Association Australasia - MEMBER ONLY WEBINAR - Certjfjcatjon - - PowerPoint PPT Presentation

Association Australasia

Responsible Investment

• MEMBER ONLY WEBINAR -

Certjfjcatjon Quarterly June 2017

22 June 2017

Presenters: James Tayler - Morphic Asset Management Cheyne McKee - Bank Australia Kirsten Simpson - VicSuper

Focussed | Vigilant | Agile

June 2017

Focussed | Vigilant | Agile

There is no Plan(et) B. Invest in change.

We ar are e the e FIRS RST T gener neration tion exper perie ienci cing climate imate change ge an and d the e LAST ST that at can an do an anyth thing ab about ut it

Focussed | Vigilant | Agile

• Founded in 2012 by senior portfolio managers with

long standing track records

• Strong alignment via majority ownership and co-

investment by the investment team

• Robust and multi level risk management embedded

at heart of investment approach

• Strong governance – part of Westpac Group

(Ascalon) which appoints two directors to MAM board

• FUM growth > 540% in three years
• Morphic Global Opportunities Fund ($125m)
• Morphic Ethical Equities Fund ($49m)

Morphic Asset Management

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*Calculations are based on exit price with distributions reinvested, after ongoing fees and expenses but excluding individual tax, member fees and entry fees (if applicable). Fund Inception 2 August 2012.

Performance of $10,000* AUD, Aug 2012 – May 2017

10,000 12,000 14,000 16,000 18,000 20,000 22,000 24,000

Focussed | Vigilant | Agile

Experienced and diverse investment team

Jack ck Lowenst nstein, in, MD & Joint int Chief ief Invest stment nt Offic icer

• Jack co-founded Morphic Asset Management in
• 2012. He was previously Deputy Chief Investment

Officer at Hunter Hall with responsibility for risk management and portfolio construction.

• He played a key role in building Hunter Hall from

just $13m under management when he joined, to a peak of just under $3 billion. In ten years as a Portfolio Manager with Hunter Hall, he generated substantial out-performance. Geoff Wood, Head of

• f Macro

cro & Risk sk

• Geoff joined Morphic at the inception in 2012. He

previously worked in risk management at Global Trading Strategies, a global macro hedge fund that managed in excess of US$1 billion through the global financial crisis.

• Prior to that, he worked at Barclays Capital in London,

managing the risks arising from the hedge fund clients of the bank's Prime Brokerage business. Chad Slater, r, ED D & Joint int Chief ief Invest stment nt Offic icer

• Chad co-founded Morphic Asset Management in
• 2012. He was previously a Portfolio Manager and

Head

• f

Currency and Macroeconomics at Hunter Hall for five years.

• Prior to this, Chad was an Investment analyst at

BT Financial Group including a secondment to Putnam Investments in Boston. He began his career as an Economist at Australian Federal Treasury. James Tayler ler, , Head of Rese search rch

• James joined Morphic in 2016. He was previously

Head of Investment Research at Knight Vinke, a leading activist investor focused on European companies, based in Zurich and London.

• Prior to this, James was Head of Investment

Research for a single family office in Switzerland following more than 10 years at Swiss Reinsurance.

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Focussed | Vigilant | Agile

Focussed | Vigilant | Agile

• Strategy: Global Equities, long/short to manage risk
• Negative & Positive Screens
• Listed on ASX on May 3rd, 2017
• Performance: +2.15% in May 2017
• Market Cap: $48m
• Trades at a premium ($1.16 as at June 16th, 2017)

Morphic Ethical Equities Fund Limited (ASX: MEC)

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Platform rm availa ilabili ility

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“Negative Screen” excludes buying shares in: Can short screen ened ed out stocks s and sectors

• rs

How the Ethical Screen works

Ethical compliance check first, before investment research

Armamen ents Tobacco & alc lcoho hol l Gambling ling Coal l & Uranium ium Mining ning Oil l & gas Intensi ensive anim imal farmin ing & aquacul ultur ure Rain in forest & old growth h logg ggin ing

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We seek out “positive” investments that support:

Water er quali lity Air ir quali lity Conser nservation Rene newable le ener nergy gy

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Stocks (Shorts) Theme Region Position Weighting

Rural Electrification Indian Infrastructure Central Asia 4.0% Power Grid Indian Infrastructure Central Asia 3.7% Fund Managers basket* Fund Managers Global

• 3.7%

Alstom Global Rail Europe 3.2% D.G. Khan Cement Pakistan Infrastructure Central Asia 3.2% Ping An Insurance Hong Kong Insurance Spread Asia Pacific 3.1% HCA US Healthcare North America 2.8% Service Corp US Deathcare North America 2.4% People’s Insurance Hong Kong Insurance Spread Asia Pacific

• 2.4%

Wells Fargo US Banking North America

• 2.3%

*Includes: Invesco, Och-Ziff, Affiliated Managers, Fortress, Eaton Vance, Legg Mason, Waddell & Reed, Artisan Partners, Janus Capital, Blackrock, AGF Management, IGM, Pzena, T Rowe, Alliance Bernstein, Federated Investors, Wisdomtree, Manning & Napier, CI Financial, GAMCO, Henderson Group, Schroders, Aberdeen, Man Group, Rathbone Brothers, GAM & Azimut.

As at May 2017 by country, sector and stock

Portfolio positioning

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As at May 2017

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0% 3% 4% 6% 7% 8% 9% 12% 15% 17% 19% 0.0% 10.0% 20.0% 30.0% Energy Telecommunication Services Real Estate Utilities Consumer Staples Materials Industrials Health Care Financials Information Technology Consumer Discretionary Morphic Ethical Equities Fund Benchmark

Portfolio positioning

By Region By Sector

1% 1% 1% 13% 16% 22% 46% 0.0% 20.0% 40.0% 60.0% Eastern Europe South & Central America Africa / Middle East Central Asia Western Europe Asia Pacific North America Morphic Ethical Equities Fund Benchmark

Focussed | Vigilant | Agile

Context Revived global demand for rail and tram networks driven by:

• Demographic changes
• Urbanization
• Economic development

Change Driver

• Trains = Highly efficient transport mode
• Trains = Low emissions
• Pioneer of hydrogen fuel-powered, zero-emission regional train

Insight edge

• Analysts still confused by Alstom’s legacy JVs
• Market not focused on new business

Member of Dow Jones Sustainability Indices

Alstom outperforms European market

Relative to SX01 Index normalised between February 2014 and February 2017

80 100 120 140 160 Feb-14 Jul-14 Dec-14 May-15 Oct-15 Mar-16 Aug-16 Jan-17

ALO FP relative to Stoxx Europe 600 Morphic ownership

Alstom – a global player in sustainable mobility

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Source: Bloomberg, Team analysis

Focussed | Vigilant | Agile 80 90 100 110 120 130 140 Sep 14 Jan 15 May 15 Sep 15 Jan 16 May 16 Sep 16 Jan 17

PWGR IN relative to ACWI US Morphic ownership

Context

• Operates world’s largest electricity grid
• Brings power to cities from renewables

Change Drivers

• Push for alternative energy sources driving high growth
• Strong growth from Rail Electrification; strengthening

state level transmission Insight edge

• Understanding Modi government commitment to

renewables = good regulatory backdrop

• Falling cost of debt = easier to grow

Power Grid share price performance

Relative to ACWI Index (USD), normalised between September 2014 and February 2017

Power Grid – enabling India’s “green energy corridor”

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Source: Bloomberg, Team analysis

Focussed | Vigilant | Agile

Focussed | Vigilant | Agile

Strong Governance – Board of Directors

JoAnna Anna Fishe her, , Non-Execu ecutive Chai airman man Ex BT Funds Management Investment Committee Australian Catholic Super & Retirement Fund Virgini nia Malley, , Non-Execu ecutive Directo ector NED Perpetual LIC Member The Clean Energy Regulator & the Nature Conservation Trust of New South Wales Mark Forstm tmann, ann, Non-Execu ecutive Directo ector Float director Hunter Hall Investment Management Former Director NSW Nature Conservation Trust Jack Lowens nstei ein, n, Executive Direc ector MD MAM Float Director Hunter Hall Global Value LIC

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Morphic has rebated $278,100 in fees so far through FGG since its launch in 2015 to youth mental health.

MEC continues our longstanding commitment to charitable giving

Morphic Asset Management will donate 2.5% of its fees from managing Morphic Ethical Equities Fund to Bush Heritage. Bush Heritage has been selected for its passionate commitment to maintaining species diversity in Australia through land conservation.

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Morphic Asset Management

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Irene ne Kardasis sis Portfolio Specialist Phone:+612 9194 6707 Email: ikardasis@morphicasset.com Level l 3, 139 Macqua cquarie rie St Sydney 2000 00 New Sout uth h Wale les Aust strali ralia

Disc iscla laim imer er: Unless specifically indicated, this presentation is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security by the sender or Morphic Asset Management Pty Ltd (“Morphic”) (ACN 155 937 901) (AFSL 419916). This presentation does not take into account the investment objectives, financial situation or particular needs of any particular

• person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision. Any person considering investment in the Morphic Global

Opportunities Fund (“MGOF”) should first review the Product Disclosure Statement (PDS) for the Fund issued by Perpetual Trust Services Ltd dated 31/01/2017. Initial Applications for units in the MGOF can only be made pursuant to the application form in the PDS. Morphic does not guarantee repayment of capital or any particular rate of return from the MGOF. Past performance is no guarantee of future performance. Investment returns have been calculated in accordance with normal industry practice utilising movements in unit price and assuming reinvestment of all distribution of income and realised profits. Statements of fact in this presentation have been obtained from and are based upon sources that Morphic believes to be reliable, but Morphic does not guarantee their accuracy, and any such information may be incomplete or

• condensed. All opinions and estimates included in this presentation constitute Morphic's judgement as of the date of this communication and are subject to change without notice.

The Certification Symbol signifies that a product or service offers an investment style that takes into account environmental, social, governance or ethical considerations. The Symbol also signifies that Morphic Ethical Equities Fund adheres to the strict disclosure practices required under the Responsible Investment Certification Program for the category of Product Provider. The Certification Symbol is a Registered Trade Mark of the Responsible Investment Association Australasia (RIAA). Detailed information about RIAA, the Symbol and Morphic Ethical Equities Fund’s methodology, performance and stock holdings can be found at www.responsibleinvestment.org, together with details about other responsible investment products certified by RIAA.1

investment or that returns are guaranteed. Appropriate professional advice should be sought prior to making an investment decision. RIAA does not hold an Australian Financial Services Licence.

For further enquiries:

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This landscape is inspired by the MacDonnell Ranges in the Northern Territory.

Bank Australia deposit and lending products

22 June 2017

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We were founded in 1957. In 2011 we became Australia’s first customer owned bank. We became Bank Australia in 2015. Today, we are leading on values based banking.

Hello, we’re Bank Australia

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• Everyday Access
• Everyday Access (additional)
• Pension Access
• Basic Account
• Online Saver
• Bonus Saver
• mySaver
• Christmas Saver
• Commercial Access
• Commercial Saver
• Community Access
• Bank Australia Term Deposit products

Certified deposit products

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Click to edit Master Certified home lending products

• Bank Australia Basic Home Loan
• Bank Australia Premium Home Loan
• Bank Australia Premium Package Loan
• Bank Australia Bridging Loan
• Bank Australia Line of Credit

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This landscape is inspired by Rathdowney in Queensland.

Questions

Super that makes a difference

VicSuper’s Socially Conscious investment option

What we will cover today

Our Journey Our Socially Conscious investment option You can make a difference

Our Corporate Responsibility journey

Industry leading sustainability

• ption

Increased commitment to green investing Whole of business sustainability agenda Fund wide climate change strategy Portfolio wide ESG integration 2001 Today

Socially Conscious investment

• ption

Our Socially Conscious investment option

The above objectives apply to the proportion in the investment option invested in equities.

These exclusionary screens only apply to the Australian and international equities components

• f the investment option. Investments across the other asset classes apply an ESG integration

strategy, with the exception of Cash.

Take action on climate change Minimise social harm Protect human rights, labour rights and the environment

Social and environmental objectives:

• Holding fossil fuel reserves used for energy

purposes

• Principal business revenue is derived from direct

fossil fuel activities

• Tobacco production, alcohol, gambling,

pornography

• Military weapons, civilian firearms
• Genetically modified organisms
• Severe incidents and/or controversies
• Found to not be adhering to widely accepted

global conventions

Doesn’t invest in companies:

VicSuper’s Socially Conscious investment option has been certified by RIAA according to the strict operational and disclosure practices required under the Responsible Investment Certification Program. See www.responsibleinvestment.org for details.

Introducing Socially Conscious

You don’t need to pay extra to invest in a socially conscious way Strategic Asset Allocation and Investment return objectives are the same as our mainstream Balanced Option

Our Socially Conscious Investment Option

Investment costs Environmental and social objectives

Ethical Funds VicSuper’s Socially Conscious Mainstream SRI options

Low High High

Wide coverage

• f social and

environmental issues

Don’t pay extra

to invest in a socially conscious way

90%

• f our members surveyed have

told us that socially conscious investment options are important

Graph sourced from VicSuper’s benchmarking and research

What you can do

It’s never been easier to invest in a super option that makes a difference

More information can be accessed on the Socially Conscious Q&A page: www.vicsuper.com.au/sociallyconscious

Association Australasia

Responsible Investment

• MEMBER ONLY WEBINAR -

Certjfjcatjon Quarterly June 2017

22 June 2017

Presenters: James Tayler - Morphic Asset Management Cheyne McKee - Bank Australia Kirsten Simpson - VicSuper