2014 Annual Report 360° ethical investing > 10 UCA Funds Management 2014 Annual Report Our strategy...

2014 Annual Report 360° ethical® investing > www.ucafunds.com.au

2 UCA Funds Management 2014 Annual Report

Table of contents

About us 5

Statement from the Chairperson and Chief Executive Officer 6

2014 under the spotlight 8

Our strategy 9

Our report 12

> About the report 12

> Restatements 13

> Determining materiality 13

> Our stakeholders 13

> Clients 13

> Social issues 15

> Governance 15

> Compliance 16

> Discrimination 17

> Investing ethically 17

> Investment team 24

UCA Funds Management 2014 Annual Report 3

Financial performance 26

> Fund performance tables 28

Continued business efficiency 29

> Client communication 29

> Valuing people 30

> Employee satisfaction 30

> OH&S injuries and incidents 32

> Human rights 32

> Carbon footprint 33

> Paper usage 33

Our clients 34

> UnitingCare Harrison 34

> Commission for Mission 35

GRI G3.1 Standard Disclosures and performance indicators 36

Industry affiliations 43

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360° ethical® investingMore than just a phraseIt may be a surprise that UCA Funds Management is 30 years young. In fact, we are Australia’s first dedicated ethical funds manager.

With this experience we have developed 360° ethical® investing, which is represented by four principles we strive for.

To maintain consistently competitive investment returns.

To give back our operating surplus to community services, advocacy and mission-based activities.

To adhere to a clearly enunciated, integrated ethical investment policy.

To be a leading example of how an ethical financial institution should operate.

360˚ethical®

investing

> www.ucafunds.com.au/360


About us

About us

Our visionTo be the fund manager of choice for ethically minded investors, and a leading example of how an ethical financial institution should operate.

Our missionUCA Funds Management’s mission is to provide professional funds management and competitive investment returns for personal investors, charities and faith-based organisations, as well to support The Uniting Church in Australia (the Church).

UCA Funds Management upholds the ethos of the Church through responsible investment practices, prudent capital management, and active community partnerships.

Who we areUCA Funds Management is a social enterprise backed by the considerable assets, resources and ethos of the Church. We are Australia’s first dedicated ethical funds manager and since 1985 we have managed investments and treasury services for charities and faith-based organisations as well as their members. Today we have more than $966 million in funds under management.

A total of 23 staff work within our corporate office at 130 Little Collins Street, Melbourne, Victoria.

UCA Funds Management is a company limited by guarantee and the Manager for the following funds.

Funds for charitable entities with tax exemption status:

> UCA Capital Guaranteed Enhanced Cash Portfolio

> UCA Growth Portfolio

> UCA Australian Equities Portfolio

Funds for individuals, self-managed superannuation funds and corporates:

> Uniting Growth Fund

> Development Fund

> Home Endowment Fund (for Church ministers)

> Funeral Fund

Investing ethically

360° ethical® investing represents our four principles:

> To maintain consistently competitive investment returns.

> To adhere to a clearly enunciated, integrated ethical investment policy.

> To be a leading example of how an ethical financial institution should operate.

> To give back our operating surplus to community services, advocacy and mission-based activities.

These four principles make up who we are. Investing within the framework of the Ethical Investment Policy, we strive to achieve the best possible results for investors.


Abou

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Stat

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Statement from the Chairperson and Chief Executive Officer

2014 in review The 2014 calendar year was another successful year for UCA Funds Management stakeholders. The backdrop for 2014’s investment performance was the continuation of very low official interest rates, which remain at a 60-year record low. The Reserve Bank of Australia cash rate remained at just 2.5 per cent throughout the year. The Australian sharemarket paused after two strong years of rises, recording an increase of 0.8 per cent (as measured by the S&P/ASX300 Accumulation Index). Another key change was a major fall in the Australian dollar from USD $0.89 at the start of the year to USD $0.82 at year’s end; a decline of 8.2 per cent.

In this environment our cash funds (the UCA Capital Guaranteed Enhanced Cash Portfolio, Development Fund and Funeral Fund) did relatively well, recording income distributions generally above the level of cash management accounts and one-year term deposits. The UCA Growth Portfolio benefitted from an increased allocation to international shares and strong returns from listed property trusts – both of which outperformed Australian equities. Income distributions from all funds were at or close to their forecast, although they were lower than in prior years.

Funds under management grew by 7 per cent for the year to exceed $966 million. This growth was mainly due to new funds from charity and faith-based clients. This flowed through as an increase in management fees, which (combined with a modest rise in expenses) facilitated a 13 per cent increase in our grants to $3.23 million. In addition, we have now accumulated $1.79 million in capital reserves which is available to support our operating capabilities and provide further grants to The Uniting Church in Australia, Synod of Victoria and Tasmania (the Synod).

We made progress on the regulatory changes involved in becoming a ‘fully-fledged’ commercial fund manager, albeit one that remains a non-profit, faith-based entity. We plan to complete this project in 2015.

In October we conducted our biennial client survey about UCA Funds Management services. The survey attracted a higher response rate of 11 per cent (from 8 per cent in 2012) and indicated a very high level of overall satisfaction – again averaging over 90 per cent, with 22 per cent providing comments and suggestions. However, in the face of ongoing change management initiatives and the retirement of key executives, our staff satisfaction levels fell. As a result, we will enhance training and development to equip management and the UCA Funds Management team as a whole to manage change and be more satisfied with their work environment.

2015 strategy and goalsThe 2014 calendar year marked the first year of our new three-year strategic plan to establish UCA Funds Management as:

> A recognised leader in ethical investing.

> A social enterprise that operates as a commercial funds management business.

> A specialist in managing funds entrusted for supporting mission, retirement income and personal savings (outside superannuation).

As with any three-year plan, its second year is typically where an organisation continues to adapt to change and makes strides towards strategic goals. Our organisation is a case in point.

The key financial indicators relating to this plan are on track. During 2015 we expect to reach $1 billion in funds under management (barring a major downturn which negatively impacts on financial markets and investor confidence). Budgeted grants to the Synod have been increased by 8 per cent, with a further 10 per cent increase for 2016 reflected in the business plan. This ensures that the mission of the Church benefits from the execution of this strategy, even though there are significant costs associated with upgrading our business model.


About usStatem

ents

Richard Carter

Director Chairperson

Michael Walsh

Chief Executive Officer

Left to right: Chairperson Richard Carter and Chief Executive Officer Michael Walsh

The interests and concerns of our major customers – charitable and faith-based organisations – are reflected in our efforts to support and develop ethical investing. While we are a small organisation with limited resources, we do manage funds for a large number of Australian mission focussed entities. Therefore, we are in a good position to improve the level of collaboration between ethical investors, charities and faith-based organisations in order to support positive environmental, social or other ethical outcomes. A current example of this is our collaborative work with community organisations and other ethical investors to engage with the payday lending sector.

We also see our collective experience in managing endowments, reserves and the working capital of non-profit organisations as a valuable source of information to assist these organisations in managing the ongoing challenge of financial sustainability. Our communications throughout the year will therefore emphasise how we see our clients can best address this challenge through their financial management practices.

The UCA Funds Management business ostensibly has a new management team, one with the commercial skills and experience to reach this year’s objectives. Their focus for the year ahead is to follow the path outlined in our strategic plan and to lead the whole team to provide a high standard of investment stewardship and maintain excellent customer service for investors.

We wish to thank the staff and fellow Board members for their professional and skilled input and to our investors for ongoing support through the year.


2014

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2014under the spotlight

+ 3.95%UCA Capital Guaranteed Enhanced Cash Portfolio

+ 8.22%UCA Growth Portfolio

+ 3.10%UCA Australian Equities Portfolio

+ 4.54%Uniting Growth Fund

+ 3.50%Development Fund and Funeral Fund

Competitive returns

92%of clients would recommend UCA Funds Management to family and friends.

Highlights

> Record operating surplus, grants and capital reserve.

> Maintained greater than 90% client satisfaction.

> Enhanced Ethical Investment Policy to include fossil fuels and a more relevant materiality threshold.

> Upgraded communications materials, marketing collateral and Offer Documents.

> Increased market presence and brand awareness through advertising, sponsorships, networking and presentations.

$966 million

Funds under management +7%2014

$900 million2013

$2.85 million

Grants to The Uniting Church in Australia

+13%2014 $3.23 million2013


Our strategy

Our strategy

Past, present and futureOur vision is to be a leading example of how an ethical financial institution should operate. By applying the principles of 360° ethical® investing, we have grown to be recognised as one of Australia’s largest dedicated ethical fund managers.

Looking forward, our strategy will see UCA Funds Management become a key pillar in the ethical investment arena as we apply for a licence as a responsible entity with the Australian Securities and Investments Commission and register two funds as managed investment schemes to further enhance their market appeal.

Holding an ever increasing presence in the ethical investment community, a range of market briefings, webinars and events have been developed for 2015 to further increase awareness of our brand and services so that, in turn, we can continue to support the mission of The Uniting Church in Australia and our clients.


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The four pillars marketing strategy In 2014, we continued to implement a four pillars marketing strategy to strengthen our brand and increase funds under management. The strategy contains four areas of focus:

> Advertising

> Sponsorships

> Networking

> Visits and presentations

Advertising

Expanding our brand’s reach was a priority when planning the 2014 advertising program. We branched into a number of new advertising avenues including online and magazine advertising with Pro Bono Australia. For the first time, we launched a campaign to encourage staff of The Uniting Church in Australia, Synod of Victoria and Tasmania (the Synod), to invest with UCA Funds Management. New campaigns for personal investors are planned for 2015.

Sponsorships

Event sponsorships allow us to support our clients as well as mix with peers in the not-for-profit and ethical investment sectors. In 2015, we were sponsors for:

> Responsible Investment Association Australasia (RIAA) Conference

> Connections UnitingCare Anti-Poverty Awards

> ESG Research Australia Awards

> Blake Art Prize

> Financial Planning Association Professional Development Luncheon

We also sponsored the Givewell Forum which was an event held across two weeks and five states. Chief Executive Officer Michael Walsh was a speaker at many of these events.

Networking

We attended many different types of events in 2014 which allowed us to network with peers in the not-for-profit sector, meet potential clients and further expand our brand.

Visits and presentations

In 2014, we conducted 98 visits or group presentations to existing or potential clients. The visit program will continue to increase in 2015 with the recent appointment of a dedicated Business Development Manager.

Billanook City9For the past three years, UCA Funds Management has been visited by Billanook College year 9 students during their annual City9 program which allows students to explore Melbourne city and learn about groups within the Synod.

During their 2014 visit to UCA Funds Management, the students embarked on “The Great Ethical Race” (inspired by the television show “The Amazing Race”) as a practical way to learn more about ethical investing. Race tasks included finding companies and groups that were able to invest with UCA Funds Management and taking photos of items within the city that represented ethical industries we could invest in (such as recycling and community services).


Our strategy

Table 1: Funds under management – $966 million

Table 2: Source of investor funds

Uniting Church Congregations

Uniting AgeWell

Retail Investors: Uniting Growth Fund

Retail Investors: Development Fund and Funeral Fund

Church Synod Reserves

Other Uniting Church Synods and Assembly

Other charities and faith-based organisations

Schools/Kingergartens

UnitingCare Agencies

UCA Capital Guaranteed Enhanced Cash Portfolio Reserve

3.59%

15.25%

1.77%

5.26%

28.46%

15.42%

6.86%

13.60%

5.88%

3.91%

UCA Australian Equities Portfolio(external investors)

UCA Growth Portfolio

Ministers’ loans

Home Endowment Fund

UCA Capital Guaranteed Enhanced Cash Portfolio

Development Fund

Uniting Growth Fund

3.58%

50.25%

0.64%

29.48%

0.81%

15.21%

0.03%

As at 31 December 2014


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About the report This is UCA Funds Management’s 2014 Annual Report and eighth sustainability report, intended to communicate sustainability efforts and provide an overview of our performance to stakeholders. We have maintained a self-declaration Global Reporting Initiative (GRI) Application Level B.

The annual reporting period covers 1 January to 31 December, 2014. The report is limited to the activities of UCA Funds Management and its controlled entities, and the company only operates in Australia. For quantitative measures of performance, the report includes data from 2011 to 2014 for year-on-year comparison and to help identify trends. The financial data in this report was prepared in accordance with International and Australian Accounting Standards based on unaudited management accounts.

We have also applied the GRI Reporting Framework’s Guidance which defines our report content and associated principles. Additionally, we have integrated the following six principles of the United Nations Principles of Responsible Investment into this report:

1. Incorporate ethical, social and governance (ESG) issues into investment analysis and decision-making processes.

2. Be active owners and incorporate ESG issues into our ownership policies and practices.

3. Seek appropriate disclosure on ESG issues by the entities in which we invest.

4. Promote acceptance and implementation of the Principles within the investment industry.

5. Work together to enhance our effectiveness in implementing the Principles.

Our report


6. Report on our activities and progress towards implementing the Principles.

Incorporating these principles involved communicating with our key stakeholders to gain insights into important issues pertaining to UCA Funds Management.

We review our policies and processes to ensure we contribute positively towards the community, and environment, while generating economic performance for investors. Each year we provide grants to The Uniting Church, Synod of Victoria and Tasmania, to financially support its mission.

RestatementsThere were no restatements in 2014.

Determining materialityIn 2014 we undertook an extensive materiality review to ensure this report would reflect the organisation’s significant economic, environmental and social impacts, and cover areas of interest that may substantively influence the assessments and decisions of our stakeholders.

The process was two-phased. Team representation from management completed a detailed materiality questionnaire. A shortlist of possible GRI indicators was created, one that proposed both the inclusion and exclusion of current indicators. Additional inputs to this process are the customer survey and annual staff survey. Assessments were also based on the marketplace and the social, political and risk environments.

We continue to report on all material issues identified as being important to our business and stakeholders.

Our ethical investment mandate is extensive, and it is applied stringently to constituent companies and other securities that form part of our investment portfolios. What we expect from the companies we invest in is also what we expect from ourselves.

Our stakeholdersThis report is a communication tool written to allow stakeholders the opportunity to review our economic, environmental and social performance. Our largest stakeholder is the Synod.

By evaluating the dynamic environment in which UCA Funds Management operates, we ensure stakeholder concerns are addressed and managed on an on-going basis. With a broad range of stakeholder expectations, this can result in issues being quite complex. We endeavour to manage these expectations in a transparent and fair way.

Our stakeholder engagement process allows us to track and manage current and emerging issues from internal and external stakeholders. These issues not only include our own direct impacts but impacts from companies and industries we associate with. Refer to Table 3 (Stakeholder engagement) on page 14.

To determine the most significant issues to report, we prioritised relevant and significant issues relating to UCA Funds Management and our stakeholders.

Additionally, during the year we updated some of our product offerings, policies and operational activities.

ClientsIn 2014, we sent a customer satisfaction survey to all our clients. Eleven per cent (770 clients) completed the survey. The survey revealed:

> Ninety-three per cent agreed or strongly agreed customer service staff are courteous and professional.

> Ninety-two per cent would recommend UCA Funds Management to friends and family.

> Ninety-one per cent agreed or strongly agreed the structure and layout of the Annual Report was easy to follow.

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Stakeholder group Reason for engagement Engagement in 2014

Investors Primary external stakeholder

> Direct customer engagement

> Quarterly newsletters

> Investment updates

> Marketing materials

> Presentations

> Website publications

> Annual Report

Staff Primary internal stakeholder

> Workplace agreement

> Performance reviews

> Training and professional education

> Staff satisfaction survey

Regulators Compliance

> Annual return

> Audits

> Written submissions

Selected equity investments Support company behaviour

> Active shareholder engagement

> Participation in industry associations

Excluded equity investments Modify company behaviour

> Direct engagement

> Participation in industry associations

Professional industry associations

Affiliation with peers and industry

> Industry group memberships

> Focus groups

> Surveys, conferences and presentations

> Regular liaison on current issues

Socially concerned entities, volunteers/community groups

Primary objective of ethical investment strategies

> Newsletters

> Website publications

> Contribution to public debate

> Community sponsorship

> Industry forums

Suppliers External stakeholder > Direct procurement of services or

resources

> Legal, tax, auditing and reporting advice

Table 3: Stakeholder engagement

There was virtually no negative feedback about our customer service. Suggestions for improvement included online account balances, product enhancements and grant details.

We are happy to report that we received only one complaint in 2014. Our complaint process is well documented and is accessible on our website.


Our report

Social issuesEach year, the Justice and International Mission (JIM) unit* conducts a survey on social issues causing the most concern to Uniting Church members. The following is a list of the top 10 responses for 2014:

The list is similar to the previous year, with the top five issues a repeat of the 2013 results. For the last three years, asylum seekers and refugees have remained the top social issue of concern. There was some minor shuffling in social issues for the rest of the list, with gambling reform and fair trade new additions in 2014.

The JIM unit will continue to give a lot of energy to combatting slavery and trafficking issues, as well as ensuring goods imported to Australia are not produced using slavery. Another focus will be on how tax avoidance deprives developing countries of vital revenue. Work in this area will contribute to a global movement seeking to ensure developing countries can raise the resources required to be self-sufficient.

Other social issues raised revolved around thinking about what we want Australia to be, with particular emphasis on how we can assist the disadvantaged, those suffering mental health problems or living in poverty.

* The JIM unit is part of The Uniting Church in Australia, Synod of Victoria and Tasmania, Commission for Mission. UCA Funds Management grants

support JIM unit’s funding.

GovernanceOur investors trust us to manage funds on their behalf. In return, we aspire to the highest levels of good governance.

Our Board of Directors sets a high standard with their strategic direction while maintaining accountability to all stakeholders. The structure, composition and diversity of the Board is essential to its effectiveness. With the exception of the Chief Executive Officer, all Board members are independent of the activities of UCA Funds Management. Non-executive Directors may not serve for a period greater than 10 consecutive years.

The Board has the ultimate oversight of our sustainability practices, Ethical Investment Policy and this report. It comprises of three committees: Audit and Compliance, Investment, and Remuneration and Nomination. The Board and each of the Committees have a charter which provides strategic guidance and effective oversight of management.

The Board and each Committee undertakes an annual performance review to allow Directors an opportunity to reflect on their effectiveness. Directors who are to be re-elected are peer reviewed every three years. All Directors with the exception of recent appointments have been peer reviewed in the last three years.

In May 2014, Stephen Taylor retired from the Board after 10 years of service. During this time he was a member and the Chair of the Investment Committee, and a member of the Remuneration and Nomination Committee.

After two years of service, Kerrie Howard resigned from the Board in July 2014.

UCA Funds Management appointed Jane Bell and Lindsay Mann as Directors in September 2014.

1. Asylum seekers and refugees

2. Climate change and reducing emissions

3. Poverty in Australia

4. Overseas poverty

5. Mental health reform

6. Gambling reform

7. Issues affecting Indigenous Australians

8. Fair Trade

9. Combatting human trafficking and slavery

10. TAFE cuts


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ComplianceWe use our compliance framework to improve processes and further develop our products. All aspects of the business are reviewed and approved by our Risk and Compliance Manager, who provides a detailed report to the Audit and Compliance Committee and, ultimately, the Board of Directors. To assist the Board, an action list was created and is maintained to ensure annual reviews are taken. This includes an annual review of policies, charters, insurance and all material issues pertaining to our operations and regulatory requirements.

This framework also monitors internal controls relative to legislative compliance, including our Ethical Investment Policy. UCA Funds Management complies with the Corporations Act 2001 and Regulations, the Anti-Money Laundering and Counter-Terrorism Financing Act 2006, and International and Australian Accounting Standards. UCA Funds Management has developed an anti-money laundering and counter-terrorism financing risk awareness training program that all staff complete annually. We uphold and adhere to the standards of the Responsible Investment Association of Australasia (RIAA) and the United Nations Principles of Responsible Investment (UNPRI).

UCA Funds Management undertakes an independent audit and assurance engagements of our financial statements for each fund and portfolio, including those where it is not required. This provides transparency and confidence in reporting. The independent audit is reported through the Audit and Compliance Committee to the Board.

Director name Time in office Position Independent Committee membership

Richard J Carter 8 years Chair, non-executive YesInvestment, Remuneration and Nomination Committee (Chair)

Jane C Bell Appointed 1 Sept 2014

Director, non-executive

YesAudit, Risk and Compliance Committee

John Etherington 7 yearsDirector, non-executive

YesAudit, Risk and Compliance Committee (Chair)

Daryl F Hawkey 8 yearsDirector, non-executive

YesAudit, Risk and Compliance, Remuneration and Nomination Committee

Kerrie A Howard2 years

Retired 29 July 2014



Terry C McCredden 1 year


Yes Investment Committee

Lindsay R Mann Appointed 1 Sept 2014


Yes Investment Committee

Richard G Moore 9 yearsDirector, non-executive


Stephen J Taylor10 years

Retired 29 May 2014


Yes Investment Committee (Chair)

Gayle E Wilson 2 yearsDirector, non-executive

YesInvestment (Chair), Remuneration and Nomination Committee

Michael Walsh 2 years Director, executive NoRemuneration and Nomination Committee

Table 4: Board of Directors


Our report

DiscriminationUCA Funds Management works within the ethos and policies of The Uniting Church in Australia. While upholding the values of the Church, we provide an environment where all stakeholders are treated with dignity and respect, and have zero tolerance towards discrimination.

During the year no incidents of discrimination were reported.

Investing ethicallyUCA Funds Management has been a signatory of the United Nations Principles for Responsible Investment (UNPRI) since 2007. UNPRI is an investor initiative in partnership with the United Nations Environment Program finance initiative and the UN Global Compact, working together to put the six Principles for Responsible Investment into practice.

The various elements of our approach to ethical investing are outlined below under the heading of each relevant UNPRI Principle.

Principle 1: We will incorporate ESG (ethical, social and governance) issues into investment analysis and decision making processes

Our 360° ethical® investing approach is grounded in four beliefs defined by investor expectations, professional practice, ethical financial institution best practice and economic value created to support our community and broader society.

Firstly, a meaningful ethical investment policy needs a solid philosophical foundation and must be communicated in a manner that can be interpreted practically when constructing an investment portfolio. These attributes enable investors to evaluate how policies align with their values or mission. It also helps investment professionals to understand the nature of interaction between the ethical investment policy and investment process. UCA Funds Management operates under an Ethical Investment Policy adopted by the

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Synod based upon the Church’s ethos and Christian values. UCA Funds Management’s role is to interpret and uphold the policy and clearly communicate how it is applied in investment processes.

The second belief is that a financial institution illustrating a commitment to ethical investing can, and should, do so by applying this approach to all investments. UCA Funds Management’s methodology interprets how the Ethical Investment Policy applies to all classes of assets under management.

The third belief underpins the comprehensive nature of 360° ethical® investing and uses a range of proven ethical investment principles. In UCA Funds Management’s case this includes a negative and positive screen, constructive shareholder engagement, monitoring of our portfolio carbon footprint, ESG indicator, and proxy voting. Our use of each of these methods is presented in this report.

Fourth and finally, ethics should extend to the organisation presenting itself as an ethical investor. Ethics in a financial institution, such as UCA Funds Management, is demonstrated in its governance, remuneration structure and practices, workplace and customer culture and how it uses its profits in society.

UCA Funds Management’s vision is to be a leading example of how an ethical financial institution should operate.

During the year we initiated a review of the Ethical Investment Policy in partnership with the Synod’s Justice and International Mission unit. The revised policy was considered and adopted by consensus at the annual Synod meeting. The policy changes include a more workable definition of materiality when applying the negative screen, a more explicit positive screen and the inclusion of unconventional fossil fuel extraction or exports in the negative screen categories.

Negative screen

Quarterly monitoring of the core investment universe for Australian equities, the S&P/ASX 300, continued throughout the year and a revised list of excluded constituents was published on our website. The review, together with any new developments affecting a company, is presented at our weekly Investment Team meeting. Recommendations from this meeting are then submitted to the Investment Committee for consideration.

Investments outside the S&P/ASX 300 (such as smaller companies, mortgages and international shares) are ethically reviewed prior to being placed within the portfolio. This removes the need to screen their broader investment universe.

The companies in Table 5 were excluded from investment as at 31 December 2014. This now includes companies which are excluded under the fossil fuels policy. This comprises those with a material business exposure to the extraction or export of thermal coal, coal seam gas, shale oil or gas, tar sands oil and deep water drilling.

Positive screen

Part of our commitment to ethical investing is to invest at least 10 per cent of each portfolio in securities that have a positive social or environmental purpose. This process is now explicitly stated in the Ethical Investment Policy with a list of business activities that are seen as ‘positive’. This includes companies with a major business in clean energy, recycling, employment, sustainable agriculture, healthcare and community services.

Positive investments also include commercial mortgages over properties that are leased by community and healthcare providers, as well as loans to support the mission of UnitingCare agencies, Uniting Church affiliated schools, university colleges and Church congregations.

Our quarterly ethical review of the S&P/ASX 300 also identifies all companies regarded as positive. This enables a comparison between holdings in positive companies within the Australian equities component of each fund with its benchmark. This illustrates whether 10 per cent exposure to positive companies compares favorably with the benchmark.

Table 6 shows the the proportion of each relevant fund held in positive companies at 31 December 2014.

Our report


Company Excluded forAinsworth Game Technology GamblingAristocrat Leisure GamblingAustal ArmamentsAWE Shale gasBeach Energy Coal seam gasBHP Billiton Uranium mining, thermal coal Buru Energy Coal seam gasCoca-Cola Amatil AlcoholCash Converters International Lending practicesCrown GamblingDonaco International GamblingDrillsearch Energy Coal seam gasEcho Entertainment Group GamblingEnergy Resources of Australia Uranium miningHotel Property Investment GamblingLeighton Holdings Human rights (corruption)Oz Minerals Uranium miningOrica Environmental damagePaladin Energy Uranium miningRio Tinto Uranium mining, thermal coalSenex Engery Coal seam gasSilex Systems UraniumSino Gas & Energy Holdings Shale gasSkycity Entertainment Group GamblingSundance Energy Australia Shale gasSyrah Resources Uranium miningTabcorp Holdings GamblingTattersalls GamblingThorn Group Lending practicesTransfield Services Human rightsTreasury Wine Estates AlcoholWhitehaven Coal Thermal coalWoolworths Gambling

Table 5: Exclusion list as at 31 December 2014

Fund Positive investments (%)UCA Capital Guaranteed Enhanced Cash Portfolio 17.00UCA Growth Portfolio 18.05UCA Australian Equities Portfolio 16.62Development Fund 28.37Uniting Growth Fund 14.56S&P/ASX 300 8.87

Table 6: Positive investments

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The positive screening process is designed to enable an increased exposure to positive companies over time. All positive companies within the S&P/ASX 300 are reviewed under an investment quality filter. Those that pass the filter are then included in the model Australian equities portfolio (a list of 50 – 70 stocks that we closely monitor).

This approach increases the depth of our research on positive companies, which can then be included in the investment portfolio if they meet further selection criteria.

During the year we increased the exposure to international equities to 15 per cent of the UCA Growth Portfolio. For this asset class a selective approach is adopted where each company needs to be able to add value to the Portfolio in a way the Australian equities component cannot do. Part of the positive screening process is to target positive overseas companies whose business model is not well-represented in Australia. Three examples are US health services supplier Cardinal Health, healthcare and LED lighting manufacturer Philips NV and electric car maker Tesla Motors.

A list of all investments held in the portfolios is presented in Table 10.

Fossil Fuels Policy development

In developing this aspect of the ethical policy it was recognised that different fossil fuels have significant variations in their greenhouse gas emissions profile and other environmental risks involved in extraction and processing. Some fossil fuels are also essential in the manufacture of products that are a vital part of the transition to more sustainable resource usage (e.g. coking coal for steel, oil for plastics).

That said, it was important that the policy accept the need for a quicker transition to cleaner energy practices. Rather than divest from the extraction of all fossil fuels, we adopted a policy that embraces society’s transition to cleaner energy. This approach discourages emissions-intensive and unconventional fossil fuels. It also actively encourages investment in cleaner conventional fossil fuels with extraction processes proven to be safe. We believe this is a more effective methodology to actively support the transition to cleaner energy.

Principle 2: We will be active owners and incorporate ESG issues into our ownership policies and practices

As each company is evaluated through strict investment and ethical criteria before it is selected for investment, it is unusual for our Investment Team to oppose company resolutions put to Annual General Meetings (AGMs). However if we do become uncomfortable with a company’s business or corporate governance, the shares would normally be sold.

During 2014, we continued to vote at all AGMs where we held voting interests on behalf of clients. Recommendations from Institutional Shareholder Services Proxy Research service are also taken into consideration when voting. We also adopted a policy of voting against a remuneration report where an individual’s remuneration exceeds 60 times Australian average weekly earnings. This is a simple, and admittedly arbitrary, benchmark on which we judge the fairness of executive remuneration in societal terms. With that, 18 resolutions were opposed.

The voting record for the year is presented in Table 7 and 8.

Constructive stakeholder engagement

Our constructive stakeholder engagement policy considers whether engagement is likely to be constructive in encouraging excluded companies to improve their practices and subsequently become eligible for investment.

In 2014 we extended our engagement plans for payday lending companies by forming a collaborative engagement group comprising financial counsellors, consumer advocacy groups, ESG researchers and other responsible investors. This group has met three times and we plan to begin a formal engagement process in 2015.


Our report

Nature of resolution opposed CompanyShareholder proposal regarding special shareholder meetings Home DepotShareholder proposal regarding employment diversity Home DepotAdoption of remuneration report Southern Cross MediaRemuneration of Non-executive Directors Carsales.comAdoption of remuneration report Flight Centre TravelApproval of proposed long-term incentive equity grant to CEO and MD

Federation Centres

Adoption of remuneration report Newcrest MiningAdoption of remuneration report AurizonElection of Director Sonic HealthcareElection of Director Fortescue MetalsGrant performance right to CEO and MD SeekGrant long-term incentive options to CEO and MD SeekRemuneration report Primary HealthcareElection of Director Primary HealthcareRemuneration report Westpac Banking CorpRemuneration report National Australia BankAdoption of remuneration report Australia and New Zealand Banking GroupResolution requisitioned to amend the constitution Australia and New Zealand Banking Group

2014 AGMs No. %Voted 40 100Not voted 0 0

Resolutions Voted forVoted

against AbstainedTotal 269 251 18 0% – 93 7 0

Table 7: AGM voting

Table 8: Companies opposed


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Principle 3: We will seek appropriate disclosure on ESG issues by the entities in which we invest

Portfolio carbon footprint

The UCA Australian Equity Portfolio (UCA AEP) has a low carbon footprint relative to the overall stock market. One reason for this is our negative screening process which excludes emissions-intensive companies, such as diversified mining companies and other companies which may have caused unacceptable environmental damage. The positive screen also contributes to this as carbon-intensive companies are not considered positive for the environment.

The extent of this low carbon footprint is also measurable. Stock exchange listed companies are divided into 22 industry groups under the Global Industry Classification Standard. The five industries that are the most carbon-intensive are Capital Goods, Energy, Materials, Transportation and Utilities.

A comparison of the UCA AEP exposure to those sectors, compared with the total exposure represented by the S&P/ASX 300 benchmark at 31 December 2014 is as follows:

Principle 4: We will promote acceptance and implementation of the Principles within the investment industry; and Principle 5: We will work together to enhance our effectiveness in implementing the Principles.

Engagement with the Responsible Investment sector

Throughout 2014, UCA Funds Management extended its engagement with other ethical investors through attendance and presentations at sector forums, as well as through sponsorships and training. New members of the management and investment team emphasised this engagement process as part of their second year of employment. Two of our managers completed studies with the Responsible Investment Academy.

We again sponsored the annual Responsible Investment Association of Australasia Conference, where we chaired a panel discussion on the role of not-for-profit organisations in the responsible investment sector. Two further conference presentations were given on the specific investment issues facing charity and faith-based organisations, including their preference for ethical investing.

Principle 6: We will each report on our activities and progress towards implementing the Principles.

Plans for 2015

Our plans for ethical investing in 2015 include:

> More staff undertaking Responsible Investment Academy training.

> The commencement of a formal constructive engagement program with the payday lending sector, with the aim of developing specific changes to business practices that this program would like companies to implement.

> The evolution of the process of engaging with companies excluded by the negative screen. We will initiate meetings to understand how certain companies are working on the negative social or environmental outcomes that prompted their exclusion.

Industry group UCA AEP (%) S&P/ASX 300 (%)Capital Goods – 0.47Energy 6.24 4.82Materials 6.42 14.82Transportation 2.47 3.99Utilities – 1.97Total 15.13 26.07

Table 9: Total exposure to carbon-intensive sectors


Our report

CompanyAustralian sharesAmcor Oil SearchAMP QBE Insurance GroupAurizon Holdings Resource GenerationCarsales.com ResmedCommonwealth Bank of Australia Scentre GroupCSL SeekFederation Centres Sims Metal ManagementFlexigroup Sonic HealthcareFlight Centre Travel Group Southern Cross Media GroupFortescue Metals Group StocklandGenworth Mortgage Insurance Suncorp GroupGoodman Group Telstra CorpGPT Group Toll HoldingsIluka Resources Reject ShopInvocare WesfarmersJB Hi-Fi Westfield CorpLend Lease Group Westpac Banking CorpNational Australia Bank Woodside PetroleumNewcrest MiningInternational sharesBerkshire Hathaway ITV PLCCardinal Health Johnson and JohnsonCME Group MastercardDanaher Corp Philips NVEcolab Tesla MotorsHome Depot Union Pacific CorpCash and fixed interest securitiesAustralia and New Zealand Banking Group Insurance Australia GroupAXA SA Mortgages and mortgage backed securitiesBank of Melbourne National Australia BankBank West Australia Seven Group HoldingsBendigo and Adelaide Bank Suncorp GroupCommonwealth Bank of Australia Swiss Re AGCommunity impact loans Westpac Banking Corporation

Table 10: List of all investments as at 31 December 2014

> The continuation of our involvement in Australia’s responsible investment sector through attendance at formal and informal gatherings and sponsorship of industry events. Our focus in this aspect will be to encourage involvement and represent the interests of charity and faith-based investors.

In implementing this plan, our aims are to encourage investment markets to recognise ESG factors as being integral to the investment process. We also aim to be recognised as a leader in ethical investing where the 360° ethical® investing approach is seen as best practice within Australia’s ethical investment sector.


Investment team

Ian Baster, Chief Investment StrategistB Econ

Ian formulates the investment strategies for the funds and oversees the management of all portfolios. With more than 40 years’ industry experience and 20 plus years with UCA Funds Management, Ian has a proven investment track record and extensive experience in stockbroking and the mining industry.

Thomas Hodson, Manager Investments B Bus, G Dip Eco, FINSIA, IMC, CFA

Thomas maintains our model portfolio containing the stocks we think are most attractive that fit in with our investment themes. He is also responsible for companies in the international equity portfolio. Thomas has more than 15 years’ experience in investment research and portfolio management in both domestic and global equities. Prior to joining UCA Funds Management, Thomas spent four years at Barclays (London) researching and managing global equities.

Noel Bryant, Senior Portfolio ManagerAdv Dip Option Theory [Chicago], CTA, CA[SA]

Noel manages the UCA Capital Guaranteed Enhanced Cash Portfolio and the Uniting Growth Fund. He also leads debates that formulate our voting intentions at Annual General Meetings. Noel has over 40 years’ experience in funds management and stockbroking, and has managed multi-billion dollar, fixed interest portfolios for major institutions in both South Africa and Australia, including arbitrage trading.

Tim Starke, Portfolio ManagerB Com, Accredited Derivatives Advisor Level 1 and 2, PS146, PRI RI Essentials

Tim manages the listed property trust portfolio within the UCA Growth Portfolio. He is also responsible for monitoring companies for compliance with the Ethical Investment Policy and our sustainability practices. Tim has more than 13 years’ experience with global institutions, and gained specialist knowledge in the management of investment instruments using complex option hedging strategies and trading scenarios.

Our

repo

rt

Chief Investment Strategist Ian Baster. Manager Investments Thomas Hodson


In 1993 Ian Baster hung up his stockbroker hat to become UCA Funds Management’s first Investment Officer. Striding into the Synod building at 130 Little Collins Street, his first thought may have been “We’re not in Kansas anymore” as he joined the small group that was UCA Funds Management – made up of two colleagues and a few support staff. Professionally dressed in his suit and tie, he was often mistaken for being lost as he walked around the building day-to-day. Although things were so different from the corporate world he knew, Ian was proud to be a part of a company with such an ethical and outward focus on the community and the world around it.

After talking with Ian about how things were, it is clear we’ve come a long way from our humble beginnings. Ian remembers starting with a mere desk phone and a shared fax machine two floors down, with our few staff scattered across two floors. An advisory task group met once a month to discuss all upcoming investment decisions. As for the investment team – well, Ian was it.

There were two key changes that gave UCA Funds Management the edge it needed to grow – the

establishment of a Board of Directors and internal investment decision-making.

Replacing the advisory task group, the introduction of a Board of Directors gave UCA Funds Management the level of governance and accountability it was missing. With Ian’s level of expertise on-board, all investment decisions moved under his management – allowing a more strategic investment approach focused on fund performance.

With these changes in place, UCA Funds Management could now compete with fund managers on Collins Street – offering the same level of professionalism and performance – while providing the ethical investment and community focus they did not.

Twenty-two years later, Ian is now Chief Investment Strategist. Feeling as though he’s achieved all he hoped for, we are now preparing for his eventual departure from UCA Funds Management. When asked if he is proud of what he’s achieved, he uttered a quick, modest reply: “I’ve just been doing my job”.

Our report

Senior Portfolio Manager Noel Bryant Portfolio Manager Tim Starke

A twenty-two year journey


Financial performance UCA Funds Management receives management and administration fees from its funds under management. From this it meets operating costs, provides grants and retains some working capital. Operating performance reached record levels in 2014 as the surplus of fees less costs reached $3.99 million which also provided for a record level of grants of $3.23 million.

This year’s direct economic value (generated by all of the funds under management) increased by 14 per cent enabling our capital reserve to increase to $1.79 million. The remainder of the surplus was granted to The Mission Support Fund of The Uniting Church in Australia, Synod of Victoria and Tasmania (the Synod).

Activities supported by this fund include:

> Coordination and support services for UnitingCare – Australia’s largest network of community service organisations.

> Advocacy programs developed or supported by the Synod’s Justice and International Mission Unit to improve social justice through corporate behaviour and public policy.

> Cross-cultural mission and worship.

> Community outreach services conducted by Uniting Church congregations.

> Infrastructure services, such as property management and insurance, across the Synod agency and congregation network.

Our

per

form

ance

(based on unaudited management accounts data)

Our perform

ance


Table 12: Statement of financial position

2014 2013 2012 2011$000’s $000’s $000’s $000’s

Total current assets 963,444 849,790 769,148 701,305Liabilities attributable to investors (961,657) (848,765) (768,799) (701,158)Capital reserve account (1,787) (1,025) (349) (147)Total liabilities and equity (963,444) (849,790) (769,148) (701,305)

This amount differs from the market value of total funds under management on page 8. This amount is based on the reporting entities that are administered and controlled by UCA Funds Management Limited (Other administered funds are not included).

> Liaison with Uniting Church-affiliated educational organisations including private schools, university colleges and kindergartens.

> Uniting Church Camping low-cost and environmentally aware accommodation and outdoor activity services.

> Uniting Journey’s culturally sensitive responsible travel services.

> Prison chaplaincy.

> Synod and Presbytery administration services.

The capital reserve represents accumulated current year and prior year savings. The funds are invested by UCA Funds Management for the purpose of regulatory and compliance requirements.

Table 11: History of key financial indicators

0

1.0

2.0

3.0

4.0

5.0

200

400

600

800

1,000

Funds under managementOperating costsOperating surplus

20142013201220112010200920082007200620052004200320022001200019991998199719961995

Ope

ratin

g su

rplu

s an

d co

sts

(mill

ions

) - A

UD Funds under managem

ent (millions) - AUD


Table 14: Summary of investment performance to 31 December 2014 This table shows the performance of each fund compared with both the strategic benchmark index and Morningstar category average of peer funds.

1 year %

3 years p.a. %

5 years p.a. %

10 years p.a. %

Since inception p.a. %

Inceptiondate

Uniting Growth Fund 4.54 10.71 5.81 6.36 8.06 Jul 2003Uniting Growth Fund Composite Index 4.99 12.53 6.20 7.13 – –Morningstar Investment Trusts Multi-sector Aggressive Category

8.44 15.47 7.90 5.71 – –

UCA Growth Portfolio 8.22 15.20 7.56 7.60 10.19 Jul 1985UCA Growth Portfolio Composite Index 8.08 15.21 7.36 6.46 – –Morningstar Investment Trusts Multi-sector Aggressive Category

8.44 15.47 7.90 5.71 – –

UCA Australian Equities Portfolio 3.10 13.30 6.08 7.13 10.78 Jan 1986S&P/ASX 300 Accumulation Index 5.30 14.70 6.48 7.38 – –Morningstar Investment Trusts Australian Equity Blend Category

4.28 14.17 5.77 6.78 – –

UCA Capital Guaranteed Enhanced Cash Portfolio 3.95 4.62 5.06 5.56 7.68 Jul 1985

UCA Cash Portfolio Composite Index 3.28 3.72 4.43 5.25 – –Morningstar Aust Short Term Fixed Interest Category Average

3.01 3.82 4.33 4.54 – –

Development Fund 3.50 4.22 4.63 4.95 6.30 #Funeral Fund 3.50 4.22 4.63 4.95 4.84 Feb 1997Morningstar Investment Trusts Australian Cash Category

3.09 3.85 4.27 4.67 – –

Table 13: Financial performance

2014 2013 2012 2011$000’s $000’s $000’s $000’s

Direct economic value generatedInvestment income 77,232 58,457 65,161 53,603Other income (7,857) 2,238 (3,698) 53Total direct economic value generated

69,375 60,695 61,463 53,656

Economic value distributedEmployee wages and benefits (2,787) (2,546) (2,202) (2,188)Operating costs (1,454) (1,521) (2,182) (1,913)Payments to providers of capital (61,142) (53,099) (54,985) (47,352)Payments to government - - - -Community investments* (3,230) (2,853) (1,892) (2,194)Allocation to capital reserve account

(762) (676) (202) (9)

Total economic value distributed (69,375) (60,695) (61,463) (53,656)Total economic value for the year – – – –

* This represents grants paid to The Uniting Church in Australia, Synod of Victoria and Tasmania.

Our

per

form

ance

# The inception of the Development Fund predates the Union of the Congregational, Methodist and Presbyterian Churches in 1977 to form The Uniting Church in Australia.


Continued business efficiency

Client communicationThroughout 2014 we continued to review and enhance our client communications, aiming to provide faster, more convenient information to clients and benefit the environment by decreasing our environmental impact.

> There was a 3 per cent increase in clients opting to receive communications via email.

> We enhanced Offer Documents and Additional Information Booklets to better communicate fund information and align with standards set by the Australian Securities and Investments Commission for registered managed investment schemes.

> A re-design project for all client forms began (to be completed in 2015), with a focus on increasing usability and creating brand consistency.

> We lengthened our hours of operation and added an after-hours telephone messaging service to improve client relations.

We have two key client communication targets for 2015 focused on efficiency and service:

> Increase the number of customers choosing to receive their correspondence via email by 5 per cent.

> Release online account access for clients.

Table 14: Summary of investment performance to 31 December 2014 This table shows the performance of each fund compared with both the strategic benchmark index and Morningstar category average of peer funds.

1 year %

3 years p.a. %

5 years p.a. %

10 years p.a. %

Since inception p.a. %

Inceptiondate

Uniting Growth Fund 4.54 10.71 5.81 6.36 8.06 Jul 2003Uniting Growth Fund Composite Index 4.99 12.53 6.20 7.13 – –Morningstar Investment Trusts Multi-sector Aggressive Category

8.44 15.47 7.90 5.71 – –

UCA Growth Portfolio 8.22 15.20 7.56 7.60 10.19 Jul 1985UCA Growth Portfolio Composite Index 8.08 15.21 7.36 6.46 – –Morningstar Investment Trusts Multi-sector Aggressive Category

8.44 15.47 7.90 5.71 – –

UCA Australian Equities Portfolio 3.10 13.30 6.08 7.13 10.78 Jan 1986S&P/ASX 300 Accumulation Index 5.30 14.70 6.48 7.38 – –Morningstar Investment Trusts Australian Equity Blend Category

4.28 14.17 5.77 6.78 – –

UCA Capital Guaranteed Enhanced Cash Portfolio 3.95 4.62 5.06 5.56 7.68 Jul 1985

UCA Cash Portfolio Composite Index 3.28 3.72 4.43 5.25 – –Morningstar Aust Short Term Fixed Interest Category Average

3.01 3.82 4.33 4.54 – –

Development Fund 3.50 4.22 4.63 4.95 6.30 #Funeral Fund 3.50 4.22 4.63 4.95 4.84 Feb 1997Morningstar Investment Trusts Australian Cash Category

3.09 3.85 4.27 4.67 – –

Efficiency


Effici

ency

Valuing peopleUCA Funds Management views staff as its most valuable resource and strongly believes that a cohesive work environment is central to maintaining an experienced and professional team.

The year ahead presents a strong opportunity for all team members to grow their knowledge in line with our plans to lift the level of regulatory compliance and achieve best practice in ethical funds management.

Turnover

In 2014, turnover was 17 per cent with four departures. Risk and Compliance Manager John Taylor and Operations Manager Pauline Gibbs both retired during the year, taking with them a total of 35 years’ experience. These changes now see the management team of six members with only one individual holding greater than three years tenure at UCA Funds Management. One position was made redundant following the decision to invest more resources into separate and more senior full time compliance and accounting roles. Another staff member also retired in 2014.

New additions to the team in 2014 were James Davidson (Operations Manager), Paul Connelly (Accountant), John Dennison (Risk and Compliance Manager) and Kate Hurse (Business Development Manager). Each brings a diversity of commercial experience which aligns with the vision of our business.

Training and professional development

The funds management industry continues to evolve and professional knowledge and expertise is required to continually move forward. To enable this we financially support our staff to maintain professional membership with their relevant industry bodies.

Additionally, we believe ongoing training is very important. We support staff to learn and develop in their roles, encouraging internal and external training to enhance and broaden skill sets. We monitor this on an annual basis and formally include professional development as part of the annual performance review process.

In 2014, training decreased by 14 per cent. During this time managers averaged 45 hours of training and non-managers averaged 16 hours; women averaged 19 hours and men averaged 29 hours. As a result of this decrease, the level of in-house training will increase during 2015. Formal training will also increase in line with a higher standard of regulatory compliance.

Annual performance appraisals were completed, with no exceptions. Managers also attended the Synod managers conference.

Employee satisfactionThe staff survey is used by management to gauge their performance. It provides staff with an opportunity to communicate or raise their concerns anonymously. Additionally, the survey results are reported to the Board of Directors so they are aware of staff sentiment and the management team’s approach to maintaining staff satisfaction.

Table 15: Staff training

2014 2013 2012 2011Training type Male Female Male Female Male Female Male Female

External training 199 79 362 240 149 113 215 128Internal training 201 91 39 19 20 17 48 24Total training hours 400 170 401 259 169 130 263 152


Efficiency

Table 16: Total workforce

2014 2013 2012 2011

Mal

e

%

Fem

ale

%

Mal

e

%

Fem

ale

%

Mal

e

%

Fem

ale

%

Mal

e

%

Fem

ale

%

Total staff

Management 4 67 2 33 5 62 3 38 5 62 3 38 6 75 2 25

Non Management

9 53 8 47 7 47 8 53 6 40 9 60 5 36 9 64

Total 23 23 23 22

Total staff - Full time

Management 4 67 2 33 4 57 3 43 2 67 1 33 2 67 1 33

Non Management

8 57 6 43 6 55 5 45 6 55 5 45 5 45 6 55

Total 20 18 14 14

Total staff - Part time

Management 0 0 0 0 1 100 0 0 3 60 2 40 4 80 1 20

Non Management

1 33 2 67 1 25 3 75 0 0 4 100 0 0 3 100

Total 3 5 9 8

Total collective agreement

Management 4 67 2 33 4 57 3 43 2 40 3 60 2 50 2 50

Non Management

9 53 8 47 7 47 8 53 6 43 8 57 5 36 9 64

Total 23 22 19 18

Total collective agreement - Full time

Management 4 67 2 33 4 57 3 43 2 67 1 33 2 67 1 33

Non Management

8 57 6 43 6 55 5 45 6 50 6 50 5 42 7 58

Total 20 18 15 15

Total collective agreement - Part time

Management 0 0 0 0 0 0 0 0 0 0 2 100 0 0 1 100

Non Management

1 33 2 67 1 25 3 75 0 0 2 100 0 0 2 100

Total 3 4 4 3

Consultant

Management 0 0 0 0 1 100 0 0 3 100 0 0 4 100 0 0

Non Management

0 0 0 0 0 0 0 0 0 0 1 100 0 0 0 0

Total 0 1 4 4

2014 2013 2012 2011Salary range Male Female Male Female Male Female Male Female

$0 - $50,000 – – – – – – – 1$50,001 - $100,000 6 6 6 8 8 6 4 8$100,001 - $150,000 4 4 3 2 2 1 – 2$150,001 plus 3 – 3 1 4 2 2 –

Table 17: Salary information by gender


Table 18: Staff survey results

2014 2013 2012 2011

Very

sat

isfie

d

Som

ewha

t sat

isfie

d

Som

ewha

t dis

satis

fied

Very

dis

satis

fied

Very

sat

isfie

d

Som

ewha

t sat

isfie

d

Som

ewha

t dis

satis

fied

Very

dis

satis

fied

Very

sat

isfie

d

Som

ewha

t sat

isfie

d

Som

ewha

t dis

satis

fied

Very

dis

satis

fied

Very

sat

isfie

d

Som

ewha

t sat

isfie

d

Som

ewha

t dis

satis

fied

Very

dis

satis

fied

% % % % % % % % % % % % % % % %

Job satisfaction 33 57 10 - 52 33 14 - 58 42 - - 68 21 11 -

Adequate work facilities 45 41 14 - 67 29 5 - 79 21 - - 63 26 11 -

Opportunity for development 32 45 23 - 48 48 5 - 65 38 15 - 58 38 5 -

Training 23 45 32 - 48 43 10 - 61 33 6 - 74 16 11 -

Benefits 24 47 29 - 38 43 19 - 53 42 5 - 58 38 5 -

Involved in decision making 16 58 26 - 33 48 19 - 26 58 16 - 42 42 16 -

Effici

ency

An annual staff satisfaction survey was completed in 2014, and once again a high proportion of staff (96 per cent) participated. This year’s survey revealed a decline in most areas, but overall satisfaction remained greater than 80 per cent across all areas.

Staff and manager training and development will be enhanced during the coming year to assist managers and staff in being equipped to manage the challenges ahead and to help increase work environment satisfaction.

OH&S injuries and incidentsIn 2014, there were no workplace injuries.

During the year the Synod office conducted an annual fire evacuation drill and provided training to all fire wardens and first aid officers. In October 2014, we promoted health week. Free seminars were offered to all staff, covering health topics such as “Bounce Back and Beyond” and “Fit 4 Work = Healthy 4 Life”. Staff were also provided with an optional in-house free influenza vaccination.

To promote healthy living, UCA Funds Management provides staff with a seasonal fruit box twice a week. A rooftop veggie box was also purchased for the Synod building to encourage time outdoors and a healthy diet.

All staff accrue 10 personal leave days annually. The average personal leave taken was five days per employee in 2014, while in 2013 it was four days. In 2012 it was seven days and five days per employee in 2011.

Human rightsUCA Funds Management provides a workplace that endorses a work-life balance, ensuring that reasonable working hours are maintained and conditions are above normal standards.

Our Ethical Investment Policy ensures that investments do not infringe human rights. All companies are reviewed and assessed to ensure that they do not operate in countries that condone this behaviour.


The UCA Funds Management team in 2014. Absent: Elisa Bywater and Anjana Karawugodage.

Efficiency

Carbon footprintUCA Funds Management’s carbon footprint continues to be quite small and immaterial due to the size and nature of our business. Nevertheless, we remain committed to monitor our footprint throughout 2015 and report on this aspect in next year’s report.

Our 2014 total water consumption was 272 kL, while in 2013 we consumed 196 kL, 209 kL in 2012, and 201 kL in 2011.

Paper usageWe continue to monitor office printing, with default settings for printing with duplex or recycled paper printing (where possible) and all staff are requested to review their printing usage on a regular basis. Colour printing is only to be used for advertising or marketing publications.

In 2014, the Major Strategic Review team joined UCA Funds Management on Level 5, 130 Little Collins Street.

The increase of staff using the floor’s printer as well as the printing of monthly client statements increased our paper usage for 2014.

In 2015 there will be a renewed diligence on resource management by revisiting programs successfully developed in 2013.


UnitingCare Harrison Community impact loanAs well as investment options, UCA Funds Management offers fixed and variable interest rate loans for commercial properties and Uniting Church groups throughout Victoria. Recently we were able to help fund an important housing project with UnitingCare Harrison.

UnitingCare Harrison is one of 85 community organisations within UnitingCare Victoria and Tasmania. Founded in the 1960s to help the homeless, disadvantaged and disabled people in eastern Melbourne, UnitingCare Harrison is one of the leading housing and community services providers in the area.

Relying on donations and local support, UnitingCare Harrison came to UCA Funds Management to discuss funding options for the redevelopment of a Uniting Church site in Croydon North. Through their disability programs, they recognised a housing need for those with disabilities (who wanted to live independently) and low-income families.

We were able to offer UnitingCare Harrison a variable interest rate loan that allowed them to increase their lending amount slowly as the development progressed. This enabled more manageable repayments and allowed UnitingCare Harrison to only borrow what was required at each stage of the project.

Overall, we were able to fund up to $3 million for the project and, in partnership with North Croydon Uniting Church and UnitingCare Communication Options (LifeAssist), Gifford Village – with 18 units, a community centre and worship centre – opened in 2013.

The village contains seven units designated to empower those with disabilities to live independently. The remaining units are available to low-income families and individuals. Residents are encouraged to support and engage with each other and the local community.

For more information about UnitingCare Harrison visit www.unitingcareharrison.org.au

Gifford Village

Our

clie

nts


Our clients

Commission for Mission

We are proud to be a social enterprise of The Uniting Church in Australia, Synod of Victoria and Tasmania (the Synod). Each year we grant our operating surplus to support the Synod’s many community services, advocacy and mission-based activities making a difference in the local community.

The Commission for Mission (CFM) is one of many Synod groups acting as a shining light in the community. Working with congregations, agencies, schools and community groups, they are dedicated to bringing to life God’s mission of justice, reconciliation and peace in the world.

In June 2014, CFM went into action after an anti-Islamic group tied black balloons to items associated with Bendigo residents who supported the development of the city’s first mosque. Within 24 hours a response developed from an idea to a plan of action. Armed with coloured balloons, CFM staff organised a community rally in Bendigo with a powerful message: Racism has no place in Bendigo.

The city centre quickly turned into a sea of colour as 200 Bendigo residents, including leaders from the local Muslim community and a number of Bendigo council members, joined to show their support.

When supplies of balloons and string ran low, Bendigo residents brought their own to ensure the rally could continue. The event soon attracted media attention, with film crews throughout the country covering the event – allowing their message to reach many Australian homes.

CFM’s quick action turned a message of hate into one of support and love; an everyday example of their mission to bring justice and compassion to the world.

Tahira Zahir at the Commission for Mission rally in Bendigo. Image courtesy of Alys Gagnon

For more information about Commission for Mission visit blogs.victas.uca.org.au/cfm

Commission for Mission

Grants beneficiary

G3.

1


GRI G3.1 Standard Disclosure and performance indicators

1 Strategy and analysis Page

1.1 Statement from the most senior decision-maker of the organisation (e.g. CEO, chair, equivalent senior position) about the relevance of sustainability to the organisation and its strategy


6

1.2 Description of key impacts, risks and opportunities


6

2 Organisational profile

2.1 Name of the organisation Who we are 5

2.2 Primary brands, products, and/or services Who we are 5

2.3 Operational structure of the organisation, including main divisions, operating companies, subsidiaries, and joint ventures

Who we are We have no operating companies, subsidiaries or joint ventures

5

2.4 Location of organisation’s headquarters Who we are 5

2.5 Number of countries where the organisation operates, and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report

Who we are 5

2.6 Nature of ownership and legal form Who we are 5

Our stakeholders 13 – 14

2.7 Markets served (including geographic breakdown, sectors served, and types of customers/beneficiaries)

Who we are 5

Our strategy 9

Tables 1 and 2 11


2.8 Scale of reporting organisation 2014 under the spotlight 8

Who we are 5

Table 13: Financial PerformanceFor full financial statements visit our website

28

2.9 Significant changes during the reporting period regarding size, structure, or ownership

There were no significant changes during the reporting period

–

2.10 Awards received in the reporting period Nil –

3 Report and parameters

3.1 Reporting period (e.g. fiscal/calendar year) for information provided

About the report 12

3.2 Date of most recent previous report (if any) About the report 12

G3.1


3 Report and parameters (continued) Page

3.3 Reporting cycle (annual, biennial, etc.) About the report 12

3.4 Contact point for questions regarding the report Feedback 43

3.5 Process for defining report content Determining materiality 13


3.6 Boundary of the report About the report 12

3.7 Limitations on the scope or boundary of the report

Nil –

3.8 Basis for reporting on joint ventures, subsidiaries, leased facilities, outsourced operations and other entities that can significantly affect comparability from period to period and/or between organisations

There are no joint ventures, subsidiaries, leased facilities, outsourced operations or other entities that affect comparability

–

3.9 Data measurement techniques and the bases of calculations, including assumptions and techniques underlying estimations appliedto the compilation of the indicators and other information in the report

We applied the GRI Indicator methodology in preparing data.

–

3.10 Explanation of the effect of any restatements of information provided in earlier reports, and the reasons for such (e.g. M&A, change of baseyears/periods, nature of business, measurement methods)

Restatements 13

3.11 Significant changes from previous reporting periods in the scope, boundary, or measurement applied in the report

There have been no significant changes from the previous reporting period

–

3.12 GRI Content index table identifying the location of the Standard Disclosures in the report

This table 36

3.13 Policy and current practice with regard to seeking external assurance for the report

About the report 12

4 Governance, commitments and engagement

4.1 Governance structure of the organisation, including committees under the highest governance responsible for specific tasks, such as setting strategy organisational oversight

Governance 15

4.2 Indicate whether the Chairman is also an executive officer

Governance 15

4.3 For organisations that have a unitary board structure, state the number of members of the highest governance body that are independent and/or non-executive members

Governance 15

4.4 Mechanisms for shareholders and employees to provide recommendations or direction to highest governance body

Governance 15

G3.

1


4 Governance, commitments and engagement (continued) Page

4.5 Link compensation for members of the highest governance body and organisation’s performance

There is no compensation for Board members based on organisational performance

–

4.6 Processes in place for the highest governance body to ensure conflicts of interest are avoided

Governance 15

4.7 Process for determining composition, qualifications and expertise of the members of the highest governance body and its committees

Governance 15

4.8 Internally developed statements of mission or valuesCodes of conduct and principles relevant to ESG performance

360° ethical® investing 4 – 5

Mission/Vision 5

Investing ethically 17 – 23

4.9 Procedures of the highest governance body for overseeing the organisation’s identification and management of environmental, economic and social performance

Governance 15


4.10 Process for evaluating the highest governance body’s own performance

Governance 15

4.11 Explanation of whether and how the precautionary principle is addressed by the organisation

We have not explicitly applied the precautionary principle

–

4.12 Externally developed economic, environmental and social charters to which the organisation subscribes or endorses


4.13 A membership in associations, has governance positions, participates in committees, provides substantive funding for, and views membership as strategic

We have no governance positions or committee engagement within our industry affiliations

–

4.14 List of stakeholder groups engaged by the organisation


4.15 Basis for identification and selection of stakeholders with whom to engage


Constructive stakeholder engagement 20

4.16 Approaches to stakeholder engagement Our stakeholders 13 – 14


4.17 Key topics that have been raised through stakeholder engagement and how we’ve responded


Clients 13 – 14

Social issues 15


G3.1


Economic Page

DMA EC

Disclosure on management approach: Economic Statement from the Chairperson and Chief Executive Officer

6

Our mission 5

360° ethical® investing 4 – 5


30

For performance go to Table 13: Financial performance

28

EC1 Direct economic value generated and distributed, including revenues, operating costs, employee compensation, donations and other community investments, retained earnings, and payments to capital providers and governments

Financial performance 26 – 28

Product and service impact section

DMA PS

Disclosure on management approach: Productservice


Governance 15

Compliance 16


30

For performance go to: Compliance monitoring and breaches

16


Proxy voting 20 – 21

FS1 Policies with specific environmental and social components applied to business lines


FS2 Procedures for assessing and screening environmental and social risks in business lines

Compliance, monitoring and breaches screening

16

FS5 Interactions with clients/investees/business partners regarding environmental and social risks and opportunities

Industry engagement 20 – 22

FS10 Percentage and number of companies held in UCA Funds’ portfolio with which we have interacted on environmental or social issues


FS11 Percentage of assets subject to positive and negative environmental or social screening


FS12 Voting policies applied to environmental or social issues for shares over which UCA Funds holds the right to vote shares or advises on voting



G3.

1

Environmental Page

DMA EN

Disclosure on management approach: Environment


6

Ethical Investment Policy 17 –20

Governance 15


30

Standard disclosure 4.11 38

EN8 Total water withdrawal by source Carbon footprint 33

Labour practices and decent work

DMA LA

Disclosure on management approach: Labourpractices and decent work


6

Ethical Investment Policy 17 – 20

Governance 15

Valuing people 30


30

For performance go to: OH&S injuries and incidents

32

Table 15: Staff training 30

Table 17: Salary information by gender

31

LA1 Total workforce by employment type, employment contract and region

Valuing people 30

Total workforce 31

LA2 Total number and rate of new employee hires and employee turnover by age group, gender and region

Turnover 30

LA3 Benefits provided to full-time employees that are not provided to temporary or part-time employees

All entitlements are the same –

LA4 Percentage of employees covered by collective bargaining agreements

100% –

LA7 Rates of injury, occupational diseases, lost days and absenteeism and work related fatalities by region and gender

OH&S 32


Labour practices and decent work (continued) Page

LA10 Average hours of training per year, per employee, by gender and by employee category


30

LA12 Percentage of employees receiving regular performance and career development reviews, by gender


30

LA14 Ratio of basic salary and remuneration of women to men by employee category

Salary information by gender 31

Society

DMA SO

Disclosure on management approach: Society Statement from the Chairperson and Chief Executive Officer

6


Governance 15


30

Vision 5

For performance and specific monitoring go to: Compliance

16

Society performance indicators

SO 3 Percentage of employees trained in organisational anti-corruption policies and procedures

Compliance 16

Human rights performance indicators

DMA HR

Disclosure on management approach: Humanrights


6


Governance 15


30

For performance go to: Discrimination 17

Compliance 16

Compliance, monitoring and breaches

16

Human rights (including risk assessment approach)

32

HR4 Total number of incidents of discrimination and actions taken

Discrimination 17

Human rights 32

G3.1

G3.

1


Product responsibility performance indicators Page

DMA PR

Disclosure on management approach: Productresponsibility


6

Governance 15


30


PR4 Total number of incidents of non-compliance with regulations and voluntary codes concerning product and service information and labelling, by type of outcomes

Nil –

PR5 Practices related to customer satisfaction, including results of survey measuring customer satisfaction

Clients 13 – 14

PR8 Total number of substantiated complaints regarding breaches of customer privacy and losses of customer data

Clients 13 – 14


Industry affiliations and key stakeholders

Member since 2006 Member since 2009

Member since 2007

Member since 2004UCA Funds Management is certified by the Responsible Investment Association Australasia (RIAA) for Ethical Investment.

Association AustralasiaResponsible Investment

Central to our philosophy is a commitment to open dialogue with stakeholders, which is why your feedback is important. Please contact us by:

Telephone 1800 996 888 Email [email protected]

Your feedback is important

Affiliations

> Australian Securities and Investments Commission (AFSL: 294 147)

> Financial Ombudsman Service member

> Deloitte Touche Tohmatsu (auditor)

> PricewaterhouseCoopers Australia (PwC) (taxation advisor)

Our largest stakeholder.

UCA Funds Management LimitedLevel 5, 130 Little Collins Street Melbourne Victoria 3000Telephone: 1800 996 888 | Fax: 03 9650 7074 | [email protected] | www.ucafunds.com.au

UCA Funds Management is the registered business name of UCA Funds Management Limited ABN 46 102 469 821, AFSL 294147, and is a social enterprise of The Uniting Church in Australia,Synod of Victoria and Tasmania.

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2014 Annual Report 360° ethical investing > 10 UCA Funds Management 2014 Annual Report Our strategy...

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