Morphic Ethical Equities Fund Ltd. · ASX:MEC
Morphic Ethical Equities Fund — Shareholder Meeting (November 2018)
46 slides from Morphic Ethical Equities Fund's shareholder meeting presentation, Nov 22, 2018
Slide 1: Global Responsible Investors
Click to edit Master title style For personal use only Global Responsible Investors November 2018 1 Global Responsible Investors
Slide 2: For personal use only
For personal use only 2 Global Responsible Investors
Slide 3: Company Results
Company Results For personal use only Company Performance Dividends 5 months to Year ended Amount 30 September 2017 30 September 2018 Pre-Tax Operating Profit $ 0.44m $ 5.29m Total Dividend 2018 2 c per share Post-Tax Operating Profit Interim Dividend $ 0.29m $ 3.81m 1 c per share (Payment date: 22
Slide 4: AGM Agenda
AGM Agenda For personal use only • Consideration of Financial Statements and Reports • Resolution 1: Remuneration Report • Resolution 2: Re-election of Virginia Malley as a Director • Resolution 3: Re-election of Mark Forstmann as a Director 4 Global Responsible Investors
Slide 5: Financial Statements
Financial Statements For personal use only To receive the Financial Report, Directors’ Report and Auditor’s Report for the Company for the financial year ended 30 September 2018. There is no requirement for shareholders to approve these reports. 5 Global Responsible Investors
Slide 6: Resolution – Remuneration report
RESOLUTION 1 – Remuneration report For personal use only “That the Remuneration Report of the Company Remuneration Report (which forms part of the Directors' Report) for the Proxies Received financial year ended 30 September 2018 be For 874,395 59.93% adopted.” Against 337,473 23.12% Open 247,465 16
Slide 7: Resolution – Re-election of Virginia Malley
RESOLUTION 2 – Re-election of Virginia Malley For personal use only “That Ms Virginia Malley, who retires by rotation in Re-election of Virginia Malley accordance with rule 6.7 of the Company’s Proxies Received Constitution and, being eligible, offers herself for re-election, be re-elected as a dire
Slide 8: Resolution – Re-election of Mark Forstmann
RESOLUTION 3 – Re-election of Mark Forstmann For personal use only “That Mr Mark Forstmann, who retires by rotation Re-election of Mark Forstmann in accordance with rule 6.7 of the Company’s Proxies Received Constitution and, being eligible, offers himself for re-election, be re-elected as a directo
Slide 9: For personal use only
For personal use only 9 Global Responsible Investors
Slide 10: A word on Responsible Investing
A word on Responsible Investing For personal use only Nicolette Boele RIAA, Executive Manager Policy, Research and Certification • 25 years’ experience delivering engagements, collaborations and accountability solutions for and with Australian and international companies, governments, unions, and NG
Slide 11: The explosion of interest for Responsible Investing
The explosion of interest for Responsible Investing For personal use only • Growth of Responsible Investing AUM between 2014 and 20161: o Australia/NZ: Total AUM in Australia & NZ $USD billion o Global: (2016): • of Millennials cite investing with a focus on ESG impact as a central goal2 • UBS revie
Slide 12: Morphic Asset Management
Morphic Asset Management • Founded in 2012 by portfolio managers with long history of ethical investing Morphic Global Opportunities Fund Performance For personal use only of $10,000* AUD, Aug 2012 – Oct 2018 • Market leaders in modern responsible investing 28,000 • Achieving above average returns t
Slide 13: Responsible Investing styles
Responsible Investing styles For personal use only Environment Social Traditional Thematic “Sustainable” Governance (ESG) Impact Investing Philanthropy Ethical Investing Investing Investing Funding for direct and Impact-only: “Defined by what we Focussed on ESG risks Focussed on areas measurable soc
Slide 14: Morphic's Responsible Investing style
Morphic’s Responsible Investing style For personal use only Environment Social Traditional Thematic “Sustainable” Governance (ESG) Impact Investing Philanthropy Ethical Investing Investing Investing 2.5% of MEC’s 100% stocks Portion of Engagement management 100% of the have ESG the portfolio and fee
Slide 15: Our approach to Responsible Investing
Our approach to Responsible Investing “Negative Screen” excludes buying shares in: For personal use only Tobacco Intensive animal Oil & gas Coal & Uranium Gambling Rain forest & old Armaments & alcohol farming & aquaculture Mining growth logging We seek out “positive” investments that support: Water
Slide 16: For personal use only
For personal use only 16 Global Responsible Investors
Slide 17: Portfolio positioning: top 10 long positions
Portfolio positioning As at 31 October 2018 by country, sector and stock For personal use only Top 10 long active positions Theme Region Weighting Alstom Global Rail Europe 3.8% China Everbright Intl Environmental & Facilities Asia Pacific 3.0% Bank Leumi Israeli Quality Banks Middle East 2.4% Servi
Slide 18: Portfolio positioning: top 5 short positions
Portfolio positioning As at 31 October 2018 by country, sector and stock For personal use only Top 5 short active positions Theme Region Weighting Qantas Airways Airlines Asia Pacific (1.0%) Sugi Holdings Japanese Drugstores Asia Pacific (1.0%) Coca-Cola Amatil Beverages Asia Pacific (1.0%) Platinum
Slide 19: The Big Train that will: Alstom (France)
The Big Train that will: Alstom (France) Alstom share price performance For personal use only USD, normalised, February 2015 – October 2018 Alstom (ALO) 170 ▪ World leader in train technology. 150 Alstom share price ▪ Cheaply priced for its growth prospects. 130 Morphic ownership ▪ Pioneer of hydrog
Slide 20: When there's muck, there's brass: China Everbright International
When there’s muck, there’s brass: China Everbright International (Hong Kong) China Everbright International share price performance For personal use only USD, normalised, April 2017 – October 2018 China Everbright Intl (257 HK) 130 CEI share price ▪ Core operations involve waste-to-energy (WTE), 120
Slide 21: Coca-Cola Amatil: Not "sweet as bro"
Coca-Cola Amatil: Not “sweet as bro” Coca-Cola Amatil share price performance For personal use only Coca-Cola Amatil (CCL AU) USD, normalised, January 2017 – October 2018 120 • Major bottler of sugary drinks in Asia- Coca-Cola Amatil share price Pacific. 110 Re-entered the Morphic short ownership po
Slide 22: Outlook – Updates on July Anti-predictions
Outlook – Updates on July Anti-predictions Equity markets returns USD & AUD, between 1 July 2018 For personal use only Anti-Predictions How are we going? and 7 November 2018 Status As at 1 July 2018 As at 7 November 2018 4% 2.8% USD AUD 2% US 10-year yields will NOT Currently at 3.2%. ✔ 0% be > 3.50
Slide 23: Some thoughts on Australian Property
Some thoughts on Australian Property… • Morphic wrote about property two years ago and recently updated Miami house price (January 2001 – August 2014) vs Sydney For personal use only house price (March 2011 – October 2018) this. • Thesis: Sydney property prices were following other euphoric property
Slide 24: Portfolio positioning by region and sector
Portfolio positioning As at October 2018 by country, sector and stock By Region By Sector For personal use only 19.7% 52.0% Financials North America Industrials 14.6% 21.4% Asia Pacific Information Technology 12.4% Consumer Discretionary 12.3% 17.2% Western Europe Health Care 9.8% 4.6% 7.1% Central
Slide 25: For personal use only
For personal use only 25 Global Responsible Investors
Slide 26: Morphic Global Opportunities Fund: 2018 Finalist
Morphic Global Opportunities Fund: 2018 Finalist high returns with lower risk “Best Global Equity Fund of the Year” Morphic Global Opportunities Fund Performance of $10,000* For personal use only • Objectives AUD, Aug 2012 – Oct 2018 o Outperform the Index in Australian dollars over rolling three ye
Slide 27: Morphic Ethical Equities Fund (MEC) Update
Morphic Ethical Equities Fund (ASX: MEC) Update 2018 Finalist “New Fund of the Year” MEC Share Price vs NTA* AUD, weekly, April 2017 – October 2018 For personal use only MEC Performance** As at October 2018 1.20 Pre-tax per share Share Price 1 Month 3 Months 6 Months CYTD ITD p.a. 1.15 -5.41% -3.82%
Slide 28: Morphic challenges in the second half of 2018
Morphic challenges in the second half of 2018 Underperformance mainly due to the following all worked against us at Morphic’s Funds Performance* As at 15 November For personal use only 2018 the same time: As at 15 November 2018 0.0% • Lower priced ‘value’ stocks underperformed what seemed to us to -
Slide 29: For personal use only
For personal use only 29 Global Responsible Investors
Slide 30: For personal use only
For personal use only 30 Global Responsible Investors
Slide 31: Trium Morphic ESG L/S Fund
Trium Morphic ESG L/S Fund For personal use only 2018 Finalist “Award for Innovation (Funds)” • Now available to Australian investors as: Trium Morphic ESG L/S Global Fund • Structure: Unit Trust feeder fund1 into underlying European UCITS Fund2 • Inception: March 2018 (Feeder Fund’s inception: Octo
Slide 32: For personal use only
For personal use only LANDFILL WASTE REDUCTION THANKS TO PUMP NON-EXECUTIVE DISPENSERS APPOINTED DIRECTORS ON TO BOD THE BOARD VOLUME OF NATURAL PURIFIED SINCE 1946 LIGHTING ENERGY WATER AND SEWAGE TREATMENT COSTS REDUCTION 32 Global Responsible Investors
Slide 33: Morphic contributions
Morphic contributions Donations Fundraising For personal use only Giveaway 33 Global Responsible Investors
Slide 34: For personal use only
For personal use only 34 Global Responsible Investors
Slide 35: Philosophy: Markets misprice change
Philosophy: Markets misprice change Illustration of a typical Morphic investment by stage of the change ESG: What matters? For personal use only cycle Reduce and High ESG ≠ Max alpha1 exit position Change through stop Buy ending losses & Improving is better than “best”2 Internal screens flag Changes
Slide 36: Investment Process: Fundamental research & risk management
Investment Process: Fundamental research & risk management For personal use only 1. Identify change 2. Analyse 3. Decide 4. Structure • Why invest now? • Ethical Screening & Internal • Group review • Discuss with risk manager ESG Audit • Has the market already • Identify “wrong” price • How can we s
Slide 37: Identifying Investments: Leveraging diverse views
Identifying Investments: Leveraging diverse views For personal use only Quality Value Earnings revisions Mispricing relative ROE vs. COE to value i.e. market i.e. changing still to reflect fundamentals change √√ INVESTMENT OPPORTUNITIES √ √ 1. Identify investments Confirmation that Morphic Library •
Slide 38: Research & Analysis
Research & Analysis • Negative For personal use only Screening • Analysis of • Relative ESG issues Ethical Valuation Screening Financial within research and & Internal Modelling • DCF models financial ESG Audit analysis • Reverse DCF 2. Analyse • Ethical Screening & Internal ESG • Engagement Audit M
Slide 39: Investment Decision
Investment Decision For personal use only • Approvals following presentation at team meetings Ethical • Screening & to veto Financial All proposals subject by either PM Internal ESG Modelling Audit 3. Decide • Sizing based on loss tolerance and VaR • Group review Meetings with • Identify “wrong” pri
Slide 40: Modern Portfolio Construction
Modern Portfolio Construction Portfolio For personal use only Ethical Screening & Financial Securities Market Internal ESG exposure Modelling Hedging Audit • Country and sector tilts • Stock selection: key • Managing specific driver of performance within risk parameters risks • Dynamic cash 4. Struc
Slide 41: Ongoing Monitoring: Portfolio governance
Ongoing Monitoring: Portfolio governance For personal use only Checklist for analysts Structured meeting schedule Ethical 1. Daily news flow update Forum Issues Screening & 2. Preview and de-brief after company results/conference Internal ESG calls Daily debrief ▪ Analysts update with “night action”
Slide 42: For personal use only
For personal use only 42 Global Responsible Investors
Slide 43: Proven investment team with strong corporate structure
Proven investment team with strong corporate structure Board of Directors For personal use only Nick Minogue (Chair), Gerard Minack, George Gabriel, Chuak Chan, Jack Lowenstein, Chad Slater Joint-CIO & MD Joint-CIO & ED Jack Lowenstein Chad Slater Business Development Head of Research Head of Macro
Slide 44: Experienced Senior investment team
Experienced Senior investment team 27 years experience in financial markets. 16 years experience in financial markets. For personal use only ▪ ▪ ▪ Jack co-founded Morphic Asset Management in 2012. ▪ Geoff joined Morphic at the inception in 2012. He He was previously Deputy Chief Investment Officer a
Slide 45: Significant alignment of interests with investors
Significant alignment of interests with investors For personal use only ▪ All senior team members are shareholders in the Firm ▪ Senior team members have a significant proportion of NAV in the Fund ▪ Short term incentives are driven by individual and Fund performance ▪ One third of bonuses invested
Slide 46: Morphic Asset Management
Morphic Asset Management For further enquiries: Level 3, 139 Macquarie St For personal use only Sydney 2000 Irene Kardasis New South Wales Business Development Manager Australia Phone: +61 2 9194 6707 Email: [email protected] Disclaimer: This presentation has been prepared for wholesale inv
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