Issued by Mercer Superannuation (Australia) Limited (MSAL) ABN 79 004 717 533 Australian Financial Services Licence #235906 as the Trustee of the Mercer Super Investment Trust: GPO Box 9946, Melbourne Vic 3001. Tel 03 9623 5555. MSAL is a wholly owned subsidiary of Mercer (Australia) Pty Ltd ABN 32 005 315 917. MERCER is a registered trademark of Mercer (Australia) Pty Ltd.
ME RCER SU PE R I N VE ST M ENT T R U ST ANNU AL RE P O R T CONTENTS About this annual report... 1 Trustee s investment objective, philosophy and approach... 2 Investment risks... 4 How the Mercer Super Investment Trust investment options performed... 5 Investment managers... 6 Largest investment holdings... 9 Some terms explained... 10 Standard risk measure and risk label... 11 Mercer Super Investment Trust investment options... 13 Who manages the Mercer Super Investment Trust?... 16 Changes to the Mercer Super Investment Trust... 18 Fees and costs... 18 Operational Risk Financial Requirement (ORFR)... 21 Your Privacy... 22 Enquiries, complaints and communication... 22 Financial Information... 23 Contact us and Directory... 25
YEAR EN D ING 30 J U N E 20 1 8 About this annual report 1
ME RCER SU PE R I N VE ST M ENT T R U ST ANNU AL RE P O R T Trustee s investment objective, philosophy and approach Multi-Manager approach What are the investment options? Investment objectives and strategy Diversified options Single Sector options Sustainable Investment and ESG considerations 2
YEAR EN D ING 30 J U N E 20 1 8 Use of derivatives in the Mercer Super Investment Trust Liquidity of the Mercer Super Investment Trust Derivatives charge ratio 3
ME RCER SU PE R I N VE ST M ENT T R U ST ANNU AL RE P O R T Investment risks 4
YEAR EN D ING 30 J U N E 20 1 8 Investment risk table How the Mercer Super Investment Trust investment options performed 5
ME RCER SU PE R I N VE ST M ENT T R U ST ANNU AL RE P O R T Investment managers Asset/Fund type Australian Shares Overseas Shares Manager Acadian Asset Management (Australia) Limited (Socially Responsible options only) Ausbil Dexia Limited Avoca Investment Management Pty Ltd Blackrock Investment Management (Aust) Limited (Equitisation only) BT Funds Management No.2 Limited (Socially Responsible options only) Colonial First State Investments Limited FIL Limited (Fidelity) Greencape Capital Pty Limited IFM Investors Pty Ltd JCP Investment Partners Ltd (including for Australian Shares for tax Exempt Investors) Macquarie Investment Management Limited (including for Australian Shares for Tax Exempt Investors) Nikko AM Limited Perpetual Investment Management Limited (Socially Responsible options only) Perennial Value Management Limited Plato Investment Management Limited (including for Australian Shares for Tax Exempt Investors) State Street Global Advisors, Australia, Limited Vinva Investment Management Limited WaveStone Capital Pty Limited Yarra Capital Management (previously Goldman Sachs Asset Management Australia Pty Ltd) Acadian Asset Management AQR Emerging Small Cap Equity Fund L.P. Arrowstreet Capital (including Small Caps) Northern Trust Limited (currency hedging for Socially Responsible options only) Baillie Gifford & Co. (including Global Small cap options) BlackRock Investment Management (Aust) Ltd BNP Paribas Investment Partners Hexavest Inc. Investec Asset Management Luxembourg S.A. Lazard Asset Management LLC (Global Small Cap options only) LSV Asset Management (including Global Small cap options) Macquarie Investment Management Limited Mercer Dublin Sustainable Global Equity Fund (Socially Responsible options only) Schroder Investment Management Australia Limited State Street Global Advisors, Australia, Limited 6
YEAR EN D ING 30 J U N E 20 1 8 Asset/Fund type Property Infrastructure Australian Fixed Interest Overseas Fixed Interest Manager AMP Capital Investors Limited Brookfield Investment Management, Inc. Charter Hall Funds Management Ltd (Industrial) Charter Hall Wholesale Management Limited (Retail) Dexus Wholesale Property Limited Goodman Funds Management Aust Ltd Investa Property Group Lend Lease Real Estate Investments Limited Macquarie Investment Management Limited Northern Trust Limited (currency hedging only) Principal Global Investors (Australia) Limited Colonial First State Investments Limited Industry Funds Management Pty Ltd KKR Global Infrastructure Investors II L.P. Macquarie Asia Infrastructure Fund L.P. Macquarie Investment Management Limited Northern Trust Limited (currency hedging only) RARE Infrastructure Limited Stonepeak Infrastructure Partners Ardea Investment Management Pty Limited BT Investment Management (Institutional) Limited Challenger Management Services Limited Macquarie Investment Management Limited QIC Limited Audax Credit BDC Inc. Aviva Investors Pacific Pty Ltd AXA Investment Managers Asia (Singapore) Ltd BlackRock Investment Management (UK) Ltd Challenger Managed Investments Limited Colchester Global Investors (Singapore) Pte. Ltd GAM Fund Management Limited H2O Asset Management LLP ICG Senior Debt Partners Kapstream Capital Pty Limited Mercer Global Investments Management Limited Metrics Credit Partners Pty Ltd Robeco Institutional Asset Management T. Rowe Price International Ltd Wellington International Management Company Pte Limited Westbourne Credit Management Limited (formerly in Infrastructure) Cash Alternative Assets Blackrock Investment Management (Australia) Limited Challenger Managed Investment Limited Aviva Investors Pacific Pty Ltd Invesco Australia Ltd Mercer Global Investments Management Limited Mercer Private Investment Partners III (Offshore),LP Natural Resources Non Mercer investment options Janus Henderson Investors (previously H3 Global Advisors Pty Limited) Newforests Asset Management Pty Ltd MLC Limited (Multi Manager Style options) Maple-Brown Abbott Limited (Value Style option) 7
ME RCER SU PE R I N VE ST M ENT T R U ST ANNU AL RE P O R T Changes to investment managers The following underlying managers were appointed in the 2017/18 financial year. Asset/Fund type Overseas Shares Property Overseas Fixed Interest Manager Baillie Gifford & Co. (Global Small cap options) Lazard Asset Management LLC (Global Small cap options) LSV Asset Management (Global small cap options) AMP Shopping Centre GAM Fund Management Limited Aviva Investors Pacific Pty Ltd Robeco Institutional Asset Management The following underlying managers were terminated in the 2017/18 financial year. Asset/Fund type Australian Shares Overseas Shares Property Overseas Fixed Interest Natural Resources Manager Macquarie High Conviction Alliance Bernstein Investment Management Australia Limited Allianz Global Investors Europe GmbH Fidelity Australia CenterSquare Investment Management, Inc. Colonial First State Investments Limited Insight Investment Management (Global) Limited Global Commodities Limited 8
YEAR EN D ING 30 J U N E 20 1 8 Largest investment holdings. Top 10 Australian share holdings Top 10 international share holdings 9
ME RCER SU PE R I N VE ST M ENT T R U ST ANNU AL RE P O R T Some terms explained Fixed interest Alternative assets Asset class Growth investments Hedging Cash Infrastructure Consumer Price Index (CPI) Defensive investments Diversified options Investment option objectives 10
YEAR EN D ING 30 J U N E 20 1 8 Mix of investments Shares Multi-manager investment approach Performance Standard risk measure and risk label Property 11
ME RCER SU PE R I N VE ST M ENT T R U ST ANNU AL RE P O R T Strategic asset allocation Trust Deed 12
YEAR EN D ING 30 J U N E 20 1 8 Mercer Super Investment Trust investment options 13
ME RCER SU PE R I N VE ST M ENT T R U ST ANNU AL RE P O R T 14
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ME RCER SU PE R I N VE ST M ENT T R U ST ANNU AL RE P O R T Who manages the Mercer Super Investment Trust? The current directors of MSAL are as follows: 16
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ME RCER SU PE R I N VE ST M ENT T R U ST ANNU AL RE P O R T Service providers to the Mercer Super Investment Trust : Administration fee Other information Changes to the Mercer Super Investment Trust Governing Rules Fees and costs Indirect cost ratio Investment management fee 18
YEAR EN D ING 30 J U N E 20 1 8 Performance related fees Buy/sell spreads Transactional and operational costs Borrowing costs Additional fees and costs 19
ME RCER SU PE R I N VE ST M ENT T R U ST ANNU AL RE P O R T 20
Diversified Single sector YEAR EN D ING 30 J U N E 20 1 8 Operational Risk Financial Requirement (ORFR) Total fees and charges for the 12 months to 30 June 2018 * The investment management fees that apply to you may be lower than those referred to above where a reduced fee has been negotiated direct with the Trustee. 21
ME RCER SU PE R I N VE ST M ENT T R U ST ANNU AL RE P O R T Your Privacy Further information available on request Enquiries, complaints and communication Enquiries and complaints procedures Keeping you up-to-date. 22
YEAR EN D ING 30 J U N E 20 1 8 Financial Information Statement of net assets as at 30 June 2018 2018 2018 2017 % $ 000 $ 000 Assets Cash and equivalents 1% 3,194 2,770 Receivables Unsettled sales 0% - Accrued income 2% 13,777 14,350 Unsettled applications 0% - GST Claimable 0% 57 53 Other receivables 0% - Unlisted units in managed investment schemes - Unrelated Lend Lease Core Plus Fund active & passive units 0% 0 Unlisted units in managed investment schemes Related AP#1 Trust 7% 41,832 25,172 Mercer DG (ex p) Trust 10% 54,210 74,664 Mercer DS Trust 0% - 15,241 Mercer OSS Trust 0% 256 7,591 OSSH#1 Trust 4% 23,498 22,048 Mercer Investment Funds Australian Shares Plus Trust 11% 61,450 55,874 Mercer Passive Global Listed Property Fund 0% 394 9,683 Mercer Passive Emerging Markets Share Fund 3% 17,962 10,003 Mercer Investment Funds Overseas Shares Trust 1% 3,924 26,425 Mercer Tailored #1 Trust 6% 32,137 16,060 TAL#2 Trust 1% 6,792 7,388 Mercer Australian Inflation Plus Fund 2% 10,366 20,356 Mercer Australian Sovereign Bond Fund 2% 11,127 24,413 Mercer Cash Fund 2% 12,710 14,126 Mercer Global Sovereign Bond Fund 1% 4,219 4,138 Mercer Global Credit Fund 0% 413 14,352 Mercer Australian Small Companies Fund 3% 16,960 15,146 Mercer Emerging Markets Debt Fund 1% 4,923 4,849 Mercer Passive Global Listed Infrastructure Fund 0% 389 7,638 Mercer Global Absolute Return Bond Fund 4% 20,402 14,296 Mercer Passive Australian Shares Fund 8% 42,925 647 Mercer Global Enhanced Low Volatility Shares Fund 4% 20,326 13,184 Mercer Passive International Shares Fund 3% 15,615 12,429 Mercer Diversified Alternatives Fund 4% 20,682 12,559 Mercer Global High Yield Bond Fund 1% 5,322 5,200 Mercer Global Opportunistic Credit Fund 1% 8,082 7,709 23
ME RCER SU PE R I N VE ST M ENT T R U ST ANNU AL RE P O R T 2018 2018 2017 % $ 000 $ 000 Assets Mercer Conservative Growth Overlay Fund 0% 37 35 Mercer Emerging Markets Shares Fund 2% 13,056 12,941 Mercer Moderate Growth Overlay Fund 0% 78 77 Mercer Growth Overlay Fund 1% 8,371 7,939 Mercer High Growth Overlay Fund 0% 243 250 Mercer Global Private Debt Fund 1% 7,548 6,123 Mercer Diversified Growth Fund 2% 10,325 10,218 Mercer Risk Management Overlay Fund 4% 25,067 23,444 Mercer Passive Hedged International Shares 5% 30,161 310 Mercer Global Small Companies Shares Fund 3% 16,661 - Current tax asset 0% 1,583 782 Total Assets 100.00% 567,074 520,483 2018 2017 $ 000 $ 000 Liabilities Payables 428 522 Current Tax Liabilities - Deferred Tax Liabilities 5,262 3,456 Total Liabilities 5,690 3,978 Net assets 561,384 516,505 Total equity attributable to unit holders 561,384 516,505 Statement of financial performance for the year ended 30 June 2018 2018 2017 $ 000 $ 000 Investment Income Interest Income 26 35 Trust distributions 23,471 19,753 Net gains/(losses) on financial instruments held at fair value through profit or loss 30,305 30,116 24 Other income - Total investment income/(loss) 53,802 49,904 Expenses Trustee Fees 3,044 2,889 Other operating expenses 231 255 Total expenses 3,275 3,144 Profit/(loss) before tax expense/(income) 50,527 46,760 Tax expense/(income) 3,436 3,225 Profit/(loss) for the reporting period after tax expense/(income) attributable to unitholders 47,091 43,535
YEAR EN D ING 30 J U N E 20 1 8 Contact us. Directory Trustee Registered Office Auditor to the Trustee Auditor to the Mercer Super Investment Trust Fund Manager Custodian Any enquiries or complaints should be directed to 25