important NOTICE

Australian Ethical High Conviction Fund

Amendment to the Fund Constitution to allow for adoption of the Attribution Managed Investment Trust regime for the Fund

Notice under section 601GCB(2) of the Corporations Act 2001 (Cth)

This notice is published by Australian Ethical Investment Ltd as responsible entity of the Australian Ethical High Conviction Fund ARSN 653 076 236 (Fund) under section 601GCB(2) of the Corporations Act 2001 (Cth) as modified by ASIC Instrument 2016/489 to notify unitholders of the Fund that the constitution of the Fund (Constitution) was amended by Supplemental Deed on 4 October 2022.

The amendments are in connection with the tax regime applying to managed investment trusts which satisfy the requirements to be AMITs, which was introduced by the Tax Law Amendment (A New Tax System for Managed Investment Trusts) Act 2016 (Cth) ("AMIT Regime").

AMIT Regime

The AMIT Regime aims to provide greater certainty and flexibility than the pre-existing rules in relation to the taxation position for a managed investment trust (MIT) and its unitholders.

A key difference between the AMIT Regime and the pre-existing tax regime which applies to a MIT is that under the AMIT Regime, unitholders are taxed on the taxable income that is "attributed" to unitholders by the responsible entity. The AMIT Regime requires the responsible entity to undertake this attribution on a fair and reasonable basis, consistent with the unitholder's rights under the MIT's constituent documents and the duties of the trustee. By contrast, the pre-existing rules generally provide for unitholders to be subject to tax to the extent, proportionately, that each unit holder is "presently entitled" to the income of the Fund according to complex trust law principles.

The AMIT Regime may provide the following potential benefits for unitholders of an AMIT compared to the pre-existing tax regime.

• Greater certainty on the tax treatment of distributions and the character of income and capital of the AMIT. This includes reducing the potential for double taxation that may arise for unitholders where there are mismatches between the amount distributed and the taxable income of the MIT.
• An AMIT can carry forward certain understatements and overstatements of taxable income and deal with them in the year in which they are discovered, which removes the requirement to re-issue amended investor statements and amend tax lodgements.
• An AMIT will be deemed to be a "fixed trust" and unitholders will be treated as having vested and indefeasible interests in the income and capital of the AMIT throughout the income year. This generally makes it easier to satisfy the tax rules for (i) carrying forward and utilising trust losses, and (ii) flowing franking credits to unitholders.
• A unitholder can be entitled to make upward adjustments to the cost base of their units in an AMIT if the unitholder receives a distribution amount that is less than their attributed share of the taxable trust components.

Summary of amendments to the Constitution of the Fund

Set out below is a summary of the effect of the proposed amendments to the Constitution.