1. Meet the managers Janus Henderson Global Natural Resources Fund
This information is solely intended for the use of wholesale clients and is not for general public distribution. This information is issued by Janus Henderson Investors (Australia) Institutional Funds Management Limited ABN , AFSL (Janus Henderson).
Meet the managers Janus Henderson Global Natural Resources Fund
March 2019
Tim Gerrard
Portfolio Manager

2. Janus Henderson Investors (Australia) Institutional Funds Management Limited
Level 36 Grosvenor Place, 225 George Street, Sydney NSW 2000
T +61 (0) F +61 (0)
Important information
This information is issued by Janus Henderson Investors (Australia) Institutional Funds Management Limited ABN , AFSL (Janus Henderson). The funds referred to within are issued by Janus Henderson Investors (Australia) Funds Management Limited ABN , AFSL unless otherwise stated.
The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.
This information is intended solely for the use of wholesale clients, as defined in section 761G of the Corporations Act 2001 (Cth) and is not for general public distribution. By receiving this information you represent that you are a wholesale client.
Past performance is not indicative of future performance. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested. This information does not purport to be a comprehensive statement or description of any markets or securities referred to within. Tax assumptions and reliefs depend upon an investor’s particular circumstances and may change if those circumstances or the law change. Prospective investors should not rely on this information and should make their own enquiries and evaluations they consider to be appropriate to determine the suitability of any investment (including regarding their investment objectives, financial situation, and particular needs) and should seek all necessary financial, legal, tax and investment advice. If you invest through a third party provider you are advised to consult them directly as charges, performance and terms and conditions may differ materially.
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3. What are the uncertainties?

4. There are always uncertainties
Global uncertainties
There are always uncertainties
US Politics
Trade war
Geopolitics
Global Growth ?
Environment
China’s Growth ? ?

5. How are we prepared?

6. We have a global investment universe
Australian and New Zealand are a small portion of the total opportunity
Fertilizer & food
Paper & packaging
Integrated Oil
Oil exploration and production
Mining
Steel
Market Cap (US$bn)
Here those red bars for the Australian companies are shown in context wit their global peers – 10x more opportunity
Energy is 6.1% of world market cap and Materials 6.4%. Ag food is 2.2%, a small but growing listed sector, so all up around 15%.
Source: Bloomberg, Janus Henderson Global Natural Resources team
Note: References made to individual securities should not constitute or form part of any offer or solicitation to issue, sell, subscribe or purchase the security

7. We have a global investment universe
Risk is mitigated through the breadth and size of the investment pool
8.6
Global resource universe is
22x the Australian resources market
Trillion (AUD)
Global resource universe is
86x the New Zealand stock market
1.9
0.4
0.1
Source: Janus Henderson Investors, Bloomberg. As at 13 March as at 13 March 2019.
Note: Based upon Janus Henderson Investors view of core natural resources; mining, energy and agriculture across the value chain, companies > AUD$1billion market capitalisation

8. We mitigate volatility via three diverse sectors
Each sector has its own trends, outlooks and opportunities
Strong outlook for EV metals
High performing industry
Cyclical recovery in metals underway
Globalisation to strengthen businesses
Cheap valuation, strong cash generation
Technology improving output and profit
Making 20% of global equities
Strong growth in gas and renewable energy
Cyclical recovery in energy has commenced
Source: Janus Henderson Investors, as at February 2019

9. Exposure to risk can be dialled up or down
Active allocation across three subsectors and the entire supply chain
Agriculture
Mining
Energy
Oil
Gas
Renewables
Upstream
Farming
Extraction
Seeds
Crop protection
Distribution
Midstream
Services
Distribution
Downstream
Steel smelters
Food
Refining
Source: Janus Henderson Global Natural Resources Fund. For illustrative purposes only

10. Actively managed exposure
Actively managed exposure across sectors, regions and market caps
Agriculture
Energy
Mining
Cash
Geographical allocation
Portfolio weight (%)
Market capitalisation
Holdings by market cap
Energy (%)
Mining (%)
Agriculture (%)
>$20 billion
19.5
17.5
13.1
$10 - $20 billion
5.6
7.2
8.9
$1 - $10 billion
1.9
15.6
4.3
<$1 billion
0.3
2.5
0.0
Source: Janus Henderson Investors, Bloomberg. As at 31 January 2019
Note: Inception date for the Janus Henderson Global Natural Resources Fund: 1 July 2012

11. We analyse cost curves to decrease risk
High cost producers are avoided
US$/dry tonne
China’s iron ore supply costs (CFR; costs including royalties and freight)
Tonnes millions
Source: Fortescue Investor Briefing (source: Metalytics), as at July 2018
Note: References made to individual securities should not constitute or form part of any offer or solicitation to issue, sell, subscribe or purchase the security

12. Opportunities

13. Environment, Sustainability and Governance (ESG)
The rise and rise of ESG – $1 Trillion and growing
ESG is mobilising billions of dollars.
3,165 ESG funds and ETFs globally running over US$1tn – 52% increase over 5 years.
Flows into funds classified as sustainable are growing more quickly than for conventional funds.
ESG flows currently dominated by Europe.
Sustainable fund flows (Europe)
Sustainable fund flows (US)
Source of images and data is Morningstar (seeking approval for use) and Amundi – internet published
Historically responsible investing was mostly about convictions with mixed academic evidence for its merits, with studies plagued by a lack of robust data. As reporting has improved its become possible to show that ESG integration has a tangible impact on equity performance improving the long term performance of portfolios.
There has been a massive mobilisation of institutional investors
According to MorningStar Direct in June 2018 there were 3165 ESG funds globally running over 1 Trillion of AUM (a 52% increase over 5 years) - $700bn in Europe and $300bn in Europe, $40bn in Australasia.
ESG/Responsible Investment/Sustainability at present is thought to be one of the fastest growing asset classes – it can’t be ignored s it cannibalises existing and captures new funds. A focus on ESG could now be considered a competitive advantage and the mindset amongst our clients has changeds from why do you do it to why are you not doing it.
This is having a self fulfilling effect on share price performance which is particularly noticeable in the last 5 years or so. According to some interesting research from Amundi, since 2014 across the market in the US and Eurozone it can be shown that best in class stocks have been remunerated and worst in class stocks penalised. (source Amundi). They have shown that tFunds with high sustainability metrics rank more often in top quartiles within their peer investment category.
Harvard business review – reference – academic support for good ESG outp perf Bad ESG.
The money flow trend is expected to grow stronger. Demand among professional fund buyers for products that incorporate environmental, social and governance criteria has shot up. ESG-related funds have risen from fifth to second place on a list of the most requested product innovations, according to a Broadridge survey of 1,000 European fund buyers. Three years ago ESG funds languished in 16th place. (Source – Broadbridge survey - Selector demand for ESG funds shoots up. By Ed Moisson 23 January 2019)
Recent MSCI studies (source AGF report) have shown that high ESG standards translate into better stock performance driven by
Higher profits and cash-flow, Lower idiosyncratic risk: Higher ESG-rated companies are better at managing company-specific business and operational risks and thus have a lower probability of suffering incidents that negatively impact share prices, AND Higher valuations: High-rated ESG companies tend to have lower systematic risk and therefore lower costs of capital leading to higher DCF valuations.
Euro34.4bn in net flows over 2018
US$5.5bn in net flows over 2018
Source: Morningstar Direct, June 2018

14. Before ESG in practice Note: Images courtesy of Rio Tinto
References made to individual securities should not constitute or form part of any offer or solicitation to issue, sell, subscribe or purchase the security . Past performance is not reliable indicator of future performance.

15. During ESG in practice Note: Images courtesy of Rio Tinto
References made to individual securities should not constitute or form part of any offer or solicitation to issue, sell, subscribe or purchase the security . Past performance is not reliable indicator of future performance.

16. After ESG in practice Note: Images courtesy of Rio Tinto
References made to individual securities should not constitute or form part of any offer or solicitation to issue, sell, subscribe or purchase the security . Past performance is not reliable indicator of future performance.

17. Environment, Sustainability and Governance (ESG)
Materials contributes to the change ?
2003 Beijing: Image source:
Source: Royalty free images

18. Environment, Sustainability and Governance (ESG)
China – responding to environmental pressure
Aluminium
Zinc
Thermal coal
Iron ore
Restricted supply  price resets
Source: Image source by Andreas Habich, via Wikimedia Commons 17

19. Opportunities - Mining
Technology helping to drive efficiencies
1900
2018
Future
Source: AngloAmerican, Our Copper Business, World Class Assets, Leading Capabilities and Attractive Growth Options, Royalty free images.

20. Opportunities - Energy
LNG as a transition fuel
Coal power generation
1t CO2 1t
LNG power generation
0.4t CO2 1t
Wood Mackenzie, April, Royalty free images.

21. Global themes: renewable energy
Solar and wind power becoming competitive
Portfolio application
Wind turbines 1.5%
Solar power
Steel 1.5%
Copper 1.5%
Source:
Note: References made to individual securities should not constitute or form part of any offer or solicitation to issue, sell, subscribe or purchase the security

22. Global themes: electrification of transport
Battery raw materials…a fast growing segment
Portfolio application
Lithium 7%
metals 20%+
Copper
Aluminium
Nickel
Cobalt
Source:
Note: References made to individual securities should not constitute or form part of any offer or solicitation to issue, sell, subscribe or purchase the security

23. Opportunities - Agriculture
Slow food, raw food, youth food…demand is growing for good fresh food
In Agriculture changes are occurring rapidly in seed technology, fertilizer and crop protection chemicals, and also in automated, remote and precision farming operations.
Food preferences are moving back to natural and healthy options. This shift is rapid affecting right up to the worlds largest companies in challenges to legacy offerings.
Heinz just wrote down some core brands by $15.4bn, with the stock plunging 28%.
We own good natural food production companies including Costa who grow blueberries across five reigions of Australia in controlled conditions to attain very high quality product year round. Mowi formerly Marine Harvest is a Norwegian based company and the world’s biggest owner of ocean farmed salmon; and Synlait Milk produces very high quality milk derivatives that achieve premium prices.
Food provenance and quality
Source: ,
Note: References made to individual securities should not constitute or form part of any offer or solicitation to issue, sell, subscribe or purchase the security

24. Emerging opportunities could surprise
Global themes: new food sources
Source: Royalty free images.

25. Janus Henderson Global Natural Resources Fund
Summary
Uncertainty is perpetual and omnipresent.
We mitigate risk through investing in a broad investment pool across diverse subsectors and geographies.
The rise of ESG is an opportunity rather than a threat.
Long term trends are evident in all three subsectors, representing long term investment opportunities.

26. Appendices

27. Janus Henderson Global Natural Resources Team
Experienced natural resource investment specialists combining finance with qualifications and industry experience in geology, mining engineering and metallurgy
Name
David Whitten
Daniel Sullivan
Darko Kuzmanovic
Tal Lomnitzer
Tim Gerrard
Title
Co-Head of Global Natural Resources
Senior Portfolio Manager
Senior Investment Manager
Portfolio Manager
Tenure (years)*
Firm: 8
Industry: 35
Firm: 5
Industry: 30
Firm: 3
Industry: 34
Firm:
Industry:
Industry: 39
Responsibility
Research overlap across all natural resource sub-sectors & market caps
Primarily mid & small cap global resource stocks (mining, energy)
Primarily large cap global resource stocks (energy, paper & pack., steel, metal refining)
Primarily large cap resource companies (mining, ag., energy, rails, etc.)
Previous role
Executive Chairman and Lead Portfolio Manager, 90 West
Head of Global Resources, Colonial First State Global Asset Management
Portfolio Manager/Senior Resource Analyst, 90 West
Partner, Caledonia Resources Management
Deputy Head of Global Resources, Colonial First State Global Asset Management/First State Investments
Senior Resource Analyst, Lonsec
Note: *As at 25 February 2019

28. ESG is integrated in our investment process
Our approach
ESG is integrated in our investment process
As I have already mentioned - good ESG practise enshrines a companies license to operate – often the key to success or disaster. A wise fund manager told me that the first rule of making money is not losing money.
A good investment framework must be disciplined and repeatable designed to select the best ideas globally to construct a well diversified portfolio. As this slide shows ESG considerations are integral to the investment analysis undertaken by the team. Basic principle – operating successfully must not come at the expense of detrimental effects to the environment and society in which a company operates.
Other threads that bind the investment process are
A long term view – sustainable practises lead to superior risk adjusted returns.
Committed to principles of good stewardship – consideration of ESG factors is integral to exercising our fiduciary duty to clients.
Active ownership - protecting and enhancing the value of the companies in which we invest and the funds of that our clients trust us with. As owners we seek to engage with companies on material ESG issues. Where there is no improvement we would divest holdings and withhold future investment.
Material ESG considerations, in line with the principles and standards outlined above, are assessed at company and portfolio levels, in a seven - step process:
1. Cost curve screening, margin analysts and project benchmarking brings in mine rehabilitation, permitting delays, cost of carbon, etc
2. Quality – inclusion of material ESG considerations and performance (adjusted for countries, sectors and size) in our assessment of management quality, corporate policies, management systems, resource quality, corporate compliance and reporting including tax transparency ;
3. Valuation – inclusion of material ESG considerations in the assumptions and calculations underpinning valuations for example permit loss or delay, operating restrictions and site rehabilitation costs ;
4. Growth – the consideration of potential material ESG threats and opportunities that could impact on future growth in earnings, resources and cashflow;
5. Stress testing – flexing assumptions behind valuations and growth models to ensure robust economics under almost any adverse economic scenario. For example, climate change - the extent to which specific assets and the portfolio is exposed to and vulnerable to transition risks and opportunities (e.g. tightening of regulations, new technologies) and physical risks (e.g. extreme weather events, droughts, flooding etc.) and opportunities ;
6. Catalysts – we consider ESG “trigger points” that could impact (positive and negative) on evaluations (e.g. environmental licence renewal, community support decision, regulatory outcome etc .;
7. Conviction – understanding the risks and ensuring that risk reward is attrative. ESG considerations are also included in SWOT analysis.

29. Stock selection is a seven stage process
Balancing quality, valuation, growth, catalyst
Continuous loop monitoring
and process improvement
Qualitative and quantitative
– not a ‘black box’ approach
50-70 quality stock portfolio
Source: Janus Henderson Investors

30. Janus Henderson Global Natural Resources Fund
Performance
Janus Henderson Global Natural Resources Fund
Period to:
31 January 2019
1 month (%)
3 months
(%)
6 months (%)
1 year
3 years
(% p.a.)
5 years
Since inception
Net performance
5.44
0.33
-7.23
-5.92
13.33
5.43
7.33
S&P Global Natural Resources Index (net dividends reinvested) in AUD
5.84
-2.58
-7.00
0.55
16.86
5.59
7.42
Excess returns (net)
-0.40
2.91
-0.23
-6.47
-3.53
-0.16
-0.09
Annualised volatility since inception %
Janus Henderson Global Natural Resources Fund
12.54
S&P Global Natural Resources NR AUD
12.83
Source: Janus Henderson Investors, as at 31 January 2019
Note: Inception date is 1 July 2012
Past performance is not a reliable indicator of future performance