australian wealth management2008/10/23 · 2007/2008 ﬁ nancial year to 10.5 cents per share, a...

AWM

HO

4229Australian W

ealth Management Annual report 2008

A n n u a l r e p o r t

2008

For

per

sona

l use

onl

y

Weal t h Managemen t Funds under managemen t

H i g h l i g h t s 2

C h a i r m a n ’s s t a t e m e n t 6

M a n a g i n g D i r e c t o r ’s o v e r v i e w 8

D i v i s i o n a l o v e r v i e w 10

D i r e c t o r s 15

O u r e m p l o y e e s 18

A W M a n d t h e c o m m u n i t y 19

A W M a n d t h e e n v i r o n m e n t 2 0

C o r p o r a t e g o v e r n a n c e 2 1

D i r e c t o r s ’ r e p o r t 2 7

R e m u n e r a t i o n r e p o r t 3 9

A u d i t o r ’s i n d e p e n d e n c e d e c l a r a t i o n 4 5

I n d e p e n d e n t a u d i t o r ’s r e p o r t 4 6

D i r e c t o r s ’ d e c l a r a t i o n 4 8

I n c o m e s t a t e m e n t 4 9

B a l a n c e s h e e t 5 0

S t a t e m e n t o f r e c o g n i s e d i n c o m e a n d e x p e n s e 5 1

C a s h f l o w s t a t e m e n t 5 2

N o t e s t o t h e f i n a n c i a l s t a t e m e n t s 5 3

S h a r e h o l d e r i n f o r m a t i o n 118

C o r p o r a t e d i r e c t o r y 12 0

Australian Wealth Management’s

Contents

For

per

sona

l use

onl

y

11

Tr us t eeAdmin is t r a t ion Mas t e r Tr us t s

Australian Wealth Management Limited

(AWM) is an independent, integrated

fi nancial services company, providing

our clients with products designed to

accompany them through the wealth

accumulation phase, into retirement

and across to the next generation.

We offer fi nancial advice, stockbroking

services, superannuation products

and estate planning through a variety

of brands including Australian Executor

Trustees, Bridges Financial Services,

Spectrum Super and United Funds

Management.

In June 2008, AWM acquired a 70%

interest in wealth management company,

Ord Minnett Holdings Limited.

Australian Wealth Management Annual report 2008

major brands

About AWM

For

per

sona

l use

onl

y

70

2005/06 2006/07 2007/08

60

50

40

30

20

10

0

$ m

illio

ns

12

2005/06 2006/07 2007/08

10

8

6

4

2

0

cent

s pe

r sha

re fu

lly fr

anke

d

special

fi nal

interim

22

Green dotted area represents the full

impact of the merger, had it occurred

at the beginning of the fi nancial year

Due to the merger between AWM and Select Managed Funds meaningful data prior to 2005/06 isn’t available

His t o r i ca l r esu l t s – ne t p r o f i t a f t e r t a x

AWM div idend h is t o r y s ince 2005/06

Highlights

For

per

sona

l use

onl

y

70

2006 2007 2008

50

40

30

20

10

0

$ bi

llion

s

60

450,000

2005/06 2006/07 2007/08

400,000

350,000

300,000

250,000

100,000

50,000

0

200,000

150,000

200

2006 2007 2008

160

140

120

100

40

20

0

80

60

180

20062006 20072007 20082008

$ m

illio

ns

Expe

nse

ratio

to in

com

e ra

tio (%

)

Funds under management – non super

Funds under admin – super

Funds under management

Funds under advice

Funds under supervision

33


Grow t h in AWM’s f unds under managemen t , admin is t r a t ion , adv ice and super v is ion

AWM’s c l ien t base i s g r owing

AWM’s r evenue is inc r eas ing and t he expense r a t io i s impr ov ing

For

per

sona

l use

onl

y

44

October November December January February March

20 Mar ch 2008

Payment of interim dividend (5 cents

per share fully franked)

4 Mar ch 2008

Announcement of on-market share

buy-back

21 Febr uar y 2008

Interim results announced – NPAT

$36.2 million

24 Januar y 2008

Appointment of George Venardos as

Non Executive Director

17 December 2007

Appointment of Andrew Todd as Chief

Information Offi cer

Highlights – Important events during the year

For

per

sona

l use

onl

y

55

28 Augus t 2008

Final results announced NPAT $65.2 million.

Final dividend announced (5.5 cents per share fully franked, paid 10 October 2008)

April May June July August September

20 Augus t 2008

Finalisation of on market share buy-back

28 Ju ly 2008

Ian Griffi ths announces 12 month transition from

Executive Director to Non-Executive Director

30 June 2008

AWM announces extension of on-market

share buy-back

27 June 2008

AWM and Credit Suisse Asset Management

sign Memorandum of Understanding to act

as trustee for a number CSAM funds

13 June 2008

Appointment of Michael Carter as Head of Wealth

Management Division

12 May 2008

AWM announces acquisition of a 70% majority stake in Ord

Minnett Holdings Limited


For

per

sona

l use

onl

y

66

I take great pleasure in presenting

Australian Wealth Management Limited’s

2008 annual report.

AWM r epor t ed a s t r ong r esu l t f o r t he yearOn behalf of your directors, I am pleased

to report that AWM announced its seventh

consecutive profi t increase, a Net Profi t

after Tax result of $65.2 million for the

year ended 30 June 2008. This result

is particularly pleasing considering the

down-turn in global markets in the second

half of the fi nancial year.

In my fi rst full year as Chairman of AWM,

the company has completed a number of

transactions, notably a purchase of 70%

of wealth management fi rm, Ord Minnett

Limited and funds associated with Credit

Suisse Asset Management.

As these transactions were undertaken

late in the year, the full effect of these

acquisitions will not be seen until

next fi nancial year. These transactions

evidence our continued belief that

growth through acquisition, using our

low cost business model and supported

with a strong risk management culture

will deliver positive results. The

Managing Director, Christopher Kelaher,

will elaborate further on these two

transactions in his overview.

AWM inc r eased i t s f u l l -year d i v idend by 10.5 %On behalf of the Board, I am pleased

to report that AWM maintained its

fi nal fully franked dividend of fi ve and

a half cents (5.5c) per share, which

shareholders received on 10 October

2008. This takes the total dividend

received by shareholders for the

2007/2008 fi nancial year to 10.5 cents

per share, a 10.5% increase on last year.

This dividend is once again at the upper

range of the company’s payout ratio

of 60-90% of NPAT.

Success f u l shar e buy-back under t akenAs part of the company’s ongoing

capital management strategy, the

Board announced in May that it would

undertake an opportunistic on-market

share buy-back. The modest programme

was undertaken to reduce the number of

shares on issue, therefore increasing the

inherent value of the remaining shares.

It was initially expected to be completed

on June 30, however subsequent to year

end; the Board resolved to extend the

buy-back. At that time, the company

assumed a modest level of debt to allow

the buyback to continue.

John Warburton

Chairman’s statement

For

per

sona

l use

onl

y

77

When it was fi nalised in late August,

AWM had purchased 16,990,343

shares for a total consideration of

$24,998,520.56.

Addi t iona l Non-E xecu t i ve D i r ec t o r appo in t ed In January 2008, George Venardos was

appointed as a non-executive director of

AWM. This is his fi rst board appointment

and we believe his experience in

fi nancial services, fi nance and accounting

complements the existing skills of the

Board. His fi nance and accounting skills

have lead us to appoint him as the

Chair of the Statutory Audit and Risk

Management Committee.

Following the end of the fi nancial year,

executive director, Ian Griffi ths expressed

a desire to transition to a non executive

role over the next twelve months. Ian

has made a signifi cant contribution to the

Company and it’s predecessors over many

years and the Board looks forward to his

valuable ongoing input.

The Board is currently reviewing its

composition and it is likely that it will

appoint an additional director to the Board

during the 2009 fi nancial year.

Di f f i cu l t mar ke t cond i t ions , bu t AWM is con f iden t o f i t slong-t e rm ou t lookAs a fi nancial services company operating

in Australia, AWM is not immune from

the effects of the global share markets.

Primarily, it is this external factor that

has affected the share price of wealth

management companies like AWM.

The fundamental reasons for investing

in AWM remain true. The majority of

AWM’s business is in superannuation

and managing the retirement funds for

more than 400,000 Australians. Only this

year, Deloitte actuaries and consultants

projected that superannuation in Australia

is expected to more than triple over

the next 13 years, from over $1 trillion

to $4 trillion. Your board believes that

AWM is well placed to take advantage

of that signifi cant growth in the years

to come, given the services it offers

and its effi cient business model.

Finally, I would like to take this

opportunity to personally thank my

fellow directors for their service this

year. In diffi cult market conditions,

there is a heightened responsibility

placed upon directors, especially

in a company like ours, where we are

the custodian of other people’s money.

I also thank the Managing Director,

Leadership Group and staff for a very

good effort in diffi cult times.

John Warburton

Chairman


For

per

sona

l use

onl

y

88

AWM’s structure and its underlying

businesses, with their diversifi ed

income streams, allows the company to

satisfactorily weather the turbulent global

markets we are currently experiencing.

Earning revenue from a variety of

businesses, not all reliant upon the

vagaries of the stock market meant

that the company was able to increase

profi t and the total funds we manage

on behalf of our clients during the 2008

fi nancial year.

F inanc ia l over v iewIt is pleasing that AWM was able to

increase its profi t, despite the challenging

market conditions. Net Profi t After Tax

increased 13% to $65.2 million for the

year ended 30 June 2008. This result

included a non recurring benefi t of $2.9

million associated with an overprovision

for income tax in prior years, and only one

month of Ord Minnett Holdings Limited

which was acquired late in the year.

While the company’s operating expense

to revenue ratio appeared steady at

50.6%, compared with 50.0% last year,

it should be noted that one month’s

worth of expenses attributable to Ord

Minnett skewed the result. Without these

expenses, the ratio would have continued

to move favourably.

AWM is noted for its strong cost control,

and in these uncertain times, the need

for vigilance on costs remains imperative.

A continued focus on cost cutting will

provide some offset to any moderation

in revenue moving forward.

Against the backdrop of uncertain global

and domestic markets, Funds Under

Management, Advice, Administration

and Supervision (FUMAS) increased

to $60.4 billion as at 30 June 2008.

This total excludes FUMA associated

with Ord Minnett and Credit Suisse

Asset Management.

Over v iew o f t he yearFeatured in the following pages are

overviews for each of the underlying

divisions. However, I would like to

mention some highlights in my overview.

Two success f u l t r ansac t ions se t f o r f u t u r e g r ow t hLate in the fi nancial year, AWM

announced the purchase of a 70%

stake in Ord Minnett Holdings Limited.

The remaining 30% holding is held by

JP Morgan Limited.

Chris Kelaher

Managing Director’s overview

For

per

sona

l use

onl

y

99

Prior to the purchase, Ord Minnett

had already resolved to transform their

business from a broking house to a wealth

management company. As part of that

transformation, they chose to partner

with AWM to assist in the transition.

Ord Minnett will continue to operate

as a stand alone business, however

it is expected that revenue and expense

synergies will be developed over time.

Two directors of AWM, Chris Kelaher

and Ian Griffi ths, have joined the board

of Ord Minnett.

Ord Minnett brings additional scale in

distribution to AWM, increasing total

adviser numbers to 470 from more than

300 and provides further opportunities

to sell AWM’s products around Australia.

In late June, AWM announced that it had

signed a Memorandum of Understanding

to transfer the trusteeship for funds

associated with Credit Suisse Asset

Management to AWM. Under the terms

of the arrangement, the trusteeship

for three Pooled Superannuation Trusts

(PSTs) will transfer to AWM.

One facet of AWM’s strategy is

growth via acquisition. Management’s

ten-year history of successfully buying

and integrating assets, coupled

with current market conditions means

AWM is well positioned to make

further acquisitions in the future.

In its relatively short history, management

has successfully completed more than

30 acquisitions.

Two key appo in tmen t s – Head o f Weal t h Managemen t D iv is ion and Ch ie f In f o rma t ion O f f i ce rTwo key appointments were made

during the year that round out the senior

leadership group at AWM.

Andrew Todd was recruited in December

2007 to the newly-created position

of Chief Information Offi cer. One of the

most important elements arising from

the 2006 merger of AWM and Select

Managed Funds was the integration

of key systems. Andrew’s role is to review

and standardise how AWM approaches

its technology needs. Also underway

is a gap analysis of AWM’s two main

investment platforms to determine if they

can be merged. While this would deliver

substantial cost savings to the company,

a merger would not occur unless the

transition was seamless for all users

of the service.

Michael Carter, former General Manager,

Alliances and Distribution – Bridges,

was appointed to the position of Head

of Wealth Management Division,

responsible for all advice groups within

AWM. Michael has worked for AWM’s

fi nancial planning business, Bridges

Financial Services for fi ve years. As

the Head of the Wealth Management

Division, Michael is responsible for the

development and growth of Funds under

Advice derived from personal fi nancial

planning and stockbroking services

to retail and institutional investors.

Company ou t lookAs a result of the uncertainty in capital

markets, AWM remains cautious

regarding its outlook in the near term.

Clearly, this kind of downturn could have

a negative impact on our overall revenues,

however, AWM’s strong and experienced

management team has the ability to adapt

to and successfully exploit prevailing

market conditions.

Despite the poor markets, AWM

still has a number of highly attractive

opportunities which, should they be

successful, will continue the company’s

historically positive trajectory.

With a strong balance sheet and recurring

earnings as hallmarks for AWM, we are

well positioned to weather the current

market conditions, and will emerge with

strong future growth.

Pleasingly, fi nancial services, and

in particular, superannuation, remains

a sector expecting long term growth.

Christopher F Kelaher

Managing Director


For

per

sona

l use

onl

y

1010

Pla t f o rm managemen t and admin is t r a t ion

Revenue : F Y 2008 : $ 229.2m F Y 2007: $ 207.4m

This division, represented by Spectrum

Super, The Portfolio Service and AET,

provides and administers personal and

corporate superannuation, Self Managed

Super Funds (SMSF) and Small APRA

Funds for retail and corporate clients.

This division had $14.6 billion as at

30 June 2008 and is the biggest revenue

generator for AWM.

The previous year’s acquisition, isuper and

Finium was successful integrated into the

Spectrum Super platform.

Our corporate super offering, Spectrum

Super received a Heron 5 star rating,

which describes the platform as

outstanding. Heron assesses and rates

the various components of the fund,

grouped under 5 areas of importance

including investment arrangements,

contributions, ancillary benefi ts,

communications and insurance.

A fully functioning administration system

for AET’s Small APRA funds has seen

historical outfl ows in this division plateau

during the year and AWM is now hopeful

of future growth in this area.

During the year AET launched a new

SMSF service called BOB, which neatly

rounds out the suite of superannuation

products AWM offers its clients.

Ou t look

While uncertain global markets have

affected the revenues in this area, and

may continue into the 2009 fi nancial year,

superannuation remains an important part

of all working Australian’s life. As AWM

has a complete superannuation offering

in the Australian market, it is well placed

to take advantage of the continued

growth in this space.

Divisional overview

For

per

sona

l use

onl

y

1111

F inanc ia l Adv ice and D is t r ibu t ion ( Weal t h Managemen t D iv is ion )

Revenue : F Y 2008 : $108.3mF Y 2007: $ 95.9m

Represented chiefl y by Bridges Financial

Services and Wealth Managers, more

than 300 fi nancial planners provide

advice on investment strategies,

wealth accumulation, retirement planning

and stockbroking to retail clients.

As at 30 June 2008 this division had

$14.6 billion in Funds Under Advice.

During the year, the division’s in-house

research team maintained defensive

investment recommendations which

positioned planners and their clients

particularly well for the current market

downturn and volatility.

A key driver for growth is the referral

relationship this division has with credit

unions, building societies and other non

bank fi nancial institutions. Referrals from

these institutions remained at record

levels this year. New referral relationships

with a growing number of building

societies, friendly societies, professional

services fi rms and semi-government

authorities support steady future growth.

A restructure of the Wealth Managers

business saw a deliberate fall in practices

and planners operating under this

licence. This brand is now positioned

for strong growth appealing to small

and medium-sized fi nancial planning

practices wishing to market their

services under their own name.

Late in the fi nancial year, a new Head

of the Wealth Management Division was

appointed. Michael Carter, who was an

internal appointment, is an experienced

Senior Executive, having worked within

the division for many years.

Ou t look

The outlook for this division remains

positive, considering the ageing

population and the increasing need

for people to plan for their retirement

from a younger age. The increasing

attractiveness of superannuation

as the preferred investment vehicle

will also assist with future growth.

Like all in the fi nancial services space,

investor confi dence and the value

of client portfolios will be impacted

by the state of global fi nancial markets

in the next 12 months.


For

per

sona

l use

onl

y

Disclaimer

The Lonsec Limited (‘Lonsec”) ABN 56 061 751 102 rating (assigned May 2008) presented in this document is limited to “General Advice” and based solely on consideration of the investment merits of the fi nancial product(s). It is not a recommendation to purchase, sell or hold the relevant product(s), and you should seek independent fi nancial advice before investing in this product(s). The rating is subject to change without notice and Lonsec assumes no obligation to update this document following publication. Lonsec receives a fee from the fund manager for rating the product(s) using comprehensive and objective criteria.1212

I nves tmen t Managemen t

Revenue : F Y2008 : $ 22.3m F Y2007: $19.1m

With $6.5 billion in Funds Under

Management (FUM), as at 30 June 2008,

United Funds Management provides

investment management for wholesale

and retail investors, using a manage the

manager (or fund of funds) type approach.

During the year, United continued to

strengthen its profi le and sales among

AWM’s associated and non-aligned

distribution partners including Bridges

and Wealth Managers.

Assisting with this business growth, eight

United Funds were awarded a Lonsec

Rating of ‘Investment Grade’ following

an initial review. Those funds were:

• United Australian Equities Fund

• United International Equities Fund

• United Capital Secure Fund

• United Sector Leaders Capital

Stable Fund


Balanced Fund


Growth Fund

• United Sector Leaders Diversifi ed

Aggressive Fund

• United Sector Leaders Capital High

Growth Fund

Subsequent to the year end, The United

Cash Management Fund reached $1 billion

FUM. Given the current market conditions,

we expect this fund to continue its growth.

Ou t look

United will continue to focus on profi table

FUM growth next year. The acquisition of

a 70% stake in Ord Minnett provides a new

distribution opportunity for the division.

For

per

sona

l use

onl

y

1313

Pr i va t e C l ien t

Revenue : F Y 2008 : $18.2mF Y 2007: $18.3m

Operating under the Australian Executor

Trustees brand, Private Client prepares

Wills, provides administration and

manages the investments of deceased

estates around Australia. It also provides

trustee services for compensation and

charitable trusts. As at 30 June 2008,

the Private Client division had $1.3 billion

in Funds Under Advice.

Private Client earns revenue on the fees

charged for the preparation of wills and

estates, deceased estate administration

and trustee and attorney services.

The average value and number of estates

remained strong in FY2008 delivering

solid revenues. The division continues to

focus on its strategy of delivering estate

planning services to fi nancial advisers and

their clients throughout Australia. With

future growth in mind, AET Private Client

has restructured to facilitate higher levels

of service to its clients.

Ou t look

In the near term, it is not expected

that there will be any dramatic decline

in probates. The value of deceased

estates managed by the company will

vary depending upon investment market

conditions. In the longer term, this division

is well positioned to take advantage of

the expected surge in inter-generational

wealth transfer.


For

per

sona

l use

onl

y

1414

Cor por a t e Tr us t

Revenue : F Y 2008 : $ 5.4mF Y 2007: $ 4.4m

As a professional trustee, this area

acts as the legal owner or holds security

over assets on behalf of clients and

provides other administration and

supervisory services.

AET provides services such as Custody,

Trustee for Wholesale Schemes, Note

Issues, Securitisation Programmes and

SPV management. This division had

$25.9 billion in Funds Under Supervision

as at 30 June 2008.

During the year, Corporate Trust saw

continued growth with the majority

in the higher margin custodian services

area. Importantly, due to diversifi cation,

this division is not as reliant on new

securitisation business as other providers

in this market.

Several developments which are expected

to increase revenue in coming years

included the establishment of Master

Custodian services through Deutsche

Bank, a business partner of AET’s, and the

CONCERT product for mortgage servicing,

developed in conjunction with a number

of industry participants.

Ou t look

Subsequent to year end, a new computer

system was installed which streamlines

a number of administration processes

and will improve reporting capabilities.

It is expected that this will allow us to

increase revenue in this division whilst

minimising expenses.

The focus over the next 12 months will

be to increase the brand awareness and

streamline processes.

For

per

sona

l use

onl

y

1515

John Warbur t on , C PA

Non-E xecu t i ve Cha i rman

John was appointed as Chairman of

AWM in September 2007, following

two years of service as a Director of

AWM and eight years as a Director with

Select Managed Funds. John also serves

as a non-executive director of AWM’s

subsidiary companies and is a member

of the Statutory Audit and Risk

Management Committee.

He currently holds a number of

directorships which include Living and

Leisure Australia Group Limited, Lend

Lease Real Estate Investments Limited

and the Melbourne Convention and

Exhibition Trust. He is chair of the City

of Melbourne audit committee and sits

on a number of other audit committees.

Chr is t opher Ke laher, BE c , L L B , F F i n

Manag ing D i r ec t o r

Chris was appointed managing director

of Australian Wealth Management in

May 2006 following the merger between

Australian Wealth Management and

Select Managed Funds. Chris had

previously served as managing director

of Select since 1997. Chris has more than

20 years’ investment management and

business development experience.

From 1985 to 1997, Chris was joint

managing director of Citicorp Global Asset

Management. During this time Chris was

responsible for business management,

strategic marketing and sales growth

in Australia, and performed an important

role in the establishment of Citicorp

Investment Management/Global Asset

Management in Australia and establishing

its New Zealand business.

Prior to joining Citicorp Global Asset

Management, Chris was a director of

Quest Investment Limited, a listed venture

capital company. Chris is responsible for

the management and strategic direction

of the AWM Group. Chris also serves as

a director of DKN Financial Group Limited.

John Warburton

Chris Kelaher


Directors

For

per

sona

l use

onl

y

1616

I an Gr i f f i t hs , C A c c , D i p A I I , M I I A

E xecu t i ve D i r ec t o r

Ian was appointed as an executive

director of Australian Wealth

Management on 29 May 2006, having

previously served as executive director

of Select Managed Funds since 1989.

Subsequent to year end, Mr Griffi ths

announced that over the next twelve

months, he will transition to a non-

executive director.

Ian has more than 30 years’ experience

in the fi nancial and superannuation

industries. Ian joined Select after

a career in superannuation administration

and consulting commencing with AMP

in 1972. His industry knowledge and skills

particularly in operations and mergers

and acquisitions, has been central

to the growth of the Group. Ian is also

a member of the Group Remuneration

and Appointments Committee.

Myles S t ewar t-Heske t h , BA , MBA

Non-E xecu t i ve D i r ec t o r

Appointed to the Board of Australian

Wealth Management in May 2006,

Myles has also been a non-executive

director of Select Managed Funds since

November 2004. Myles is Chairman of the

Group Remuneration and Appointments

Committee. Myles is also Chairman of

Radicle Timber Plantations Limited, which

is listed on the London Stock Exchange.

Myles has more than 22 years of domestic

and international experience at a senior

level in banking and fi nance, including the

former Commercial Bank of Australia (now

Westpac), Asian Development Bank, Saudi

Industrial Development Fund, former

Sanwa Bank Japan (now UFJ Holdings)

and Citibank Australia. He also has more

than 18 years’ experience in the crop

protection business, both in Australia and

overseas. He is a director of CICONIA,

which holds investments in agbiotech,

crop protection and crop nutrition

in Singapore.

Myles is also a director of Pacifi c

Agriscience Pte Ltd, a Singapore

corporation which is engaged in the global

marketing of crop protection and crop

nutrition products as well as a signifi cant

shareholder in a teak plantation known

as Forest Hills in Southern China. He

is a director of Optima Investments Pte

Ltd, a Singapore corporation which has

been established to hold agricultural

investments in various countries. Myles

has served as a professional company

director since 1992.

Ian Grif fiths

Myles Stewart-Hesketh

For

per

sona

l use

onl

y

1717

Geor ge Venar dos, B C om, F C A , F C I S , F T I A , FA I C D

Non-E xecu t i ve D i r ec t o r

George was appointed to the board

of Australian Wealth Management in

January 2008 as a non-executive director.

George is also the Chairman of the

Statutory Audit and Risk Management

Committee. George, who is the Chief

Financial Offi cer of Insurance Australia

Group Limited (IAG) has more than

29 years’ experience in fi nancial services.

Prior to joining IAG, George held the

position of Executive Director and

General Manager, Finance and Corporate

Services, with the Legal & General Group

in Australia.

He was the Chairman of the Finance and

Accounting Standing Committee for the

Insurance Council of Australia. In 2003,

George was awarded CFO of the Year

in Insto Magazine’s Annual Distinction

Awards.

George Venardos


For

per

sona

l use

onl

y

1818

Work fo r ce p r o f i leAs our name implies, all 758 full and

part-time employees work in various

states around Australia. Our Tasmanian

operations, closely followed by those

in South Australia, employ the majority

of our staff, with 36% and 28%

respectively. The majority of these

roles are in administration or our shared

services such as legal and compliance,

fi nance and information technology.

New South Wales has our third largest

concentration of employees with 25%.

The remaining 11% is shared throughout

smaller offi ces in Victoria, Queensland

and Western Australia.

AWM is a f ami l y-f r iend ly employerAt AWM, we encourage our employees

to strive for an appropriate work-life

balance. To assist in this endeavour,

we offer a wellbeing program to all

employees, called Health@Wealth.

This program provides education

on health issues through monthly

newsletters, seminars and on-site

health-tests, such as fl u injections and

healthy heart check.

During the year an eight weeks paid

parental leave program was introduced

for all permanent staff with more than

one year’s service. This is also available to

staff who may be adopting a child.

For the third year in a row, AWM

has complied with the Women in the

Workplace Act of 1999.

Staff are offered a confi dential employee

assistance program should they require

counselling services for any reason.

We ar e commi t t ed t o p r ov id ing a sa f e wor k ing env i r onmen tEach major state offi ce has an active

Occupational Health and Safety (OHS)

committee ensuring the safety and

welfare of our employees.

While there were reports of a few minor

incidents, no major injuries occurred

during the year.

Develop ing our peop le i s a p r io r i t yAWM aims to promote career

development and enhance the knowledge

and skills of its staff through learning

and development. We see that the returns

on investment in training are both direct

and indirect, resulting in increased

productivity, improved staff morale,

reduced absenteeism, staff turnover

and lower recruitment costs.

All staff are encouraged to set

personal development plans with their

managers and to undertake training

that is appropriate for their role and

development.

During the year, we undertook a “Training

Needs Analysis”, to ensure that employee

training focussed on areas that are

specifi c to the company environment

and employee and team needs. The Senior

Leadership Team, and their direct reports,

completed a written survey and were

interviewed by the Human Resources

team about their own personal training

needs. The fi ndings from the survey

and interviews will form the basis of

a Learning and Development Program

that will be initiated throughout the

company in 2009.

Our employees

For

per

sona

l use

onl

y

AWM’s Workp lace G iv ing char i t ies

1919

AWM is committed to fulfi lling its

responsibility as a good corporate citizen

and offers a diverse range of programs

aimed at assisting others.

AWM has a Workp lace Giv ing Pr ogr ammeAWM established a Workplace Giving

Programme in 2005 that allows staff to

donate to a variety of charities across

a broad range of humanitarian needs.

AWM supports the generosity of its

employees, by matching dollar for dollar,

those contributions.

The charities chosen by the

employees are:

Beyond Blue

www.beyond.blue.org.au

Care Australia

www.careaustralia.org.au

The Cancer Council of Australia

www.cancer.org.au

The Hobart City Mission

www.hcm.asn.au

The RSPCA

www.rspca.org.au

The Starlight Children’s Foundation

www.starlight.org.au

WWF Australia

www.wwf.org.au

Outside of the Workplace Giving

Programme, AWM supports a number

of charity events and makes donations

to charities through its business

divisions. The donations may be

monetary or in-kind donations.

Communi t y leave i s o f f e r ed t o a l l s t a f fEmployees are encouraged to help

out in their local communities and are

offered one leave day per year for

community service.

AE T o f f e r s char i t ab le t r us t s and p r esc r ibed p r i va t e f undsAWM’s Private Client division, through

the charitable trusts and prescribed

private funds they offer, have been

donating money to a large number

of charities nominated by the client,

or their trustee, for many years.


AWM and the community

For

per

sona

l use

onl

y

2020

Where possible we take into account

environmental factors when making

decisions across our business and are

committed to improving our efforts

in this regard.

What we’ve done t h r oughou t t he yearAWM has participated in Earth Hour since

its inception. Earth Hour, an initiative

of the WWF, calls on individuals and

businesses to switch off unnecessary

lights and electrical items. In 2008,

we increased our participation from

Sydney alone to all offi ces nationally

and encouraged employees to participate

outside the workplace.

According to the Earth Hour website,

2008 was the biggest voluntary power

down in history.

Within all our major tenancies, we are

committed to improving our energy

effi ciency, water use and recycling

rates. During 2008, we investigated,

and in some cases, switched to off-peak

electricity. We anticipate making further

improvements throughout 2009.

AWM participates in the building

manager’s environmental initiatives

program in our 207 Kent Street, Sydney

premises. All tenants are encouraged

to assist in the manager’s goal of a 75%

or better rate of recycling of waste items.

To achieve this goal, staff must use the

strategically placed recycling and rubbish

bins provided.

In offi ces nationally, a paper recycling bin

is provided and the default setting on the

most used printers are set to double-sided

printing to reduce paper use.

AWM o f f e r s c l ien t s r espons ib le inves tmen t op t ionsWe offer our clients the opportunity to

invest in socially responsible investment

options, with at least two options on each

of our major platforms.

AWM also holds a 19.9% investment

stake in Australian Ethical Investments

Limited.

AWM and the environment

For

per

sona

l use

onl

y

2121

The Board of directors and management

of AWM recognise the importance

of good corporate governance and

is committed to maintaining high

governance standards within the

Company. This is paramount since

AWM is both a listed company and

an entity operating within the fi nancial

services sector, highly regulated by

APRA, ASIC, the ASX, AUSTRAC and

the Attorneys General offi ces.

The Board is responsible to its

shareholders for the performance

of the Company. The Board’s focus

is to enhance the interests of

shareholders and key stakeholders.

A summary of the Company’s policies

and procedures in relation to governance

are available in the corporate governance

section of the Company’s website:

www.awmlimited.com.au The

Company’s corporate governance

policies and practices are reviewed

annually and will continue to develop

and improve its governance practices

and monitor developments in best

practice corporate governance.

Pr inc ip le 1 : Lay so l id f ounda t ions f o r managemen t and over s igh tThe Board has formalised its roles and

responsibilities. These are set out in

a Charter which clearly defi nes the

matters that are reserved for the Board

and those that the Board has delegated

to management. The responsibilities of

the Board include: determining strategic

objectives and direction of the company;

setting and monitoring annual operating

plans; monitoring fi nancial objectives;

ongoing assessment and monitoring of

performance; determining group fi nancial

strategy and policies; managing and

monitoring risk and compliance, internal

compliance and control, reviewing the

company’s code of conduct and overall

corporate governance to ensure effective

and timely disclosure of policies,

procedures and other relevant data to

the market, shareholders and customers.

Delegation to Managing Director:

The board delegates to the Managing

Director responsibility for implementing

the Company’s strategic direction and

managing day to day operations.

Clear lines of communication have

been established between the Chairman

and the Managing Director to ensure

the responsibilities are understood.

Appointment of new directors: All new

directors receive an induction pack on

appointment which sets out the Board’s

responsibilities, the directors’ duties and

the role of the committees of the Board

and management.

Pr inc ip le 2 : S t r uc t u r e t he boar d t o add va lueBoard Independence: A director of AWM

will be considered independent where the

director is independent of management

(ie. a non-executive director), does

not hold a substantial interest in the

company and is free from any business or

other relationship that could materially

interfere with, or could reasonably be

perceived to interfere with, the exercise

of independent judgement. The Board has

made its own assessment to determine

the independence of each director and

notes that at the date of this report three

of the fi ve directors are independent.

The Board notes the requirement for a

majority of independent directors.


Corporate governance statement

For

per

sona

l use

onl

y

2222

Composition of Board: At the date of

this report the Board comprises three

non-executive directors, of which all are

independent, and two executive directors

(Messrs Kelaher and Griffi ths). A Profi le

of each director is set out in the Directors’

report. The Chairman is selected by

the Board and is an independent director.

The Chairman and managing director

have separate roles.

The independent non-executive

directors are Messrs Stewart-Hesketh,

Venardos and Warburton.

Appointments/Nomination Committee:

The Board has established a Group

Remuneration and Appointments

Committee, a charter has been

formalised which includes consideration

of director’s competencies, selection,

assessment and nomination practices

and self-evaluation processes.

Pr inc ip le 3 : P r omo t e e t h ica l and r espons ib le dec is ion mak ing The Board has developed a Code of

Conduct which is designed to ensure a

high standard of corporate and individual

behaviour. Directors, executives and

all employees are aware of their

responsibilities under the terms of their

appointment or contract of employment.

The Code provides that directors

and executives must act honestly, in

good faith and in the best interests of

the company; use due care, skill and

diligence in fulfi lling their duties; use

the power of their position for a proper

purpose; not make improper use of

information acquired by their position;

not allow personal interests, or those of

associates, to confl ict with the interests

of the company; exercise independent

judgement and maintain confi dentiality.

Directors, offi cers and employees are

subject to the Corporations Act 2001

relative to restrictions applying for,

acquiring and disposing of securities of

the company if they are in possession of

inside information. Directors, offi cers and

employees are restricted from trading

in the company’s securities during

the six week period prior to making

an announcement to the market on the

company’s half year and full year results.

In addition, directors have entered

into an agreement with the company

which requires approval before trading

in the company’s securities and on-going

disclosure to the company of any

change in the director’s interest in

securities within three business days

of the change occurring.

Pr inc ip le 4 : Sa f eguar d in t egr i t y in f inanc ia l r epor t ingThe Board of AWM receives regular

reports about the fi nancial condition

and operational results of AWM and its

controlled entities. The managing director

and chief fi nancial offi cer report in

writing to the Board that the consolidated

fi nancial statements of AWM for each

half year and full year present a true and

fair view, in all material respects, of the

Group’s fi nancial condition and are in

accordance with accounting standards.

In addition, they report on the company’s

risk management system and the

effectiveness of such system.

The Board has established a Statutory

Audit and Risk Management Committee

to provide assistance to the Board in

accordance with its established Terms

of Reference. The Committee meets at

least four times per year. The Committee

comprises only non-executive directors,

with a majority of independent directors,

and the chairman of the committee is not

the chairman of the Board.

For

per

sona

l use

onl

y

2323

The principal functions of the committee

are to review the half and full year

fi nancial report, review accounting

policies, appoint the internal and external

auditors, review the scope and plans

of the internal and external auditors

and any material issues arising from

these audits, oversee the independence

of the external auditors and to ensure

effectiveness of AWM’s systems

of accounting, internal controls and risk

management. The board has adopted

a formal policy on the provision of

non audit services. The members of

the audit committee and qualifi cations

of each member are set out in the

Directors’ Report.

Pr inc ip le 5 : Make t imely and ba lanced d isc losur eThe Board is committed to keeping

its shareholders and the market fully

informed of major developments that

may have an impact on the company.

Procedures are in place to identify

matters that are likely to have a material

affect on the price of the company’s

securities and to ensure those matters

are notifi ed to the Australian Securities

Exchange (ASX) in accordance with Listing

Rule disclosure requirements.

In June 2008, the disclosure policy was

reviewed by the Board and circulated

to all staff for acknowledgement and

affi rmation. The Company Secretary

is responsible for maintaining a register

of information referred to her or the

Managing Director that a director,

executive or employee queried as to

being a potential item for disclosure.

All disclosure is actioned as soon

as advised. The company secretary

is responsible for all communications

with the ASX. A copy of this policy

is available on the company’s website.

Pr inc ip le 6 : Respec t r igh t s o f shar eho lder sAWM recognises the right of shareholders

to be informed of matters, in addition to

those prescribed by law, which affect

their investments in the company.

AWM communicates information to

shareholders through the annual report,

disclosures to the ASX, ASIC and the

company’s website.

The Board encourages active

participation by shareholders at any

company meetings. AWM ensures that

the company’s auditors attend the annual

general meeting or other meetings

of the company and shareholders are

afforded the opportunity of asking the

company’s auditor questions regarding

the conduct and content of the audit.

A shareholder may submit a question

to the auditor prior to the meeting

by emailing the company secretary.

Pr inc ip le 7 : Recogn ise and manage r i skThe Board recognises that effective

management of risk is an integral part

of good management and is vital to the

continued growth and success of AWM.

The Board is ultimately responsible for

the oversight of the AWM Group’s risk

management and control framework and

has implemented a policy framework

designed to ensure that the Group’s

risks are identifi ed, analysed, evaluated,

monitored and communicated within the

organisation or to any relevant external

party and that adequate controls are in

place and effectively function.

The Board has established a Statutory


which is responsible for reviewing all

aspects of risk and compliance on behalf

of the Board. In addition, a Commercial

Operations and Risk Committee has

been established which comprise two

independent non-executive directors,

members from the legal, compliance,

internal audit and risk management team

of the business and a representative from

each operating business within the Group.


For

per

sona

l use

onl

y

2424

At this committee the Group risk

department reports to the Committee

on the monitoring of risk through the

business, risk reporting through the

enterprise-wide framework including

positive assurance. This committee

endeavours to meet every eight weeks

and reports to the Statutory Audit and

Risk Management Committee.

The managing director and the chief

fi nancial offi cer report in writing to the

Board to the best of their knowledge

and belief, that the statement given

in accordance with best practice

recommendation 4.1 is founded on

a sound system of risk management

and internal compliance and control in

operation as at the date of this report.

This report confi rms that the system

implements the policies adopted by the

Board either directly or through delegation

to management and that the company’s

risk management and internal compliance

is operating effectively in all material

respects as at the date of this report,

based on the risk management model

adopted by the Board.

The statements provide a reasonable,

but not absolute, level of assurance and

do not imply a guarantee against adverse

events or more volatile outcomes arising

in the future. In addition, it sets out that

risk management and internal compliance

and internal control systems are subject

to periodic declarations by process

owners and review by the company’s

audit process and regulators.

The company has established a number

of other policies which include, but are not

limited to, the delegations policy, Privacy,

Code of Conduct, market disclosure, Anti-

money laundering and IT Code of Conduct.

Pr inc ip le 8 : Remuner a t e f a i r l y and r espons ib l yThe remuneration policy objective

of AWM is to ensure that employee

emoluments properly refl ect the person’s

duties and responsibilities and is designed

to attract, retain and motivate executives

of the highest quality and standard.

The level of remuneration of directors

and executives is set out in the Directors’

report and Notes to the Financial

Report. The Board has established a


Committee. A review of compensation

arrangements for the managing director

and executives is conducted annually

by the Committee and includes an

individual’s performance, review of

market rates for similar positions and the

results of the company during the period.

This committee is chaired by Mr Stewart-

Hesketh and comprises members Messrs

Griffi th, Vernados and Warburton.

This statement is dated 2 October 2008.

For

per

sona

l use

onl

y

25

For

per

sona

l use

onl

y

26

Contents – financial report

D i r e c t o r s ’ r e p o r t 2 7

R e m u n e r a t i o n r e p o r t 3 9

A u d i t o r ’s i n d e p e n d e n c e d e c l a r a t i o n 4 5

I n d e p e n d e n t a u d i t o r ’s r e p o r t 4 6

D i r e c t o r s ’ d e c l a r a t i o n 4 8

I n c o m e s t a t e m e n t 4 9

B a l a n c e s h e e t 5 0

S t a t e m e n t o f r e c o g n i s e d i n c o m e a n d e x p e n s e 5 1

C a s h f l o w s t a t e m e n t 5 2

N o t e s t o t h e f i n a n c i a l s t a t e m e n t s 5 3

S h a r e h o l d e r i n f o r m a t i o n 118

C o r p o r a t e d i r e c t o r y 12 0

For

per

sona

l use

onl

y

27

The directors of Australian Wealth

Management Limited (AWM) submit

herewith the annual fi nancial report of

the company for the fi nancial year ended

30 June 2008. In order to comply with the

provisions of the Corporations Act 2001,

the directors report as follows:

Information about the directorsThe names and particulars of the directors

of the Company during or since the end of

the fi nancial year are:

John Warburton, CPA – Non-Executive chairman

John was appointed as chairman of AWM

in September 2007, following two years

of service as a director of AWM and eight

years as a director with Select Managed

Funds Limited (SMF). John also serves

as a non-executive director of AWM’s

subsidiary companies and is a member of

the Statutory Audit and Risk Management

Committee.

He currently holds a number of

directorships which include Living and

Leisure Australia Group Limited, Lend

Lease Real Estate Investments Limited

and the Melbourne Convention and

Exhibition Trust. He is chair of the City of

Melbourne audit committee and sits on a

number of other audit committees.

Christopher Kelaher, B.Ec., LL.B., F Fin – Managing director

Chris was appointed managing director of

AWM in May 2006 following the merger

between AWM and SMF. Chris had

previously served as managing director

of SMF since 1997.

Chris has more than 20 years’ investment

management and business development

experience. From 1985 to 1997, Chris

was joint managing director of Citicorp

Global Asset Management. During this

time Chris was responsible for business

management, strategic marketing and

sales growth in Australia, and performed

an important role in the establishment of

Citicorp Investment Management/Global

Asset Management in Australia and

establishing its New Zealand business.

Prior to joining Citicorp Global Asset

Management, Chris was a director of

Quest Investment Limited, a listed venture

capital company. Chris is responsible for

the management and strategic direction

of AWM. Chris also serves as a director

of DKN Financial Group Limited.

Ian Griffiths, C.Acc., DipAII., MIIA – Executive director

Ian was appointed as an executive

director of AWM on 29 May 2006, having

previously served as executive director of

SMF since 1989. Subsequent to year end,

Mr Griffi ths announced that over the next

twelve months, he will transition to a non-

executive director.

Ian has more than 30 years’ experience

in the fi nancial and superannuation

industries. Ian joined SMF after a career

in superannuation administration and

consulting commencing with AMP in

1972. His industry knowledge and skills

particularly in operations and mergers

and acquisitions, has been central to

the growth of the Group. Ian is also a

member of the Group Remuneration and

Appointments Committee.

Myles Stewart-Hesketh, B.A., M.B.A. – Non-Executive director

Appointed to the board of AWM in

May 2006, Myles has also been a

non-executive director of SME since

November 2004. Myles is chairman of the


Committee. Myles is also chairman of

Radicle Timber Plantations Limited, which

is listed on the London Stock Exchange.

Myles has more than 22 years of domestic

and international experience at a senior

level in banking and fi nance, including the

former Commercial Bank of Australia

(now Westpac), Asian Development

Bank, Saudi Industrial Development Fund,

former Sanwa Bank Japan (now UFJ

Holdings) and Citibank Australia. He also

has more than 18 years’ experience in the

crop protection business, both in Australia

and overseas. He is a director of CICONIA,

which holds investments in agbiotech,

crop protection and crop nutrition in

Singapore. Myles is also a director of

Pacifi c Agriscience Pte Ltd, a Singapore

corporation which is engaged in the global

marketing of crop protection and crop

nutrition products as well as a signifi cant

shareholder in a teak plantation known

as Forest Hills in Southern China. He is

a director of Optima Investments Pte

Ltd, a Singapore corporation which has

been established to hold agricultural

investments in various countries.

Myles has served as a professional

company director since 1992.


Directors’ report

For

per

sona

l use

onl

y

28

George Venardos, BCom, FCA, FCIS, FTIA, FAICD – Non-Executive director

George was appointed to the board of

AWM in January 2008 as a non-executive

director. George is also the chairman of

the Statutory Audit and Risk Management

Committee.

George, who is the Chief Financial Offi cer

of Insurance Australia Group Limited (IAG)

has more than 29 years’ experience in

fi nancial services. Prior to joining IAG,

George held the position of Executive

director and General Manager, Finance

and Corporate Services, with the Legal &

General Group in Australia. He was the

chairman of the Finance and Accounting

Standing Committee for the Insurance

Council of Australia. In 2003, George

was awarded CFO of the Year in Insto

Magazine’s Annual Distinction Awards.

Robert Thomas, B.Econ, MSDIA, SF Fin – Non-Executive chairman

Robert joined the board in February 2005

in a non-executive chairman capacity and

resigned during the year. Robert was a

member of the Group Remuneration and

Appointments and Statutory Audit and

Risk Management Committees until his

resignation.

Graham Rogers, FIA (London), FIAA (Australia) – Non-Executive director

Graham served as member of the board of

subsidiary companies since 1997 and was

appointed non-executive deputy chairman

of AWM following the merger with SMF

in 2006. Graham resigned during the

year. Graham was also chairman of the


Committee and a member of the Statutory


until his resignation.

The above named directors held offi ce

during the whole of the fi nancial year

and since the end of the fi nancial year

except for:

Robert Thomas – resigned •

27 September 2007

Graham Rogers – resigned •

2 November 2007

George Venardos – appointed •

24 January 2008

In addition to the directors of AWM listed

above, the following were directors of

subsidiary companies:

Stuart Palmer – director of Australian

Executor Trustees (NSW) Limited.

Malcolm McIntosh – director of Australian

Executor Trustees

(NSW) Limited.

The board of Australian Executor Trustees

(NSW) Limited meets quarterly and is

responsible for all fi duciary, risk and

compliance aspects required under the

Trustees Act.

Company Secretary

Ms Danielle Corcoran

Ms Corcoran was appointed to the

position of company secretary in February

2005. Before joining AWM she held

similar positions with other listed public

companies. Ms Corcoran is also Head of

Human Resources for AWM.

Directors’ report ( cont’d )

For

per

sona

l use

onl

y

29

Directorships of other listed companiesDirectorships of other listed companies held by directors in the 3 years immediately before the end of the fi nancial year are as follows:

Director Company Period of DirectorshipChristopher Kelaher DKN Financial Group Ltd 9 January 2004 – present

Ian Griffi ths Tasmanian Perpetual Trustees Ltd 22 October 2002 – 27 July 2006

John Warburton Living & Leisure Australia Group Ltd 15 May 2006 – present

George Venardos IAG Finance (New Zealand) Ltd 6 October 2004 – present

Robert Thomas Heartware Ltd 17 January 2005 – present

Virgin Blue Holdings Ltd 8 September 2006 – present

TOWER Australia Group Ltd 22 August 2007 – present

Directors’ shareholdings The following table sets out each director’s relevant interest in shares and options in shares of the company or a related body

corporate as at the date of this report.


DirectorsFully paid ordinary

shares numberShare options

numberJohn Warburton 18,375 –

Myles Stewart-Hesketh 50,000 –

George Venardos 56,000 –

Robert Thomas 10,000 –

Graham Rogers 18,375 –

Christopher Kelaher 18,338,228 500,000

Ian Griffi ths 13,098,953 250,000

Remuneration of directors and senior managementInformation about the remuneration of directors and senior management is set out in the remuneration report of this directors’ report,

on pages 39 to 40.


For

per

sona

l use

onl

y

30

Restrictions on dealing in AWM securities

In addition to legal requirements that

prevent any person from dealing in

AWM securities when in possession of

undisclosed price sensitive information,

the board has implemented a policy

that prohibits directors, executives and

other designated senior management

personnel from:

dealing in AWM securities when •

in possession of price sensitive

information;

short term speculative trading in AWM •

securities;

transactions that limit economic risk •

associated with unvested entitlements

to AWM securities; and

any trading in AWM securities without •

full disclosure to the chairman of the

board.

Principal activities

AWM and its subsidiaries provide a

diversifi ed range of fi nancial services to

retail and wholesale clients. The principal

activities of AWM during the year were:

Superannuation platform trusteeship •

and administration;

Investment management; •

Financial advice, distribution and •

stockbroking;

Private client and estate planning; and•

Corporate trust.•

Review of operations

The consolidated entity delivered a sound

result despite challenging domestic and

international equity markets, particularly

in the second half of the year. For the year

ended 30 June 2008, operating profi t after

tax attributable to equity holders was

$65.2 million (2007: $57.7 million). This

represents an increase of $7.5 million or

13% over the previous corresponding period.

The 2008 result included a non-recurring

benefi t of $2.9 million associated with

overprovision for income tax in prior

years. This adjustment was largely due

to taxation issues associated with the

Select merger in 2006, as well as the fi rst-

time application of AASB 112 in 2007.

On 4 March 2008, the company

announced that it would undertake an

on-market share buy-back. At completion

of the buy-back, the company had

purchased a total of 16,990,343 shares,

investing a total of $25 million. The

buy-back program was EPS accretive.

On 27 June 2008, directors resolved to

extend the program beyond 30 June 2008.

The buy-back was completed on

19 August 2008.

Against the backdrop of uncertain global

and domestic markets, the company

increased slightly its Funds Under

Management, Administration, Advice and

Supervision (FUMAS) to $60.4 billion as

at 30 June 2008.

Share options granted to directors and senior managementDuring and since the end of the fi nancial year an aggregate 3,127,121 share options were granted to the following directors and to the

fi ve highest remunerated offi cers of the company as part of their remuneration:

Directors and senior managementNumber of

options granted Issuing entity

Number of ordinary shares

under optionChristopher Kelaher 1,532,841 Australian Wealth Management Ltd 1,532,841

Ian Griffi ths 594,280 Australian Wealth Management Ltd 594,280

Alex Hutchison* 200,000 Australian Wealth Management Ltd 200,000

Andrew McLachlan 200,000 Australian Wealth Management Ltd 200,000

Gary Riordan 200,000 Australian Wealth Management Ltd 200,000

Michael Harvey 200,000 Australian Wealth Management Ltd 200,000

Stuart Steele 200,000 Australian Wealth Management Ltd 200,000

* resigned 14 March 2008


For

per

sona

l use

onl

y

31

Basic earnings per share increased 11.6%

from 10.25 cents per share in 2007 to 11.44

cents per share in 2008. Cash earnings per

share increased from 11.59 cents per share

in 2007 to 12.54 cents per share in 2008.

Issued capital increased by 47.6 million

shares on 2 June 2008 when the company

agreed to purchase 70% of broking house

Ord Minnett Holdings Pty Limited.

The directors announced a fi nal dividend

of 5.5 cents per share, taking the total

dividend for the year to 10.5 cents per

share, an increase of 1 cent per share

or 10.5% on fi nancial year 2007.

Changes in state of affairs

On 1 June 2008, AWM acquired a 70%

stake in Ord Minnett Holdings Limited.

Other than the matter identifi ed above,

there was no signifi cant change in the

state of affairs of the consolidated entity

during the fi nancial year.

Subsequent events

There has not been any matter or

circumstance occurring subsequent to

the end of the fi nancial year that has

signifi cantly affected, or may signifi cantly

affect, the operations of the consolidated

entity, the results of those operations,

or the state of affairs of the consolidated

entity in future fi nancial years.

Future developments

Disclosure of information regarding

likely developments in the operations

of the consolidated entity in future

fi nancial years and the expected

results of those operations is likely to

result in unreasonable prejudice to the

consolidated entity. Accordingly, this

information has not been disclosed in

this report.

Dividends

In respect of the fi nancial year ended

30 June 2007, as detailed in the directors’

report for that fi nancial year, a fi nal

dividend of 5.5 cents per share franked

to 100% at 30% corporate income tax

rate was paid to the holders of fully paid

ordinary shares on 5 October 2007.


30 June 2008, an interim dividend of

5.0 cents per share franked to 100% at

30% corporate income tax rate was paid

to the holders of fully paid ordinary shares

on 20 March 2008.


30 June 2008, the directors declared

the payment of a fi nal dividend of

5.5 cents per share franked to 100%

at 30% corporate income tax rate to

the holders of fully paid ordinary shares

on 10 October 2008. This dividend will

be paid to all shareholders recorded

on the Register of Members on

8 September 2008.


For

per

sona

l use

onl

y

32

1. AMP Limited (AMP)

2. AXA Asia Pacifi c Holdings

Limited (AXA)

3. Challenger Financial Services

Limited (CGF)

4. Count Financial Limited (COU)

5. IOOF Holdings Limited (IFL)

6. Financials Accumulation Index (XFJAI)

7. Hunter Hall International Limited (HHL)

8. Over Fifty Group Limited (OFG)

9 Perpetual Limited (PPT)

10. Small Ordinaries Accumulation

Index (XSOAI)

11. Tower Limited (TWR)

12. Treasury Group Limited (TRG)

13. Trust Company Limited (TRU)

14. WHK Group Limited (WHG)

The holders of these options do not

have the right, by virtue of the option, to

participate in any share issue or interest

issue of the company or of any other body

corporate or registered scheme.

The comparator group of ASX listed companies selected by the board is listed below:

Shares under option or issued on exercise of optionsDetails of unissued shares or interests under option as at the date of this report are:

Issuing entity

Number of shares under

option Class of sharesExercise price

of optionExpiry date of

optionsAustralian Wealth Management Ltd 600,000 Ordinary $0.80 15 February 2014

Australian Wealth Management Ltd 100,000 Ordinary $1.00 16 June 2014

Australian Wealth Management Ltd 800,000 Ordinary $1.48 17 January 2011

Australian Wealth Management Ltd 1,850,000 Ordinary $2.46 09 January 2011

Australian Wealth Management Ltd 460,000 Ordinary $2.60 29 March 2011

Australian Wealth Management Ltd 1,050,000 Ordinary $2.51 (a) 30 June 2013

Australian Wealth Management Ltd 1,190,000 Ordinary $2.51 30 June 2013

Australian Wealth Management Ltd 750,000 Ordinary $2.68 22 November 2012

(a) In accordance with the terms of the share based arrangement, this series consists of two tranches of options. 50% vest on 30 June 2009 and the remaining 50% vest on 30 June 2010. 50% of the options of each tranche vest subject to the Group’s achievement of the approved budget for that fi nancial year and the remaining 50% if the Company’s Total Shareholder Return (TSR) is positive, and in the top quartile relative to the TSR of a comparator group of Australian Securities Exchange (ASX) listed companies selected by the board. Both performance hurdles (other than the continuing service condition) were tested at 30 June 2008 and were not met, therefore these options will not vest to the option holder.


For

per

sona

l use

onl

y

33

Indemnification of officers and auditors

During the fi nancial year, the company

paid a premium in respect of a contract

insuring the directors of the company (as

named above), the company secretary,

Ms Danielle Corcoran, and all executive

offi cers of the company and of any related

body corporate against a liability incurred

as such a director, secretary or executive

offi cer 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.

The company has not otherwise during

or since the fi nancial year, except to the

extent permitted by law, indemnifi ed or

agreed to indemnify an offi cer or auditor

of the company or of any related body

corporate against a liability incurred as

such an offi cer or an auditor.

Directors’ meetings

The following table sets out the number of

directors’ meetings (including meetings of

committees of directors) held during the

fi nancial year and the number of meetings

attended by each director (while they

were a director or committee member).

During the fi nancial year, 13 board

meetings, 2 Group Remuneration and

Appointments Committee and 4 Statutory


meetings were held.

Details of shares or interests issued during or since the end of the fi nancial year as a result of exercise of an option are:

Issuing entity

Number of shares under

option Class of sharesExercise price

of optionExpiry date of

optionsAustralian Wealth Management Ltd 2,318,750 Ordinary $1.14 $nil

Australian Wealth Management Ltd 917,000 Ordinary $1.27 $nil




Board of directorsGroup remuneration and appointments committee

Statutory audit and risk management committee

Directors Held Attended Held Attended Held AttendedJohn Warburton 13 13 1 1 4 4

Myles Stewart-Hesketh 13 13 2 2 3 3

George Venardos 8 8 1 1 2 2

Christopher Kelaher* 13 13 – – – –

Ian Griffi ths* 13 13 1 1 – –

Robert Thomas 3 3 1 1 1 1

Graham Rogers 4 4 1 1 2 2

* Not a non-executive director


For

per

sona

l use

onl

y

34

Proceedings on behalf of the companyAs at the date of this report, there

are currently no proceedings being

undertaken on behalf of the company.

Non-audit services

Details of amounts paid or payable to the

auditor for non-audit services provided

during the year by the auditor are outlined

in note 37 to the fi nancial statements.

The directors are satisfi ed that the

provision of non-audit services, during

the year, by the auditor (or by another

person or fi rm on the auditor’s behalf) is

compatible with the general standard of

independence for auditors imposed by

the Corporations Act 2001.

The directors are of the opinion that the

services as disclosed in note 37 to the

fi nancial statements do not compromise

the external auditor’s independence,

based on advice received from the

Statutory Audit and Risk Management

Committee, for the following reasons:

fees earned from non-audit work •

undertaken by Deloitte Touche

Tohmatsu are capped at 1.0 times

the total audit fee;

all non-audit services have been •

reviewed and approved to ensure that

they do not impact the integrity and

objectivity of the auditor, and

none of the services undermine the •

general principles relating to auditor

independence as set out in Code of

Conduct APES 110 Code of Ethics for

Professional Accountants issued by

the Accounting Professional & Ethical

Standards board, including reviewing

or auditing the auditor’s own work,

acting in a management or decision-

making capacity for the company,

acting as advocate for the company or

jointly sharing economic risks

and rewards.

Auditor’s independence declaration

The auditor’s independence declaration is

included on page 45 of the annual report.

Rounding off of amounts

The company is a company of the kind

referred to in ASIC Class Order 98/0100,

dated 10 July 1998, and in accordance

with that Class Order amounts in the

directors’ report and the fi nancial report

are rounded off to the nearest thousand

dollars, unless otherwise indicated.

Remuneration Report

This remuneration report, which forms

part of the directors’ report, sets out

information about the remuneration

of AWM’s directors and its senior

management for the fi nancial year ended

30 June 2008. The prescribed details

for each person covered by this report

are detailed below under the following

headings:

director and senior management details•

remuneration policy•

remuneration of directors and senior •

management.

Director and senior management details

The following persons acted as directors

of the company during or since the end of

the fi nancial year:

John Warburton (chairman)•

Christopher Kelaher •

(managing director)

Ian Griffi ths•

Myles Stewart-Hesketh•

George Venardos, appointed •

24 January 2008

Robert Thomas, resigned •

27 September 2007

Graham Rogers, resigned •

22 November 2007

The term ‘senior management’ is used in

this remuneration report to refer to the

following persons. Except as noted, the

named persons held their current position

for the whole of the fi nancial year and

since the end of the fi nancial year:

Andrew McLachlan (CEO Private Client)•

Andrew Todd (Chief Information •

Offi cer), appointed 17 December 2007

Ashley Boland (General Manager •

Superannuation Distribution and

Product)

Danielle Corcoran (Company Secretary)•

Gary Riordan (Group General Counsel)•

Jake Jodlowski (General Manager •

Investments)

Michael Carter (Head of Wealth •

Management Division), appointed

12 June 2008

Michael Harvey (Chief Financial Offi cer)•

Philip Joseph (CEO Corporate Trust)•

Stuart Steele •

(General Manager Operations)

Alex Hutchison (CEO Wealth •

Management), resigned 14 March 2008

Matthew Hall (Chief Operating Offi cer), •

resigned 15 February 2008


For

per

sona

l use

onl

y

35

Remuneration policy for directors and senior management

The company’s performance is leveraged

on the skills and capabilities of its

directors and senior management. AWM’s

remuneration policy seeks to ensure

that directors and senior management

are remunerated at competitive rates,

in order to attract and retain high

quality individuals to create wealth

for shareholders. Senior management

remuneration is linked to the achievement

of short and long term company goals

to protect and increase the interests

of shareholders and to encourage the

individual performance of directors and

senior management.

Group Remuneration and Appointments Committee

The Group Remuneration and Appointments

Committee is responsible for:

Establishing and maintaining •

remuneration policies and practices;

Reviewing and recommending to •

the board the remuneration of the

managing director and executive

director;

Reviewing non-executive •

remuneration;

Reviewing and approving remuneration •

of senior management reporting to the

managing director;

Reviewing and approving participation •

of senior management in options or

other incentive plans; and

Agreeing on benchmarks against which •

annual salary reviews are to be made.

Non-executive directors’ remuneration

Fees and payments to non-executive

directors are reviewed by the Group


Committee on an annual basis.

Remuneration is calculated on the basis

of the director’s level of responsibility

and their involvement in board sub-

committees. The amount of directors’ fees

also takes into account the obligations

placed on directors by signifi cant levels of

compliance and other regulatory activities

and liabilities related to the fi nancial

services industry.

The aggregate amount of fees and amounts

payable to non-executive directors in any

one year is approved by shareholders

from time to time at the annual general

meeting. At an annual general meeting of

the company held in February 2006, the

shareholders set a maximum aggregate

sum of $950,000 plus out of pocket

expenditure. Non-executive directors do

not participate in the AWM Share Option

Plan or any other incentive plans, and do

not receive any retirement benefi ts other

than compulsory superannuation payments

unless under special circumstances

approved by the board.

Executive director and senior management remuneration

The Group Remuneration and

Appointments Committee has

responsibility for reviewing the

remuneration of executive directors and

Group senior management. The objective

of the remuneration structure is to ensure

that the correct calibre of executive is

recruited, align the interests of senior

management with those of shareholders

and to ensure the executive’s incentive

is linked to the strategic goals and

performance of the company and

individual performance objectives.

The senior management salaries and

remuneration framework has three

components:

Total Fixed Remuneration (TFR) •

– includes all guaranteed or fi xed

remuneration (including base salary,

superannuation and fringe benefi ts);

Short Term Incentive (STI) – annual •

bonus payment based on individual

and company performance; and

Long Term Incentive (LTI) – •

participation in the AWM Share

Option Plan.

Fixed Remuneration

Fixed remuneration payable to senior

management includes salary and statutory

superannuation contributions and may

include cash or non-cash benefi ts, such

as additional superannuation or motor

vehicles. Fixed remuneration is set

that is both appropriate to the position

taking into consideration expertise,

accountability, knowledge, experience,

job environment, independence and

infl uence and is competitive in the

market. The framework for executive

fi xed remuneration is reviewed on an

annual basis by the Group Remuneration

and Appointments Committee. The


Committee has access to external advice,

independent of management, to assist in

this process.

Short-Term Incentives

Senior management may also receive

incentive or performance payments,

based on pre-determined individual and

company performance criteria.

A short-term incentive plan has been

established to allow the opportunity for


For

per

sona

l use

onl

y

36

senior management to receive additional

remuneration based on the achievement

of both individual performance

objectives agreed between the relevant

executive and the managing director and

the achievement of a company pre-

determined Net Profi t After Tax (NPAT)

target set by the Group Remuneration

and Appointments Committee for each

relevant performance period. Each

executive has the potential to receive

an individual performance bonus of up

to 10% of their TFR, and a company

component of up to 40% of TFR.

Long Term Incentive/Option Plan

Senior management are invited to

participate in the AWM Share Option Plan

established in 2005. The purpose of the

Share Option Plan is:

to drive medium to long-term •

performance outcomes;

link the interest of senior management •

to those of shareholders;

provide competitive reward to attract •

and retain employees;

strengthen the link between •

remuneration and performance; and

to reward senior management •

for improvements in the Group’s

performance when measured against

a range of factors, including internal

and external measures and measures

against peers.

Each performance period (1 July to

30 June) the board may consider granting

options to senior management within the

Group. Options will vest over a three year

period and will be subject to performance

hurdles determined by the board for

each allocation.

The current performance hurdles are:

50% of options vest if the company’s •

Total Shareholder Return (TSR) is

positive relative to the TSR of a

comparator group of ASX-listed

companies as determined by the board

(ie. needs to sit within the top quartile

and be positive return); and


result is in excess of the approved

budget for each period and exceeds the

prior year result by at least 15% after

adjustment for acquisitions.

Elements of executive director and senior management remuneration

Remuneration packages contain the

following key elements:

Short-term employee benefi ts – salary/•

fees, bonuses and non monetary

benefi ts including the provision of

motor vehicles and health benefi ts;

Post-employment benefi ts – including •

superannuation and prescribed

retirement benefi ts; and

Long-term share-based payments – •

share options granted under the AWM

Share Option Plan.

Service Agreements

The service agreements of the Group

senior management and directors, with

the exception of the managing director,

remain unchanged.

Managing director – Christopher Kelaher

During the fi nancial year the managing

director’s service agreement included

provisions that his employment may be

terminated by AWM with termination

benefi ts determined to be a maximum

of one years’ base salary plus accrued

entitlements. The remuneration package

consisted of a TFR of $750,000 per

annum and a bonus subject to Mr Kelaher

achieving pre-determined individual and

company objectives set down by the


Committee. During the year he earned a

short term incentive bonus of $270,000.

The contract was reviewed effective

1 July 2008.

From 1 July 2008, Mr Kelaher’s

remuneration now consists of a TFR of

$780,000 per annum. In addition, he is

able to earn a short term incentive bonus

of up to 100% of his TFR. This incentive

bonus includes a company component

measured against the company’s targeted

NPAT pre non-recurring items for the

performance period and is set by the

board at the beginning of each fi nancial

year. In addition, there is an individual

component which is based on meeting key

performance indicators set by the board

for each performance period.

As approved by shareholders at the Annual

General Meeting held 22 November 2007,

Mr Kelaher has been granted the second

of three tranches of options on 1 July 2008.

The number of options granted was

1,248,000 at an exercise price of $1.34.

The options will be subject to the

performance hurdles as described in the

AWM Share Option Plan. The comparator

group for this tranche of options has been

determined by the board to be the ASX200.

In addition, if he meets certain key

performance indicators in relation

to acquisitions he is able to receive

additional options up to a value of

$500,000. Allocation of these options

received shareholder approval at the 2007

Annual General Meeting.


For

per

sona

l use

onl

y

37

Executive director– Ian Griffiths

During the fi nancial year Mr Griffi ths

received a TFR of $250,000 per annum.

In addition, he earned a short term

incentive bonus of $40,000. Mr Griffi ths’

employment was able to be terminated

by the Company giving 24 months’ notice.

Mr Griffi ths was able to terminate his

employment with the company by giving

three months’ notice. Mr Griffi ths was

subject to non-compete obligations for

a period of six months following any

termination of his employment.

In July 2008, Mr Griffi ths announced his

intention to transition to non-executive

director status during the ensuing twelve

months. As a result, Mr Griffi ths’ existing

leave entitlements were paid out in full and

he agreed to forego all future employee

entitlements including leave provisions,

bonuses and options (including those

approved at the 2007 Annual General

Meeting with grant dates of 1 July 2008

and 1 July 2009). Further, Mr Griffi ths

surrendered his entitlement to a two year

termination payment. During this time, the

board has determined that Mr Griffi ths will

receive a consultancy fee which will cease

once the transition is complete.

Senior management – Alex Hutchison, Andrew McLachlan, Andrew Todd, Ashley Boland, Danielle Corcoran, Gary Riordan, Jake Jodlowski, Matthew Hall, Michael Carter, Michael Harvey, Philip Joseph and Stuart Steele

The key terms of the Executive Service

Agreements of the above senior

management are:

the senior management are entitled •

to options under the AWM Share

Option Plan;

the senior management are entitled •

to a receive an individual performance

cash bonus of up to 10% of TFR, and

a company component of up to 40%

of TFR. The individual component is

based on meeting key performance

indicators set by the managing director

for each performance period. The

company component is measured

against the company’s targeted

NPAT pre non-recurring items for the

performance period and is set by the

board at the beginning of each fi nancial

year. The managing director is able to

exercise discretion in relation to the

determination of the amount of cash

bonus granted subject to board approval;

the senior management have entered •

into a contract which includes a total

remuneration package (inclusive of

superannuation) with no contract

expiry date;

AWM may terminate the employment •

of either Mr Jodlowski, Mr Harvey or

Mr Steele by giving 12 months’ notice.

Each of these members of senior

management may terminate their

employment with AWM by giving three

months’ notice;


of Mr Riordan by giving six months’

notice. Mr Riordan may terminate his


months’ notice;


of either Mr McLachlan, Mr Todd or Mr

Joseph by giving three months’ notice.




months’ notice;


of either Mr Boland, Ms Corcoran or

Mr Carter by giving one months’ notice.



employment with AWM by giving one

months’ notice;

each of these senior management are •

subject to non-compete obligations for

a period of six months following the

termination of their employment.

Relationship between the remuneration policy and company performance

Elements of the remuneration of key

management personnel is linked to the

performance of the Group. Each member

of senior management is entitled to

receive a cash bonus of up to 40% of TFR

subject to the Group meeting targeted

NPAT set by the board at the beginning

of each fi nancial year.

The performance hurdles of the long term

incentive/option plan are also linked to

company performance with the current

performance hurdles of:


TSR is positive relative to the TSR

of a comparator group of ASX-listed

companies as determined by the board

(ie. needs to sit within the top quartile

and be positive return); and


result is in excess of the approved

budget for each period and exceeds the

prior year result by at least 15% after

adjustment for acquisitions.

The tables below set out summary

information about the consolidated entity’s

earnings and movements in shareholder

wealth for the two years to June 2008:


For

per

sona

l use

onl

y

38

30 June 2008 $’000

30 June 2007 $’000

Revenue 316,764 287,285

Net profi t before tax 91,327 83,421

Net profi t after tax 64,984 57,415

30 June 2008 30 June 2007Share price at start of year 2.66 2.42

Share price at end of year 1.30 2.66

Interim dividend1 5.0cps 4.0cps

Final dividend1, 2 5.5cps 5.5cps

Basic earnings per share 11.44 10.25

Diluted earnings per share 11.40 10.18

1 Franked to 100% at 30% corporate income tax rate.

2 Declared after the balance date and not refl ected in the fi nancial statements.

The historical consolidated entity performance table includes the relevant information available following the merger between SMF

and AWM and the commencement of linking remuneration policy to company performance.

In addition, during 2008 AWM repurchased 10,001,105 shares for $15,292,000. The shares were repurchased at the prevailing market

price on the date of the buy-back.


For

per

sona

l use

onl

y

39

Short term employee benefi ts

Post-employment

benefi ts

Termination benefi ts

Share based payment

TotalSalary &

fees BonusNon-

monetaryOther

benefi tsSuper-

annuation Options

$ $ $ $ $ $ $ $Directors

Christopher Kelaher 2008 648,654 270,000 – – 100,000 – 449,003 1,467,657

2007 538,742 350,000 – – 105,113 – 157,767 1,151,622

Ian Griffi ths 2008 250,000 40,000 – – – – 188,567 478,567

2007 225,000 125,000 – – – – 71,109 421,109

John Warburton 2008 121,789 – – – 10,961 – – 132,750

2007 77,099 – – – 6,939 – – 84,038

Myles Stewart-Hesketh

2008 59,633 – – – 5,367 – – 65,000

2007 58,751 – – – 5,288 – – 64,039

Graham Rogers 2008 38,814 – – – 3,493 50,000 – 92,307

2007 91,037 – – – 7,685 – – 98,722

Robert Thomas 2008 34,465 – – – 3,282 – – 37,747

2007 137,861 – – – 12,686 – – 150,547

George Venardos 2008 33,592 – – – – – – 33,592

Michael Jefferies 2007 63,750 – – – – – – 63,750

Graeme Cureton 2007 48,750 – – – – – – 48,750

Senior management

Alex Hutchison (1) 2008 260,911 – – – 13,129 291,420 171,827 737,286

2007 336,565 173,462 – – 12,687 – 167,041 689,755

Andrew McLachlan (1) 2008 218,489 13,000 – – 26,511 – 163,634 421,634

2007 208,126 123,780 – – 21,614 – 167,041 520,561

Gary Riordan 2008 298,649 30,000 – – 13,121 – 66,234 408,004

2007 277,837 50,000 – – 16,393 – 45,182 389,412

Michael Harvey 2008 246,687 27,500 – – 13,121 – 105,515 392,823

2007 226,523 50,000 – – 12,665 – 89,803 378,991

Stuart Steele 2008 241,574 30,000 – – 28,042 – 105,515 405,131

2007 226,888 70,000 – – 20,420 – 89,803 407,111

Philip Joseph (1) 2008 188,864 12,000 – – 21,136 – 142,352 364,352

2007 177,034 103,729 – – 26,408 – 135,535 442,706

Danielle Corcoran (1) 2008 196,870 27,000 – – 13,129 – 107,084 344,083

2007 167,314 112,060 – – 12,686 – 92,644 384,704


Remuneration report

For

per

sona

l use

onl

y

40

Short term employee benefi ts

Post-employment

benefi ts

Termination benefi ts

Share based payment

TotalSalary &

fees BonusNon-

monetaryOther

benefi tsSuper-

annuation Options

$ $ $ $ $ $ $ $

Ashley Boland 2008 179,352 15,000 – – 20,198 – 66,234 280,784

2007 162,271 45,000 – – 14,739 – 45,182 267,192

Jake Jodlowski 2008 188,401 15,000 – – 21,119 – 68,975 293,495

2007 168,666 46,250 – – 15,180 – 52,432 282,528

Matthew Hall 2008 183,698 – – – 8,576 14,674 89,979 296,927

2007 283,873 75,000 – – 12,665 – 89,803 461,341

Andrew Todd 2008 127,546 25,000 – – 7,070 – – 159,616

David Mazengarb 2007 196,565 10,000 – – 12,665 187,262 15,466 421,958

Total 2008 3,517,988 504,500 – – 308,255 356,094 1,724,919 6,411,756

2007 3,672,652 1,334,281 – – 315,833 187,262 1,218,808 6,728,836

No director or member of senior management appointed during the period received a payment as part of his or her consideration

for agreeing to hold the position.

(1) Included in the bonus for 2007 is two bonus payments, one paid in December 2006 for the period ended 30 September 2006 and a bonus paid in September 2007 for the year ended 30 June 2007.

Bonuses and share-based payments granted as compensation for the current fi nancial year.

Employee share option planThe Group has an ownership-based compensation scheme for executives and senior employees of the Group. The establishment of the

AWM Share Option Plans were approved by the board of directors.

Each employee share option converts into one ordinary share of AWM on exercise. No amounts are paid or payable by the recipient

on receipt of the option. The options carry neither rights to dividends nor voting rights. Options may

be exercised at any time from the date of vesting to the date of their expiry.

The Group Remuneration and Appointments Committee regards the grant of options to employees as an appropriate long-term

incentive and retention component of total remuneration for executives and senior employees. It is expected that future annual grants

of options will be made, the vesting of which will be subject to attainment of appropriate performance hurdles and on the basis

of continuing employment with the Group.

AWM offers the eligible executives with the option to either exercise the options for cash or convert it into ordinary shares. Options

granted under the plan carry no dividend or voting rights.

During the fi nancial year, the following share-based payment arrangements were in existence:

Remuneration report ( cont’d )

For

per

sona

l use

onl

y

41

Options – Series Grant date Expiry date

Grant date fair value

$ Vesting date(1) Issued 15 February 2005 15-Feb-05 15-Feb-14 0.34 30-November-2007

(2) Issued 28 February 2005 28-Feb-05 16-Jun-14 0.32 30-November-2007

(5) Issued 16 May 2005 16-May-05 16-Jun-14 0.22 30-November-2007

(6) Issued 17 January 2006 17-Jan-06 17-Jan-11 0.43 17-January-2009

(7) Issued November 2004 (ex Select) 07-Jun-06 15-May-08 1.19 15-November-2007

(8) Issued November 2005 (ex Select) 07-Jun-06 24-Nov-15 1.10 30-June-2008

(9) Issued 9 January 2007 09-Jan-07 09-Jan-11 0.64 09-January-2008

(10) Issued 29 March 2007 29-Mar-07 29-Mar-11 0.38 29-March-2008

(11) Issued 5 September 2007 05-Sep-07 30-Jun-13 0.52 40% 30-June-2008 (1)

30% 30-June-2009 (1)

30% 30-June-2010 (1)

(12) Issued 5 September 2007 05-Sep-07 30-Jun-13 0.62 40% 5-September-2008

30% 5-September-2009

30% 5-September-2010

(13) Issued 30 November 2007 30-Nov-07 30-Nov-11 0.55 30-June-2008 (2)

(14) Issued 22 November 2007 22-Nov-07 22-Nov-12 0.78 33% 22-November-2008 (3)

33% 22-November-2009 (3)

33% 22-November-2010 (3)

(1) In accordance with the terms of the share based arrangement, series 11 consists of three tranches of options. 40% vest on 30 June 2008, 30% vest on 30 June 2009 and the remaining 30% vests on 30 June 2010. 50% of the options of each tranche vest subject to the Group’s achievement of the approved budget for that fi nancial year and the remaining 50% if the Company’s Total Shareholder Return (TSR) is positive, and in the top quartile relative to the TSR of a comparator group of ASX listed companies selected by the board. The performance conditions are met only if they continue to be employed with the company at that time. Both performance hurdles (other than the continuing service condition) were tested at 30 June 2008 and were not met, therefore these options will not vest to the option holder in the future, irrespective of continued service.

(2) Options issued on 30 November 2007 to the executive directors of the Group were approved at the AGM held on 22 November 2007. The vesting date is 30 June 2008. 50% of the options vest if the Group’s result is in excess of the approved budget for that fi nancial year and exceeds the prior year’s result by at least 15% after adjustment for acquisitions and the remaining 50% if the Company’s TSR is positive, and in the top quartile relative to the TSR of a comparator group of ASX listed companies selected by the board. Both performance hurdles (other than the continuing service condition) were tested at 30 June 2008 and were not met, therefore these options will not vest to the option holder.

(3) Options issued on 22 November 2007 to the executive directors of the Group were approved at the AGM held on 22 November 2007. The options vest in three equal tranches over the three year period following grant, and cannot be exercised until all tranches have vested. These options were issued subject to no further performance hurdles, for the reason that they represent options that should have been granted to the executive directors under a prior board approval. By reason the timing of the Company’s merger with SMF, the previously approved options were not granted. At the time of the original board approval there were performance hurdles applied to the proposed grant being 50% of the options vest if the Company’s TSR is positive and in the top quartile relative to the TSR of a comparator group of ASX listed companies and the remaining options vest if the Company’s results are in excess of the approved budget for the 2006/2007 fi nancial year. All of these performance hurdles have already been satisfi ed and accordingly no further hurdles were imposed.

There are no further service or performance criteria that need to be met in relation to options granted under series (1), (2), (5), (7), (9) and series (10) before the benefi cial interest vests in the recipient. Series (6), (8) and (11) to (14) vest only if they continue to be employed with the company at that time.


For

per

sona

l use

onl

y

42

The following grants of share-based compensation to directors and senior management relate to the current fi nancial year:

Name Option Series

During the fi nancial year % of compensation for the year

consisting of optionsNo. Granted No. Vested% of grant

vested% of grant forfeited

Christopher Kelaher

(13) Issued 30 November 2007 1,032,841 nil nil 100%30.6%

(14) Issued 22 November 2007 500,000 nil nil n/a

Ian Griffi ths(13) Issued 30 November 2007 344,280 nil nil 100%

39.4%(14) Issued 22 November 2007 250,000 nil nil n/a

Alex Hutchison (11) Issued 5 September 2007 200,000 nil nil 100% 23.3%

Andrew McLachlan (11) Issued 5 September 2007 200,000 nil nil 40% 38.8%

Gary Riordan (11) Issued 5 September 2007 200,000 nil nil 40% 16.2%

Michael Harvey (11) Issued 5 September 2007 200,000 nil nil 40% 26.9%

Stuart Steele (11) Issued 5 September 2007 200,000 nil nil 40% 26.0%

Philip Joseph (11) Issued 5 September 2007 150,000 nil nil 40% 39.1%

Danielle Corcoran (11) Issued 5 September 2007 200,000 nil nil 40% 31.1%

Ashley Boland (11) Issued 5 September 2007 200,000 nil nil 40% 23.6%

Jake Jodlowski (11) Issued 5 September 2007 200,000 nil nil 40% 23.5%

Matthew Hall (11) Issued 5 September 2007 200,000 nil nil 100% 30.3%

During the year, the following directors and senior management exercised options that were granted to them as part of their

compensation. Each option converts into one ordinary share of AWM:

Name SeriesOptions

exercisedOrdinary shares of AWM issued Amount paid Exercise Price Amount unpaid

No. No. $ $ $

Christopher Kelaher

(8) Issued Nov 2005 ex-Select (1) 613,847 613,847 779,586 1.27 $nil


Ian Griffi ths(8) Issued Nov 2005 ex-Select (1) 303,153 303,153 385,004 1.27 $nil


Alex Hutchison

(6) Issued Jan 2006 300,000 300,000 444,000 1.48 $nil

(1) Issued Feb 2005 400,000 400,000 320,000 0.80 $nil

Michael Harvey


Stuart Steele (7) Issued Nov 2004 ex-Select (1) 175,000 175,000 199,500 1.14 $nil

Jake Jodlowski


Matthew Hall (7) Issued Nov 2004 ex-Select (1) 175,000 175,000 199,500 1.14 $nil

(1) As disclosed in the Scheme Booklet for the merger, options over Select shares held by former Select employees were converted into AWM options of economic equivalence.


For

per

sona

l use

onl

y

43

The following table summarises the value of options granted, exercised or lapsed during the year to directors and senior management:

Name

Value of options granted at the grant date (i)

$

Value of options exercised at the exercise date (ii)

$

Value of options lapsed at the date of lapse (iii)

$Christopher Kelaher 959,558 441,996 571,058

Ian Griffi ths 384,602 197,869 190,352

Alex Hutchison 103,633 265,070 263,433

Andrew McLachlan 103,633 – 35,296

Gary Riordan 103,633 – 35,296

Michael Harvey 103,633 43,500 35,296

Stuart Steele 103,633 43,500 35,296

Philip Joseph 77,725 – 26,472

Danielle Corcoran 103,633 – 35,296

Ashley Boland 103,633 – 35,296

Jake Jodlowski 103,633 21,750 35,296

Matthew Hall 103,633 43,500 263,433

(i) The value of options granted during the period is recognised in compensation over the vesting period of the grant, in accordance with Australian accounting standards.

(ii) Includes options granted in both the current fi nancial year and in previous fi nancial years that were exercised during the fi nancial year.

(iii) The value of options lapsing during the period due to the failure to satisfy a vesting condition is determined assuming the vesting condition had been satisfi ed.


For

per

sona

l use

onl

y

44

The table below provides details of the cash bonus (Short Term Incentive (STI)) to be paid in September 2008 and the proportion of

bonuses forfeited by directors and senior management during the current fi nancial year:

2008 Bonus Recipient Amount granted $ % of bonus forfeitedChristopher Kelaher 270,000 64%

Ian Griffi ths 40,000 68%

Andrew McLachlan 13,000 79%

Gary Riordan 30,000 62%

Michael Harvey 27,500 58%

Stuart Steele 30,000 56%

Philip Joseph 12,000 77%

Danielle Corcoran 27,000 49%

Ashley Boland 15,000 70%

Jake Jodlowski 15,000 71%

Andrew Todd 25,000 26%

The STI consists of two components:

(1) a company component of up to 40% TFR. This component was forfeited by each individual due to the company not meeting its pre

determined Net Profi t After Tax (NPAT) target set by the Group Remuneration & Appointments Committee for the fi nancial year

ended 30 June 2008.

(2) An individual component of up to 15% of the executive’s TFR, based on assessed performance determined in the managing director’s

discretion.

This directors’ report is signed in accordance with a resolution of the directors made pursuant to s.298(2) of the Corporations Act 2001.

On behalf of the directors

John Warburton

Non-Executive Chairman

Sydney, 27 August 2008


For

per

sona

l use

onl

y

45

The board of directors


Level 22, 207 Kent Street

Sydney NSW 2000

27 August 2008

Dear board members


In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence

to the directors of Australian Wealth Management Limited.

As lead audit partner for the audit of the fi nancial statements of Australian Wealth Management Limited for the fi nancial year

ended 30 June 2008, I declare that to the best of my knowledge and belief, there have been no contraventions of:

(i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

(ii) any applicable code of professional conduct in relation to the audit

Yours sincerely

DELOITTE TOUCHE TOHMATSU

CM Barling

Partner

Chartered Accountants

Deloitte Touche TohmatsuABN 74 490 121 060

Grosvenor Place225 George StreetSydney NSW 2000PO Box N250 Grosvenor PlaceSydney NSW 1220 Australia

DX 10307SSETel: +61 (0) 2 9322 7000Fax: +61 (0) 2 9322 7001www.deloitte.com.au

Liability limited by a scheme approved under Professional Standards Legislation.


Auditor’s independence declaration

For

per

sona

l use

onl

y

46

Independent Auditor’s Report to the directors of Australian Wealth Management LimitedReport on the Financial Report

We have audited the accompanying fi nancial report of Australian Wealth Management Limited, which comprises the balance sheet as

at 30 June 2008, and the income statement, cash fl ow statement and statement of recognised income and expense for the year ended

on that date, a summary of signifi cant accounting policies, other explanatory notes and the directors’ declaration of the consolidated

entity comprising the company and the entities it controlled at the year’s end or from time to time during the fi nancial year as set out

on pages 49 to 117.

Directors’ Responsibility for the Financial Report

The directors of the company are responsible for the preparation and fair presentation of the fi nancial report in accordance

with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001.

This responsibility includes establishing and maintaining internal control relevant to the preparation and fair presentation of the

fi nancial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting

policies; and making accounting estimates that are reasonable in the circumstances. In Note 2, the directors also state, in accordance

with Accounting Standard AASB 101 Presentation of Financial Statements, that compliance with the Australian equivalents to

International Financial Reporting Standards ensures that the fi nancial report, comprising the fi nancial statements and notes,

complies with International Financial Reporting Standards.

Auditor’s Responsibility

Our responsibility is to express an opinion on the fi nancial report based on our audit. We conducted our audit in accordance with

Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to

audit engagements and plan and perform the audit to obtain reasonable assurance whether the fi nancial report is free from material

misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial report.

The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the

fi nancial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to

the entity’s preparation and fair presentation of the fi nancial report in order to design audit procedures that are appropriate in the

circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also

includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the

directors, as well as evaluating the overall presentation of the fi nancial report.

Deloitte Touche TohmatsuABN 74 490 121 060

Grosvenor Place225 George StreetSydney NSW 2000PO Box N250 Grosvenor PlaceSydney NSW 1220 Australia

DX 10307SSETel: +61 (0) 2 9322 7000Fax: +61 (0) 2 9322 7001www.deloitte.com.au

Independent auditor’s report

For

per

sona

l use

onl

y

47

We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.

Auditor’s Independence Declaration

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.

Auditor’s Opinion

In our opinion:

(a) the fi nancial report of Australian Wealth Management Limited is in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of the company’s and consolidated entity’s fi nancial position as at 30 June 2008 and of their

performance for the year ended on that date; and

(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the

Corporations Regulations 2001; and

(b) the fi nancial report also complies with International Financial Reporting Standards as disclosed in Note 2.

Report on the Remuneration Report

We have audited the Remuneration Report included in pages 39 to 44 of the directors’ report for the year ended 30 June 2008.

The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with

section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our

audit conducted in accordance with Australian Auditing Standards.

Auditor’s Opinion

In our opinion the Remuneration Report of Australian Wealth Management Limited for the year ended 30 June 2008, complies with

section 300A of the Corporations Act 2001.

DELOITTE TOUCHE TOHMATSU

Partner

Chartered Accountants



For

per

sona

l use

onl

y

48

The directors declare that:

(a) in the directors’ opinion, there are reasonable grounds to believe that the company will be able to pay its debts as and when they

become due and payable;

(b) in the directors’ opinion, the attached fi nancial statements and notes thereto are in accordance with the Corporations Act 2001,

including compliance with accounting standards and giving a true and fair view of the fi nancial position and performance of the

company and the consolidated entity; and

(c) the directors have been given the declarations required by s.295A of the Corporations Act 2001.

At the date of this declaration, the company is within the class of companies affected by ASIC Class Order 98/1418. The nature of the

deed of cross guarantee is such that each company which is party to the deed guarantees to each creditor payment in full of any debt

in accordance with the deed of cross guarantee.

In the directors’ opinion, there are reasonable grounds to believe that the company and the companies to which the ASIC Class Order

applies, as detailed in note 30 to the fi nancial statements will, as a group, be able to meet any obligations or liabilities to which they

are, or may become, subject by virtue of the deed of cross guarantee.

Signed in accordance with a resolution of the directors made pursuant to s.295(5) of the Corporations Act 2001.

On behalf of the directors

John Warburton

Non-Executive Chairman


Directors’ declaration

For

per

sona

l use

onl

y

49

Consolidated Company

Note 2008 2007 2008 2007

$’000 $’000 $’000 $’000

Revenue 5 316,197 285,737 59,334 56,050

Share of profi ts of associates and jointly controlled entities accounted for using the equity method

11 567 1,548 – –

Employee benefi ts expenses (68,667) (64,226) – –

Depreciation and amortisation expense (6,805) (5,881) – –

Finance costs (144) (41) (17) –

Commission expenses (114,877) (103,645) – –

Fund related expenses (6,702) (3,441) – –

Occupancy expenses (4,949) (4,637) – –

Marketing expenses (2,422) (2,580) – –

Other expenses (20,871) (19,413) (75) (56)

Profi t before income tax expense 7 91,327 83,421 59,242 55,994

Income tax expense 8 (26,343) (26,006) (54) –

Profi t for the year 64,984 57,415 59,188 55,994

Attributable to:Equity holders of the parent 65,162 57,693 59,188 55,994

Loss attributable to minority interest (178) (278) – –

64,984 57,415 59,188 55,994

Earnings per share: Basic (cents per share) 24 11.44 10.25

Diluted (cents per share) 24 11.40 10.18

Notes to the fi nancial statements are included on pages 53 to 117.


Income StatementFor the financial year ended 30 June 2008

For

per

sona

l use

onl

y

50


Note 2008 2007 2008 2007

$’000 $’000 $’000 $’000Current assetsCash and cash equivalents 32(a) 86,767 86,411 341 663 Trade and other receivables 9 124,896 46,741 – 2,000 Other fi nancial assets 10 208 809 – – Other 15 6,445 5,294 – –

Total current assets 218,316 139,255 341 2,663

Non-current assetsTrade and other receivables 9 272 250 – – Investments accounted for using the equity method 11 1,989 8,935 – – Other fi nancial assets 10 39,114 16,701 974,214 903,763 Property, plant and equipment 12 10,164 6,207 – – Goodwill 13 553,671 512,697 – – Other intangible assets 14 194,300 163,105 – – Deferred tax assets 8 11,637 9,970 241 1,165 Other 15 3,435 4,482 – –

Total non-current assets 814,582 722,347 974,455 904,928

Total assets 1,032,898 861,602 974,796 907,591

Current liabilitiesTrade and other payables 16 124,556 37,316 – 2,000 Borrowings 17 14 14 – – Current tax liabilities 8 20,656 16,994 19,240 17,310 Other fi nancial liabilities 18 3,720 18,283 – 1,911 Provisions 19 20,602 9,428 – – Other 20 4,029 4,485 – –

Total current liabilities 173,577 86,520 19,240 21,221

Non-current liabilitiesTrade and other payables 16 1 1 – – Borrowings 17 30 35 – – Deferred tax liabilities 8 1,946 3,114 – – Provisions 19 6,703 914 – – Other 20 4,751 6,118 – –

Total non-current liabilities 13,431 10,182 – –

Total liabilities 187,008 96,702 19,240 21,221

Net assets 845,890 764,900 955,556 886,370

EquityIssued capital 21 797,751 724,678 956,490 883,416 Reserves 22 9,493 13,559 (1,190) 2,389 Retained earnings 23 32,674 26,910 256 565 Parent entity interest 839,918 765,147 955,556 886,370 Minority interest 5,972 (247) – –

Total equity 845,890 764,900 955,556 886,370


Balance sheetAs at 30 June 2008

For

per

sona

l use

onl

y

51


Note 2008 2007 2008 2007

$’000 $’000 $’000 $’000Gain/(loss) on available-for-sale investments taken to equity 22 (5,423) 3,881 (4,359) –

Income tax on items taken directly to equity 22 577 (577) – –

Net income recognised directly in equity (4,846) 3,304 (4,359) –

Profi t for the period 64,984 57,415 59,188 55,994

Total recognised income and expense for the period 60,138 60,719 54,829 55,994

Attributable to:

Equity holders of the parent 60,316 60,997 54,829 55,994

Minority interest (178) (278) – –

60,138 60,719 54,829 55,994



Statement of recognised income and expenseFor the financial year ended 30 June 2008

For

per

sona

l use

onl

y

52


Note 2008 2007 2008 2007

$’000 $’000 $’000 $’000

Cash fl ows from operating activities

Receipts from customers 347,976 265,309 – –

Payments to suppliers and employees (246,767) (184,356) (75) (49)

Interest and other costs of fi nance paid (135) (34) (17) –

Income tax paid (21,654) (15,784) (21,748) (15,784)

Net cash provided by/(used in) operating activities 32(f) 79,420 65,135 (21,840) (15,833)

Cash fl ows from investing activities

Dividends received 764 1,255 59,174 56,000

Interest and bill discounts received 3,999 3,716 161 49

Payment for investment securities (19,886) (476) (11,809) –

Proceeds on sale of investment securities – 728 – –

Amounts received for repayment of amounts advanced to other entities

809 – – –

Amounts advanced to/(borrowed from) other entities 422 283 39,986 1,941

Payment for property, plant and equipment (2,110) (2,982) – –

Proceeds from sale of property, plant and equipment 6 25 – –

Net cash infl ow/(outfl ow) on acquisition of businesses 32(b) 23,641 (4,461) (24) –

Payment for intangible assets (20,759) (1,796) – –

Additional interest acquired in associates & jointly controlled entities

34 (920) – –

Net cash provided by/(used in) investing activities (13,080) (4,628) 87,488 57,990

Cash fl ows from fi nancing activities

Proceeds from issues of equity securities 4,832 13,364 4,832 13,364

Payment for share buy-back to equity holders of the parent (11,305) – (11,305) –

Repayment of borrowings (14) (125) – –

Proceeds from borrowings – 53 – –

Dividends paid:

- members of the parent entity (59,497) (56,441) (59,497) (56,441)

Net cash provided by/(used in) fi nancing activities (65,984) (43,149) (65,970) (43,077)

Net increase in cash and cash equivalents 356 17,358 (322) (920)

Cash and cash equivalents at the beginning of the fi nancial year

86,411 68,682 663 1,583

Reclassifi cation of deposits held – 371 – –

Cash and cash equivalents at the end of the fi nancial year

32(a)86,767 86,411 341 663


Cash flow statementfor the financial year ended 30 June 2008

For

per

sona

l use

onl

y

53

1 General informationAustralian Wealth Management Limited

(the Company) is a public company listed

on the Australian Stock Exchange (trading

under the symbol ‘AUW’), incorporated

and operating in Australia.

The Company’s registered offi ce and its

principal place of business are as follows:

Registered offi ce

Level 22

207 Kent Street

SYDNEY NSW 2000

Tel: (02) 9028 5900

Principal place of business

Level 22

207 Kent Street

SYDNEY NSW 2000

Tel: (02) 9028 5900

The entity’s principal activities are the

provision of wealth management services.

2 Significant accounting policiesStatement of compliance

The fi nancial report is a general purpose

fi nancial report which has been prepared

in accordance with the Corporations

Act 2001, Accounting Standards and

Interpretations, and complies with other

requirements of the law.

The fi nancial report includes the separate

fi nancial statements of the Company and

the consolidated fi nancial statements of

the Group.

Accounting Standards include Australian

equivalents to International Financial

Reporting Standards (‘A-IFRS’).

Compliance with A-IFRS ensures that

the fi nancial statements and notes of

the Company and the Group comply

with International Financial Reporting

Standards (‘IFRS’).

The fi nancial statements were

authorised for issue by the directors on

27 August 2008.

Basis of preparation

The fi nancial report has been prepared on

the basis of historical cost, except for the

revaluation of certain non-current assets

and fi nancial instruments. Cost is based

on the fair values of the consideration

given in exchange for assets. All amounts

are presented in Australian dollars, unless

otherwise noted.

The Company is a company of the kind

referred to in ASIC Class Order 98/0100,

dated 10 July 1998, and in accordance

with that Class Order amounts in the

fi nancial report are rounded off to

the nearest thousand dollars, unless

otherwise indicated.

The following signifi cant accounting

policies have been adopted in the

preparation and presentation of the

fi nancial report:

Critical accounting judgments and key

sources of estimation uncertainty

In the application of the Group’s

accounting policies, management is

required to make judgments, estimates

and assumptions about carrying values

of assets and liabilities that are not

readily apparent from other sources. The

estimates and associated assumptions

are based on historical experience and

other factors that are considered to be

relevant. Actual results may differ from

these estimates.

The estimates and underlying

assumptions are reviewed on an ongoing

basis. Revisions to accounting estimates

are recognised in the period in which

the estimate is revised if the revision

affects only that period, or in the period

of the revision and future periods if the

revision affects both current and future

periods. Refer to note 3 for a discussion of

critical judgments in applying the entity’s

accounting policies, and key sources of

estimation uncertainty.

Adoption of new and revised Accounting Standards

In the current year, the Group has

adopted all of the new and revised

Standards and Interpretations issued

by the Australian Accounting Standards

board (the AASB) that are relevant to its

operations and effective for the current

annual reporting period. Details of the

impact of the adoption of these new

accounting standards are set out in the

individual accounting policy notes set out

below. The Group has also adopted the

following Standards as listed below which

only impacted on the Group’s fi nancial

statements with respect to disclosure.

AASB 101 ‘Presentation of Financial •

statements’ (revised October 2006)

AASB 7 ‘Financial Instruments: •

Disclosures’

The following signifi cant accounting

policies have been adopted in the

preparation and presentation of the

fi nancial report:

(a) Basis of consolidation

The consolidated fi nancial statements

incorporate the fi nancial statements

of the Company and entities (including

special purpose entities) controlled by the

Company (its subsidiaries) (referred to as


Notes to the financial statements for the financial year ended 30 June 2008

For

per

sona

l use

onl

y

54

‘the Group’ in these fi nancial statements).

Control is achieved where the Company

has the power to govern the fi nancial and

operating policies of an entity so as to

obtain benefi ts from its activities.

The results of subsidiaries acquired or

disposed of during the year are included

in the consolidated income statement

from the effective date of acquisition

or up to the effective date of disposal,

as appropriate.

Where necessary, adjustments are made

to the fi nancial statements of subsidiaries

to bring their accounting policies into line

with those used by other members of

the Group.

All intra-group transactions, balances,

income and expenses are eliminated in

full on consolidation. In the separate

fi nancial statements of the Company,

intra-group transactions (‘common control

transactions’) are generally accounted for

by reference to the existing (consolidated)

book value of the items. Where the

transaction value of common control

transactions differ from their consolidated

book value, the difference is recognised as

a contribution by or distribution to equity

participants by the transacting entities.

Minority interests in the net assets

(excluding goodwill) of consolidated

subsidiaries are identifi ed separately

from the Group’s equity therein. Minority

interests consist of the amount of those

interests at the date of the original

business combination and the minority’s

share of changes in equity since the date

of the combination. Losses applicable to

the minority in excess of the minority’s

interest in the subsidiary’s equity are

allocated against the interests of the

Group except to the extent that the

minority has a binding obligation and is

able to make an additional investment to

cover the losses.

(b) Borrowing costs

Borrowing costs directly attributable to

the acquisition, construction or production

of qualifying assets, which are assets that

necessarily take a substantial period of

time to get ready for their intended use

or sale, are added to the cost of those

assets, until such time as the assets are

substantially ready for their intended

use or sale. Investment income earned

on the temporary investment of specifi c

borrowings pending their expenditure on

qualifying assets is deducted from the

borrowing costs eligible for capitalisation.

All other borrowing costs are recognised

in profi t or loss in the period in which they

are incurred.

(c) Business combinations

Acquisitions of subsidiaries and

businesses are accounted for using

the purchase method. The cost of the

business combination is measured as

the aggregate of the fair values (at

the date of exchange) of assets given,

liabilities incurred or assumed, and

equity instruments issued by the Group

in exchange for control of the acquiree,

plus any costs directly attributable

to the business combination. The

acquiree’s identifi able assets, liabilities

and contingent liabilities that meet the

conditions for recognition under AASB 3

‘Business Combinations’ are recognised

at their fair values at the acquisition date,

except for non-current assets (or disposal

groups) that are classifi ed as held for sale

in accordance with AASB 5 ‘Non-current

Assets Held for Sale and Discontinued

Operations’, which are recognised and

measured at fair value less costs to sell.

Goodwill arising on acquisition is

recognised as an asset and initially

measured at cost, being the excess of

the cost of the business combination over

the Group’s interest in the net fair value

of the identifi able assets, liabilities and

contingent liabilities recognised. If, after

reassessment, the Group’s interest in the

net fair value of the acquiree’s identifi able

assets, liabilities and contingent liabilities

exceeds the cost of the business

combination, the excess is recognised

immediately in profi t or loss.

The interest of minority shareholders in

the acquiree is initially measured at the

minority’s proportion of the net fair value

of the assets, liabilities and contingent

liabilities recognised.

(d) Cash and cash equivalents

Cash comprises cash on hand and demand

deposits. Cash equivalents are short-term,

highly liquid investments that are readily

convertible to known amounts of cash and

which are subject to an insignifi cant risk

of changes in value.

Bank overdrafts are shown within

borrowings in current liabilities in the

balance sheet.

(e) Employee benefits

A liability is recognised for benefi ts

accruing to employees in respect of wages

and salaries, annual leave, long service

leave, and sick leave when it is probable

that settlement will be required and they

are capable of being measured reliably.


For

per

sona

l use

onl

y

55

Liabilities recognised in respect of

employee benefi ts expected to be settled

within 12 months, are measured at their

nominal values using the remuneration

rate expected to apply at the time of

settlement.

Liabilities recognised in respect of

employee benefi ts which are not expected

to be settled within 12 months are

measured as the present value of the

estimated future cash outfl ows to be made

by the Group in respect of services provided

by employees up to reporting date.

Defined contribution plans

Contributions to defi ned contribution

superannuation plans are expensed when

incurred.

(f) Financial assets

Investments are recognised and

derecognised on trade date where the

purchase or sale of an investment is under

a contract whose terms require delivery

of the investment within the timeframe

established by the market concerned,

and are initially measured at fair value,

net of transaction costs except for those

fi nancial assets classifi ed as at fair value

through profi t or loss which are initially

measured at fair value.

Subsequent to initial recognition,

investments in subsidiaries are measured

at cost in the company financial

statements. Subsequent to initial

recognition, investments in associates

are accounted for under the equity

method in the consolidated financial

statements and the cost method in the

company financial statements.

Other fi nancial assets are classifi ed

into the following specifi ed categories:

‘available-for-sale’ fi nancial assets and

‘loans and receivables’. The classifi cation

depends on the nature and purpose of the

fi nancial assets and is determined at the

time of initial recognition.

Effective interest method

The effective interest method is a method

of calculating the amortised cost of a

fi nancial asset and of allocating interest

income over the relevant period. The

effective interest rate is the rate that

exactly discounts estimated future cash

receipts through the expected life of the

fi nancial asset, or, where appropriate, a

shorter period.

Income is recognised on an effective

interest rate basis for debt instruments

other than those fi nancial assets ‘at fair

value through profi t or loss’.

Available-for-sale financial assets

Certain shares and redeemable notes

held by the Group are classifi ed as being

available-for-sale and are stated at fair

value. Fair value is determined in the

manner described in note 33. Gains and

losses arising from changes in fair value

are recognised directly in the investments

revaluation reserve with the exception

of impairment losses, interest calculated

using the effective interest method and

foreign exchange gains and losses on

monetary assets which are recognised

directly in profi t or loss. Where the

investment is disposed of or is determined

to be impaired, the cumulative gain or loss

previously recognised in the investments

revaluation reserve is included in profi t or

loss for the period.

Dividends on available-for-sale equity

instruments are recognised in profi t and

loss when the Group’s right to receive

payments is established.

The fair value of available-for-sale

monetary assets denominated in a

foreign currency is determined in that

foreign currency and translated at the

spot rate at reporting date. The change

in fair value attributable to translation

differences that result from a change in

amortised cost of the asset is recognised

in profit or loss, and other changes are

recognised in equity.

Loans and receivables

Trade receivables, loans, and other

receivables that have fi xed or

determinable payments that are not

quoted in an active market are classifi ed

as ‘loans and receivables’. Loans and

receivables are measured at amortised

cost using the effective interest method

less impairment.

Interest income is recognised by applying

the effective interest rate.

Impairment of financial assets

Financial assets, other than those at

fair value through profi t or loss, are

assessed for indicators of impairment

at each balance sheet date. Financial

assets are impaired where there is

objective evidence that as a result of one

or more events that occurred after the

initial recognition of the fi nancial asset

the estimated future cash fl ows of the

investment have been impacted.

For fi nancial assets carried at amortised

cost, the amount of the impairment

is the difference between the asset’s

carrying amount and the present value of

estimated future cash fl ows, discounted

at the original effective interest rate.

The carrying amount of the fi nancial asset

is reduced by the impairment loss directly

for all fi nancial assets with the exception


For

per

sona

l use

onl

y

56

of trade receivables where the carrying

amount is reduced through the use of

an allowance account. When a trade

receivable is uncollectible, it is written

off against the allowance account.

Subsequent recoveries of amounts

previously written off are credited against

the allowance account. Changes in the

carrying amount of the allowance account

are recognised in profi t or loss.

With the exception of available-for-sale

equity instruments, if, in a subsequent

period, the amount of the impairment

loss decreases and the decrease can be

related objectively to an event occurring

after the impairment was recognised,

the previously recognised impairment

loss is reversed through profi t or loss to

the extent the carrying amount of the

investment at the date the impairment

is reversed does not exceed what the

amortised cost would have been had the

impairment not been recognised.

In respect of available-for-sale equity

instruments, any subsequent increase

in fair value after an impairment loss is

recognised directly in equity.

Derecognition of financial assets

The Group derecognises a fi nancial

asset only when the contractual rights

to the cash fl ows from the asset expire,

or it transfers the fi nancial asset and

substantially all the risks and rewards of

ownership of the asset to another entity.

If the Group neither transfers nor retains

substantially all the risks and rewards of

ownership and continues to control the

transferred asset, the Group recognises

its retained interest in the asset and

as associated liability for amounts it

may have to pay. If the Group retains

substantially all the risks and rewards

of ownership of a transferred fi nancial

asset, the Group continues to recognise

the fi nancial asset and also recognises a

collateralised borrowing for the proceeds

received.

(g) Financial instruments issued by the company

Debt and equity instruments

Debt and equity instruments are classifi ed

as either liabilities or as equity in

accordance with the substance of the

contractual arrangement. An equity

instrument is any contract that evidences

a residual interest in the assets of an

entity after deducting all of its liabilities.

Equity instruments issued by the Group

are recorded at the proceeds received,

net of direct issue costs.

Financial liabilities

Financial liabilities are classifi ed as either

fi nancial liabilities at fair value through

profi t or loss or other fi nancial liabilities.

Other financial liabilities

Other fi nancial liabilities, including

borrowings, 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.

The effective interest method is a method

of calculating the amortised cost of a

fi nancial liability and of allocating interest

expense over the relevant period. The

effective interest rate is the rate that

exactly discounts estimated future cash

payments through the expected life of the

fi nancial liability, or, where appropriate,

a shorter period.

(h) Foreign currency

Foreign currency transactions

All foreign currency transactions during

the fi nancial year are brought to account

using the exchange rate in effect at the

date of the transaction. Foreign currency

monetary items at reporting date are

translated at the exchange rate existing

at reporting date. Non-monetary assets

and liabilities carried at fair value that

are denominated in foreign currencies are

translated at the rates prevailing at the

date when the fair value was determined.

Exchange differences are recognised

in profi t or loss in the period in which

they arise.

(i) Goods and services tax

Revenues, expenses and assets are

recognised net of the amount of goods

and services tax (GST), except:

i. where the amount of GST incurred is not

recoverable from the taxation authority,

it is recognised as part of the cost of

acquisition of an asset or as part of an

item of expense; or

ii. for receivables and payables which are

recognised inclusive of GST.

The net amount of GST recoverable from,

or payable to, the taxation authority

is included as part of receivables or

payables.

Cash fl ows are included in the cash

fl ow statement on a gross basis.

The GST component of cash fl ows arising

from investing and fi nancing activities

which is recoverable from, or payable to,

the taxation authority is classifi ed

as operating cash fl ows.


For

per

sona

l use

onl

y

57

(j) Goodwill

Goodwill acquired in a business

combination is initially measured at

its cost, being the excess of the cost

of the business combination over the

acquirer’s interest in the net fair value


contingent liabilities recognised. Goodwill

is subsequently measured at its cost less

any impairment losses.

For the purpose of impairment testing,

goodwill is allocated to each of the

Group’s cash-generating units (CGUs),

or groups of CGUs, expected to benefi t

from the synergies of the business

combination. CGUs (or groups of CGUs)

to which goodwill has been allocated

are tested for impairment annually, or

more frequently if events or changes in

circumstances indicate that goodwill

might be impaired.

If the recoverable amount of the CGU (or

group of CGUs) is less than the carrying

amount of the CGU (or groups of CGUs),

the impairment loss is allocated fi rst

to reduce the carrying amount of any

goodwill allocated to the CGU (or groups

of CGUs) and then to the other assets of

the CGU (or groups of CGUs) pro-rata on

the basis of the carrying amount of each

asset in the CGU (or groups of CGUs). An

impairment loss recognised for goodwill

is recognised immediately in profi t or loss

and is not reversed in a subsequent period.

On disposal of an operation within a CGU,

the attributable amount of goodwill is

included in the determination of the profi t

or loss on disposal of the operation.

(k) Impairment of other tangible and intangible assets

At each reporting date, the Group reviews

the carrying amounts of its tangible and

intangible 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). Where the asset does not

generate cash fl ows that are independent

from other assets, the Group estimates the

recoverable amount of the cash-generating

unit to which the asset belongs. Where

a reasonable and consistent basis of

allocation can be identifi ed, corporate

assets are also allocated to individual

cash-generating units, or otherwise

they are allocated to the smallest group

of cash-generating units for which a

reasonable and consistent allocation

basis can be identifi ed.

Intangible assets with indefi nite

useful lives and intangible assets not

yet available for use are tested for

impairment annually and whenever there

is an indication that the asset may be

impaired.

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 fl ows are discounted to

their present value using a pre-tax

discount rate that refl ects current market

assessments of the time value of money

and the risks specifi c to the asset for

which the estimates of future cash fl ows

have not been adjusted.

If the recoverable amount of an asset (or

cash-generating unit) is estimated to be

less than its carrying amount, the carrying

amount of the asset (cash-generating unit)

is reduced to its recoverable amount. An

impairment loss is recognised in profi t

or loss immediately, unless the relevant

asset is carried at fair value, in which

case the impairment loss is treated as a

revaluation decrease (refer note 2(q)).

Where an impairment loss subsequently

reverses, the carrying amount of the

asset (cash-generating unit) is increased

to the revised estimate of its recoverable

amount, but only to the extent 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 (cash-

generating unit) in prior years. A reversal

of an impairment loss is recognised in

profi t or loss immediately, unless the

relevant asset is carried at fair value, in

which case the reversal of the impairment

loss is treated as a revaluation increase

(refer note 2(q)).

(l) Income taxCurrent tax

Current tax is calculated by reference

to the amount of income taxes payable

or recoverable in respect of the taxable

profi t or tax loss for the period. It is

calculated using tax rates and tax laws

that have been enacted or substantively

enacted by reporting date. Current tax for

current and prior periods is recognised as

a liability (or asset) to the extent that it is

unpaid (or refundable).


For

per

sona

l use

onl

y

58

Deferred tax

Deferred tax is accounted for using the

balance sheet liability method. Temporary

differences are differences between the

tax base of an asset or liability and its

carrying amount in the balance sheet.

The tax base of an asset or liability is the

amount attributed to that asset or liability

for tax purposes.

In principle, deferred tax liabilities are

recognised for all taxable temporary

differences. Deferred tax assets

are recognised to the extent that it

is probable that suffi cient taxable

amounts will be available against which

deductible temporary differences or

unused tax losses and tax offsets can be

utilised. However, deferred tax assets

and liabilities are not recognised if the

temporary differences giving rise to them

arise from the initial recognition of assets

and liabilities (other than as a result of

a business combination) which affects

neither taxable income nor accounting

profi t. Furthermore, a deferred tax liability

is not recognised in relation to taxable

temporary differences arising from the

initial recognition of goodwill.

Deferred tax liabilities are recognised for

taxable temporary differences associated

with investments in subsidiaries,

branches and associates, and interests

in joint ventures except where the

Group is able to control the reversal

of the temporary differences and it is

probable that the temporary differences

will not reverse in the foreseeable

future. Deferred tax assets arising

from deductible temporary differences

associated with these investments and

interests are only recognised to the

extent that it is probable that there will

be suffi cient taxable profi ts against which

to utilise the benefi ts of the temporary

differences and they are expected to

reverse in the foreseeable future.

Deferred tax assets and liabilities are

measured at the tax rates that are

expected to apply to the period(s) when

the asset and liability giving rise to them

are realised or settled, based on tax rates

(and tax laws) that have been enacted

or substantively enacted by reporting

date. The measurement of deferred tax

liabilities and assets refl ects the tax

consequences that would follow from the

manner in which the Group expects, at

the reporting date, to recover or settle

the carrying amount of its assets and

liabilities.

Deferred tax assets and liabilities are offset

when they relate to income taxes levied

by the same taxation authority and the

company/Group intends to settle its current

tax assets and liabilities on a net basis.

Current and deferred tax for the period

Current and deferred tax is recognised

as an expense or income in the income

statement, except when it relates to

items credited or debited directly to

equity, in which case the deferred tax

is also recognised directly in equity, or

where it arises from the initial accounting

for a business combination, in which

case it is taken into account in the

determination of goodwill or excess.

Tax consolidation

The company and all its wholly-owned

Australian resident entities are part of

a tax-consolidated group under Australian

taxation law. Australian Wealth

Management Limited is the head entity

in the tax-consolidated group.

Tax expense/income, deferred tax

liabilities and deferred tax assets

arising from temporary differences of

the members of the tax-consolidated

group are recognised in the separate

fi nancial statements of the members of

the tax-consolidated group using the

‘separate taxpayer within group’ approach

by reference to the carrying amounts

in the separate fi nancial statements of

each entity and the tax values applying

under tax consolidation. Current tax

liabilities and assets and deferred tax

assets arising from unused tax losses and

relevant tax credits of the members of the

tax-consolidated group are recognised by

the company (as head entity in the tax-

consolidated group).

Due to the existence of a tax funding

arrangement between the entities in

the tax-consolidated group, amounts are

recognised as payable to or receivable

by the company and each member of the

group in relation to the tax contribution

amounts paid or payable between the

parent entity and the other members of

the tax-consolidated group in accordance

with the arrangement. Further information

about the tax funding arrangement

is detailed in note 8 to the fi nancial

statements. Where the tax contribution

amount recognised by each member of

the tax-consolidated group for a particular

period is different to the aggregate of

the current tax liability or asset and any

deferred tax asset arising from unused

tax losses and tax credits in respect of

that period, the difference is recognised

as a contribution from (or distribution to)

equity participants.


For

per

sona

l use

onl

y

59

(m) Intangible assetsIntangible assets acquired separately

Intangible assets acquired separately

are recorded at cost less accumulated

amortisation and impairment.

Amortisation is charged on a straight-line

basis over their estimated useful lives.

The estimated useful life and amortisation

method is reviewed at the end of each

annual reporting period, with any changes

in these accounting estimates being

accounted for on a prospective basis.

Computer and development software

Computer and development software

is recorded at cost less accumulated

amortisation and impairment. Amortisation

is charged on a straight line basis over

their estimated useful lives of 3 – 5 years.

The estimated useful life and amortisation

method is reviewed at the end of each

annual reporting period. Subsequent to

initial recognition, internally-generated

intangible assets acquired in a business

combination are reported at cost less

accumulated amortisation and accumulated

impairment losses, on the same basis as

intangible assets acquired separately.

Customer lists

Customer list assets are assessed for

their useful life and are categorised into

two categories: fi nite life customer lists

and indefi nite life customer lists. Finite

life intangible assets are amortised on a

straight line basis over their estimated

useful lives of 7 – 25 years, and

indefi nite life intangible assets are not

amortised. Each period, the useful life of

the indefi nite life intangible assets are

reviewed to determine whether events

and circumstances continue to support

an indefi nite useful life assessment for

the asset. Such assets are tested for

impairment in accordance with the policy

stated in note 2(k). The estimated useful

life and amortisation method of the fi nite

life customer lists is reviewed at the end

of each annual reporting period, with any

changes being recognised as a change in

accounting estimate.

Patents, trademarks and licences

Patents, trademarks and licences are

recorded at cost less accumulated

amortisation and impairment.

Amortisation is charged on a straight line

basis over their estimated useful lives of

20 years. The estimated useful life and

amortisation method is reviewed at the

end of each annual reporting period, with

any changes being recognised as a change

in accounting estimate.

Contract agreements

Contract agreements are recorded at

cost less accumulated amortisation and

impairment. Amortisation is charged on

a straight line basis over their estimated

useful lives of 3 – 10 years. The estimated

useful life and amortisation method

is reviewed at the end of each annual

reporting period, with any changes being

recognised as a change in accounting

estimate.

Intangible assets acquired in a business combination

Intangible assets acquired in a business

combination are identifi ed and recognised

separately from goodwill where they

satisfy the defi nition of an intangible

asset and their fair values can be

measured reliably.

Subsequent to initial recognition,

intangible assets acquired in a business

combination are reported at cost

less accumulated amortisation and

accumulated impairment losses, on the

same basis as intangible assets acquired

separately.

(n) Investments in associates

An associate is an entity over which the

Group has signifi cant infl uence and that

is neither a subsidiary nor an interest in a

joint venture. Signifi cant infl uence is the

power to participate in the fi nancial and

operating policy decisions of the investee

but is not control or joint control over

those policies.

The results and assets and liabilities

of associates are incorporated in these

fi nancial statements using the equity

method of accounting, except when

the investment is classifi ed as held for

sale, in which case it is accounted for in

accordance with AASB 5 ‘Non-current

Assets held for Sale and Discontinued

Operations’. Under the equity method,

investments in associates are carried in

the consolidated balance sheet at cost

as adjusted for post-acquisition changes

in the Group’s share of the net assets of

the associate, less any impairment in the

value of individual investments.

Losses of an associate in excess of the

Group’s interest in that associate (which

includes any long-term interests that,

in substance, form part of the Group’s

net investment in the associate) are

recognised only to the extent that the

Group has incurred legal or constructive

obligations or made payments on behalf

of the associate.

Any excess of the cost of acquisition over

the Group’s share of the net fair value


contingent liabilities of the associate

recognised at the date of the acquisition

is recognised as goodwill. The goodwill


For

per

sona

l use

onl

y

60

is included within the carrying amount

of the investment and is assessed for

impairment as part of that investment.

Any excess of the Group’s share of the

net fair value of the identifi able assets,

liabilities and contingent liabilities

over the cost of the acquisition, after

reassessment, is recognised immediately

in profi t or loss. Where a group entity

transacts with an associate of the Group,

profi ts and losses are eliminated to the

extent of the Group’s interest in the

relevant associate.

(o) Joint venture arrangementsJointly controlled assets

Interests in jointly controlled assets in

which the Group is a venturer (and so

has joint control) are included in the

fi nancial statements by recognising

the Group’s share of jointly controlled

assets (classifi ed according to their

nature), the share of liabilities incurred

(including those incurred jointly with

other venturers) and the Group’s share of

expenses incurred by or in respect of each

joint venture. The Group also recognises

income from the sale or use of output

from the joint venture in accordance with

the revenue policy in note 2(s).

The Group’s interests in assets where

the Group does not have joint control

are accounted for in accordance with

the substance of the Group’s interest.

Where such arrangements give rise to an

undivided interest in the individual assets

and liabilities of the joint venture, the

Group recognises its undivided interest

in each asset and liability and classifi es

and presents those items according to

their nature.

Jointly controlled entities

Interests in jointly controlled entities in

which the Group is a venturer (and so

has joint control) are accounted for under

the equity method in the consolidated

fi nancial statements and the cost method

in the company fi nancial statements.

(p) Leased assets

Leases are classifi ed as fi nance leases

when the terms of the lease transfer

substantially all the risks and rewards

incidental to ownership of the leased

asset to the lessee. All other leases are

classifi ed as operating leases.

Group as lessee

Assets held under fi nance leases are

initially recognised at their fair value or,

if lower, at amounts equal to the present

value of the minimum lease payments,

each determined at the inception of the

lease. The corresponding liability to the

lessor is included in the balance sheet as

a fi nance lease obligation.

Lease payments are apportioned

between finance charges and reduction

of the lease obligation so as to achieve a

constant rate of interest on the remaining

balance of the liability. Finance charges

are charged directly against income,

unless they are directly attributable to

qualifying assets, in which case they

are capitalised in accordance with the

Group’s general policy on borrowing

costs. Refer to note 2(b). Contingent

rentals are recognised as expenses in the

periods in which they are incurred.

Finance leased assets are amortised on

a straight line basis over the estimated

useful life of the asset.

Operating lease payments are recognised

as an expense on a straight-line basis over

the lease term, except where another

systematic basis is more representative of

the time pattern in which economic benefi ts

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.

Lease incentives

In the event that lease incentives are

received to enter into operating leases,

such incentives are recognised as a

liability. The aggregate benefi ts of

incentives are 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 benefi ts from the leased

asset are consumed.

(q) Property, plant and equipment

Plant and equipment, leasehold

improvements and equipment under

fi nance lease are stated at cost less

accumulated depreciation and impairment.

Cost includes expenditure that is directly

attributable to the acquisition of the item.

In the event that settlement of all or part

of the purchase consideration is deferred,

cost is determined by discounting the

amounts payable in the future to their

present value as at the date of acquisition.

Depreciation is provided on property,

plant and equipment. Depreciation is

calculated on a straight line basis so as

to write off the net cost or other revalued

amount of each asset over its expected

useful life to its estimated residual value.

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, residual values and

depreciation method are reviewed at the


For

per

sona

l use

onl

y

61

end of each annual reporting period, with

the effect of any changes recognised on a

prospective basis.

Assets held under financial eases are

depreciated over their expected useful

lives on the same basis as owned

assets or, where shorter, the term of the

relevant lease.

The gain or loss arising on disposal or

retirement of an item of property, plant

and equipment is determined as the

difference between the sales proceeds

and the carrying amount of the asset and

is recognised in profi t or loss.

The following useful lives are used in the calculation of depreciation:

Leasehold improvements 5 – 7 years•

Plant and equipment 5 – 15 years•

(r) Provisions

Provisions are recognised when the

Group has a present obligation (legal or

constructive) as a result of a past event, it

is probable that the Group will be required

to settle the obligation, and a reliable

estimate can be made of the amount of

the obligation.

The amount recognised as a provision is

the best estimate of the consideration

required to settle the present obligation

at reporting date, taking into account the

risks and uncertainties surrounding the

obligation. Where a provision is measured

using the cashfl ows estimated to settle

the present obligation, its carrying amount

is the present value of those cashfl ows.

When some or all of the economic

benefits required to settle a provision

are expected to be recovered from a

third party, the receivable is recognised

as an asset if it is virtually certain that

reimbursement will be received and

the amount of the receivable can be

measured reliably.

Provision for claims

The provision for claims has been

established to cover anticipated costs

that may arise from known legal matters

as at the end of the fi nancial year.

(s) Revenue

Revenue is measured at the fair value of

the consideration received or receivable

Rendering of services

Revenue from the rendering of services

is recognised at the time the service is

provided.

Upfront commissions revenue

Upfront commissions are recorded as

deferred revenue and recognised as

revenue on a straight line basis over a

period that is refl ective of the continued

service provided. The deferral period

is 5 years.

Dividend and interest revenue

Dividend revenue from investments is

recognised when the shareholder’s right

to receive payment has been established.

Interest revenue is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the fi nancial asset to that asset’s net carrying amount.

(t) Share-based payments

Equity-settled share-based payments with

employees and others providing similar

services are measured at the fair value of

the equity instrument at the grant date.

Fair value is measured by use of a binomial

model. The expected life used in the model

has been adjusted, based on management’s

best estimate, for the effects of non-

transferability, exercise restrictions,

and behavioural considerations. Further

details on how the fair value of equity-

settled share-based transactions has been

determined can be found in note 34.

The fair value determined at the grant

date of the equity-settled share-based

payments is expensed on a straight-line

basis over the vesting period, based on

the Group’s estimate of shares that will

eventually vest.

At each reporting date, the Group revises

its estimate of the number of equity

instruments expected to vest. The impact

of the revision of the original estimate,

if any, is recognised in profi t or loss

over the remaining vesting period, with

corresponding adjustment to the equity

settled employee benefi ts reserve.

The above policy is applied to all equity-

settled share-based payments that were

granted after 7 November 2002 that

vested after 1 January 2005. No amount

has been recognised in the fi nancial

statements in respect of the other equity-

settled shared-based payments.

(u) Standards and interpretations issued not yet effective

At the date of authorisation of the

fi nancial report, the following Standards

and Interpretations were in issue but not

yet effective:

Initial application of the following

Standards will not affect any of the

amounts recognised in the fi nancial

report, but will change the disclosures

presently made in relation to the Group

and the company’s fi nancial report:


For

per

sona

l use

onl

y

62

3 Critical accounting judgements and key sources of estimation uncertainty

Critical judgements in applying the

entity’s accounting policies

The following are the critical judgements

(apart from those involving estimations,

which are dealt with below), that

management has made in the process of

applying the Group’s accounting policies

and that have the most signifi cant effect

on the amounts recognised in the fi nancial

statements:

Key sources of estimation uncertaintyIntangible assets

Useful lives of intangible assets with

fi nite lives are reviewed annually.

Any reassessment of useful lives in a

particular year will affect the amortisation

expense (either increasing or decreasing)

through to the end of the reassessed

useful life for both the current and future

years. Details of the assumptions used

are provided in note 14.

Impairment of goodwill

Determining whether goodwill is impaired

requires an estimation of the value in use

of the cash-generating units to which

goodwill has been allocated. The value in use

calculation requires the entity to estimate the

future cash fl ows expected to arise from the

cash-generating unit and a suitable discount

rate in order to calculate present value.

The carrying amount of goodwill at the

balance date was $553,671,000 (2007:

$512,697,000) and indefi nite life intangible

assets was $136,086,000 (2007:

$123,302,000). No impairment losses

were recognised during the fi nancial year.

Details of the value in use of the cash-

generating units for goodwill are provided

in note 13 and note 14 for indefi nite life

intangible assets.

4 Segment informationInformation on business segmentsProducts and services within each business segment

For management purposes, the Group

is organised into fi ve major operating

divisions, fi nancial advice & distribution,

private client, platform management &

administration, investment management

and corporate trust. These divisions are

the basis on which the Group reports

its primary segment information. The

principal products and services of each

of these divisions are as follows:

Financial advice and distribution the provision of fi nancial planning advice supported by services such as investment research, training, compliance support and access to fi nancial products.

Private client the provision of estate planning, trustee, agency and estate administration services to clients.

Platform management and administration the provision of administration and management services through master trust platforms, which offer a single access point to a range of investment products.

Investment management the provision of the multi-manager approach, utilising sector specialist fund managers with the aim of providing above median performance at below median risk.

Corporate trust the provision of custodial services for investment schemes, trustee of security trustee for securitisation and structured fi nance transactions and trustee for note issues.


For

per

sona

l use

onl

y

63

Segment revenues

External sales Inter-segment(i) Other Total

2008 2007 2008 2007 2008 2007 2008 2007

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000Platform management and administration

180,963 170,723 48,244 36,641 – – 229,207 207,364

Investment management 22,287 19,138 – – – – 22,287 19,138

Financial advice and distribution

84,392 68,443 23,608 27,486 285 – 108,285 95,929

Private client 18,160 18,258 – – – – 18,160 18,258

Corporate trust 5,446 4,422 – – – – 5,446 4,422

Total of all segments 383,385 345,111

Eliminations (71,853) (64,127)

Unallocated 5,232 6,301

Consolidated 316,764 287,285

(i) Inter-segment sales are recorded at amounts equal to competitive market prices charged to external customers for similar goods.

Segment result

External sales Inter-segment(i) Other Total

2008 2007 2008 2007 2008 2007 2008 2007

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000Platform management and administration

70,526 63,254

Investment management 13,449 10,013

Financial advice and distribution

(860) 2,279

Private client 5,205 7,254

Corporate trust 2,062 1,221

Total of all segments 90,382 84,021

Eliminations – –

Unallocated 945 (600)

Profi t before income tax expense

91,327 83,421

Income tax expense (26,343) (26,006)

Profi t for the period 64,984 57,415


4 Segment information (cont’d)

For

per

sona

l use

onl

y

64

Segment assets and liabilities

Assets Liabilities

2008 2007 2008 2007

$’000 $’000 $’000 $’000Platform management and administration 97,327 101,113 22,601 25,475

Investment management 2,825 3,156 582 374

Financial advice and distribution 394,290 203,928 132,518 33,226

Private client – – – –

Corporate trust – – – –

Total of all segments 494,442 308,197 155,701 59,075

Eliminations (496,673) (518,870) (11,365) (14,740)

Unallocated 1,035,129 1,072,275 42,672 52,367

Consolidated 1,032,898 861,602 187,008 96,702

Other segment information

Platform management & administration Investment management

Financial advice & distribution Private client

2008 2007 2008 2007 2008 2007 2008 2007

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000Carrying value of investments accounted for using the equity method

– 1,315 – 866 1,916 1,951 – –

Share of net profi ts of associates accounted for under the equity method

– – – – 115 4 – –

Acquisition of segment assets

2,582 18,381 – – 39,119 2,609 – –

Depreciation and amortisation of segment assets

2,275 1,474 – – 909 230 – 7

Signifi cant other non-cash expenses

1,216 939 212 122 317 201 351 154



For

per

sona

l use

onl

y

65

Other segment information

Corporate trust Unallocated

2008 2007 2008 2007

$’000 $’000 $’000 $’000Carrying value of investments accounted for using the equity method – – 73 4,803

Share of net profi ts of associates accounted for under the equity method – – 452 1,544

Acquisition of segment assets – – 2,305 2,982

Depreciation and amortisation of segment assets 145 148 3,476 4,021

Signifi cant other non-cash expenses 223 40 4 17

The consolidated entity operates in one principal geographical area – Australia.

5 Revenue Consolidated Company

2008 2007 2008 2007

$’000 $’000 $’000 $’000

An analysis of the Group’s revenue for the year is as follows:

Revenue from the rendering of services 310,839 281,114 – –

Interest revenue:

Bank deposits 2,968 3,711 157 49

Other loans and receivables 1,095 142 3 1

4,063 3,853 160 50

Dividends:

Subsidiaries – – 58,957 56,000

Other entities 1,215 518 217 –

1,215 518 59,174 56,000

Other (aggregate of immaterial items) 80 252 – –

316,197 285,737 59,334 56,050

6 Finance costs Consolidated Company

2008 2007 2008 2007

$’000 $’000 $’000 $’000Interest on bank overdrafts and loans 12 26 – –

Interest obligations under fi nance leases 9 4 – –

Unwinding of deferred purchase consideration 6 – – –

Other interest expense 117 11 17 –

144 41 17 –



For

per

sona

l use

onl

y

66

7 Profit for the year before tax Consolidated Company

2008 2007 2008 2007

$’000 $’000 $’000 $’000

(a) Gains and lossesProfi t/(loss) for the year has been arrived at after crediting/(charging) the following gains and losses:

Gain/(loss) on disposal of property, plant and equipment (9) (44) – –

Gain/(loss) on disposal of investments – 7 – –

Net foreign exchange gains/(losses) (34) (1) (34) (4)

(43) (38) (34) (4)

(b) Other expensesProfi t for the year includes the following expenses:

Impairment of trade receivables 12 13 – –

Depreciation of non-current assets (2,266) (2,858) – –

Amortisation of non-current assets (4,539) (3,023) – –

(6,805) (5,881) – –

Operating lease rental expenses:

Minimum lease payments (48) (109) – –

Employee benefi t expense:Post employment benefi ts – defi ned contribution plans (4,351) (3,736) – –

Equity settled share-based payments (2,322) (1,472) – –

Termination benefi ts (704) (671) – –

Other employee benefi ts (61,290) (58,347) – –

(68,667) (64,226) – –


For

per

sona

l use

onl

y

67

8 Income taxes Consolidated Company

2008 2007 2008 2007

$’000 $’000 $’000 $’000Income tax recognised in profi t or loss

Tax expense/(income) comprises:

Current tax expense/(income) 27,864 24,598 (809) 415

Benefi t arising from previously unrecognised tax losses (60) – (60) –

Adjustments recognised in the current year in relation to the current tax of prior years

(3,400) – – –

24,404 24,598 (869) 415

Deferred tax expense/(income) relating to the origination and reversal of temporary differences

1,383 1,408 890 (415)

Adjustments recognised in the current year in relation to the deferred tax of prior years

556 – 33 –

1,939 1,408 923 (415)

Total tax expense/(income) 26,343 26,006 54 –

The prima facie income tax expense on pre-tax accounting profi t from operations reconciles to the income tax expense in the fi nancial statements as follows:

Profi t from operations 91,327 83,421 59,242 55,994

Income tax expense calculated at 30% 27,398 25,026 17,773 16,798

Amortisation of intangible assets 1,355 934 – –

Share based payments expense 697 442 – –

Other non-deductible expenses 132 89 – 2

Equity share of associates’ profi t (170) (464) – –

Assessable dividends received 227 – – –

Fully franked dividends (591) (155) (17,752) (16,800)

Research and development – – – –

Other 140 (38) – –

29,188 25,834 21 –

Adjustments recognised in the current year in relation to the current tax of prior years

(2,845) 172 33 –

Income tax expense 26,343 26,006 54 –

Unused tax losses for which no deferred tax asset has been recognised 1,110 1,110 1,110 1,110

Potential tax benefi t at 30% 333 333 333 333

The unused tax losses relate to capital losses arising on the formation of the AWM tax consolidated group in 2005 ($939k) and transfer from SMF ($10k) upon joining the tax consolidated group on 29 May 2006.

The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate entities on taxable profi ts under Australian tax law. There has been no change in the corporate tax rate when compared with the previous reporting period.


For

per

sona

l use

onl

y

68

8 Income taxes Consolidated Company

2008 2007 2008 2007

$’000 $’000 $’000 $’000

Income tax recognised directly in equity

The following current and deferred amounts were charged directly to equity during the period:

Deferred tax:

Revaluations of available-for-sale securities 577 (577) – –

Reclassifi cation of deferred PAYG instalments – – – –

Share issue costs – – – –

577 (577) – –

Current tax assets and liabilities

Current tax payables:

Income tax payable attributable to:

Head entity (870) (92) (870) (92)

Entities in the tax-consolidated group 20,110 17,086 20,110 17,402

Other 1,416 – – –

20,656 16,994 19,240 17,310


For

per

sona

l use

onl

y

69

Deferred tax assets/(liabilities) arise from the following:

Consolidated

2008 Opening balance

Charged to income

Charged to equity

Acquisitions & disposals

Closing balance

$’000 $’000 $’000 $’000 $’000

Temporary differences

Accrued income – (17) – (9) (26)

Deferred acquisition costs (2,320) 457 – – (1,863)

Deductible business related expenditure (57) – – (57)

Deferred benefi t plan surplus (217) 217 – – –

Deferred capital gains tax liabilities (577) – 577 – –

Deferred PAYG tax instalments – – – – –

Employee benefi ts 1,959 391 – 3,569 5,919

Deferred commission 3,007 (670) – (63) 2,274

Staff incentives 1,042 (450) – 208 800

Retirement benefi t obligations – – – – –

Lease incentives 173 46 – 86 305

Surplus rent provision 123 (64) – – 59

Property, plant and equipment 1,083 (355) – 66 794

Accrued expenses 617 (324) – 106 399

Provision for doubtful debts 6 – – 5 11

Provision for claims – (11) – 229 218

Credit Union incentive provision 69 16 – – 85

Bridges planner initial equity scheme 600 (600) – – –

Share issue costs 646 (220) – – 426

AWM separation costs deductible over 5 years 645 (329) – – 316

Borrowing costs – 1 – – 1

Revenue losses – 30 – – 30

6,856 (1,939) 577 4,197 9,691

Presented in the balance sheet as follows:

Deferred tax (liability) (1,946)

Deferred tax asset 11,637

9,691


8 Income taxes (cont’d)

For

per

sona

l use

onl

y

70

Consolidated


Charged to income

Charged to equity


Closing balance

$’000 $’000 $’000 $’000 $’000


Accrued income (19) 19 – – –

Deferred acquisition costs – (2,320) – – (2,320)

Defi ned benefi t plan surplus – (217) – – (217)

Deferred capital gains tax liabilities – – (577) – (577)

Deferred PAYG tax instalments (2) 2 – – –

Employee benefi ts 2,501 (542) – – 1,959

Deferred commission 926 2,081 – – 3,007

Staff incentives 807 235 – – 1,042

Retirement benefi t obligations 67 (67) – – –

Lease incentives 208 (35) – – 173

Surplus rent provision 313 (190) – – 123

Property, plant and equipment 541 542 – – 1,083

Accrued expenses 426 184 – 7 617

Provision for doubtful debts 5 1 – – 6

Credit Union incentive provision 37 32 – – 69

Bridges planner initial equity scheme 1,200 (600) – – 600

Share issue costs 890 (244) – – 646


8,834 (1,408) (577) 7 6,856

Presented in the balance sheet as follows: (3,114)

Deferred tax (liability) 9,970




For

per

sona

l use

onl

y

71

Company


Charged to income

Charged to equity


Closing balance

$’000 $’000 $’000 $’000 $’000


Bridges planner initial equity scheme 600 (600) – – –


Tax losses – revenue – 10 – – 10

1,165 (924) – – 241


Deferred tax (liability) –

Deferred tax asset 241

241

Company


Charged to income

Charged to equity


Closing balance

$’000 $’000 $’000 $’000 $’000


Bridges planner initial equity scheme – 600 – – 600


750 415 – – 1,165


Deferred tax (liability) –


1,165



For

per

sona

l use

onl

y

72

Tax consolidationRelevance of tax consolidation to the Group

The company and its wholly-owned

Australian resident entities have formed

a tax-consolidated group and are therefore

taxed as a single entity. The head entity

within the tax-consolidated group is AWM.

The members of the tax-consolidated

group are identifi ed at note 30.

Nature of tax funding arrangements and tax sharing agreements

Entities within the tax-consolidated

group have entered into a tax funding

arrangement and a tax-sharing agreement

with the head entity. Under the terms

of the tax funding arrangement, AWM

and each of the entities in the tax-

consolidated group has agreed to pay a

tax equivalent payment to or from the

head entity, based on the current tax

liability or current tax asset of the entity.

Such amounts are refl ected in amounts

receivable from or payable to other

entities in the tax-consolidated group.

The tax sharing agreement entered into

between members of the tax-consolidated

group provides for the determination of

the allocation of income tax liabilities

between the entities should the head

entity default on its tax payment

obligations or if an entity should leave

the tax-consolidated group. The effects

of the tax sharing agreement is that each

member’s liability for tax payable by the

tax-consolidated group is limited to the

amount payable to the head entity under

the tax funding arrangement.


2008 2007 2008 2007

$’000 $’000 $’000 $’000Unrecognised deferred tax assets

The following deferred tax assets have not been brought to account as assets:

Temporary differences 11,735 – 1,308 –

Tax losses – capital 333 333 333 333

12,068 333 1,641 333



For

per

sona

l use

onl

y

73

9 Trade and other receivables Consolidated Company

2008 2007 2008 2007

$’000 $’000 $’000 $’000Current

Trade receivables (i) 108,596 14,146 – –

Allowance for doubtful debts (35) (20) – –

108,561 14,126 – –

Goods and services tax recoverable 146 1,926 – –

Fees & commissions receivable 15,677 28,506 – –

Loans to Bridges authorised representatives – 2,000 – 2,000

Other 512 183 – –

124,896 46,741 – 2,000

Non-current

Other 272 250 – –

272 250 – –

(i) The average credit period on rendering of services is 30 days. No interest is charged on the trade receivables for the fi rst 30 days from the date of the invoice.

Ageing of past due but not impaired

30 – 60 days 518 172 – –

60 – 90 days 330 87 – –

90+ days 460 557 – –

1,308 816 – –

Movement in allowance for doubtful debts

Balance at the beginning of the year (20) (14) – –

Acquisitions through business combinations (16) – – –

Impairment losses recognised on receivables (12) (13) – –

Amounts written off as uncollectible 13 7 – –

Balance at the end of the year (35) (20) – –

In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the directors believe that there is no further credit provision required in excess of the allowance for doubtful debts.


For

per

sona

l use

onl

y

74

10 Other financial assets Consolidated Company

2008 2007 2008 2007

$’000 $’000 $’000 $’000

Investments carried at cost:

Non-current

Investments in subsidiaries – – 863,766 873,810

Other 48 24 24 –

48 24 863,790 873,810

Available-for-sale investments carried at fair value:

Current

Ord Minnett Funds 208 – – –

Non-current

Shares (i) 39,066 16,677 7,450 –

39,274 16,677 7,450 –

Loans carried at amortised cost:

Current

Non-interest-bearing loans advanced to other entities – 809 – –

Non-current

Loans to subsidiaries – – 102,974 29,953

– 809 102,974 29,953

39,322 17,510 974,214 903,763

Disclosed in the fi nancial statements as:

Current other fi nancial assets 208 809 – –

Non-current other fi nancial assets 39,114 16,701 974,214 903,763

39,322 17,510 974,214 903,763

(i) The consolidated entity holds 6% (2007: 6%) of the ordinary share capital of Tasmanian Perpetual Trustees Limited, a company involved in funds management and trustee services, 19.97% (2007: 16%) of the ordinary share capital of Australian Ethical Investment Limited and 2% of IOOF Holdings Limited (2007: nil%) both companies involved in funds management and 18% (2007: 29%) of the ordinary share capital of DKN Financial Group Limited a company involved in the distribution of investment products.


For

per

sona

l use

onl

y

75

11 Investments accounted for using the equity method Consolidated Company

2008 2007 2008 2007

$’000 $’000 $’000 $’000Investments in associates 1,697 8,595 – –

Investments in jointly controlled entities 292 340 – –

1,989 8,935 – –

Name of entity Principal activityCountry of

incorporationOwnership interest Published fair value

2008 2007 2008 2007

% % $’000 $’000

Associates

DKN Financial Group Limited (i)

Distribution of investment products

Australia (i) 29 – 36,738

Police & Nurses Financial Planning Pty Limited

Financial planning Australia 35 35 – –

J C Private Clients Pty Limited


Jointly controlled entities

Northern Inland Investment Services Pty Limited


(i) On 14 November 2007 DKN Financial Group Limited merged with Lonsdale Financial Group and Wrap Account Limited reducing the Group’s ownership interest to below 20%. Equity accounting for DKN Financial Group Limited ceased on that date.

Summarised fi nancial information in respect of the Group’s associates is set out below:

Consolidated

2008 2007

$’000 $’000

Financial position:

Total assets 3,318 50,400

Total liabilities 2,164 (2,297)

Net assets 1,154 48,103

Group’s share of associates’ net assets 297 13,827

Financial performance:

Total Revenue* 8,545 14,724

Total profi t for the year* 2,140 7,047

Group’s share of associates’ profi t/(loss)* 581 1,558

* DKN Financial Group Limited included up to the date equity accounting ceased.


For

per

sona

l use

onl

y

76

Summarised fi nancial information in respect of the Group’s jointly controlled entities is set out below:

Consolidated

2008 2007

$’000 $’000

Financial position:

Current assets 18 58

Non-current assets 688 647

Current liabilities (71) (22)

Non-current liabilities – (4)

Net assets 635 679

Group's share of associates' net assets 286 339

Financial performance:

Total Revenue 286 293

Total profi t for the year (30) (27)

Group's share of jointly controlled entities' profi t/(loss) (14) (10)

Dividends received from associates and joint ventures

During the year, the Group received dividends of $757,000 (2007: $1,233,000) from its associates.

11 Investments accounted for using the equity method (cont’d)


For

per

sona

l use

onl

y

77

12 Property, plant and equipment Consolidated

Leasehold improve-

ments at cost

Plant and equipment at

cost

Equipment under fi nance lease at cost Total

$’000 $’000 $’000 $’000

Gross carrying amount

Balance at 1 July 2006 3,026 5,234 348 8,608

Acquisitions through business combinations – 55 – 55

Additions 2,418 511 53 2,982

Disposals (420) (541) – (961)

Balance at 1 July 2007 5,024 5,259 401 10,684

Acquisitions through business combinations 2,644 1,489 – 4,133

Additions 997 1,109 – 2,106

Disposals (33) (1,291) (116) (1,440)

Balance at 30 June 2008 8,632 6,566 285 15,483

Accumulated depreciation/amortisation

Balance at 1 July 2006 (337) (1,923) (252) (2,512)

Disposals 420 473 – 893

Depreciation expense (1,130) (1,627) (101) (2,858)

Balance at 1 July 2007 (1,047) (3,077) (353) (4,477)

Disposals 33 1,276 115 1,424

Depreciation expense (1,075) (1,180) (11) (2,266)

Balance at 30 June 2008 (2,089) (2,981) (249) (5,319)

Net book value

As at 30 June 2007 3,977 2,182 48 6,207

As at 30 June 2008 6,543 3,585 36 10,164


2008 2007 2008 2007

$’000 $’000 $’000 $’000Aggregate depreciation allocated, whether recognised as an expense or capitalised as part of the carrying amount of other assets during the year:

Leasehold improvements 1,075 1,130 – –

Plant and equipment 1,180 1,627 – –

Equipment under fi nance lease 11 101 – –

2,266 2,858 – –


For

per

sona

l use

onl

y

78

13 Goodwill Consolidated Company

2008 2007 2008 2007

$’000 $’000 $’000 $’000


Balance at beginning of fi nancial year 512,705 512,636 – –

Additional amounts recognised from business combinations occurring during the period

40,974 69 – –

Balance at end of fi nancial year 553,679 512,705 – –

Accumulated impairment losses

Balance at beginning of fi nancial year (8) (8) – –

Impairment losses for the year – – – –

Balance at end of fi nancial year (8) (8) – –

Net book value

At the beginning of the fi nancial year 512,697 512,628 – –

At the end of the fi nancial year 553,671 512,697 – –

Allocation of goodwill to cash-generating units

Goodwill has been allocated for impairment testing purposes to six groups of cash-generating units, as follows:

Consolidated

2008 2007

$’000 $’000Platform management and administration 30,169 30,169

Investment management 124,300 124,300

Financial advice and distribution 285,900 285,900

Private client 19,700 19,700

Corporate trust 32,400 32,400

Select Managed Funds 20,228 20,228

Ord Minnett Group 40,974 –

553,671 512,697


For

per

sona

l use

onl

y

79

Assumptions used for all cash generating units

The recoverable amount of all the cash-

generating units is determined based

on a value in use calculation which uses

cash fl ow projections based on fi nancial

budgets covering a fi fteen-year period,

and discount rate of 12% (2007: 12%) per

annum. Cash fl ow projections during the

budget period for cash-generating units

are also based on an appropriate level of

margin reduction. Management believes

that any reasonably possible change in

key assumptions on which recoverable

amount is based would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of these cash-generating units.

The recoverable amounts for these cash generating units are based on the same key assumptions.

The key assumptions used in the value in use calculations for these cash-generating units are as follows:

Budgeted funds under management, fee •

rates and number of members refl ect

past experience.

Budgeted investment growth, average •

investment growth refl ect past

experience.

All cash generating units have used •

a cost ratio consistent with past

experience except for platform

management and administration.

Platform management and •

administration has used a declining

cost ratio based on budgeted cost

savings in the future.

14 Other intangible assets Consolidated

Computer development & software

Customer lists

Brand names and trademarks

Contract agreements

Total

$’000 $’000 $’000 $’000 $’000


Balance at 1 July 2006 1,578 143,540 2,057 – 147,175

Additions – 20,989 – – 20,989

Consideration adjustment – (405) – – (405)

Balance at 1 July 2007 1,578 164,124 2,057 – 167,759

Additions 204 5,734 – – 5,938

Consideration adjustment – (2) – – (2)

Acquisitions through business combinations 224 16,693 7,757 5,124 29,798

Disposals – – – – –

Balance at 30 June 2008 2,006 186,549 9,814 5,124 203,493

Accumulated amortisation & impairment

Balance at 1 July 2006 (498) (1,121) (12) – (1,631)

Amortisation expense (i) (272) (2,606) (145) – (3,023)

Balance at 1 July 2007 (770) (3,727) (157) – (4,654)

Disposals – – – – –

Amortisation expense (i) (250) (3,992) (145) (152) (4,539)

Balance at 30 June 2008 (1,020) (7,719) (302) (152) (9,193)

Net book value

As at 30 June 2007 808 160,397 1,900 – 163,105

As at 30 June 2008 986 178,830 9,512 4,972 194,300

13 Goodwill (cont’d)


For

per

sona

l use

onl

y

80

The company did not hold any intangible assets during the current or comparative reporting period.

(i) Amortisation expense is included in the line item ‘depreciation and amortisation expense’ in the income statement.

The following useful lives are used in the calculation of amortisation:

Computer development & software 3 – 5 years

Customer lists 7 – 25 years

Brand names and trademarks 20 years

Contract agreements 3 – 10 years

Indefi nite life intangible assets Consolidated

2008 2007

$’000 $’000Carrying amounts of indefi nite life customer lists 128,329 123,302

Carrying amounts of indefi nite life brand names 7,757 –

136,086 123,302

Customer lists

The key value driver of the indefi nite life

customer lists is the fi nancial planning

practices that support and generate

revenue from AWM customers. The

useful life of the customer lists is driven

by the turnover of the fi nancial planning

practices. Historically the turnover of

these practices has been limited to

only one over the past 10 years. On this

basis, it has been determined that these

customer lists have an indefi nite useful

life and are assessed for impairment

on an annual basis.

Brand names

The brand names acquired through

business combinations have been

assessed to have an indefi nite useful life.

There are no plans to abandon or alter the

acquired brand names in the future and

there is no foreseeable limit to the period

over which the brand names are expected

to generate net cash infl ows. The brand

names are assessed for impairment on an

annual basis.

Assumptions used for all cash generating units

The recoverable amount of all the

indefi nite life intangible assets is

determined based on a value in use

calculation which uses cash fl ow

projections based on fi nancial budgets

covering a fi fteen-year period, and

discount rate of 12% (2007: 12%) per

annum. Cash fl ow projections during the

budget period for cash-generating units

are also based on an appropriate level of

margin reduction. Management believes

that any reasonably possible change in

key assumptions on which recoverable

amount is based would not cause the

aggregate carrying amount to exceed the

aggregate recoverable amount of these

cash-generating units.

The recoverable amounts for these cash

generating units are based on the same

key assumptions.

The key assumptions used in the value in

use calculations for these cash-generating

units are as follows:

Budgeted funds under management, fee •

rates and number of members refl ect

past experience.

Budgeted investment growth, average •

investment growth refl ects past

experience.

All cash generating units have used •

a cost ratio consistent with past

experience.

14 Other intangible assets (cont’d)


For

per

sona

l use

onl

y

81

15 Other assets Consolidated Company

2008 2007 2008 2007

$’000 $’000 $’000 $’000

Current

Prepayments 3,204 1,218 – –

Deferred commission expense 2,952 3,253 – –

Refund receivable from former defi ned benefi t plan – 723 – –

Other 289 100 – –

6,445 5,294 – –

Non-current

Deferred commission expense 3,435 4,482 – –

3,435 4,482 – –

9,880 9,776 – –

16 Trade and other payables Consolidated Company

2008 2007 2008 2007

$’000 $’000 $’000 $’000

Current

Trade payables (i) 99,315 19,874 – –

Accrued expenses 18,795 11,079 – –

Goods and services tax (GST) payable 2,390 3,983 – –

Payable to Bridges authorised representatives – 2,000 – 2,000

Other 4,056 380 – –

124,556 37,316 – 2,000

Non-current

Other 1 1 – –

1 1 – –

124,557 37,317 – 2,000

(i) The credit period on purchases does not exceed 30 days. No interest is charged on the trade payables. The Group has fi nancial risk management policies in place to ensure that all payables are paid within the credit timeframe.


For

per

sona

l use

onl

y

82

17 Borrowings Consolidated Company

2008 2007 2008 2007

$’000 $’000 $’000 $’000

Secured – at amortised cost

Current

Finance lease liabilities (note 28) (i) 14 14 – –

14 14 – –

Non-current

Finance lease liabilities (note 28) (i) 30 35 – –

30 35 – –

44 49 – –

(i) Secured by the assets leased. The borrowings are fi xed interest rate debt with repayment periods not exceeding 5 years. The current weighted average effective interest rate on the lease liabilities is 7.41%pa (2007: 7.41%pa).

The unused facilities available to the Group’s include $20,000,000 in short-term cash advances (2007: $20,000,000).

18 Other financial liabilities Consolidated Company

2008 2007 2008 2007

$’000 $’000 $’000 $’000

Current

Deferred purchase consideration 3,720 18,283 – –

Loans to subsidiaries – – – 1,911

3,720 18,283 – 1,911


For

per

sona

l use

onl

y

83

19 Provisions Consolidated Company

2008 2007 2008 2007

$’000 $’000 $’000 $’000

Current

Employee benefi ts 19,679 9,107 – –

Provision for claims 729 – – –

Surplus lease space (i) 194 321 – –

20,602 9,428 – –

Non-current

Employee benefi ts 6,703 826 – –

Surplus lease space (i) – 88 – –

6,703 914 – –

27,305 10,342 – –

(i) The provision for surplus lease space represents the value of future lease payments that the Group is presently obligated to make under non-cancellable operating lease contracts. The estimate may vary as a result of changes in the utilisation of the leased premises and sub-lease arrangements where applicable. The unexpired term of the leases is 1 year.

Consolidated

Surplus lease space

Provision for claims

$’000 $’000Balance at 1 July 2007 409 –

Additional provisions recognised – –

Acquired through business combination – 764

Reductions arising from payments/other sacrifi ces of future economic benefi ts

(215) (35)

Balance at 30 June 2008 194 729


For

per

sona

l use

onl

y

84

20 Other liabilities Consolidated Company

2008 2007 2008 2007

$’000 $’000 $’000 $’000

Current

Lease incentives (note 28) 518 213 – –

Deferred commission income 3,511 4,272 – –

4,029 4,485 – –

Non-Current

Lease incentives (note 28) 500 365 – –

Deferred commission income 4,251 5,753 – –

4,751 6,118 – –

8,780 10,603 – –

21 Issued capital Consolidated Company

2008 2007 2008 2007

$’000 $’000 $’000 $’000606,514,250 AWM fully paid ordinary shares (2007: 564,705,325) 797,751 724,678 956,490 883,416

Changes to the then Corporations Law abolished the authorised capital and par value concept in relation to share capital from

1 July 1998. Therefore, the company does not have a limited amount of authorised capital and issued shares do not have a par value.


For

per

sona

l use

onl

y

85

Fully paid ordinary shares 2008 2007

No. ’000 $’000 No. ’000 $’000Balance at beginning of fi nancial year 564,705 724,678 552,380 709,125

Issue of shares under executive and employee share option plan (note 34) 4,236 4,832 12,325 13,364

Transfer from employee equity-settled benefi ts reserve (note 22) – 1,542 – 2,189

Issue of AWM shares arising on business combination (note 31) 47,574 82,066 – –

Share issue costs – (37) – –

Share buy-back (10,001) (15,292) – –

Share buy-back costs – (38) – –

Balance at end of fi nancial year 606,514 797,751 564,705 724,678

Fully paid ordinary shares carry one vote per share and carry the right to dividends.

During the period, the Group executed a publicly announced share buy-back programme resulting from a decision by the Group for

ongoing capital management purposes. All the shares purchased are cancelled. The share buy-back occurred between the period

19 March 2008 to 30 June 2008. In total 10,001,105 shares were bought back during this period.

Share options granted under the employee share option plan

In accordance with the provisions of the employee share option plans, as at 30 June 2008, executives and senior employees have

options over 6,800,000 (2007: 8,685,750) ordinary shares (of which 3,790,000 (2007: 8,685,750) are unvested), in aggregate.

Share options granted under the employee share option plan carry no rights to dividends and no voting rights. Further details of the

employee share option plans are contained in note 34 to the fi nancial statements.

22 Reserves Consolidated Company

2008 2007 2008 2007

$’000 $’000 $’000 $’000Investments revaluation 6,324 11,170 (4,359) –

Equity-settled employee benefi ts 3,169 2,389 3,169 2,389

9,493 13,559 (1,190) 2,389

Investments revaluation reserve

Balance at beginning of fi nancial year 11,170 7,866 – –

Valuation gain/(loss) recognised (5,423) 3,881 (4,359) –

Related income tax 577 (577) – –

Balance at end of fi nancial year 6,324 11,170 (4,359) –

The investments revaluation reserve arises on the revaluation of available-for-sale fi nancial assets. Where a revalued fi nancial asset

is sold that portion of the reserve which relates to that fi nancial asset, and is effectively realised, is recognised in profi t or loss.

Where a revalued fi nancial asset is impaired that portion of the reserve which relates to that fi nancial asset is recognised in profi t

or loss.

21 Issued capital (cont’d)


For

per

sona

l use

onl

y

86


2008 2007 2008 2007

$’000 $’000 $’000 $’000

Equity-settled employee benefi ts reserve

Balance at beginning of fi nancial year 2,389 3,106 2,389 3,106

Share-based payment 2,322 1,472 2,322 1,472

Transfer to share capital (1,542) (2,189) (1,542) (2,189)

Balance at end of fi nancial year 3,169 2,389 3,169 2,389

The equity-settled employee benefi ts reserve arises on the grant of share options to executives and senior employees under the

employee share option plan. Amounts are transferred out of the reserve and into issued capital when the options are exercised.

Further information about share-based payments to employees is made in note 34 to the fi nancial statements.

23 Retained earnings Consolidated Company

2008 2007 2008 2007

$’000 $’000 $’000 $’000Balance at beginning of fi nancial year 26,910 25,658 565 1,012

Net profi t attributable to members of the parent entity 65,162 57,693 59,188 55,994

Adjustment on acquisition of minority interest 99 – – –

Dividends provided for or paid (note 25) (59,497) (56,441) (59,497) (56,441)

Balance at end of fi nancial year 32,674 26,910 256 565

24 Earnings per share Consolidated

2008 2007

Cents per share

Cents per share

Basic earnings per share 11.44 10.25

Diluted earnings per share 11.40 10.18

Basic earnings per share

The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows:

Consolidated

2008 2007

$’000 $’000Net profi t 65,162 57,693

Earnings used in the calculation of basic EPS 65,162 57,693

22 Reserves (cont’d)


For

per

sona

l use

onl

y

87

2008 2007

$’000 $’000Weighted average number of ordinary shares for the purposes of basic earnings per share 569,654 562,612

Diluted earnings per share

The earnings and weighted average number of ordinary shares used in the calculation of diluted earnings per share are as follows:

2008 2007

$’000 $’000Net profi t 65,162 57,693

Earnings used in the calculation of diluted EPS 65,162 57,693

2008 2007

No. ’000 No. ’000Weighted average number of ordinary shares used in the calculation of basic EPS 569,654 562,612

Shares deemed to be issued for no consideration in respect of:

Employee options 1,746 4,366

Weighted average number of ordinary shares used in the calculation of diluted EPS 571,400 566,978

The following potential ordinary shares are not dilutive and are therefore excluded from the weighted average number of ordinary

shares for the purposes of diluted earnings per share:

2008 2007

No. ’000 No. ’000Employee options 6,324 –

24 Earnings per share (cont’d)


For

per

sona

l use

onl

y

88

25 Dividends 2008 2007

Cents per share

Total$’000

Cents per share

Total$’000

Recognised amounts

Fully paid ordinary shares

Interim dividend:

Fully franked at a 30% tax rate 5.00 28,429 4.00 22,588

Final dividend (for the previous fi nancial year):


Special dividend:

Fully franked at a 30% tax rate – – 4.50 25,390

10.50 59,497 10.00 56,441

Unrecognised amounts

Fully paid ordinary shares

Final dividend:


On 27 August 2008, the directors declared a fully franked fi nal dividend of 5.5 cents per share to the holders of fully paid ordinary

shares in respect of the fi nancial year ended 30 June 2008, to be paid to shareholders on 10 October 2008. This dividend has

not been included as a liability in these fi nancial statements and will be paid to all shareholders on the Register of Members on

8 September 2008. The total estimated dividend to be paid is $30,398,000.

Company

2008 2007

$ $Adjusted franking account balance 19,240,199 20,717,773

Impact on franking account balance of dividends not recognised 13,027,714 13,315,070


For

per

sona

l use

onl

y

89

26 Commitments for expenditureLease commitments

Finance lease liabilities and non-cancellable operating lease commitments are disclosed in note 28 to the fi nancial statements.

27 Contingent liabilities and contingent assets Consolidated Company

2008 2007 2008 2007

$’000 $’000 $’000 $’000

Contingent liabilities

Rental bond guarantees 3,889 2,134 1,644 1,644

ASX settlement bond guarantee 500 500 – –

ASIC bond guarantees 100 100 – –

Underwriting commitments as at 30 June 2008 25,375 – – –

In addition the parent entity and

consolidated entity had contingent

liabilities in respect of:

Estate and trustee operations

Australian Executor Trustees Limited, a

subsidiary of AWM, is currently defending

claims brought against it in its capacity

as trustee of estates and superannuation

funds. In aggregate these total

approximately $575,000. Professional

indemnity insurance cover is held to meet

any professional liabilities that may arise

for individual claims above the applicable

excess, in aggregate the Group would

be potentially liable for $75,000 of these

claims.

Financial advice division

Bridges Financial Services Pty Limited

and Wealth Managers Pty Limited,

subsidiaries of AWM, are currently

defending complaints made against

them in their capacity as Australian

Financial Services Licensees. In aggregate

these total approximately $2,600,000.

Professional indemnity insurance cover is

held to meet any professional liabilities

that may arise for individual claims above

the applicable excess, the Group would be

potentially liability for $795,000 of these

claims.

Buyer of last resort facility

Bridges Financial Services Pty Limited,

a subsidiary of AWM, has a contractual

agreement with its planners to provide a

“Buyer of Last Resort Facility” should a

planner wish to sell their business and on

the satisfaction of certain circumstances.

The terms and conditions provide that on

satisfaction of specifi c requirements for a

purchase price to be payable based on the

planner’s recurring income stream from

The Portfolio Service.

Bridges Financial Services Pty Limited

has not been called upon to exercise its

obligation. It is possible that the market

value or resale value of such a business

purchased may exceed the cost to Bridges

Financial Services Pty Limited.


For

per

sona

l use

onl

y

90

28 LeasesFinance leasesLeasing arrangements

Finance leases relate to computer/offi ce equipment with lease terms of 5 years. The Group has options to purchase the computer/offi ce

equipment for a nominal amount at the conclusion of the lease agreements.

Finance lease liabilitiesMinimum future lease payments

Present value of minimum future lease payments

Consolidated Company Consolidated Company

2008 2007 2008 2007 2008 2007 2008 2007

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000No later than 1 year 14 14 – – 14 14 – –

Later than 1 year and not later than 5 years

36 51 – – 30 35 – –

Minimum lease payments* 50 65 – – 44 49 – –

Less future fi nance charges (6) (16) – – – – – –

Present value of minimum lease payments 44 49 – – 44 49 – –

Included in the fi nancial statements as: (note 17)

Current borrowings 14 14 – –

Non-current borrowings 30 35 – –

44 49 – –

* Minimum future lease payments includes the aggregate of all lease payments and any guaranteed residual.

Operating leasesLeasing arrangements

Operating leases relate to offi ce premises with lease terms of between 2 to 6 years and offi ce equipment with lease terms of between

1 to 5 years. A number of the leased properties have options to extend the leases for between 3 to 5 years. The Group does not have

an option to purchase the leased assets at the expiry of the lease period.


2008 2007 2008 2007

$’000 $’000 $’000 $’000

Non-cancellable operating lease payments

Not longer than 1 year 8,133 4,614 – –

Longer than 1 year and not longer than 5 years 13,211 10,110 – –

Longer than 5 years 3,587 2,077 – –

24,931 16,801 – –


For

per

sona

l use

onl

y

91

In respect of non-cancellable operating leases the following liabilities have been recognised:


2008 2007 2008 2007

$’000 $’000 $’000 $’000

Lease incentives (note 20)

Current 518 213 – –

Non-current 500 365 – –

1,018 578 – –

29 Jointly controlled operations and assetsThe Group is a venturer in the following jointly controlled operations and assets:

Name of venture Principal activity Output interest

2008 2007

% %Bridges Adelaide Financial planning 38 38

Bridges Parramatta Financial planning 38 38

The Group’s interest, as a venturer, in assets employed in the above jointly controlled operations and assets is detailed below.

The amounts are included in the consolidated fi nancial statements under their respective asset categories:

Consolidated 2008 2007

$’000 $’000

Non-current assets

Intangible assets 736 825

Total non-current assets 736 825

Total assets 736 825

28 Leases (cont’d)


For

per

sona

l use

onl

y

92

30 Subsidiaries

Name of entity Country of incorporation

Ownership interest 2008 2007

% %Parent entity

Australian Wealth Management Limited (Legal Parent) (i) Australia

Controlled entities

Australian Executor Trustees Limited* Australia 100 100

Australian Executor Trustees (SA) Limited* Australia 100 100

Bagot’s Executor & Trustee Company Limited* Australia 100 100

Bagot’s Nominees Pty Limited Australia 100 100

Australian Executor Trustees (NSW) Limited* Australia 100 100

Australian Executor Trustees (Canberra) Limited* Australia 100 100

Executor Trustee Australia Limited* Australia 100 100

Tower Austrust Building Pty Limited Australia 100 100

AET Structured Finance Services Pty Limited Australia 100 100

AET SPV Management Pty Limited Australia 100 100

Bridges Financial Services Group Pty Limited* Australia 100 100

Bridges Financial Services Pty Limited Australia 100 100

Bridges Nominee Pty Limited Australia 100 100

Cigar Nominee Pty Limited Australia 100 100

Australian Wealth Management Service Co. Pty Limited* Australia 100 100

Questor Financial Services Limited Australia 100 100

Executive Wealth Management Pty Limited Australia 100 100

Executive Wealth Management Financial Services Pty Limited Australia 100 100

Group Investments Nominee Pty Limited Australia 100 100

JV1 Pty Limited Australia 100 100

Accountplan Taxation Services Pty Limited Australia 100 100

AET Super Solutions Pty Limited Australia 100 51

Select Managed Funds Limited (Accounting Parent) Australia 100 100

SMF Funds Management Limited Australia 100 100

United Funds Management Limited Australia 100 100

Sentinel Adviser Services Pty Limited Australia 100 100

SMF Wealth Management Pty Limited Australia 100 100

Wealth Managers Pty Limited Australia 100 100

Accountplan Pty Limited Australia 100 100

Austselect Pty Limited Australia 100 100

Super Choice Pty Limited Australia 100 100

Spectrum Managed Funds Pty Limited Australia 100 100


For

per

sona

l use

onl

y

93

Name of entity Country of incorporation

Ownership interest 2008 2007

% %SMF Pty Limited Australia 100 100

SEM Group Administration Pty Limited Australia 100 100

SMF Investment Managers (Super & Pension Fund) Pty Limited Australia 100 100

SMF SuperOptions Pty Limited Australia 100 100

CU Financial Advisory Services Pty Limited Australia 100 100

Finium Trustees Limited Australia 100 100

B D Shepparton Pty Limited Australia 75 75

Holiday Coast Wealth Management Pty Limited Australia 80 –

NT Homebush Pty Limited Australia 70 –

JK Rye Pty Limited Australia 100 –

Ord Minnett Holdings Pty Limited Australia 70 –

Ord Minnett Limited Australia 70 –

Ord Minnett Financial Planning Pty Limited Australia 70 –

Ord Minnett Management Ltd Australia 70 –

Dicksons Limited Australia 70 –

Contango Nominees Pty Ltd Australia 70 –

Beaglemoat Nominees Pty Ltd Australia 70 –

Minnett Nominees Pty Ltd Australia 70 –

Caltowie Investments Pty Limited Australia 70 –

Ord Minnett Prime Nominees Pty Limited Australia 70 –

OMLC Nominees Pty Limited Australia 70 –

(i) Australian Wealth Management Limited is the head entity within the tax-consolidated group.

* These wholly-owned subsidiaries have entered into a deed of cross guarantee with AWM pursuant to ASIC Class Order 98/1418 and are relieved from the requirement to prepare and lodge an audited fi nancial report.

All wholly-owned subsidiaries are members of the tax-consolidated group.

30 Subsidiaries (cont’d)


For

per

sona

l use

onl

y

94

The consolidated income statement and balance sheet of the entities party to the deed of cross guarantee are:

Consolidated

2008 2007

$’000 $’000Income statement

Revenue 176,359 149,587

Share of profi ts of associates and jointly controlled entities accounted for using the equity method 56 13

Employee benefi ts expenses (65,909) (63,734)

Depreciation and amortisation expense (2,042) (2,121)

Finance costs (67) (4)

Commission expenses (3,148) (4,252)

Fund related expenses (804) (324)

Occupancy expenses (3,666) (2,893)

Marketing expenses (2,011) (2,412)

Other expenses (16,243) (15,357)

Profi t before income tax expense 82,525 58,503

Income tax expense (7,597) (5,658)

Profi t for the year 74,928 52,845

Balance sheet

Current assets

Cash and cash equivalents 17,861 23,635

Trade and other receivables 4,114 9,351

Other fi nancial assets – –

Other 2,575 1,697

Total current assets 24,550 34,683

Non-current assets

Trade and other receivables – –

Investments accounted for using the equity method 1,053 998

Other fi nancial assets 880,671 781,657

Property, plant and equipment 6,004 3,944

Goodwill 94,786 94,786

Other intangible assets 182 13

Deferred tax assets 4,279 6,235

Other – –

Total non-current assets 986,975 887,633

Total assets 1,011,525 922,316

Current liabilities

Trade and other payables 9,113 6,156



For

per

sona

l use

onl

y

95

Consolidated

2008 2007

$’000 $’000Borrowings 14 14

Current tax liabilities 19,240 17,310

Other fi nancial liabilities – –

Provisions 8,943 9,428

Other 253 214

Total current liabilities 37,563 33,122

Non-current liabilities

Trade and other payables – –

Borrowings 30 35

Deferred tax liabilities – 217

Provisions 902 914

Other 443 366

Total non-current liabilities 1,375 1,532

Total liabilities 38,938 34,654

Net assets 972,587 887,662

Equity

Issued capital 956,490 883,417

Reserves (1,190) 2,389

Retained earnings* 17,287 1,856

Parent entity interest 972,587 887,662

Minority interest – –

Total equity 972,587 887,662

* Retained earnings

Retained earnings as at beginning of the fi nancial year 1,856 5,452

Net profi t 74,928 52,845

Dividends provided for or paid (59,497) (56,441)

Retained earnings as at end of the fi nancial year 17,287 1,856



For

per

sona

l use

onl

y

96

31 Acquisition of businesses

Names of businesses acquired Principal activityDate of

acquisition

Proportion of shares acquired

Cost of acquisition

% $’000

2008:

Controlled entities

Holiday Coast Wealth Management Pty Limited

Financial planning 1/10/07 80 2,112

Ord Minnett Group Full-service stockbroking, fi nancial planning, portfolio services, funds management and equity capital markets services

1/6/08 70 83,521

85,633

2007:

Controlled entities

CU Financial Advisory Services Pty Limited Financial planning 16/11/06 100 1,545

Finium Trustees Limited Trustee, superannuation and investment administration

31/5/07 100 16,352

17,897


For

per

sona

l use

onl

y

97

2008Holiday Coast Wealth Management

Pty Limited Ord Minnett Group Total fair value on

acquisition $’000Net assets acquired

Book value $’000

Fair value adjustment

$’000

Fair value on acquisition

$’000Book value

$’000


$’000


$’000Current assets:

Cash 29 – 29 27,290 – 27,284 27,313

Trade & other receivables

116 – 116 66,401 – 66,407 66,523

Other fi nancial assets 8 – 8 3,464 – 3,464 3,472

Non-current assets:

Property, plant and equipment

259 – 259 3,873 – 3,873 4,132

Deferred tax assets 44 – 44 3,822 – 3,822 3,866

Current liabilities:

Payables (91) – (91) (70,656) – (70,656) (70,747)

Provisions (64) – (64) (7,320) – (7,320) (7,384)

Non-current liabilities:

Provisions – – – (5,885) – (5,885) (5,885)

Deferred tax liabilities (6) – (6) – – – (6)

295 – 295 20,989 – 20,989 21,284

Minority interest component of the net assets acquired

(6,423)

Intangible assets recognised on acquisition

29,798

Goodwill on acquisition 40,974

Total consideration 85,633

Net cash fl ow on acquisitions Consolidated Company

2008 2007 2008 2007

$’000 $’000 $’000 $’000Total purchase consideration 85,633 17,897 – –

Less: non-cash consideration for Ord Minnett Group

(82,066) – – –

Consideration paid in cash 3,567 17,897 – –

Less: cash and cash equivalent balances acquired

(27,313) (717) – –

(23,746) 17,180 – –

31 Acquisition of businesses (cont’d)


For

per

sona

l use

onl

y

98

The initial accounting for the acquisition

of the Ord Minnett Group has only been

provisionally determined at reporting

date. At the date of fi nalisation of this

report, the necessary market valuations

of intangible assets had not been

fi nalised and the adjustment to goodwill

noted above has therefore only been

provisionally determined based on draft

valuations.

The cost of the acquisitions comprises

cash for Holiday Coast Wealth

Management Pty Ltd and comprises the

non-cash issue of 47,574,280 ordinary

shares in Australian Wealth Management

Ltd for the Ord Minnett Group acquisition.

Included in the net profi t for the period

is $436,000 attributable to the purchase

of the Ord Minnett Group and a loss of

$57,000 attributable to the purchase of

Holiday Coast Wealth Management Ltd.

Had these business combinations been

effected at 1 July 2007, the revenue of

the Group would be $415,513,000, and

net profi t before tax $101,021,000. The

directors of the Group consider these

‘pro-forma’ numbers to represent an

approximate measure of the performance

of the combined group on an annualised

basis and to provide a reference point for

comparison in future periods.

In determining the ‘pro-forma’ revenue

and profi t of the Group had the Ord

Minnett Group and Holiday Coast Wealth

Management Pty Ltd been acquired at the

beginning of the current reporting period,

the directors have calculated amortisation

expense of intangible assets on the basis

of the fair values arising in the accounting

for the business combination rather than

the carrying amounts recognised in the

pre-acquisition fi nancial statements.

2007 CU Financial Advisory Services Pty Limited Finium Trustees Limited Total fair value on

acquisition $’000Net assets acquired

Book value $’000


$’000


$’000Book value

$’000


$’000


$’000Current assets:

Cash 374 – 374 343 – 343 717

Trade & other receivables

13 – 13 45 – 45 58

Other fi nancial assets 1 – 1 – – – 1

Non-current assets:

Property, plant and equipment

55 – 55 – – – 55

Other intangible assets – 1,224 1,224 – 16,000 16,000 17,224

Deferred tax assets – – – 7 – 7 7

Current liabilities:

Payables (96) – (96) (43) – (43) (139)

Provisions (26) – (26) – – – (26)

321 1,224 1,545 352 16,000 16,352 17,897

Goodwill on acquisition –

17,897

31 Acquisition of businesses (cont’d)


For

per

sona

l use

onl

y

99

32 Notes to the cash flow statement(a) Reconciliation of cash and cash equivalents

For the purposes of the cash fl ow statement, cash and cash equivalents includes cash on hand and in banks and investments in money

market instruments, net of outstanding bank overdrafts. Cash and cash equivalents at the end of the fi nancial year as shown in the

cash fl ow statement is reconciled to the related items in the balance sheet as follows:


2008 2007 2008 2007

$’000 $’000 $’000 $’000Cash and cash equivalents 86,767 86,411 341 663

(b) Businesses acquired

During the fi nancial year, the Group acquired two business. The net cash infl ow on acquisition was $23,746,000, other acquisition costs

of $25,000, minority interest cash contributions totalled $75,000 for the year and deferred consideration and other payments relating

to prior year business acquisitions of $155,000. Refer to note 31 for further details of these acquisitions.

CU Financial Advisory Services Pty

Limited (CUFAS) and Finium Trustees

Limited (Finium) became wholly owned on

acquisition and have joined the company’s

tax-consolidated group (refer note 8). For

tax purposes, the tax values of CUFAS’s

and Finium’s assets are required to be

reset based on market values and other

factors.

The cost of the acquisitions comprises

cash for all of the acquisitions with the

exception of an estimated deferred

consideration of $16,323,000.

Included in the net profi t for the period is

$120,000 attributable to the purchase of

CUFAS and $715,000 attributable to the

purchase of Finium.

Had these business combinations been

effected at 1 July 2006, the revenue of

the Group would be $302,956,000, and

net profi t before tax $89,603,000. The

directors of the Group consider these

‘pro-forma’ numbers to represent an

approximate measure of the performance

of the combined group on an annualised

basis and to provide a reference point for

comparison in future periods.


For

per

sona

l use

onl

y

100

(c) Business disposedDuring the fi nancial year, the Group did not dispose of any businesses.


2008 2007 2008 2007

$’000 $’000 $’000 $’000

Consideration

Cash and cash equivalents – 75 – –

Book value of net assets sold

Current assets

Cash and cash equivalents – 75 – –

Current liabilities

Trade and other payables – (5) – –

Net assets disposed – 70 – –

Gain on disposal – 5 – –

– 75 – –

Net cash infl ow on disposal

Cash and cash equivalents consideration – 75 – –

Less cash and cash equivalent balances disposed of – (75) – –

– – – –

(d) Non-cash financing and investing activities

During the current fi nancial year, the Group issued ordinary shares with an aggregate fair value of $82,066,000 to acquire the business

indicated in note 31. This share issue is not refl ected in the cash fl ow statement.

During the prior fi nancial year, the Group acquired $59,000 of equipment under a fi nance lease. This acquisition will be refl ected in the

cash fl ow statement over the term of the fi nance lease via lease repayments.

(e) Financing facilities

The consolidated entity does not have any fi nancing facilities in use. Unused borrowing facilities are disclosed in note 17.

32 Notes to the cash flow statement (cont’d)


For

per

sona

l use

onl

y

101

(f) Reconciliation of profit from ordinary activities after related income tax to net cash flows from operating activities


2008 2007 2008 2007

$’000 $’000 $’000 $’000Profi t for the year 64,984 57,415 59,188 55,994

(Gain)/loss on sale of non-current assets 9 42 – –

(Gain)/loss on disposal of business – (5) – –

Foreign exchange (gain)/loss 34 – – –

Share of associates’ profi t (567) (1,548) – –

Depreciation and amortisation of non-current assets 6,805 5,881 – –

Dividends received and receivable (1,215) (518) (59,173) (56,000)

Interest received and receivable (3,999) (3,716) (161) (49)

Share based payments expense 2,322 1,472 – –

Bad and doubtful debts 34 6 – –

Non-cash interest expense – 6 – –

Expired interest on asset purchase loans 9 – – –

Increase/(decrease) in current tax liability 2,771 8,815 1,930 14,291

Increase/(decrease) in deferred tax balances 1,900 1,407 924 415

Transfer from reserves – (335) – –

(Increase)/decrease in amounts due under the tax-funding arrangement – – (24,548) (30,484)

Changes in net assets and liabilities, net of effects from acquisition and disposal of businesses: – – – –

(Increase)/decrease in assets:

Current receivables (11,440) (2,522) – –

Other current assets (60) (418) – –

Non-current receivables (21) (38) – –

Other non-current assets 1,047 1,275 – –

Increase/(decrease) in liabilities:

Current payables 19,286 1,884 – –

Current provisions (127) (483) – –

Other current liabilities (832) (637) – –

Non-current payables – – – –

Non-current provisions (95) (1,025) – –

Other non-current liabilities (1,425) (1,823) – –

Net cash from operating activities 79,420 65,135 (21,840) (15,833)

32 Notes to the cash flow statement (cont’d)


For

per

sona

l use

onl

y

102


Profi t Equity Profi t Equity Profi t Equity Profi t Equity

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

2008 -20% +20% -20% +20%

Available-for-sale investments – (7,813) – 7,813 – (1,490) – 1,490

2007 -10% +10% -10% +10%

Available-for-sale investments – (1,668) – 1,668 – – – –

33 Financial instruments(a) Capital risk management

The Group manages its capital to ensure

that entities in the Group will be able

to continue as a going concern while

maximising the return to stakeholders

through the optimisation of the debt and

equity balance.

The capital structure of the Group

consists of cash and cash equivalents

and equity attributable to equity

holders of the parent, comprising issued

capital, reserves and retained earnings

as disclosed in notes 21, 22 and 23

respectively.

Operating cash fl ows and equity

instruments, are used to maintain and

fund the Group’s expansion through

business acquisitions, as well as to

make the routine outfl ows of tax and

dividends. The Group’s policy is to utilise

a combination of internally generated

cashfl ows and short-term debt to meet

anticipated future funding requirements.

(b) Financial risk management objectives

The board of directors issue and review

the Group Risk Management Policy. In

doing so the board determines the risk

appetite, and selects the strategic options

which will help the Group achieve its

objectives within the overall risk appetite

of the Group. Governance of the Policy is

delegated to the Statutory Audit and Risk

Management Committee, and compliance

with policies is reviewed by the internal

auditor department on a continuous basis

to mitigate risk exposures.

The Group is exposed to market risk,

credit risk, interest rate risk and liquidity

risk. Each of these risks are discussed

further below.

The Group does not enter into or trade

fi nancial instruments, including derivative

fi nancial instruments, for speculative

purposes.

(c) Market risk

The Group’s current investment strategy

exposes the Group to Australian

Securities Exchange (ASX) market

risks. The strategy allows investments

in ASX listed companies that provide

long term strategic value, limiting the

Group’s exposure to short-term market

fl uctuations.

The Group has made additional

investments during the year, increasing

the Group’s exposure to market risks.

There has been no change to the manner

in which it manages and measures the

risk from the previous period.

Market risk – sensitivity analysis

The following table details the Group’s

sensitivity to a 20% (2007: 10%) increase

and decrease in the share prices of the

Group’s ASX listed investments. 20%

(2007: 10%) represents management’s

assessment of the possible change in

share prices as at reporting date.

A positive number indicates an increase

in profi t or loss and other equity where

the share prices increase in value.

For a devaluation in the share prices

the balances below are negative,

representing a decrease in profi t or loss

and other equity.


For

per

sona

l use

onl

y

103

(c) Interest rate risk management

The Group’s activities expose the Group

to interest rate risks only to the affect

that a change in interest rates will reduce

or increase interest revenue on future

variable rate cash and cash equivalent

balances. Movements in the interest rate

have an insignifi cant impact on the net

profi t of the Group. The Group maintains

its policy of funding acquisitions and core

activities through operating cashfl ows

and equity instruments, as a result the

Group has no debt as at balance date.

There has been no change to the Group’s

exposure to interest rate risks or the

manner in which it manages and measures

the risk from the previous period.

The company and the Group’s exposures

to interest rates on fi nancial assets and

fi nancial liabilities are detailed in the

liquidity risk management section of

this report.

(d) Credit risk management

Credit risk refers to the risk that

a counterparty will default on its

contractual obligations resulting in

fi nancial loss to the Group. The Group

has adopted a policy of only dealing with

creditworthy counterparties and obtaining

suffi cient collateral where appropriate,

as a means of mitigating the risk of

fi nancial loss from defaults. The Group’s

exposure and the credit ratings of its

counterparties are continuously monitored

and the aggregate value of transactions

concluded are spread amongst approved

counterparties. Credit exposure is

controlled by counterparty limits.

Trade receivables consist of a large

number of customers and spread across

diverse industries. Ongoing credit

evaluation is performed on the fi nancial

condition of accounts receivable and,

where appropriate, collateral is obtained.

The Group does not have any

signifi cant credit risk exposure to

any single counterparty or any group

of counterparties having similar

characteristics. The credit risk on

liquid funds is limited because the

counterparties are banks with high

credit-ratings assigned by international

credit-rating agencies.

(e) Liquidity risk management

Ultimate responsibility for liquidity risk

management rests with the board of

directors, who have built an appropriate

liquidity risk management framework

for the management of the Group’s

short, medium and long-term funding

and liquidity management requirements.

The Group manages liquidity risk by

maintaining adequate reserves, banking

facilities and reserve borrowing facilities

by continuously monitoring forecast

and actual cash fl ows and matching the

maturity profi les of fi nancial assets and

liabilities.

Included in note 17 is a listing of

additional undrawn facilities that the

Company/Group has at its disposal to

further reduce liquidity risk.

33 Financial instruments (cont’d)


For

per

sona

l use

onl

y

104

Liquidity and interest risk tables

The following tables detail the Company’s and the Group’s remaining contractual maturity for its non-derivative fi nancial liabilities

and the Group’s expected maturity for its non-derivative fi nancial assets. The liability tables have been drawn up based on the

undiscounted cash fl ows of fi nancial liabilities based on the earliest date on which the Group can be required to pay. The table includes

both interest and principal cash fl ows. The asset tables below have been prepared based on the undiscounted contractual maturities of

the fi nancial assets including interest that will be earned on those assets except where the Company/Group anticipates that the cash

fl ow will occur in a different period. All assets are disclosed at their fair values.

Consolidated

Weighted average effective

interest rateLess than 1 month 1-3 months

3 months to 1 year 1-5 years 5+ years

% $’000 $’000 $’000 $’000 $’000

2008

Financial assets:

Non-interest bearing – 197,135 – – – 40,006

Variable interest rate instruments 5.7 38,906 – – – 56,031

Fixed interest rate instruments 6.6 444 308 2,096 – –

236,485 308 2,096 – 96,037

Financial liabilities:

Non-interest bearing – 127,701 – 3,720 – –

Finance lease liability 7.4 1 2 11 37 –

127,702 2 3,731 37 –

2007

Financial assets:


Variable interest rate instruments 4.7 – – – – 85,432

Fixed interest rate instruments 7.6 427 244 308 250 –

47,908 244 308 250 102,133


Non-interest bearing – 37,247 – 32,167 3,111 –

Finance lease liability 7.4 1 2 11 51 –

37,248 2 32,178 3,162 –

33 Financial instruments (cont’d)


For

per

sona

l use

onl

y

105

Company

Weighted average effective

interest rateLess than 1 month 1-3 months

3 months to 1 year 1-5 years 5+ years

% $’000 $’000 $’000 $’000 $’000

2008

Financial assets:

Non-interest bearing – – – – – 872,131

Variable interest rate instruments 7.5 – – – – 341

– – – – 872,472


Financial guarantee – – – – – –


1,652 – – – 1,652

2007

Financial assets:

Non-interest bearing – – – 2,000 – 903,763

Variable interest rate instruments 4.3 – – – – 663

– – 2,000 – 904,426


Financial guarantee – – – – – –

Non-interest bearing – 1,911 – 19,310 – –

1,911 – 19,310 – –

At year end it was not probable that the counterparty to the fi nancial guarantee contract will claim under the contract. Consequently

there is no amount included above.

(f) Fair value of financial instruments

The fair values of fi nancial assets and fi nancial liabilities are determined as follows:

the fair value of fi nancial assets and fi nancial liabilities with standard terms and conditions and traded on active liquid markets are •

determined with reference to quoted market prices.

the fair value of other fi nancial assets and fi nancial liabilities are determined in accordance with generally accepted pricing models •

based on discounted cash fl ow analysis using prices from observable current market transactions.

Quoted prices

Financial assets in this category include shares.


For

per

sona

l use

onl

y

106

34 Share-based paymentsEmployee share option plan

The Group has an ownership-based

compensation scheme for executives

and senior employees of the Group. The

establishment of the employee share

options plans were approved by the board

of directors.

Each employee share option converts into

one ordinary share of AWM on exercise.

No amounts are paid or payable by the

recipient on receipt of the option. The

options carry neither rights to dividends

nor voting rights. Options may be

exercised at any time from the date of

vesting to the date of their expiry.

The Group Remuneration and

Appointments Committee regards

the grant of options to employees as

an appropriate long-term incentive

and retention component of total

remuneration for executives and senior

employees. It is expected that future

annual grants of options will be made,

the vesting of which will be subject to

attainment of appropriate performance

hurdles and on the basis of continuing

employment with the Group.

AWM offers the eligible executives with

the option to either exercise the options

for cash or convert it into ordinary shares.

Options granted under the plan carry no

dividend or voting rights.

The following share-based payment

arrangements were in existence during

the current and comparative reporting

periods:

Options – Series No. Grant date Expiry dateExercise

price Fair value at grant date

$ $(1) Issued 15 February 2005 (1) 4,000,000 15-Feb-05 15-Feb-14 0.80 0.34

(2) Issued 28 February 2005 (1) 100,000 28-Feb-05 16-Jun-14 1.00 0.32

(3) Issued 1 March 2005 (1) 400,000 01-Mar-05 15-Feb-14 1.00 0.22

(4) Issued 1 April 2005 (1) 2,200,000 01-Apr-05 05-Apr-14 1.00 0.26

(5) Issued 16 May 2005 (1) 200,000 16-May-05 16-Jun-14 1.00 0.22

(6) Issued 17 January 2006 (1) 3,050,000 17-Jan-06 17-Jan-11 1.48 0.43

(7) Issued November 2004 (ex Select) (2) 7,393,750 07-Jun-06 15-May-08 1.14 *1.19

(8) Issued November 2005 (ex Select) (2) 917,000 07-Jun-06 24-Nov-15 1.27 1.10

(9) Issued 9 January 2007 (3) 2,350,000 09-Jan-07 09-Jan-11 2.46 0.64

(10) Issued 29 March 2007 (4) 500,000 29-Mar-07 29-Mar-11 2.60 0.38

(11) Issued 5 September 2007 (5) 2,150,000 05-Sep-07 30-Jun-13 2.51 0.52

(12) Issued 5 September 2007 (6) 1,260,000 05-Sep-07 30-Jun-13 2.51 0.62

(13) Issued 30 November 2007 (7) 1,377,121 30-Nov-07 30-Nov-11 2.64 0.55

(14) Issued 22 November 2007 (8) 750,000 22-Nov-07 22-Nov-12 2.68 0.78

* This represents the restated fair value in AWM terms on cancellation of Select options and conversion to AWM options. It is not, and was not intended to be, an increase in fair value to the employee.

The weighted average fair value of the share options granted during the fi nancial year is $0.59 (2007: $0.59). Options were priced using

a binomial option pricing model. Where relevant, the expected life used in the model has been adjusted based on management’s best

estimate for the effects of non-transferability, exercise restrictions (including the probability of meeting market conditions attached to

the option), and behavioural considerations. Expected volatility is based on the historical share price volatility since May 2006.


For

per

sona

l use

onl

y

107

(1) Prior to the merger with SMF, the

performance hurdle for vesting

of AWM options was a 10%

(compounding) increase in annual net

profi t after tax and before goodwill

amortisation. As a consequence of the

merger, a number of AWM’s senior

executives were made redundant

and, in accordance with the terms

of the Share Option Plan, the Group


Committee exercised its discretion to

vest all options held by the redundant

executives. For continuing employees,

the performance hurdle in respect of

unvested options has been waived

as it is now impractical to measure

performance against the hurdle on the

basis established prior to the merger.

(2) As disclosed in the Scheme Booklet for

the merger, options over Select shares

held by former Select employees have

been converted into AWM options of

economic equivalence. These options

vest progressively over a service

period.

(3) In accordance with the terms of the

share based arrangement, options

issued during the fi nancial year ended

30 June 2007, after approval by the

board, vest on the Group’s achievement

of a pre-determined target for

improved profi t performance.



issued on 29 March 2007 vest one year

after issue conditional on continuing

employment with the Group.


share based arrangement, series 11

consists of three tranches of options.

40% vest on 30 June 2008, 30% vest

on 30 June 2009 and the remaining

30% vest on 30 June 2010. 50% of the

options of each tranche vest subject

to the Group’s achievement of the

approved budget for that fi nancial

year and the remaining 50% if the

Company’s TSR is positive, and in

the top quartile relative to the TSR

of a comparator group of ASX listed

companies selected by the board.



issued on 5 September 2007 in series

12 vest progressively over a three year

service period.

(7) Options issued on 30 November 2007

to the executive directors of the Group

were approved at the AGM held on

22 November 2007. The vesting date

is 30 June 2008. 50% of the options

vest if the Group’s result is in excess of

the approved budget for that fi nancial

year and exceeds the prior year’s result

by at least 15% after adjustment for

acquisitions and the remaining 50%

if the Company’s TSR is positive, and

in the top quartile relative to the TSR

of a comparator group of ASX listed

companies selected by the board.

(8) Options issued on 22 November 2007

to the executive directors of the Group

were approved at the AGM held on

22 November 2007. The options vest

in three equal tranches over the three

year period following grant, and cannot

be exercised until all tranches have

vested. These options were issued

subject to no further performance

hurdles, for the reason that they

represent options that should have

been granted to the executive directors

under a prior board approval. By reason

the timing of the Company’s merger

with SMF, the previously approved

options were not granted. At the time

of the original board approval there

were performance hurdles applied to

the proposed grant being 50% of the

options vest if the Company’s TSR is

positive and in the top quartile relative

to the TSR of a comparator group of

ASX listed companies and the balance

of the options vest if the Company’s

results are in excess of the approved

budget for the 2006/2007 fi nancial

year. All of these performance hurdles

have already been satisfi ed and

accordingly no further hurdles were

imposed.

34 Share-based payments (cont’d)


For

per

sona

l use

onl

y

108

Inputs into the model Option series

Series 1 Series 2 Series 3 Series 4 Series 5

Grant date share price 1.00 1.09 0.93 1.07 0.93

Exercise price 0.80 1.00 1.00 1.00 1.00

Expected volatility 30.0% 30.0% 30.0% 30.0% 30.0%

Option life 9 years 9.5 years 9 years 9 years 9 years

Dividend yield 0.0% 0.0% 0.0% 0.0% 0.0%

Risk-free interest rate 5.25% 5.25% 5.25% 5.25% 5.25%


Series 6 Series 7 Series 8 Series 9 Series 10

Grant date share price 1.55 2.34* 2.34* 2.46 2.54

Exercise price 1.48 1.14 1.27 2.46 2.60

Expected volatility 30.0% 30.0% 30.0% 32.3% 32.3%

Option life 5 years 2 years 8 years 4 years 4 years

Dividend yield 3.0% 3.0% 3.0% 3.4% 3.4%

Risk-free interest rate 5.25% 5.25% 5.25% 6.03% 6.03%

* These options refer to Select options replaced with AWM options on 7 June 2006. The share price is the AWM price on this date, not when the options were originally granted by Select in November 2004 and 2005.


Series 11 Series 12 Series 13 Series 14Grant date share price 2.58 2.58 2.70 2.69

Exercise price 2.51 2.51 2.64 2.68

Expected volatility 34.2% 34.2% 32.8% 33.0%

Option life 5 years 5 years 4 years 5 years

Dividend yield 3.4% 3.4% 3.4% 3.4%

Risk-free interest rate 6.50% 6.50% 5.75% 5.75%



For

per

sona

l use

onl

y

109

The following reconciles the outstanding share options granted under the executive share option plan at the beginning

and end of the fi nancial year:

2008 2007

Number of options

Weighted average exercise

priceNumber of

options

Weighted average exercise

price

$ $Balance at beginning of the fi nancial year 8,685,750 1.59 18,160,750 1.11

Granted during the fi nancial year 5,537,121 2.57 2,850,000 2.48

Exercised during the fi nancial year (i) (4,235,750) 1.14 (12,325,000) 1.37

Lapsed during the fi nancial year (3,187,121) 2.07 – –

Balance at end of the fi nancial year (ii) 6,800,000 2.49 8,685,750 1.59

Exercisable at end of the fi nancial year 3,010,000 2.10 – –

(i) Exercised during the fi nancial year

The following share options granted under the employee share option plan were exercised during the fi nancial year:

2008Number

exercised Exercise date

Share price at exercise

date

Options Series

(3) Issued 1 March 2005 175,000 13-Sep-07 2.53

(5) Issued 16 May 2005 100,000 05-Dec-07 2.60

(1) Issued 15 February 2005 200,000 05-Dec-07 2.60

(3) Issued 1 March 2005 875,000 11-Dec-07 2.55

(8) Issued November 2005 (ex Select) 613,847 11-Dec-07 2.55

(1) Issued 15 February 2005 400,000 21-Dec-07 2.44

(3) Issued 1 March 2005 350,000 09-Jan-08 2.46

(8) Issued November 2005 (ex Select) 303,153 09-Jan-08 2.46

(3) Issued 1 March 2005 787,500 29-Feb-08 1.74

(3) Issued 1 March 2005 65,625 06-Mar-08 1.63

(3) Issued 1 March 2005 65,625 10-Mar-08 1.61

(6) Issued 17 January 2006 300,000 04-Apr-08 1.95

4,235,750



For

per

sona

l use

onl

y

110

2007Number

exercised Exercise date

Share price at exercise

date

Options Series

(1) Issued 15 February 2005 800,000 03-Jul-06 2.42



(1) Issued 15 February 2005 200,000 03-Aug-06 2.21

(1) Issued 15 February 2005 350,000 08-Sep-06 2.35

(1) Issued 15 February 2005 200,000 29-Sep-06 2.48

(1) Issued 15 February 2005 50,000 23-Feb-07 3.01

(1) Issued 15 February 2005 100,000 09-Mar-07 2.70

(3) Issued 1 March 2005 400,000 27-Sep-06 2.49

(4) Issued 1 April 2005 2,200,000 25-Jul-06 2.23

(6) Issued 17 January 2006 375,000 11-Jul-06 2.31

(6) Issued 17 January 2006 650,000 25-Jul-06 2.23

(6) Issued 17 January 2006 125,000 03-Aug-06 2.21

(6) Issued 17 January 2006 300,000 20-Sep-06 2.42

(6) Issued 17 January 2006 50,000 29-Sep-06 2.48

(6) Issued 17 January 2006 300,000 23-Feb-07 3.01

(6) Issued 17 January 2006 50,000 07-Mar-07 2.69

(7) Issued November 2004 (ex Select) 700,000 21-Sep-06 2.46


(7) Issued November 2004 (ex Select) 1,575,000 27-Sep-06 2.49


(8) Issued November 2005 (ex Select) 65,625 01-Jul-06 2.36






12,325,000

(ii) Balance at end of the fi nancial year

The share options outstanding at the end of the fi nancial year had a weighted average exercise price of $2.49 (2007: $1.59), and a

weighted average remaining contractual life of 3.9 years (2007: 3.9 years).



For

per

sona

l use

onl

y

111

35 Key management personnel compensationThe aggregate compensation made to key management personnel of the company and the Group is set out below:


2008 2007 2008 2007

$ $ $ $Short-term employee benefi ts 4,022,488 5,006,933 4,022,488 5,006,933

Post-employment benefi ts 308,255 315,833 308,255 315,833

Termination benefi ts 356,094 187,262 356,094 187,262

Share-based payment 1,724,919 1,218,808 1,724,919 1,218,808

6,411,756 6,728,836 6,411,756 6,728,836

36 Related party transactions(a) Equity interests in related partiesEquity interests in subsidiaries

Details of the percentage of ordinary shares held in subsidiaries are disclosed in note 30 to the fi nancial statements.

Equity interests in associates and joint ventures

Details of interest in associates and joint ventures are disclosed in note 11 to the fi nancial statements.

(b) Transactions with key management personneli. Key management personnel compensation

Details of key management personnel compensation are disclosed in note 35 to the fi nancial statements.

ii. Loans to key management personnel

There are no loans between the Group and key management personnel.

iii. Key management personnel equity holdings

Fully paid ordinary shares of AWM.


For

per

sona

l use

onl

y

112

Balance at 1 July

Granted as compen-

sation

Received on exercise of options

Net other change

Balance at 30 June

Balance held

nominally

2008 No. No. No. No. No. No.JC Warburton (Non-Executive chairman) 18,375 – – – 18,375 –

M Stewart-Hesketh (Non-Executive director) 40,001 – – 9,999 50,000 –

G Venardos (Non-Executive director), appointed 24 January 2008

– – – 56,000 56,000 –

RB Thomas (Non-Executive director), resigned 27 September 2007

10,000 – – – 10,000 –

GEN Rogers (Non-Executive deputy chairman), resigned 22 November 2007

18,375 – – – 18,375 –

CF Kelaher (managing director) 14,751,675 – 1,488,847 2,097,706 18,338,228 –

IG Griffi ths (Executive director) 12,445,800 – 653,153 – 13,098,953 –

AP Hutchison (CEO Bridges), resigned 14 March 2008 20,000 – 700,000 (700,000) 20,000 –

AL McLachlan (CEO Private Client) 353 – – – 353 –

MO Hall (Chief Operating Offi cer), resigned 15 February 2008

2,275,875 – 175,000 – 2,450,875 –

P Joseph (CEO Corporate Trust) – – – – – –

G Riordan (Group General Counsel) – – – – – –

SJE Steele (General Manager Operations) 2,103,500 – 175,000 – 2,278,500 –

MK Harvey (Chief Financial Offi cer) 2,135,875 – 175,000 – 2,310,875 –

D Corcoran (Company Secretary) – – – – – –

JK Jodlowski (General Manager Investments) 1,157,625 – 87,500 – 1,245,125 –

A Boland (General Manager Superannuation Distribution & Product)

4,677 – – (3,802) 875 –

A Todd (Chief Information Offi cer), appointed 17 December 2007

– – – 8,890 8,890 –

36 Related party transactions (cont’d)


For

per

sona

l use

onl

y

113

Balance at 1 July

Granted as compen-

sation

Received on exercise of options

Net other change

Balance at 30 June

Balance held

nominally

2007 No. No. No. No. No. No.JC Warburton (non-executive director) 18,375 – – – 18,375 –

M Stewart-Hesketh (non-executive director) 40,001 – – – 40,001 –

RB Thomas (non-executive chairman) 10,000 – – – 10,000 –

GEN Rogers (non-executive deputy chairman) 18,375 – – – 18,375 –

CF Kelaher (managing director) 13,750,875 – 875,000 125,800 14,751,675 –

IG Griffi ths (executive director) 14,350,000 – 1,050,000 (2,954,200) 12,445,800 –

AP Hutchison (CEO Bridges) 20,000 – – – 20,000 –

AL McLachlan (CEO Private Client) 353 – – – 353 –

MO Hall (chief operating offi cer) 1,750,875 – 525,000 – 2,275,875 –

P Joseph (CEO Corporate Trust) – – – – – –

DG Mazengarb (general manager wealth management), resigned 27 July 2007

28,875 – 525,000 46,125 600,000 –

G Riordan (group general counsel) – – – – – –

SJE Steele (general manager operations) 1,578,500 – 525,000 – 2,103,500 –

MK Harvey (chief fi nancial offi cer) 1,610,875 – 525,000 – 2,135,875 –

D Corcoran (company secretary) – – – – – –

JK Jodlowski (general manager investments) 895,125 – 262,500 – 1,157,625 –

A Boland (general manager superannuation distribution & product)

65,177 – – (60,500) 4,677 –



For

per

sona

l use

onl

y

114

Share options of Australian Wealth Management Limited

Balance at 1 July

Granted as comp-

ensation ExercisedNet other change

Balance at 30 June

Balance vested at 30 June

Vested but not exer-cisable

Vested and exer-

cisable

Options vested

during year

2008 No. No. No. No. No. No. No. No. No.CF Kelaher (managing director)

1,488,847 1,532,841 (1,488,847) (1,032,841) 500,000 – – – 1,488,847

IG Griffi ths (executive director)

653,153 594,281 (653,153) (344,281) 250,000 – – – 653,153

AP Hutchison (CEO Bridges), resigned 14 March 2008

950,000 200,000 (700,000) (450,000) – – – – 700,000

AL McLachlan (CEO Private Client)

950,000 200,000 – (80,000) 1,070,000 650,000 – 650,000 650,000

MO Hall (chief operating offi cer), resigned 15 February 2008

425,000 200,000 (175,000) (450,000) – – – – 175,000

P Joseph (CEO corporate trust)

450,000 150,000 – (60,000) 540,000 450,000 – 450,000 450,000

G Riordan (group general counsel)

150,000 200,000 – (80,000) 270,000 150,000 – 150,000 150,000

SJE Steele (general manager operations)

425,000 200,000 (175,000) (80,000) 370,000 250,000 – 250,000 425,000

MK Harvey (chief fi nancial offi cer)

425,000 200,000 (175,000) (80,000) 370,000 250,000 – 250,000 425,000

D Corcoran (company secretary)

500,000 200,000 – (80,000) 620,000 250,000 – 250,000 250,000

JK Jodlowski (general manager investments)

237,500 200,000 (87,500) (80,000) 270,000 150,000 – 150,000 237,500


150,000 200,000 – (80,000) 270,000 150,000 – 150,000 150,000

A Todd (chief information offi cer)

– – – – – – – – –



For

per

sona

l use

onl

y

115

Balance at 1 July

Granted as comp-

ensation ExercisedNet other change

Balance at 30 June

Balance vested at 30 June

Vested but not exer-cisable

Vested and exer-

cisable

Options vested

during year

2007 No. No. No. No. No. No. No. No. No.CF Kelaher (managing director)

2,363,847 – (875,000) – 1,488,847 – – – –

IG Griffi ths (executive director)

1,703,153 – (1,050,000) – 653,153 – – – –

AP Hutchison (CEO Bridges)

700,000 250,000 – – 950,000 – – – –

AL McLachlan (CEO Private client)

700,000 250,000 – – 950,000 – – – –

MO Hall (chief operating offi cer)

700,000 250,000 (525,000) – 425,000 – – – –

P Joseph (CEO corporate trust)

200,000 250,000 – – 450,000 – – – –

DG Mazengarb (general manager wealth management), resigned 27 July 2007

525,000 10,000 (525,000) 10,000 – – – –

G Riordan (group general counsel)

– 150,000 – – 150,000 – – – –

SJE Steele (general manager operations)

700,000 250,000 (525,000) – 425,000 – – – –

MK Harvey (chief fi nancial offi cer)

700,000 250,000 (525,000) – 425,000 – – – –

D Corcoran (company secretary)

350,000 150,000 – – 500,000 – – – –

JK Jodlowski (general manager investments)

350,000 150,000 (262,500) – 237,500 – – – –


– 150,000 – – 150,000 – – – –

All share options issued to key management personnel were made in accordance with the provisions of the employee share option plan.

During the fi nancial year, 3,454,500 options (2007: 4,287,500) were exercised by key management personnel at a weighted average exercise price of $1.16 (2007: $1.14). No amounts remain unpaid on the options exercised during the fi nancial year at year end.

Further details of the employee share option plan and of share options granted during the 2008 and 2007 fi nancial years are contained in notes 34 and 35 to the fi nancial statements.



For

per

sona

l use

onl

y

116

( iv) Other transactions with key management personnel of the Group

There were no other transactions with

key management personnel of the Group

during the 2008 and 2007 fi nancial years.

(c) Transactions with other related parties

Transactions between Australian Wealth

Management Limited and its related

parties:

During the fi nancial year, the following

transactions occurred between the

company and its other related parties:

AWM recognised tax payable in respect •

of the tax liabilities of its wholly-

owned subsidiaries. Payments to/from

the company are made in accordance

with the terms of the tax funding

arrangement.

AWM received dividends of •

$58,956,391 (2007: $56,000,000) from

its subsidiaries.

The following balances arising from

transactions between the company and

its other related parties are outstanding

at reporting date:

Current loans totalling $nil (2007: •

$1,911,272) are repayable to

subsidiaries.

Non-current loans totalling $15,921,747 •

(2007: $29,952,807) are repayable to

AWM by subsidiaries.

All amounts advanced to or payable to

related parties are unsecured and are

subordinate to other liabilities.

The amounts outstanding will be settled

in cash. No guarantees have been

given or received. No expense has been

recognised in the period for bad or

doubtful debts in respect of the amounts

owed by related parties.

Transactions and balances between

the company and its subsidiaries

were eliminated in the preparation of

consolidated fi nancial statements of

the Group.

Transactions between the Group and its

related parties:

Amounts recognised as revenue from •

DKN Financial Group Limited was

$75,250 (2007: $194,484).

Amounts recognised as expenditure •

to DKN Financial Group Limited was

$5,410,340 (2007:$5,683,359).

Transactions between the Group and

its associates were eliminated in the

preparation of consolidated fi nancial

statements of the Group to the extent

of the Group’s share in profi ts and losses

of the associate resulting from these

transactions.

(d) Parent entity

The parent entity in the Group is

Australian Wealth Management Limited.



For

per

sona

l use

onl

y

117

37 Remuneration of auditors


2008 2007 2008 2007

$ $ $ $

Auditor of the parent entity

Audit or review of the fi nancial report 636,076 512,989 309,000 294,600

Taxation services 35,020 77,320 19,000 8,500

Audit of product fi nancial reports and regulatory returns 193,351 146,510 – –

Other assurance services 187,101 – – –

1,051,548 736,819 328,000 303,100

Other auditors

Auditing the fi nancial report 5,000 – – –

Controls assurance services 49,121 30,000 – –

Compliance review – 5,800 – –

Audit of product fi nancial reports and regulatory returns 740,918 513,709 – –

Other assurance services – 78,317 – –

795,039 627,826 – –

The auditor of Australian Wealth Management Limited is Deloitte Touche Tohmatsu.


For

per

sona

l use

onl

y

118

Share CapitalAustralian Wealth Management has on issue 599,525,017 fully paid ordinary shares held by 34,919 holders as at 24 September 2008.

All ordinary shares of the company carry one vote per share.

Twenty Largest Shareholders

Rank Investor Name Total Units % of Issued capital1 Trust Company Fiduciary Services Limited 102,249,994 17.06

2 JP Morgan Nominees Australia Limited 59,387,437 9.91

3 UBS Wealth Management Australia Nominees Pty Ltd 54,973,300 9.17

4 National Nominees Limited 46,678,367 7.79

5 ACN 100 037 474 Pty Limited 37,362,000 6.23

6 HSBC Custody Nominees (Australia) Limited 31,333,462 5.23

7 RBC Dexia Investor Services Australia Nominees Pty Limited (PIPooled A/C) 19,166,312 3.20

8 Bendigo Bank Limited 12,996,718 2.17

9 Queensland Investment Corporation c/- National Nominees Limited 12,709,124 2.12

10 Citicorp Nominees Pty Limited 9,936,957 1.66

11 ANZ Nominees Limited (Cash Income A/C) 9,389,927 1.57

12 Citicorp Nominees Pty Limited (CFSIL CFS WS Small Comp A/C) 7,270,755 1.21

13 David Vautin Pty Limited 6,546,127 1.09

14 Cogent Nominees Pty Limited 5,301,602 0.88

15 HSBC Custody Nominees (Australia) Limited – GSCO ECSA 5,066,309 0.85

16 Sandhurst Trustees Ltd (JM Asset Management A/C) 4,777,550 0.80

17 Citicorp Nominees Pty Limited (CFS Future Leaders Fund A/C) 3,782,933 0.63

18 Citicorp Nominees Pty Limited (CFSIL Cwlth Aust SHS 4 A/C) 3,314,766 0.55

19 Custodial Services Limited c/- ABN-Amro Craigs Limited 3,234,813 0.54

20 RBC Dexia Investor Services Australia Nominees Pty Limited (PIIC A/C) 2,704,773 0.45

Total 438,183,226 73.09

Shareholder information

For

per

sona

l use

onl

y

119

Distribution of Equity Securities(a) Analysis of number of shareholders by size of holding

Range No. of holders No. of Units % Issued Capital1 – 1,000 18,974 8,357,334 1.39

1001 – 5000 11,172 25,710,398 4.29

5001 – 10,000 2,476 18,615,941 3.11

10,001 – 100,000 2,137 50,534,563 8.43

100,001 + 160 496,306,781 82.78

Total 34,919 599,525,017 100.00

(b) There were 8,468 shareholders holding less than a marketable parcel ($500) based on a market price of $1.30 at the close of trading on 24 September 2008.

Substantial ShareholdingsThe following substantial shareholder notices have been lodged in accordance with section 671B of the Corporations Act 2001:

Name Date of Interest No. of Ord. Shares % of Issued CapitalTrust Company Fiduciary Services Limited

24 June 2008 102,249,994 17.06%


2 June 2008 47,574,280 7.70%

ACN 100 037 474 Pty Limited 3 June 2008 37,362,000 6.09%

Deutsche Bank AG 2 May 2008 30,370,718 5.06%

Share register and other enquiriesIf you have any questions in relation to your shareholding, share transfers or dividends, please contact our share registry:

Computershare Investor Services Pty Limited

GPO Box 7045

Sydney NSW 2001

Australian callers: 1800 235 549

Telephone +61 3 9415 4248

Email: [email protected]

Website: www.computershare.com.au

Please include your shareholder reference number (SRN) or holder identifi cation number (HIN) in all correspondence to the share registry.


For

per

sona

l use

onl

y

120

Directors J C Warburton CPA

Chairman

C F Kelaher B Ec, LLB, ASIA

managing director

I G Griffi ths C Acc, Dip AII, MIIA

M Stewart-Hesketh, BA, MBA

G Venardos, BCom, FCA, FCIS, FTIA, FAICD

Company Secretary D S Corcoran

Notice of annual general meeting The annual general meeting of Australian Wealth

Management Limited will be held at the offi ces of:

Ord Minnett Limited

Level 23

120 Collins Street

Melbourne, Victoria, 3000

time 9.00am

date 26 November 2008

A formal notice of meeting is enclosed.

Principal registered office in Australia Level 22, 207 Kent Street

Sydney, NSW, 2000

(02) 9028 5900

Share registry Computershare Investor Services Pty Ltd

60 Carrington Street

Sydney NSW 2000

Auditor Deloitte Touche Tohmatsu

180 Lonsdale Street

Melbourne VIC 3000

Solicitors Baker & McKenzie

AMP Centre

50 Bridge Street

Sydney NSW 2000

Bankers National Australia Bank Limited

225 George Street

Sydney 2000

Stock exchange listing Australian Wealth Management Limited shares are

listed on the Australian Stock Exchange (ASX: AUW)

Website address www.awmlimited.com.au

Corporate directory

For

per

sona

l use

onl

y

australian wealth management2008/10/23 · 2007/2008 ﬁ nancial year to 10.5 cents per share, a...

Documents