Australian Ethical Investments (AEI) has reported a 15 per cent fall in net profit for the 2010 financial year to $1 million, due to higher expenses relating to staff departures.

The fund manager saw operating expenses rise by $1 million to $12.5 million, an increase of 10.2 per cent over the previous year.

"Expenses were significantly impacted by costs associated with the departure of senior staff during the year amounting to $482,000," the company said.

In August last year, AEI chief executive Anne O'Donnell stepped down after nine years with the company, and received a termination benefit of $235,000.

O'Donnell was succeeded by former Perpetual corporate trust division head Phillip Vernon in November last year.

Chief investment officer (CIO) Martin Halloran resigned in May 2010 to take up a senior role in the Australian public service.

He was replaced by James Jordan, previously the company's head of research, who was appointed in June this year.

"As a result of these changes and subsequent management restructuring, some of our funds were placed on fund watch or hold pending a review of the changes," the company said.

The company said it was still waiting for rating responses for a number of its funds.

Revenues over 2010 increased by $1 million, representing an increase of 7 per cent over the previous year.

The revenues were negatively impacted by fee errors amounting to $261,000.

The fees were realised and booked this year, but should have been reported in last year's results.

"After adjusting current and prior year revenue numbers for these errors, revenue growth was 11 per cent, roughly in line with the growth in funds under management," the company said.

Funds under management increased by 12.1 per cent to $613.8 million.