Investment and Advice Services for Not-for-Profit Organisations

MORGAN STANLEY WEALTH MANAGEMENT 1

Investment and advice services for not-for-profit organisations

The noble efforts of not-for-profit organisations make our world a far brighter place.We’re proud of our clients and their work. We’re dedicated to providing them with advice, guidance and support designed to contribute to their success – both financial and altruistic.


Table of contentsBuilding the foundations of success 2

Disciplined advice process 5

Robust investment process 6

Sustainable investing 9

Governance 10

Reporting capabilities and technology 12

Outsourced expertise 13

2 MORGAN STANLEY WEALTH MANAGEMENT

Building the foundations of successThe not-for-profit sector is incredibly diverse. It consists of organisations of all sizes, cuts across geographic boundaries and sets out to solve a broad set of social and environmental issues.

While every not-for-profit organisation is unique, they’re all powered by people who are driven by a desire to make a difference. In the most functional organisations this passion is complemented by a wide variety of skills, experience and expertise.

For many not-for-profit organisations however, investment management isn’t a core skill. And yet it can be a critical component of success. Continuity of funding is vital and professional investment management can help deliver

a consistent income stream. This has never been more important given the current low return environment and increasing competition for donor funds.

In addition, not-for-profit organisations are expected to adhere to the highest possible standards of probity. Professional management of an endowment ensures fiduciary duties are fulfilled and there is transparency and accountability regarding where funds are invested (using best practice environmental, social and governance filters).

Morgan Stanley’s commitment to the not-for-profit sectorOur team are highly experienced in managing the investments of Australian charities, trusts, not-for-profit and religious organisations and we work with more than 150 clients in these sectors. Our clients operate in areas of social welfare, health and medicine, education, aged care, sport and philanthropic trusts. The table below provides examples of some of the clients we currently work with and some of the services we have provided.

Client description Scope of work Outcome achieved* How returns were maximised

Large aged care provider

Management of a conservative bond and fixed income portfolio

Returns well in excess of cash rates with very little volatility

Via a quality bond and term deposit portfolios, with active management of maturities

Social welfare organisation

On-going management of a portfolio of domestic and international assets

Helped rebuild cash flows, advised the board on the need for reduced spending, whilst improving investment returns

Via a specifically constructed investment portfolio with an ethical overlay specifically maximising franking credit.

Faith based organisation

Continued management of a multi-asset class investment portfolio within a mandated asset allocation model

Providing returns in excess of the cash rate whilst ensuring appropriate liquidity requirements were met

Via a specifically constructed investment portfolio across all asset classes

Private school NFP foundations and benevolent funds

On-going management of various school foundations with investment portfolios

We continue to successfully manage the school foundations within the mandated framework

Via a specifically constructed investment portfolio with an ethical overlay specifically maximising franking credits

* Past performance is not indicative of future performance.


Capability and global resourcesFor more than 80 years, Morgan Stanley has been a leader, innovator and partner for our clients. We have provided security and comfort through the careful management and robust oversight of investment portfolios.

Morgan Stanley is one of the world’s largest wealth organisations:

• 55,000 employees in 1,000 offices across more than 40 countries.

• 16,000 financial advisers.

• US$2 trillion in assets under management.

Morgan Stanley has been awarded:

• Best Global Investment Bank for 2015 – Euromoney.

• Best Investment Bank in Asia for 2015 – Euromoney.

• Ranked number 1 in the 2016 Institutional Investor All-Asia Research Team survey.

Morgan Stanley is the largest global wealth manager in Australia:

• Five offices (Sydney, Melbourne, Brisbane, Adelaide and Perth).

• 150 financial advisers and not-for-profit specialists in each office.

• A$26 billion in wealth management client assets.

Your advisers are supported by one of the world’s strongest investment organisations.



Disciplined advice processYour financial adviser works closely with you to understand your needs while maintaining the focus and discipline necessary to guide your portfolio through the most challenging market cycles.

SET FINANCIAL OBJECTIVES

Your financial adviser meets with you to help you develop an investment strategy based on your specific goals, time horizon, liquidity needs and tolerance for risk and volatility as outlined in your investment policy statement.

DEFINE INVESTMENT STRATEGY

Based on your input, your financial adviser recommends an asset allocation model designed to achieve desired return outcomes within specified risk parameters.

EVALUATE AND SELECT INVESTMENTS

Your financial adviser helps you implement your asset allocation by selecting appropriate investments and constructing a properly diversified portfolio.

ONGOING REVIEW

Your financial adviser reports on your investment performance and provides advice on adjustments to address changing circumstances and conditions.


Robust investment processWe adhere to a strict portfolio construction methodology which is founded in a deep understanding of client needs, emphasises the importance of asset allocation, incorporates insight from a broad range of sources, both proprietary and external, and is acutely aware of the importance of risk management.

CASH

INTL.SHARES

BONDSPROPERTY

CREDIT

AUST. SHARES

CONSTRUCT IPS AND INVESTMENT

STRATEGY

STRATEGIC AND TACTICAL ASSET

ALLOCATION

IMPLEMENTATION OF INVESTMENT

STRATEGY

ONGOING REVIEW PROCESS


Rigorous filtering processMorgan Stanley delivers a rigorous manager selection process that has been refined over many years and is designed to inspire confidence.

• Leading research and insights – industry leading and award winning research covering more than 3,000 companies globally.

• Rigorous analysis – less than 10% of the universe of 14,000+ investment managers meet our standards for platform inclusion.

• Robust governance – manager decisions are governed by an experienced committee that meets at least twice weekly.

• Ongoing monitoring – investment products and managers are continually reviewed, with multiple points of contact.

• Extensive library of research – made available to clients and their advisers.

Asset allocation strategyMorgan Stanley firmly believes asset allocation is the most important determinant of portfolio performance over the long term and as a result we devote a significant amount of intellectual capital to the process. Our local research team includes an asset allocation specialist who is responsible for taking the broader insights delivered by Morgan Stanley’s global strategists and economists and applying them to Australian market conditions and investors.

There are two key components of our asset allocation strategy.

Strategic asset allocation Strategic asset allocation (SAA) takes a longer term view of asset class risk and return characteristics with the objective of meeting clients’ risk tolerances and return goals. We conduct a formal review of our SAA every 12 months.

Tactical asset allocation Tactical asset allocation (TAA) seeks to exploit short term opportunities within asset classes to add additional value above that of the rest of the market. We conduct a formal review of our TAA on a quarterly basis; however, TAA changes can be implemented at any time.



Sustainable investingAt Morgan Stanley, we believe the solutions to global challenges will be fuelled by private capital as much as donor funds. Every investor has a role to play – even organisations that operate in the not-for-profit sector.

Creating sustainable client portfoliosWe’re committed to constructing client portfolios that deliver financial goals as well as positive social and environmental outcomes – and we don’t believe you need to trade one off against the other. We’re able to cater for the full spectrum of sustainable investing approaches. Depending on client needs and attitudes, we’re able to deliver portfolios through:

• values alignment – intentionally avoiding investments based on specific criteria

• environmental, social and governance (ESG) integration – proactively considering ESG criteria alongside financial analysis to identify opportunities and risks

• thematic exposure – focusing on themes and sectors dedicated to solving sustainability-related domestic and global challenges

• impact investing – allocating funds to private enterprises structured to deliver specific positive social and/or environmental impacts.

Institute for Sustainable InvestingThe Morgan Stanley Institute for Sustainable Investing is dedicated to accelerating the adoption of sustainable investing, which seeks to deliver both competitive financial returns and positive environmental and social impact.

Sustainable investingThe Institute develops and facilitates access to innovative and scalable financial products to enable adoption of sustainable investing strategies across investor types and asset classes.

Thought leadershipThe Institute produces and develops informative analysis and curates opinions from firm, industry and issue experts to inform and empower investors.

Capacity buildingThe Institute supports programs and strategic partnerships that train and develop the next generation of sustainable investing leaders.

Local expertiseLocally, our head of research and investment strategy for our Australian wealth management business – Nathan Lim – has a long history and outstanding expertise in sustainable investing. Prior to joining Morgan Stanley, Nathan was portfolio manager for Australian Ethical Investments. Not only is Australian Ethical Investments one of the most respected managers in the sustainable investing industry but the fund Nathan managed was recognised as Best International Fund of the Year in 2014. Nathan has a deep commitment to the inclusion of environmental, social and governance factors within financial analysis.


GovernanceThe importance of appropriate governance structures can’t be overstated. If you need additional expertise or a fresh perspective, our specialists can help.

Your investment policy statementIt’s important to establish an investment policy statement in order to provide structure to the decision making process.

Today’s increasingly complex investment landscape places significant pressure on the fiduciaries overseeing the investment pools of charities, endowments and foundations. Many are not only re-examining their current investment decision making practises, but also looking to ensure that those practises allow for enough flexibility in implementation to maximise the likelihood of investment success. Recognising the increasing importance of the investment portfolio success to the needs of the broader organisation, more fiduciaries are taking a holistic view, spending as much time on issues such as risk management, good governance and spending policy as on asset allocation and investment strategy. A clearly articulated investment policy statement serves as the foundation of an integrated and aligned oversight process.

What an investment policy statement isAn investment policy statement is a client-specific document designed to address the objectives, constraints, unique circumstances and overall oversight procedures that govern investment-related activities within the investment programs of the organisation. A good investment policy statement will clearly define the responsibilities of all parties involved including: the trustees, the investment committee, the investment advisor, and the custodian. It will present the portfolio’s financial objectives within the context of how much risk the trustees are willing and able to bear. A well written investment policy statement will typically address the following subjects:

• Purpose and scope.

• Definition and duties.

• Objectives.

• Strategic asset allocation framework.

• Rebalancing and spending policy.

How we can helpHaving a well-defined and clearly-articulated investment policy statement is vital in today’s investment landscape. It fills a vital role in helping to lay the foundation for your overall governance structure and ensures that all fiduciaries are fulfilling their obligations, resulting in an increased probability that you will successfully meet your objectives. Our team has extensive experience working with similar clients in this regard.


Safeguards Part of your fiduciary duty is ensuring your partners adhere to the highest possible governance standards. Morgan Stanley maintains a comprehensive corporate governance protocol, which ensures compliance with our general obligations under the Corporations Act 2001, ASIC Market Integrity Rules and Rules of the ASX Group.

Our Responsible Executives supervise the design, implementation, functioning and review of all operations and processes for compliance with regulatory requirements.

Morgan Stanley has an established Board that is responsible for overseeing our risk management systems, internal controls and processes and external audit.

Morgan Stanley has a range of practical processes designed to further protect the interests of clients. We have implemented a tight control framework including a robust system for ensuring the assets purchased on behalf of clients align to our understood and agreed assessment of their risk profile and objectives. This is done on account opening and on a daily basis to ensure transactions and market movements don’t inadvertently push a client into a risk position that is inappropriate for them based on our understanding of their circumstances.

WE HAVE AN ARRAY OF CONTROL SYSTEMS, INCLUDING:

portfolio analytics, modelling and

reporting

trade execution and settlement controls

client account management

processes

regulatory compliance framework

proprietary risk management

systems designed to ensure suitability of

client assets


Reporting capabilities and technologyMorgan Stanley has invested heavily in leading proprietary technology solutions to provide both advisers and their clients the tools they need to reliably and efficiently monitor and manage investment portfolios.

Online, web based investment portfolio management servicesOur client-facing technology provides you with the ability to monitor your portfolio holdings, view transactions, customise reports, create consolidated account groups, and review monthly statements. Clients can also view intraday market value changes, create ‘watch lists’ and access market data and research.

We are happy to provide more detailed information on our platforms and technology upon request.

Quality reporting documentationSafeguarding the financial health of your organisation is one of the most important responsibilities the board of a not-for-profit organisation will face. As part of our service to you, we will provide reporting that will help you meet your obligations and operate in accordance with your investment policy statement.

Portfolio reports are updated daily, and can be accessed via a secure website at any time. We will also provide detailed monthly, quarterly and annual audited reports that will allow you to review the ongoing investment performance.

Our standard reporting includes:

• portfolio valuation

• asset class allocation

• portfolio performance

• investment movements

• income and tax credits

• transaction history

In addition, we’re able to provide you with multi-currency reporting for your international investments. We’re happy to provide samples of our different reporting formats on request.


Outsourced expertiseThrough our work with not-for-profit groups, we have built an extensive network of specialist resources that we’re able to refer our clients to, or engage on their behalf.

In the current challenging and competitive environment, you must look to continually strengthen your governance, increase the efficiency of your operations and achieve consistently improving, measurable results.

At Morgan Stanley, we serve as an experienced and capable ally in these efforts. Our team is able to engage a broad range of specialists to help not-for-profit organisations refine and implement their strategies. We can help you address some of the most pressing challenges facing your organisation.

At Morgan Stanley, we have previously helped our clients engage specialist resources to help with a range of needs, including:

• Professional leadership

• Board development and governance

• Outsourced administration services

• Formulating strategy

• Improving governance

• Streamlining operations

• Building networks and connections

• Fundraising techniques

Begin your journey A relationship with a Morgan Stanley adviser is distinctive. Focused exclusively on your needs, this relationship commits Morgan Stanley’s resources to achieving your goals. We’re excited about the prospect of working together and look forward to learning more about how we can apply our expertise to help you achieve your objectives.

This communication is made by Morgan Stanley Wealth Management Australia Pty Ltd (“Morgan Stanley Wealth Management”) (ABN 9 009 145 555, AFSL No. 240813), a participant of ASX Group. Morgan Stanley Wealth Management is a member of the Morgan Stanley group.This communication is not intended as an offer or solicitation in relation to any particular financial product. Certain financial products may only be acquired through a formal offering document (such as a prospectus or product disclosure statement), which you should read before de-ciding to invest. Some of Morgan Stanley Wealth Management’s products and services are only available to professional or sophisticated inves-tors or wholesale clients as defined in the Corporations Act 2001 (Cth). You should read our Financial Services Guide (“FSG”), available at www.morganstanley.com.au, before deciding whether or not to acquire or use Morgan Stanley Wealth Management’s financial services.

© 2016 Morgan Stanley Wealth Management Australia Pty Ltd

www.morganstanley.com.au

SydneyLevel 26, Chifley Tower 1800 808 576

MelbourneLevel 14, 120 Collins Street 1800 804 697

AdelaideLevel 4, 2 King William Street 1800 812 298

BrisbaneLevel 34, 71 Eagle Street 1800 777 602

PerthLevel 11, Exchange Tower 1800 065 117

Documents

Investment and Advice Services for Not-for-Profit Organisations