements
$'000
Plant and
equipment
$'000
230
-
230
-
-
230
-
-
-
230
1,785
(546)
1,239
-
-
1,728
(25)
(464)
-
1,239
1,117
(554)
563
334
8
280
(39)
(20)
-
563
374
(338)
36
125
59
-
(70)
-
(78)
36
Total
$'000
459
67
2,238
(134)
(484)
(78)
2,068
Total
$'000
1,935
(1,476)
459
620
87
(92)
(156)
459
Total
$'000
3,506
(1,438)
2,068
459
67
2,238
(134)
(484)
(78)
2,068
Consolidated entity
Year ended 30 June 2015
Opening net book amount
Additions
Reclassification of assets
included in a disposal group
classified as held for sale and
other disposals (see Note 11)
Depreciation charge
Impairment loss
Write off
Closing net book amount
Parent entity
At 30 June 2014
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2014
Opening net book amount
Additions
Disposals
Depreciation charge
Closing net book amount
Parent entity
At 30 June 2015
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2015
Opening net book amount
Additions
Reclassification of assets
included in a disposal group
classified as held for sale and
other disposals (see Note 11)
Depreciation charge
Impairment loss
Write off
Closing net book amount
63
Australian Ethical
Australian Ethical Investment Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
30 June 2015
(continued)
11 Reclassification of assets classified as held for sale
In June 2013, the Company's management reclassified its Canberra property from "Non-current assets - Property,
plant and equipment" to "Current assets - Assets classified as held for sale" to reflect its effort to sell the property.
Over the past 2 years, the Company has had a comprehensive sales program to locate a buyer. Unfortunately
despite continued efforts, the Company has been unable to sell the property. As a result of the depressed market,
the Company feels that a sale is not probable in the short term.
Since 30 June 2014 the Canberra property market continued to soften with:
• Secondary rents falling further including units within the properties' immediate vicinity being offered at
lower rents.
Incentives across all precincts have increased significantly and on average, are moving towards a
baseline of 25% for prime and 30%+ for secondary.
•
• Vacancy rates have continued to increase.
• Comparative sales have deteriorated.
As a result of the above factors at 31 December 2014, a valuation of the Canberra building was conducted by
Jones Lang LaSalle and Knight Frank, independent valuers not related to the Group, to determine the fair value.
Based on advice received from independent valuers, the Directors determined that the value of the property was
below the carrying value and have recorded an impairment of $412,500.
During the subsequent six months the profile of leasing clients changed with further falls in secondary rents which
were partly offset by a reduction in incentives offered. A valuation was conducted by Jones Lang LaSalle and
based on this advice the Directors determined to record a further impairment of $71,749.
Valuers Jones Lang LaSalle and Knight Frank are both members of the Institute of Valuers of Australia. The
valuation was determined by reference to recent market transactions on arm's length terms. Estimated selling
costs of $75,000, including agent’s commission and associated legal costs, were deducted from the independent
valuation to determine the carrying value.
In accordance with AASB13 Fair Value Measurement, the fair value category for the Canberra building input into
the valuation techniques has been assessed as Level 3. The Company considers the market approach to valuing
the building to be the most appropriate method of assessing the fair value. More specifically in arriving at its
opinion of fair value, the Company has referred to the direct comparison and capitalisation of net income approach
adopted by the independent Valuers.
The capitalisation of net income approach is based on estimates of net market rent, capitalised at an appropriate
discount rate less estimates of the time required to lease the property, estimated leasing incentives and estimated
agents fees. Significant quantitative unobservable inputs used in determining the fair value of the property include
market rents, capitalisation rates, leasing downtime, leasing incentives and agents’ fees. These rates are based
on feedback from independent Valuers based on the location, type and nature of the property along with current
and anticipated market conditions.
Significant unobservable quantitative inputs used in determining the fair value as at 30 June 2015 include:
Unobservable Quantitative
Inputs
Comparative sales
Building sizes
Range
$1,700 - $1,900 psm
1,006.5 square meters
Average
$1,800 psm
64
Annual Report 2015
Australian Ethical Investment Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
30 June 2015
(continued)
12 Non-current assets - Intangible assets
Capitalised
website
development
$'000
129
(46)
83
95
29
(41)
83
154
(97)
57
83
26
(52)
57
Capitalised
website
development
$'000
129
(46)
83
95
29
(41)
83
Consolidated entity
At 30 June 2014
Cost
Accumulated amortisation
Net book amount
Year ended 30 June 2014
Opening net book amount
Additions
Amortisation charge
Closing net book amount
Consolidated entity
At 30 June 2015
Cost
Accumulated amortisation
Net book amount
Year ended 30 June 2015
Opening net book amount
Additions
Amortisation charge
Closing net book amount
Parent entity
At 30 June 2014
Cost
Accumulated amortisation
Net book amount
Year ended 30 June 2014
Opening net book amount
Additions
Amortisation charge
Closing net book amount
65
Australian Ethical
Australian Ethical Investment Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
30 June 2015
(continued)
12 Non-current assets - Intangible assets (continued)
Parent entity
At 30 June 2015
Cost
Accumulated amortisation
Net book amount
Year ended 30 June 2015
Opening net book amount
Additions
Amortisation charge
Closing net book amount
Capitalised
website
development
$'000
154
(97)
57
83
26
(52)
57
13 Non-current assets - Deferred tax assets
The balance comprises temporary differences
attributable to:
Other employee benefits
Audit fees
Community grants
Provision for employee leave
Total deferred tax assets
Movements:
Opening balance
Charged/credited:
- to profit or loss
Closing balance
Consolidated entity
At
30 June
2015
$'000
30 June
2014
$'000
Parent entity
At
30 June
2015
$'000
30 June
2014
$'000
342
66
144
220
772
86
38
92
180
396
342
36
144
220
742
Consolidated entity
Parent entity
2015
$'000
396
376
772
2014
$'000
348
48
396
2015
$'000
383
359
742
86
25
92
180
383
2014
$'000
348
35
383
66
Annual Report 2015
Australian Ethical Investment Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
30 June 2015
(continued)
14 Other non-current assets
Consolidated entity
At
30 June
2015
$'000
30 June
2014
$'000
Parent entity
At
30 June
2015
$'000
Investment in Australian Ethical Superannuation
Pty Limited
-
-
316
15 Current liabilities - Trade and other payables
30 June
2014
$'000
316
Consolidated entity
At
30 June
2015
$'000
1,171
60
1,960
1,142
4,333
30 June
2014
$'000
1,446
61
1,684
285
3,476
Parent entity
At
30 June
2015
$'000
313
60
1,557
1,142
3,072
30 June
2014
$'000
540
61
1,304
285
2,190
Trade payables
Unearned income
Other payables
Employee bonus payable
16 Provisions
Consolidated entity
At
30 June
2015
Non-
current
$'000
130
30 June
2015
Non-
current
$'000
130
Current
$'000
293
Current
$'000
293
30 June
2014
Non-
current
$'000
94
30 June
2014
Non-
current
$'000
94
Total
$'000
423
Current
$'000
232
Parent entity
At
Total
$'000
423
Current
$'000
232
Total
$'000
326
Total
$'000
326
Employee benefits - long service leave
Employee benefits - long service leave
67
Australian Ethical
Australian Ethical Investment Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
30 June 2015
(continued)
17 Issued capital
(a) Share capital
Ordinary shares - fully paid
Notes
17(b),
17(c)
Consolidated and Parent Entity
At
30 June
2014
Shares
30 June
2015
$'000
30 June
2015
Shares
1,053,818
1,023,147
7,004
30 June
2014
$'000
6,432
The Company does not have authorised capital or par value in respect of its issued shares.
(b) Movements in ordinary share capital
Details
Opening balance - 1 July 2013
Employee share scheme issues
Closing balance - 30 June 2014
a
Opening balance - 1 July 2014
Employee share scheme issues
Closing balance - 30 June 2015
Notes Number of shares
1,015,086
8,061
1,023,147
17(d)
17(d)
1,023,147
30,671
1,053,818
$'000
6,278
154
6,432
6,432
572
7,004
(c) Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Group in
proportion to the number of shares held.
On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one
vote, and upon a poll each share is entitled to one vote.
(d) Employee share scheme
Information relating to the employee share scheme, including details of shares issued under the scheme, is set out
in Note 26.
For information related to rights and shares issued to key management personnel during the financial year refer to
the remuneration report contained within the Directors' report.
14,924 shares are considered to be Treasury shares as the Employee Share Plan Trust is defined as an agent of
the Company. No value is attributed to these shares.
(e) Capital management
The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while
maximising the return to stakeholders through the optimisation of the debt and equity balance. The Group's overall
strategy remains unchanged from 2014.
The capital structure of the Group consists of equity of the Group (comprising issued capital, reserves, and
retained earnings).
68
Annual Report 2015
Australian Ethical Investment Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
30 June 2015
(continued)
17 Issued capital (continued)
(e) Capital management (continued)
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. The Group has external capital requirements and
at all times during the year the Group has met all externally imposed capital requirements. Further details on the
external capital requirements are contained in Note 3(d).
18 Reserves and retained earnings
(a) Reserves
Share-based payments
Other reserves
Movements:
Share-based payments reserve
Opening balance
Employee share plan expense
Issue of shares held by entity to employees
Other - Asset revaluation reserve
Opening balance
Net loss on revaluation of available-for-sale
financial assets
Net realised loss on available-for-sale financial
assets
Write-off of available-for-sale financial assets
Other - Employee share plan reserves
Employee share plan - Deferred
Nature and purpose of reserves
Consolidated entity
At
30 June
2015
$'000
2,022
316
2,338
30 June
2014
$'000
1,122
(4)
1,118
Parent entity
At
30 June
2015
$'000
2,022
316
2,338
30 June
2014
$'000
1,122
(4)
1,118
Consolidated entity
Parent entity
2015
$'000
2014
$'000
2015
$'000
2014
$'000
1,122
1,472
(572)
2,022
(4)
-
-
4
-
316
316
345
931
(154)
1,122
4
(1)
(7)
-
(4)
-
-
1,122
1,472
(572)
2,022
(4)
-
-
4
-
316
316
345
931
(154)
1,122
4
(1)
(7)
-
(4)
-
-
Rights reserve
The share-based payment reserve relates to rights granted by the Group to its employees under its previous
share-based payment arrangements. Items included in the share-based payment reserve will not be reclassified
subsequently to profit or loss. Further information about share-based payments to employees is set out in Note 26.
69
Australian Ethical
Australian Ethical Investment Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
30 June 2015
(continued)
18 Reserves and retained earnings (continued)
(a) Reserves (continued)
Asset revaluation reserve
The asset revaluation reserve represents the cumulative gains and losses arising on the revaluation of
available-for-sale financial assets that have been recognised in other comprehensive income, net of amounts
reclassified to the Consolidated Statements of Comprehensive Income when those assets have been disposed of
or are determined to be impaired.
Share-based payment reserve
This reserve relates to shares granted by the Group to its employees under its current share-based payment
arrangement. Items included in the rights reserve will not be reclassified subsequently to profit or loss. Further
information about the new share-based payments to employees is set out in Note 26.
(b) Retained earnings/accumulated losses
Movements in retained earnings/(accumulated losses) were as follows:
Opening balance - 1 July
Net profit for the year
Dividends
Transfer of reserve due to write off of financial
assets
Closing balance - 30 June
19 Dividends
(a) Ordinary shares
Interim dividend for the current financial year
Final dividend for the prior financial year
Consolidated entity
Parent entity
2015
$'000
1,933
1,970
(2,089)
(4)
1,810
2014
$'000
669
2,543
(1,279)
-
1,933
2015
$'000
(337)
2,612
(2,089)
(4)
182
2014
$'000
(742)
1,684
(1,279)
-
(337)
Consolidated entity
Parent entity
2015
$'000
843
1,246
2,089
2014
$'000
819
460
1,279
2015
$'000
843
1,246
2,089
2014
$'000
819
460
1,279
(b) Dividends not recognised at the end of the reporting period
Consolidated entity
2014
$'000
2015
$'000
Parent entity
2015
$'000
2014
$'000
In addition to the above dividends, since year end the Directors have
declared a final dividend of 120 cents per fully paid ordinary share
(2014: 120 cents), fully franked based on tax paid at 30%. The
aggregate amount of the declared dividend expected to be paid on
30 September 2015 out of profits for the year ended at 30 June
2015, but not recognised as a liability at year end, is
1,265
1,246
1,265
1,246
70
Annual Report 2015
Australian Ethical Investment Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
30 June 2015
(continued)
19 Dividends (continued)
(c) Dividend rate
Dividends declared and/or paid fully franked at 30% tax rate in respect of the corresponding financial year
2015
Ordinary shares - 2015 interim
Ordinary shares - 2014 final
2014
Ordinary shares - 2014 interim
Ordinary shares - 2013 final
Cents per
share
Total Amount
80
120
80
45
$843,054
$1,246,676
$818,522
$460,416
Date of
Payment
27/03/2015
03/10/2014
28/03/2014
04/10/2013
% Franked
100
100
100
100
20 Key management personnel disclosures
The specified Directors of Australian Ethical Investment Limited and its Controlled Entities during the financial year
were:
Parent entity directors
Name
Stephen Gibbs
Mara Bun
Tony Cole
Kate Greenhill
Phil Vernon
Position
Chairperson, non-executive
Director, non-executive
Director, non-executive
Director, non-executive
Managing Director & Chief Executive Officer, executive
Other key management personnel
Name
David Barton
Adam Kirk
David Macri
Tom May
Stuart Palmer
Position
Chief Financial Officer
General Manager, Business Development
Chief Investment Officer
General Counsel & Company Secretary
Head of Ethics & Corporate Advocacy
Departed management
Name
Position
Paul Smith (resigned 28/11/2014) General Manager, Strategy & Communications
71
Australian Ethical
Australian Ethical Investment Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
30 June 2015
(continued)
20 Key management personnel disclosures (continued)
(a) Key management personnel compensation
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
21 Remuneration of auditors
Consolidated entity
Parent entity
2015
$
1,994,192
142,840
44,420
249,251
2,430,703
2014
$
1,830,107
156,522
37,269
83,309
2,107,207
2015
$
1,910,221
134,863
44,420
249,251
2,338,755
2014
$
1,766,239
150,457
37,269
83,309
2,037,274
During the year the following fees were paid or payable for services provided by the auditor of the Company, its
related practices and non-related audit firms:
(a) KPMG Australia
(i) Audit and other assurance services
Audit services for the consolidated entity and
subsidiaries
Audit and review of consolidated and subsidiary
financial statements
Audit services in accordance with regulatory
requirements
Audit services for non-consolidated trusts and
superannuation fund *
Audit and review of managed funds for which the
Company acts as Responsible Entity
Audit and review of superannuation fund for which
the subsidiary entity acts as Responsible
Superannuation Entity
Audit services in accordance with regulatory
requirements
Total remuneration for audit services
Taxation services
Tax and other accounting services
Total remuneration of KPMG Australia
Consolidated entity
Parent entity
2015
$
2014
$
2015
$
2014
$
32,710
40,480
73,190
31,700
35,600
67,300
27,450
36,250
63,700
26,600
31,500
58,100
109,290
109,400
109,290
109,400
21,160
46,030
176,480
249,670
68,299
317,969
20,500
49,600
179,500
246,800
111,708
358,508
-
-
109,290
172,990
68,299
241,289
-
-
109,400
167,500
111,708
279,208
* These fees are incurred by the Company and are effectively recovered from the funds via management fees.
72
Annual Report 2015
Australian Ethical Investment Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
30 June 2015
(continued)
22 Related party transactions
(a) Ultimate parent entity
(b) Subsidiaries
Interests in subsidiaries are set out in Note 24.
(c) Transactions with other related parties
The following transactions occurred with related parties:
Australian Ethical Trusts
Australian Ethical Investment Limited provides
investment services and administration to the
Australian Ethical Trusts in accordance with the
trust deed
a
Australian Ethical Retail Superannuation Fund
Australian Ethical Superannuation Pty Limited
provides investment services/ (rebate of
investment services) to the Australian Ethical
Retail Superannuation Fund
a
Australian Ethical Superannuation Pty Limited
provides Administration/Trustee services to the
Australian Ethical Retail Superannuation Fund
a
Australian Ethical Superannuation Pty Limited
provides Member Administration services to the
Australian Ethical Retail Superannuation Fund
Australian Ethical Superannuation Pty Limited
Service fee paid to Australian Ethical Investment
Limited
Dividends paid to Australian Ethical Investment
Limited
Director fees paid by Australian Ethical Investment
Limited
Transactions between Australian Ethical
Superannuation Pty Limited and its parent entity
under the tax consolidation and related tax sharing
agreement referred to in Note 2(d)
Consolidated entity
Parent entity
2015
$
2014
$
2015
$
2014
$
21,625,739
15,978,015
21,625,739
15,978,015
(14,491,963)
(8,549,666)
11,959,605
10,652,828
1,675,403
1,442,946
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,954,852
7,197,435
2,988,213
956,228
92,836
105,038
1,004,218
779,920
73
Australian Ethical
Australian Ethical Investment Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
30 June 2015
(continued)
22 Related party transactions (continued)
(c) Transactions with other related parties (continued)
Transactions between related parties are on commercial terms and conditions no more favourable than those
available to other parties unless otherwise stated.
(d) Outstanding balances
The following balances are outstanding at the end of the reporting period in relation to transactions with related
parties:
Consolidated entity
At
30 June
2015
$
30 June
2014
$
Parent entity
At
30 June
2015
$
30 June
2014
$
Investment held in Australian Ethical
Superannuation Pty Limited
-
-
316,000
316,000
Amounts receivable from the Australian Ethical
Trusts
1,056,974
1,689,795
1,056,974
1,689,795
Amounts receivable from the Australian Ethical
Retail Superannuation Fund
720,066
888,253
-
-
Amounts receivable from the Australian Ethical
Superannuation Pty Limited
Amounts payable to Australian Ethical
Superannuation Pty Limited
-
-
-
-
697,408
1,485,318
-
26,788
(e) Terms and conditions
Transaction between related parties are on normal commercial terms and conditions no more favourable than
those available to other parties unless otherwise stated.
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.
74
Annual Report 2015
Australian Ethical Investment Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
30 June 2015
(continued)
23 Reconciliation of profit after income tax to net cash inflow from operating activities
Consolidated entity
Parent entity
Profit for the year
Adjustments to operating profit:
Depreciation and amortisation
Loss on disposal of property, plant & equipment
Loss on write-off of property, plant & equipment
Tax effect of sale of investments recognised in
financing activities
Non-cash employee benefits expense -
share-based payments
Impairment loss
Recognition of unearned income
Dividends received from subsidiary classified as
investing activity
Change in operating assets and liabilities:
Decrease/(increase) in trade and other receivables
Decrease/(increase) in other current assets
Decrease in deferred tax assets
Increase in trade and other payables
Increase in current tax liabilities
Decrease in deferred tax liabilities
Increase/(decrease) in provisions
Net cash inflow from operating activities
2015
$'000
1,970
186
74
11
-
1,649
484
(61)
-
966
39
(515)
857
697
(1)
97
6,453
2014
$'000
2,543
272
15
-
(1)
931
282
(71)
-
(271)
(142)
(48)
1,559
349
(30)
(25)
5,363
2015
$'000
2,612
186
74
11
-
1,648
484
(61)
2014
$'000
1,684
272
15
-
(1)
931
282
(71)
(2,988)
(956)
1,418
53
(497)
882
357
(1)
97
4,275
(1,890)
(139)
(35)
872
390
(30)
(57)
1,267
24 Subsidiaries
Details of the Group's subsidiaries at the end of the reporting period are as follows.
Name of the subsidiary
a
Australian Ethical
Superannuation Pty Limited
a
Australian Ethical Investment
Limited Employee Share Plan
Trust
Principal activity
Place of incorporation
and operation
Proportion of ownership
interest and voting
power held by the Group
Trustee of the Australian
Ethical Retail
Superannuation Fund
Australia
100%
Employee deferred share
plan trust
Australia
100%
75
Australian Ethical
Australian Ethical Investment Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
30 June 2015
(continued)
25 Events occurring after the reporting period
Between 30 June 2015 the following events occurred that may significantly affect the Group:
• On 31 August the following shares were issued:
- 11,659 shares were issued to the Employee Share Trust for employee long term incentives;
- 11,899 shares were issued in respect of the vesting of STI performance rights (AEFAG);
- 16,834 shares were issued in respect of the vesting of LTI performance rights (AEFAC).
• On 31 July the administration fee on the Superannuation fund was reduced from 0.93% to 0.63%. This
reduction will impact revenues in 2015/16.
• A new subsidiary company, Australian Ethical Foundation Ltd was established which going forward will
receive and administer the Group's community grants.
The Group’s fees are primarily based on its funds under management which in turn is impacted by changes in
equity markets.
Other than as outlined in this report, no matter or circumstance has occurred subsequent to year end that has
significantly affected, or may significantly affect, the operations of the Group, the results of those operations or the
state of affairs of the Group in subsequent financial years.
26 Share-based payments
The following share-based payment arrangements existed as at 30 June 2015.
(a) Performance rights
Under the Australian Ethical Investment Limited employee share incentive scheme (ESIS) that existed until
August 2014, participants were 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 Group 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.
Performance rights granted during the year:
76
Annual Report 2015
Australian Ethical Investment Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
30 June 2015
(continued)
26 Share-based payments (continued)
(a) Performance rights (continued)
Parent entity
As at 1 July
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Other adjustment
As at 30 June
a
Vested and exercisable at 30 June 2015
Performance rights summary
2015
Number of
options
2014
Number of
options
54,056
11,899
(5,855)
(15,745)
-
1,257
45,612
11,899
45,043
29,614
(4,147)
(8,061)
(8,393)
-
54,056
10,693
(i) Fair value of rights granted
All rights were calculated at grant date based on the underlying share prices minus estimated net present value of
future dividends that the holders of rights are not entitled to.
Included under employee benefits expense in the Consolidated Statements of Comprehensive Income is
$1,648,718 (2014: $930,557) relating to rights issued under the employee share ownership plan.
77
Australian Ethical
Australian Ethical Investment Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
30 June 2015
(continued)
26 Share-based payments (continued)
(b) Deferred shares
Under the long term incentive scheme introduced in 2014, participants are granted shares subject to meeting
specified performance criteria over the performance period. The number of shares that the participant receives is
determined at the time of grant with the shares being held in trust. These shares are issued for nil consideration.
The shares have voting rights and employees receive dividends. Subject to the terms and conditions of the
incentive scheme the deferred shares have the following attributes determining whether they will vest.
Deferred shares are held in an Employee Share Trust until vesting conditions are met.
27 Earnings per share
(a) Basic earnings per share
From continuing operations attributable to the ordinary equity holders of the
Company
(b) Diluted earnings per share
From continuing operations attributable to the ordinary equity holders of the
Company
Parent entity
2015
Cents
190.00
2014
Cents
248.51
Parent entity
2015
Cents
180.69
2014
Cents
241.13
78
Annual Report 2015
Australian Ethical Investment Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
30 June 2015
(continued)
27 Earnings per share (continued)
(c) Weighted average number of shares used as denominator
Parent entity
2015
Number
2014
Number
Weighted average number of ordinary shares used as the denominator in
calculating basic earnings per share
Adjustments for calculation of diluted earnings per share:
Weighted average number of rights outstanding
Weighted average number of ordinary and potential ordinary shares used as the
denominator in calculating diluted earnings per share
28 Commitments and contingencies
(a) Operating leases
Operating leases relate to leases of office premises for a term of 5 years. The Group does not have an option to
purchase the premises at the expiry of the lease period.
1,090,239
1,036,821
53,418
31,315
1,054,418
1,023,103
Consolidated entity
Parent entity
2015
$'000
2014
$'000
2015
$'000
2014
$'000
Non-cancellable operating lease commitments
Within one year
Later than one year but not later than five years
Payments recognised as an expense
Minimum lease payments recognised as an
expense
Liabilities recognised in respect of
non-cancellable operating leases
Lease incentives
Current
Non-current
232
431
663
234
234
223
663
886
208
208
232
431
663
234
234
61
141
202
61
202
263
61
141
202
223
663
886
208
208
61
202
263
(b) Guarantees
The Group has provided a guarantee for $221,733 over the rental of building premises at 130 Pitt Street.
(c) Other commitments
The Group has no other commitments and contingent assets and liabilities as at 30 June 2015.
79
Australian Ethical
Australian Ethical Investment Limited and its Controlled Entities
Directors' Declaration
30 June 2015
Directors' declaration
1
In the opinion of the directors of Australian Ethical Investment Limited and its Controlled Entities:
(a)
the consolidated financial statements and notes that are set out on pages 25 to 64 and the
Remuneration report in sections to in the Directors’ report, are in accordance with the
Corporations Act 2001, including:
(i) giving a true and fair view of the Group’s financial position as at 30 June 2015 and of its
performance, for the financial year ended on that date; and
(b)
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
there are reasonable grounds to believe that the Group will be able to pay its debts as and when
they become due and payable.
2
3
The directors have been given the declarations required by Section 295A of the Corporations Act 2001
from the chief executive officer and chief financial officer for the financial year ended 30 June 2015.
The directors draw attention to Note 2(a) to the consolidated financial statements, which includes a
statement of compliance with International Financial Reporting Standards.
Signed in accordance with a resolution of the directors:
Phil Vernon
Managing Director and Chief Executive Officer
Sydney
28 August 2015
80
Annual Report 2015
Auditors Independence Declaration
81
Australian Ethical Independent Auditors Report
82
Annual Report 2015 83
Australian Ethical This page has been intentionally left blank
84
Annual Report 2015 Shareholder Information
Shareholder information as at Tuesday, 8 September 2015
The Company has two classes of equity securities.
Equity securities
Number of holders
Number on issue
Voting rights
Fully paid ordinary shares
Unquoted performance rights
1,000
17
1,094,210
One vote per share
16,416
No voting rights
Top 20 shareholders of fully paid shares
Shareholder
Select Managed Funds Pty Ltd
Citicorp Nominees Pty Ltd
Mr James Andrew Thier
Ms Caroline Le Couteur
Mr Howard Pender
Mr Eric Yin Wang & Mrs Patty Bik Yuk Tse
Mr Trevor Roland Lee
Mrs Judith Margaret Boag
Pacific Custodians Pty Limited (Employee Share Plan Trust)
Mr Bruce Allan & Mrs Ann Marion McGregor
HB Sarjeant & Assoc Pty Ltd (HB Sarjeant & Assoc S/F Acc)
Mr Anthony Scott Cook
Ms Daisy Their
Garrett Smythe Ltd
Estate of Dr Edward Arthur Iceton
Ms Judith Ingrouille Ajani
Mr Andrew Charles Gracey
Mr Michel & Mrs Ann Beuchat
Mr Phillip Andrew Vernon
Mr Trevor Roland Lee (Lee Family Super Fund)
Balance
196,472
61,754
51,367
49,436
43,952
39,261
29,376
28,503
26,583
24,279
20,140
18,121
18,048
17,169
12,000
11,700
10,349
9,667
9,412
8,041
%
17.956%
5.644%
4.694%
4.518%
4.017%
3.588%
2.685%
2.605%
2.429%
2.219%
1.841%
1.656%
1.649%
1.569%
1.097%
1.069%
0.946%
0.883%
0.860%
0.735%
85
Australian Ethical Distribution of holdings of fully paid shares
Range
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001+
Totals
Holders
Total Units
887
89
7
16
1
207,022
184,438
46,991
459,287
196,472
1,000
1,094,210
%
18.92
16.86
4.30
41.97
17.96
100
On Monday, 7 September 2015 AEF ordinary shares closed at $58. Accordingly, less than 9 shares constitute a
marketable parcel. On Tuesday, 8 September 2015 the Company had 14 shareholders whose holding is not a
marketable parcel; these 14 shareholders own a total of 49 shares.
Tom May, Company Secretary
86
Annual Report 2015 Contact us
Phone: 02 8276 6288
Fax: 02 9252 1987
Email: enquiries@australianethical.com.au
Web: australianethical.com.au
Post: Reply Paid 3993, Sydney NSW 2001
Street Address: Level 8, 130 Pitt Street, Sydney
Australian Ethical Investment Ltd (ABN 47 003 188 930; Australian Financial Services Licence No. 229949) is the Responsible
Entity and Investment Manager of the Australian Ethical Managed Investment Funds. Interests in the Australian Ethical Retail
Superannuation Fund (ABN 49 633 667 743; Fund Registration No. R1004731) are offered by Australian Ethical Investment Ltd
by arrangement with its subsidiary and trustee of the Super Fund, Australian Ethical Superannuation Pty Ltd (ABN 43 079 259
733, Registrable Superannuation Entity Licence No. L0001441).
The information contained in this Update is general information only, and does not take into account your individual
investment objectives, financial situation or needs. Before acting on it, you should consider seeking independent financial
advice that is tailored to suit your personal circumstances and should refer to the Financial Services Guide, Product Disclosure
Statements and Additional Information Booklets available on our website (www.australianethical.com.au).
Certain statements in this Update relate to the future. Such statements involve known and unknown risks and uncertainties
and other important factors that could cause the actual results, performance or achievements to be materially different from
expected future results. Australian Ethical Investment Ltd does not give any representation, assurance or guarantee that the
events expressed or implied in any forward looking statements in this Update will actually occur and you are cautioned not to
place undue reliance on such statements.
The content of this Update is intended to provide a summary and general overview concerning matters of interest and is
correct as at the date of publication. It has not been subject to auditor review. Australian Ethical Investment Ltd does not
accept any liability, either directly or indirectly, arising from any person relying, either wholly or partially, upon any information
shown in, or omitted from, this Update. Under no circumstances will Australian Ethical Investment Ltd be liable for any loss or
damage caused by your reliance on information obtained from this Update. You should consider seeking independent advice
from a legal or other professional adviser before acting in response to the content of this Update.