Mercer Investment Trusts New Zealand - PDF document

1 Mercer Investment Trusts New Zealand
Mercer Investment Trusts New Zealand M E RCER (N.Z.) LIMITED MERCER INVESTMENT TRUSTS NE W ZEALAND STATEMENT OF INVESTM ENT POLICY AND OBJECTIVES Effective from 1 July 202 1 MERCER i CONTENTS 1. Background ................................ ................................ ................................ ............... 1 2. Roles and Responsibilities ................................ ................................ ........................ 4 3. Investment Structure ................................ ................................ ................................ . 6 4. Investment Beliefs and Process ................................ ................................ ................ 7 5. Objectives ................................ ................................ ................................ ............... 11 6. Investment Strategy ................................ ................................ ................................ 13 7. Glossary ................................ ................................ ................................ .................. 27 8. Appendix ................................ ................................ ................................ ................. 29 SIPO Mercer Investment Trusts New Zealand MERCER 1 1. Background Introduction This Statement of Inv estment Policy and Objectives ( SIPO) applies to the Mercer Investment Trusts New Zealand ( MITNZ or Trust s ). The MITNZ are unregistered wholesale investment trusts. P urpose The principal purpose of the T rusts is to provide a range of investment portfolios to investors who meet the test for being a wholesale investor for the purposes of the Financial Markets Conduct Act 2013 (FMCA) . Manager Mercer (N.Z.) Limited ( Mercer or Manage

2 r ) . Trustee Trustees Executors L
r ) . Trustee Trustees Executors Limited ( TEL or Trustee ) . Custodian BNP Paribas Fund Services Australasia Pty Limited (BNP Paribas) . Any MITNZ assets not held by BNP Paribas are held by TEL or its nominee (including its wholly - owned subsidiary, TEA Custodians (MITNZ) Limited). Portfolio s The MITNZ are a range of Trusts , each with one or more Portfolios invested in a single sector asset class or diversified across multiple asset classes. One or more I nvestment M anagers are utilised to invest the assets of each portfolio. The Trusts and Portfolios of the MITNZ are shown in the table on page 2 & 3 . SIPO Re view The SIPO is to be reviewed annually although reviews may be completed before this time. In the event of a major change to the purpose of the Trusts or a major event impacting the Trust ’s investments, Mercer may consider an earlier review. Any review will be carried out by Mercer in conjunction with the Trustee , where appropriate, and will consider the investment objectives of the Trusts and take account of any changes in the P ortfolios being offered and the investment outlook which may affe ct the relative value and role of the different asset classes. Mercer is responsible for approving the SIPO , but will give prior written notice of any proposed changes to the Trustee . SIPO Mercer Investment Trusts New Zealand MERCER 2 Availability of SIPO The most current version of the SIPO can be found by following this link: https://info.mercer.com/rs/521 - DEV - 513/images/ MITNZ _SIPO.pdf Alternatively the most current version of the SIPO can be provided by the M anager upon request using the contact details below . How to Contact Us Address: Mercer Investment Trusts New Zealand Mercer (N.Z.) Limited Level 11 15 Custom s Street W est PO Box 105591 Auc

3 kland 1010 New Zeala
kland 1010 New Zealand Phone: +64 9 928 3200 Email: nzportfolios@mercer.com Website: https://www.mercer.co.nz/ Availability of Information Memorandum Investment in the MITNZ is also governed by the terms of the Information Memorandum, which can be found by following this link: https://info.mercer.com/rs/521 - DEV - 513/images/MITNZ_Inform ation_Memorandum_FINAL.pdf MITNZ Portfolios MITNZ Portfolio Offered in MITNZ IM * Shares Mercer Trans - Tasman Shares Trust Mercer Trans - Tasman Shares Portfolio Y Mercer Socially Responsible Trans - Tasman Shares Portfolio Y Mercer New Zealand Shares Index Portfolio Y Mercer Unhedged Overseas Shares Trust Mercer Overseas Shares Portfolio Y Mercer Overseas Shares Plus Portfolio Y Mercer Socially Responsible Overseas Shares Portfolio Y Mercer Socially Responsible Overseas Shares Index Portfolio Y Mercer Overseas Low Volatility Shares Portfolio Y Mercer Overseas Small Companies Portfolio Y Mercer Emerging Markets Portfolio Y Mercer Overseas Shares Index Portfolio Y Mercer Hedged Overseas Shares Index Portfolio Y Mercer Overseas Shares Index Portfolio B Y Mercer Hedged Overseas Shares Index Portfolio B Y Mercer Socially Responsible Hedged Overseas Shares Index Portfolio Y Mercer Hedged Overseas Shares Trust Mercer Hedged Overseas Shares Portfolio Y Mercer Hedged Overseas Shares Plus Portfolio Y Mercer Hedged Composite Global Shares Portfolio N Mercer Socially Responsible Hedged Overseas Shares Portfolio Y Mercer Diversified Trust Mercer Shares Portfolio Y Real Assets Mercer Trans - Tasman Property Trust SIPO Mercer Investment Trusts New Zealand MERCER 3 MITNZ Portfolio Offered in MITNZ IM * Shares Mercer Unlisted Property Portfolio Y Mercer Infrastructur

4 e Trust Mercer Unlisted Infrastruct
e Trust Mercer Unlisted Infrastructure Portfolio Y Mercer Property and Infrastructure Trust Mercer Listed Property Portfolio Y Mercer Listed Infrastructure Portfolio Y Mercer Commodities Trust Mercer Natural Resources Portfolio Y Mercer Commodities Portfolio Y Mercer Diversified Trust Mercer Real Assets Portfolio Y Alternatives Mercer Alternative Assets Trust Mercer Alternative Assets Portfolio Y Mercer Select Alternative Assets Portfolio Y Cash and Fixed Interest Mercer New Zealand Cash and Fixed Interest Trust Mercer Cash Portfolio Y Mercer New Zealand Sovereign Bond Portfolio Y Mercer Overseas Fixed Interest Trust Mercer Overseas Sovereign Bond Portfolio Y Mercer Overseas Sovereign Bond Index Portfolio Y Mercer Global Credit Portfolio Y Mercer Socially Responsible Global Credit Portfolio Y Mercer Overseas Fixed Interest Portfolio Y Mercer Global Absolute Return Bond Portfolio Y Diversified Mercer Diversified Trust Mercer Conservative Portfolio Y Mercer Moderate Portfolio Y Mercer Balanced Portfolio Y Mercer Growth Portfolio Y Mercer High Growth Portfolio Y Mercer Socially Responsible Conservative Portfolio Y Mercer Socially Responsible Balanced Portfolio Y Mercer Socially Responsible Growth Portfolio Y *some additional private portfolios may be tailored for specific investors. These private portfolios are not shown in the table above and are described in separate agreements with those investors. SIPO Mercer Investment Trusts New Zealand MERCER 4 2. Roles and Responsibilities Manager Mercer is responsible for the investment of the MITNZ ’s assets, in accordance with legislative requirements, the Trust Deed, the Information Memorandum and this SIPO. The Manager’s responsibilities include to :  maintain

5 the investment governance framework inc
the investment governance framework including effective investment policies;  establish investment beliefs and investment process;  set investment objectives and risk tolerance for the Portfolios ;  determine investment strategy for each Portfolio . This includes the Benchmark Asset Allocation, ranges, other limits and appropriate indices;  implement investment strategy; and  monitor Portfolio investment performance relative to objectives and compliance with strategy limits. The i nvestment g overnance f ramework repres ents the totality of systems, structures, policies, processes and people utilised to address the Manager’s investment related responsibilities͘ The Mercer Board has ultimate responsibility fo r the proper investment of the MITNZ . In order to most effectively discharge its responsibilities, however, Mercer has adopted a delegated decision - making structure. The Board has adopted a Board Charter stating the matters delegated to Board committees and management and those matters reserved for decision by the Board. A Risk, Audit and Due Diligence Committee has been established to carry out various functions (including investment governance fu nctions , receipt of investment reports and the monitoring of Portfolio investment performance ) on behalf of the Board . In addition , the Board contracts certain functions to other Mercer related entities and external parties in order to meet its responsibilities. Mercer adopts a “manager of manager s” approach which involves delegating to I nvestment M anagers within each asset class in order to implement the investment strategy. Certain administrative and operational functions are also delegated. Further detail on the investment structure is shown in Section 3. Mercer maintains a conflicts management framework to he lp manage potential issues that m

6 ay arise as a result of delegation to r
ay arise as a result of delegation to related parties. Further detail can be found in the Mercer NZ Investment Process , Policies and Governance Framework document . The Trust Deed and a separate agreement between Mercer and the Trustee also impose restrictions on related party transactions. SIPO Mercer Investment Trusts New Zealand MERCER 5 Trustee The Trustee is responsible for acting as trustee of each Trust within the MITNZ , including by :  a cting on behalf of the M=TNZ’s investors in relation to the Manager and the MITNZ ;  monitoring the performance by the Manager of its functions and the financial position of the MITNZ and each Trust ; and  holding each Trust ’s assets or ensuring that the assets are held in accordance with the Trust Deed and applicable legislative requ irements. SIPO Mercer Investment Trusts New Zealand MERCER 6 3. Investment Structure The MITNZ is a series of wholesale investment trusts which incorporate a range of single sector and diversified multi - sector portfolios. The MITNZ trusts are currently invested in a mix of:  p ortfolios of securities managed by I nvestment M anagers under delegation and governed by investment management agreement s with Mercer . The securities so managed are held under a segregated mandate managed by the releva nt I nvestment M anager;  f unds managed by other related entities of Mercer ͕ including Mercer Australia’s m ulti - m anager f unds and Mercer Ireland funds; and  m anaged funds offered and managed by other Investment Managers . The I nvestment M anagers , and mandates of the MITNZ can be changed by Mercer , from time to time . Changes may occur for product management reasons or where a review of a particular Investment M anager and/or asset class dictates

7 that change is necessary or desirable
that change is necessary or desirable in the interests of investors. MITNZ Diversified Portfolios MITNZ Single Sector Portfolios Securtities managed under Segregated Mandates Mercer Fund e.g. Australia, Ireland External Manager Fund SIPO Mercer Investment Trusts New Zealand MERCER 7 4. Investment Beliefs and Process Beliefs Mercer’s investment approach is based on the belief that an optimal investment strategy takes full advantage of investment opportunities by diversifying across investment classes (in a multi - sector portfolio ) and investment styles, thereby achievin g maximum investment efficiency. Mercer believes that a “manager of managers” approach is the most effective and flexible way of delivering the best outcome for investors , and that w ell - constructed combinations of highly rated specialist investment manager s generally result in securing a portfolio of investments that provide consistent, above - average performance over time. Some asset classes may be managed by a single manager where that is appropriate or necessary . Underpinning this approach , there are five basic elements to Mercer’s investment beliefs : Active Management Mercer believe s that active management is a skill and, as evidenced by Mercer’s value - add analysis, Mercer’s manager research process can improve the likelihood of identifying capable and skilful managers. Operational Efficiency Mercer considers overall investment returns can be enhanced by having a monitoring and governance framework that focuses on evaluating and quantifying investment efficiency. Risk Management Mercer believes that a sset allocation and diversification are the most important decision s to be made in relation to the investment process . Mercer is also of the view that r isk and return are related and that risk is itself a multi - dimension

8 al concept. Dynamic Asset Allocati o
al concept. Dynamic Asset Allocati on Markets can exhibit trends over the medium to long term and can be behavioural in nature, which is why Mercer believes Dynamic Asset Allocation can add value through higher returns and also mitigate downside risk in a Portfolio . Sustainability Mercer b elieves that environmental, social and governance (ESG) risks and opportunities can have a material impact on long - term risk and return outcomes and considers that taking a sustainable investment view is more likely to create and preserve long - term investm ent capital. Mercer also believes that Active Ownership helps realise long - term shareholder value . SIPO Mercer Investment Trusts New Zealand MERCER 8 Investment Process Setting the investment strategy Mercer has established a range of Portfolios with different risk/reward profiles to suit the needs of a wide range of investors. Mercer determine s an appropriate investment strategy for the MITNZ as a whole and for each individual Portfolio . Setting the investment strategy is a continual process th at aims, first and foremost, to ensure alignment between agreed investment objectives and the structure of the individual Portfolio. The methodology used by Mercer to develop the investment strategy for each Portfolio involves, as a first step, considera tion of:  e xpected risk and return relative to the Portfolio ’s objectives͖  t he overall composition of the Portfolio ’s investments including the adequacy of diversification;  t he liquidity of selected investments having regard to expected cash flow requirements;  a vailability and reliability of valuation information;  e xpected tax consequences; and  a ssociated costs of investing and any other relevant matters. The investment strategy is then formulated with reference to the P

9 ortfolio ’s risk and return o bjectiv
ortfolio ’s risk and return o bjectives (plus the further considerations listed above) and in a manner that utilises the benefits of diversification within and between asset classes. The Portfolio 's B enchmark A sset A llocations are then set and modelled on a continuing basis to assess their ongoing appropriateness in the light of expected market conditions and the asset allocation’s ability to deliver on the particular Portfolio ’s investment objectives͘ Strategic A sset A llocation involves setting a Benchmark Asset Allocation for the lon g - term (but subject to reviews). Asset allocation may be adjusted with the aim of adding value to the performance of this Benchmark Asset Allocation through D ynamic A sset A llocation as described below. The investment strategy for each Portfolio is regularl y reviewed to ensure an appropriate balance between risk and return and to maximise the likelihood of achieving the Portfolio ' s stated objectives. Asset allocation modelling is undertaken to assess the impact of potential changes on each P ortfolio. Mercer formulates capital markets forecasts and employs proprietary modelling tool s to support these processes. Th is analysis is used to test the appropriateness of each Portfolio by estimating , among other metrics, the likelihood that the Portfolio will achieve its performance objectives, expected return, expected volatility and the probability of a negative return. Mercer also stress - tests each Portfolio to assess how it might perform under different scenarios. Reviewing the investment strategy Mercer undertakes a formal strategy review at least every three years. Any recommended changes are supported by detailed analysis setting out the rationale for changes and the expected impact on Portfolio characteristics. In the interim, Mercer performs a “health check” which revi

10 ews the investment strategies for each
ews the investment strategies for each Portfolio to gauge whether the agreed investment objectives and strategy remain appropriate and in the best interests of investors. At least one such health check is conducted in - between th e formal triennial reviews. SIPO Mercer Investment Trusts New Zealand MERCER 9 Potential enhancements considered in formal reviews and health checks may include:  t he addition of a new asset cl ass or a new type of investment;  i ncor poration of new Mercer research;  i nvestment environmental factors including significant market events ; and  l ong - term market/industry trends and the outlook for growth. The primary aim of any adjustment to a Portfolio ’s investment strategy is to improve the balance between risk and return and maximise the chance of achieving the stated objectives. Key considerations include:  the d e gree of diversification;  a ppropriate levels of liquidi ty, to facilitate daily pricing;  a vailability of c ommercially attractive fees with an emphasis on value, via cost effective investment structures;  t ransparency and reliability in asset valuation;  t he competitive environment, peer performan ce/offerings and investor demands; and  p roduct viab ility . These investment s trategies are reflected in the Benchmark Asset Allocation and r anges for each Portfolio , as set out in Section 6 . Dynamic Asset Allocation The Portfolio s in the Diversified Trust may be subject to a Dynamic Asset Allocation ( DAA) process designed primarily for risk control, capital preservation, and incremental value - add. DAA assessments are conducted on a regular basis and involve two stages. First, each asset class is assessed to determine whether it warrants being under or over - weighted based on a broad range of factors. Secondly, position

11 size ( i.e. the extent to which the as
size ( i.e. the extent to which the asset class weight is ‘tilted’ within the b enchmark ranges) is determined based on the level of conviction as to the expected value such tilts will add , and dictates the Target Allocation . This DAA approach aims to produce a more stable pattern of returns for the relevant Portfolio , especially during unstable market periods. Manager Selection Mercer focuses on selecting I nvestment M anagers who are specialist s within their particular investment markets and who have demonstrated capability and conviction in portfolio construction and the execution of investment strategies. A formalised process of screening potential managers, including a detailed assessment of their ability and performance, is coupled with on - going monitoring and formal performance reviews. The aim is to achieve a level of returns meeting or exceeding the objectives set, from time to time, for each Portfolio and which is consistent with the risk profile of each Portfolio . SIPO Mercer Investment Trusts New Zealand MERCER 11 5. Objectives Each Portfolio has a return - based objective . There are two types of investment objectives. Single - sector portfolios utilise a market or composite index as a benchmark with the objective of outperforming this benchmark. Multi - sector portfolios aim to achieve the applicable net real return objective. In setting these objectives, Mercer takes into consideration a range of risk - based factors. Benchmark: Market or Composite Index The FMCA requires managers of schemes registered under that Act to disclose information on the past performance of their fund s in quarterly fund updates. The performance of an appropriate market index must be inclu ded alongside that information. The market index must be a ‘broad - based securities mar ket index or indices’ which is͗ (a)

12 (i) widely recognised and widely used i
(i) widely recognised and widely used in the financial markets; or (ii) administered by a person other than the manager of the s cheme or any associated persons; and (b) appropriate in terms of assessing movements in the market in which the specified fund invests . Under the Financial Markets Conduct (Market Index) Exemption Notice 2018, managers are able to use a suitable peer group index where there is no appropriate market index available. In this situation, a composite index may be calculated which incorporates both market indices and peer group indices. For each Single - sector P ortfolio , the objective is to outperform the Benchmark return over periods of one year and longer. The Benchmark return is calculated using the return for each relevant market or peer group index (shown on page s 19 & 20 ) and the Benchmark Asset Allocation weights of each Fund (shown in Section 6). Each index return for the relevant period is multiplied by the weight for that asset class. Return based objectives In setting investment objectives , Mercer recognises the risk of inflation eroding the value of future returns. It has therefore set the return objectives for all multi - sector, diversified Portfolio s with reference to the achievement of a certain level of real return over a given timefram e. More specifically, each M ulti - sector , diversified Portfolio has an investment objective to earn the applicable t arget n et r eal r ate of r eturn (a return after tax * and investment related fees in excess of inflation as measured by c onsumer p rice i ndex i ncreases) specified in the table below. The objectives are reviewed from time to time to ensure reasonableness. In addition, for each Portfolio , outperformance will be sought relative to the return of the Benchmark Portfolio over periods of one year and longer . SIPO Mercer Inves

13 tment Trusts New Zealand MERCER
tment Trusts New Zealand MERCER 12 * Tax at 28% Prescribed Investor Rate Each single - sector Portfolio aims to achieve the investment objective of o utperform ing the relevant Benchmark Portfolio over 1 year and longer The return of the Benchmark Portfolio for each Portfolio is calculated using the weighted return of each asset class (given by the relevant indices shown in Section 6 ) . T he specific B enchmark A sset A llocation asset class weights of each Portfolio are shown in Section 6 . To do this, each publicly available index return must be sought for the relevant period, then multiplied by the weight of that asset class. This is then used to calculate the return of the Benchmark Portfolio. Risk - based objectives Mercer utilises a multi - dimensional approach when building or assessing diversified portfolios in order to better manage the risks inherent in the Portfolio s . The five risk factors considered are:  p robability of meeting objectives ;  v olatility ;  f requency of a negative return ;  s everity of the worst negative returns ; and  c oncentration in sources of risk. Multi - sector, diversified Portfolios Target gross real rate of return (% p.a.) ( after fees, before tax*) Target net real rate of return (% p.a.) ( after fees, after tax*) Investment timeframe Additional Objective Mercer Conservative 1. 00 0. 50 At least 3 years Outperform the relevant benchmark over periods of 1 year and longer periods Mercer Moderate 2. 00 1. 00 At least 5 years Mercer Balanced 3. 0 0 2. 00 At least 8 years Mercer Growth 4. 00 2.5 0 At least 10 years Mercer High Growth 4.5 0 3. 00 At least 1 3 years Mercer Socially Responsible Conservative 1. 00 0.5 0 At least 3 years Mercer Socially Responsible Balanced 3

14 . 0 0 2. 00 At least 8 years Me
. 0 0 2. 00 At least 8 years Mercer Socially Responsible Growth 4. 00 2.5 0 At least 10 years SIPO Mercer Investment Trusts New Zealand MERCER 13 6. Investment Strategy The tables below shows the Benchmark Asset Allocation and Ranges for the Portfolios . Multi - Asset Class ( Diversified ) Portfolios Benchmark Asset Allocation Asset Class/ Sector Mercer Conservative Portfolio Mercer Moderate Portfolio Mercer Balanced Portfolio Mercer Growth Portfolio Mercer High Growth Portfolio Trans - Tasman Shares 5.0 9.5 12.5 15.5 20 .0 Overseas Shares 9.3 16.9 25 .5 35.1 42.5 Overseas Shares Low Volatility 2.2 2.0 3.6 5.5 6.6 Overseas Shares Small Caps - 1.6 2. 9 4.4 5.3 Emerging Markets Shares - 2.0 3.6 5.5 6.6 Total Overseas Shares 11. 5 22.5 35 .5 50.5 61 .0 Total Shares (excluding Real Assets) 16.5 32.0 48.0 66.0 81.0 Listed Property Shares 0.9 2.0 3.0 3.5 3.5 Unlisted Property 0.9 2.0 3.0 3.5 3.5 Listed Infrastructure Shares 0.9 2.0 3.0 3.5 3.5 Unlisted Infrastructure 0.9 2.0 3.0 3.5 3.5 Natural Resources - - - - - Total Real Assets investments 3.5 8 .0 12.0 1 4 .0 1 4 .0 Alternative investments - - - - - NZ Sovereign Bonds 15.0 13.0 10.0 5.0 1 .0 Overseas Sovereign Bonds 18.5 1 4 .0 1 1 .0 5 .0 1.0 Global Credit 13.5 10.0 8.0 4 .0 1.0 Other Fixed Interest 3.0 5 .0 7 .0 5 .0 1.0 Total Fixed Interest 50.0 4 2 .0 3 6 .0 19.0 4 .0 Total Cash 30.0 18 .0 4 .0 1.0 1 .0 Total 100.0 100.0 100.0 100.0 100.0 Growth Investments 20 .0 40 .0 60 .0 80 .0 9 5 .0 Defensive Investments 80 .0 6 0 .0 4 0 .0 2 0 .0 5 .0 SIPO Mercer Investment Trusts New

15 Zealand MERCER 14 Benchmark
Zealand MERCER 14 Benchmark Ranges Asset Class/ Sector Mercer Conservative Portfolio Mercer Moderate Portfolio Mercer Balanced Portfolio Mercer Growth Portfolio Mercer High Growth Portfolio Trans - Tasman Shares 0 – 10 0 – 1 9.5 2.5 – 22.5 5.5 – 25.5 10 – 30 Overseas Shares 6 .5 – 16 .5 12.5 – 32.5 25.5 – 45.5 40.5 – 60.5 51 – 71 Real Assets investments 0 – 10 0 – 19 3.5 – 23.5 6 – 26 6 – 26 Alternative investments - 0 – 10 0 – 10 0 – 10 0 – 10 Fixed Interest 35 – 65 25 – 55 18 – 48 7 – 27 0 – 1 4 Cash 20 – 50 5 – 35 0 – 2 0 0 – 15 0 – 15 Growth Investments 5 – 35 20 – 50 40 – 70 60 – 90 75 – 100 Defensive Investments 65 – 95 50 – 80 30 – 60 10 – 40 0 – 25 Currency Hedging Asset Class/ Sector Benchmark Active Management Range (Target) Overseas Shares 1 50 0 – 100 Real Assets investments 2 100 - Global Fixed Interest 3 100 - 1 hedged to NZ$ such that total overseas shares are 50% hedged on a net of tax basis for a 28% PIR tax payer. The level of currency hedging for overseas shares is managed between 0% and 100% (on a net of tax basis) and may change over time depending on Mercer's view of the relative strength (or weakness) of the New Zealand dollar. 2 100% hedged to NZ$ on a net of tax basis for a 28% PIR tax payer. 3 100% hedged to NZ$ on a net of tax basis for a 28% PIR tax payer. Socially Responsible Multi - Asset Class (Diversified) Portfolios Benchmark Asset Allocation Asset Class/ Sector Mercer Socially Responsible Conservative Portfolio Mercer Socially Responsible Bala

16 nced Portfolio Mercer Socially Respon
nced Portfolio Mercer Socially Responsible Growth Portfolio Trans - Tasman Shares 5.0 12.5 15.5 Overseas Shares 11. 5 35.5 50.5 Total Overseas Shares 11. 5 35.5 50.5 Total Shares (excluding Real Assets) 16.0 48.0 6 6.0 Listed Property Shares 0.9 3.0 3.5 Unlisted Property 0.9 3.0 3.5 Listed Infrastructure Shares 0.9 3.0 3.5 Unlisted Infrastructure 0.9 3.0 3.5 Natural Resources - - - Total Real Assets investments 3.5 12.0 14.0 Alternative investments - - - SIPO Mercer Investment Trusts New Zealand MERCER 15 NZ Sovereign Bonds 15.0 10.0 5.0 Overseas Sovereign Bonds 18.5 1 1 .0 5.0 Global Credit 13.5 8.0 4.0 Other Fixed Interest 3.0 7.0 5.0 Total Fixed Interest 50.0 3 6 .0 19 .0 Total Cash 30.0 4 .0 1 .0 Total 100.0 100.0 100.0 Growth Investments 20 .0 60.0 80.0 Defensive Investments 80.0 40.0 20.0 Benchmark Ranges Asset Class/ Sector Mercer Socially Responsible Conservative Portfolio Mercer Socially Responsible Balanced Portfolio Mercer Socially Responsible Growth Portfolio Trans - Tasman Shares 0 – 10 2.5 – 22.5 5.5 – 25.5 Overseas Shares 6.5 – 16.5 25.5 – 45.5 40.5 – 60.5 Real Assets investments 0 – 10 3.5 – 23.5 6.0 – 26.0 Alternative investments - 0 – 10 0 – 10 Fixed Interest 35 – 65 18 – 48 7 – 27 Cash 20 – 50 0 – 20 0 – 15 Growth Investments 5 – 35 40 – 70 60 – 90 Defensive Investments 65 – 95 30 – 60 10 – 40 Currency Hedging Asset Class/ Sector Benchmark Active Management Range (Target) Overseas Shares 1 50 0 – 100 Real Assets investments 2 100 - Global Fixed Interest 100

17 - 1 The level of currency hedging f
- 1 The level of currency hedging for overseas shares is managed between 0% and 100% and may change over time depending on Mercer's view of the relative strength (or weakness) of the New Zealand dollar. 2 100% hedged to NZ$ on a net of tax basis for a 28% PIR tax payer. SIPO Mercer Investment Trusts New Zealand MERCER 16 Shares Benchmark Asset Allocation Asset Class/ Sector Mercer Trans - Tasman Shares Portfolio Mercer Socially Responsible Trans - Tasman Shares Portfolio Mercer New Zealand Shares Index Portfolio Trans - Tasman Shares 100.0 100.0 100.0 Total Overseas Shares - - - Total Cash - - - Total 100.0 100.0 100.0 Benchmark Ranges Asset Class/ Sector Mercer Trans - Tasman Shares Portfolio Mercer Socially Responsible Trans - Tasman Shares Portfolio Mercer New Zealand Shares Index Portfolio Trans - Tasman Shares 90 – 100 90 – 100 90 – 100 Overseas Shares - - - Cash 0 – 10 0 – 10 0 – 10 Growth Investments 90 – 100 90 – 100 90 – 100 Defensive Investments 0 – 10 0 – 10 0 – 10 Benchmark Asset Allocation Asset Class/ Sector Mercer Shares Portfolio Mercer Hedged Composite Global Shares Mercer Emerging Market s Portfolio Mercer Overseas Small Companies Portfolio Mercer Overseas Low Volatility Shares Portfolio Trans - Tasman Shares 26.0 - - - - Overseas Shares 48.1 65.0 - - - Overseas Shares Low Volatility 9.3 12.5 - - 100.0 Overseas Shares Small Caps 7.4 10.0 - 100.0 - Emerging Markets Shares 9.2 12.5 100.0 - - Total Overseas Shares 74.0 100.0 100.0 100.0 100.0 Total Cash - - - - - Total 100.0 100.0 100.0 100.0 100.0 SIPO Mercer Investment Trusts Ne

18 w Zealand MERCER 17 Benchmar
w Zealand MERCER 17 Benchmark Ranges Asset Class/ Sector Mercer Shares Portfolio Mercer Hedged Composite Global Shares Mercer Emerging Market s Portfolio Mercer Overseas Small Companies Portfolio Mercer Overseas Low Volatility Shares Portfolio Trans - Tasman Shares 16 - 36 - - - - Overseas Shares - 45 – 80 Overseas Shares Low Volatility - 0 – 25 80 – 100 Overseas Shares Small Caps - 5 – 15 90 – 100 Emerging Markets Shares - 5 – 22.5 90 – 100 Overseas Shares 64 - 84 90 – 100 90 – 100 90 – 100 80 – 100 Cash 0 – 10 0 – 10 0 – 10 0 – 10 0 – 20 Benchmark Asset Allocation Asset Class/ Sector Mercer Socially Responsible Overseas Shares Portfolio Mercer Socially Responsible Hedged Overseas Shares Portfolio Mercer Socially Responsible Overseas Shares Index Portfolio Mercer Socially Responsible Hedged Overseas Shares Index Portfolio Trans - Tasman Shares - - - - Overseas Shares 100.0 100.0 100.0 100.0 Overseas Shares Low Volatility - - - - Overseas Shares Small Caps - - - - Emerging Markets Shares - - - - Total Overseas Shares 100.0 100.0 100.0 100.0 Total Cash - - - - Total 100.0 100.0 100.0 100.0 Benchmark Ranges Asset Class/ Sector Mercer Socially Responsible Overseas Shares Portfolio Mercer Socially Responsible Hedged Overseas Shares Portfolio Mercer Socially Responsible Overseas Shares Index Portfolio Mercer Socially Responsible Hedged Overseas Shares Index Portfolio Trans - Tasman Shares - - - - Overseas Shares 90 – 100 90 – 100 90 – 100 90 – 100 Cash 0 – 10 0 – 10 0 – 10 0 – 10 Growth In

19 vestments 90 – 100 90 – 10
vestments 90 – 100 90 – 100 90 – 100 90 – 100 Defensive Investments 0 – 10 0 – 10 0 – 10 0 – 10 SIPO Mercer Investment Trusts New Zealand MERCER 18 Benchmark Asset Allocation Asset Class/ Sector Mercer Overseas Shares Portfolio Mercer Hedged Overseas Shares Portfolio Mercer Overseas Shares Plus Portfolio Mercer Hedged Overseas Shares Plus Portfolio Trans - Tasman Shares - - - - Overseas Shares 100.0 100.0 100.0 100.0 Overseas Shares Low Volatility - - - - Overseas Shares Small Caps - - - - Emerging Markets Shares - - - - Total Overseas Shares 100.0 100.0 100.0 100.0 Total Cash - - - - Total 100.0 100.0 100.0 100.0 Benchmark Ranges Asset Class/ Sector Mercer Overseas Shares Portfolio Mercer Hedged Overseas Shares Portfolio Mercer Overseas Shares Plus Portfolio Mercer Hedged Overseas Shares Plus Portfolio Trans - Tasman Shares - - - - Overseas Shares 90 – 100 90 – 100 90 – 100 90 – 100 Cash 0 – 10 0 – 10 0 – 10 0 – 10 Growth Investments 90 – 100 90 – 100 90 – 100 90 – 100 Defensive Investments 0 – 10 0 – 10 0 – 10 0 – 10 Benchmark Asset Allocation Asset Class/ Sector Mercer Overseas Shares Index Portfolio Mercer Hedged Overseas Shares Index Portfolio Mercer Overseas Shares Index Portfolio B Mercer Hedged Overseas Shares Index Portfolio B Trans - Tasman Shares - - - - Overseas Shares 100.0 100.0 100.0 100.0 Overseas Shares Low Volatility - - - - Overseas Shares Small Caps - - - - Emerging Markets Shares - - - - Total Overseas Shares 100.0 100.0 100.0 100.0 Total Cash - - - - To

20 tal 100.0 100.0 100.0 100.0 SI
tal 100.0 100.0 100.0 100.0 SIPO Mercer Investment Trusts New Zealand MERCER 19 Benchmark Ranges Asset Class/ Sector Mercer Overseas Shares Index Portfolio Mercer Hedged Overseas Shares Index Portfolio Mercer Overseas Shares Index Portfolio B Mercer Hedged Overseas Shares Index Portfolio B Trans - Tasman Shares - - - - Overseas Shares 90 – 100 90 – 100 90 – 100 90 – 100 Cash 0 – 10 0 – 10 0 – 10 0 – 10 Growth Investments 90 – 100 90 – 100 90 – 100 90 – 100 Defensive Investments 0 – 10 0 – 10 0 – 10 0 – 10 Currency Hedging 1 Portfolio Benchmark (After Tax) Active Management Range (Target – After Tax ) Mercer Trans - Tasman Shares Mercer Socially Responsible Trans - Tasman Shares Portfolio 0% - Mercer New Zealand Shares Index Portfolio 0% - Mercer Overseas Shares Portfolio 0% - Mercer Hedged Overseas Shares Portfolio 100% - Mercer Overseas Shares Plus Portfolio 0% - Mercer Hedged Overseas Shares Plus Portfolio 100% - Mercer Overseas Small Companies Portfolio 0% - Mercer Overseas Low Volatility Shares Portfolio 0% - Mercer Emerging Markets Portfolio 0% - Mercer Shares Portfolio 50% 0 – 100% Mercer Hedged Composite Global Shares Portfolio 100% - Mercer Socially Responsible Overseas Shares Portfolio 0% - Mercer Socially Responsible Hedged Overseas Shares Portfolio 100% - Mercer Socially Responsible Overseas Shares Index Portfolio 0% - Mercer Socially Responsible Hedged Overseas Shares Index Portfolio 100% - Mercer Overseas Shares Index Portfolio 0% - Mercer Hedged Overseas Shares Index Portfolio 100% - Mercer Overseas Shares Index Portfolio B 0% - Mercer Hedge

21 d Overseas Shares Index Portfolio B 10
d Overseas Shares Index Portfolio B 100% - 1 hedged to $NZ on an after - tax basis for a 28% PIR tax payer SIPO Mercer Investment Trusts New Zealand MERCER 20 Real Assets Benchmark Asset Allocation Asset Class/ Sector Mercer Unlisted Property 1 Portfolio Mercer Listed Property Portfolio Mercer Unlisted Infrastructure 1 Portfolio Mercer Listed Infrastructure Portfolio Mercer Natural Resources 3 Portfolio Mercer Commodities Portfolio Mercer Real Assets 1 Portfolio Listed Property 100.0 - - - 25.5 Unlisted Property 100.0 - - - - 17.0 Listed Infrastructure - - 100.0 - 25.5 Unlisted Infrastructure - 100.0 - - 17.0 Natural Resources 3 - - - 100.0 15.0 Commodities 100.0 Total Real Assets 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Total Cash - - - - - - - Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Benchmark Ranges Asset Class/ Sector Mercer Unlisted Property 1 Po rtfolio Mercer Listed Property Portfolio Mercer Unlisted Infrastructure 1 Portfolio Mercer Listed Infrastructure Portfolio Mercer Natural Resources Portfolio Mercer Commodities Portfolio Mercer Real Assets 1 Portfolio Listed Property 90 - 100 - - - - 0 - 60 Unlisted Property 80 – 100 - - - - - 0 - 60 Listed Infrastructure - - - 90 - 100 - - 0 - 60 Unlisted Infrastructure - - 80 - 100 - - - 0 - 60 Natural Resources - - - - 90 - 100 - 0 - 30 Commodities - - - - - 90 - 10 3 - Real Assets 80 – 100 90 – 100 80 – 100 90 – 100 90 – 100 90 – 103 80 – 100 Cash 0 – 2 0 0 – 1 0 0 – 2 0 0 – 10 0 – 1 0

22 - 3 – 1 0 0 – 20
- 3 – 1 0 0 – 20 Growth Investments 80 – 100 90 – 100 80 – 100 90 – 100 90 – 100 90 – 103 80 – 100 Defensive Investments 0 – 2 0 0 – 1 0 0 – 2 0 0 – 1 0 0 – 1 0 - 3 – 1 0 0 – 2 0 Currency Hedging 2 Portfolio Benchmark Active Management Range (Target) Mercer Listed Property Portfolio 100% - Mercer Unlisted Property Portfolio 100% - Mercer Listed Infrastructure Portfolio 100% - Mercer Unlisted Infrastructure Portfolio 100% - Mercer Natural Resources Portfolio 100% - Mercer Commodities Portfolio 100% - Mercer Real Assets Portfolio 100% - SIPO Mercer Investment Trusts New Zealand MERCER 21 1 Liquidity condition : Special Transaction and Liquidity Conditions may apply, p lease refer to the MITNZ Information Memorandum for more details . 2 100% hedged to NZ$ on a net of tax basis for a 28% PIR tax payer. 3 Natural resources includes Timber and Commodities. Alternatives Benchmark Asset Allocation Asset Class/ Sector Mercer Alternative Assets Portfolio 1 Mercer Select Alternative Assets Portfolio 1 Alternative investments 100 .0 100.0 Total Cash - - Total 100 .0 100.0 Benchmark Ranges Asset Class/ Sector Mercer Alternative Assets Portfolio 1 Mercer Select Alternative Assets Portfolio 1 Alternative investments 50 – 100 50 – 100 Cash 0 – 50 0 – 50 Growth Investments 50 – 100 50 – 100 Defensive Investments 0 – 50 0 – 50 1 Liquidity condition : Special Transaction and Liquidity Conditions may apply, p lease refer to the MITNZ Information Memorandum for more details . Currency Hedging 2 Asset Class / Sector Benchmark Active Management Range (Target) Alternative Inve

23 stments 100 - 2 H e dged to NZ$ on
stments 100 - 2 H e dged to NZ$ on a net of tax basis for a 28% PIR tax payer. SIPO Mercer Investment Trusts New Zealand MERCER 22 Cash and Fixed Interest Benchmark Asset Allocation Asset Class/ Sector Mercer New Zealand Sovereign Bond Portfolio Mercer Overseas Sovereign Bond Portfolio Mercer Overseas Sovereign Bond Index Portfolio Mercer Overseas Fixed Interest Portfolio NZ Sovereign Bonds 100.0 - - - Overseas Sovereign Bonds - 100.0 100.0 - Global Credit - - - - Overseas Fixed Interest - - - 100.0 Absolute Return Bonds - - - - Total Fixed Interest 100.0 100.0 100.0 100.0 Total Cash - - - - Total 100.0 100.0 100.0 100.0 Growth Investments 0 0 0 0 Defensive Investments 100.0 100.0 100.0 100.0 Benchmark Ranges Asset Class/ Sector Mercer New Zealand Sovereign Bond Portfolio Mercer Overseas Sovereign Bond Portfolio Mercer Overseas Sovereign Bond Index Portfolio Mercer Overseas Fixed Interest Portfolio Fixed Interest 90 – 100 90 – 100 90 – 100 90 – 100 Cash 0 – 10 0 – 10 0 – 10 0 – 10 SIPO Mercer Investment Trusts New Zealand MERCER 23 Benchmark Asset Allocation Asset Class/ Sector Mercer Cash Portfolio Mercer Global Absolute Return Bond Portfolio Mercer Global Credit Portfolio Mercer Socially Responsible Global Credit Portfolio NZ Sovereign Bonds - - - - Overseas Sovereign Bonds - - - - Global Credit - - 100.0 100.0 Overseas Fixed Interest - - - - Absolute Return Bonds - 100 - - Total Fixed Interest 0 100.0 100.0 100.0 Total Cash 100.0 - - - Total 100.0 100.0 100.0 100.0 Growth Investments 0 0 0

24 0 Defensive Investments 100.0 10 0
0 Defensive Investments 100.0 10 0 10 0 10 0 Benchmark Ranges Asset Class/ Sector Mercer Cash Portfolio Mercer Global Absolute Return Bond Portfolio Mercer Global Credit Portfolio Mercer Socially Responsible Global Credit Portfolio Fixed Interest - 90 - 100 90 – 100 90 – 100 Cash 100 0 - 10 0 – 10 0 – 10 Currency Hedging Asset Class/ Sector Benchmark Active Management (Target) Overseas Fixed Interest 1 100 - 1 H edged to NZ$ on a net of tax basis for a 28% PIR tax payer. SIPO Mercer Investment Trusts New Zealand MERCER 24 Asset Class Benchmark Indices, Tax Treatment and Hedging The table below details indices for each asset class that are used to calculate the Benchmark Portfolio return that the Portfolio s will be measured against. It also details the current tax treatment and the current NZD strategic hedging level. The return of the Benchmark Portfolio for each Portfolio is calculated using the weighted return of each asset class (given by the relevant indice s shown below and the specific B enchmark A sset A llocation asset class weights of each Portfolio ). Asset Class Benchmark Indices Current Tax Treatment Current NZD Strategic Hedging Level (before tax) 2 Trans - Tasman Shares S&P/ NZX 50 Index with Imputation Credits - 1 - Socially Responsible Trans - Tasman Shares S&P/ NZX 50 Index with Imputation Credits - 1 - New Zealand Index Shares S&P/ NZX 50 Index with Imputation Credits - 1 - Unhedged Overseas Shares MSCI World Index with net dividends reinvested in NZD FDR 0% Hedged Overseas Shares MSCI World Index with net dividends reinvested (100% hedged to NZD on an after tax basis) FDR 139% Overseas Low Volatility Shares MSCI World Minimum Volatility Index with net dividends reinvested in NZD FDR

25 0% Overseas Small Companies MSCI
0% Overseas Small Companies MSCI World Small Cap Index with n et d ividends r einvested in NZD FDR 0% Emerging Markets MSCI Emerging Markets Index in NZD (with net dividends reinvested) FDR 0% Socially Responsible Overseas Shares MSCI World Index with net dividends reinvested in NZD FDR 0% Socially Responsible Hedged Overseas Shares MSCI World Index with net dividends reinvested (hedged to NZD) FDR 100% Socially Responsible Overseas Shares Index Portfolio MSCI World Index with net dividends reinvested excluding Tobacco, Controversial and Nuclear Weapons companies in NZD FDR 0% Socially Responsible Hedged Overseas Shares Index Portfolio MSCI World Index with net dividends reinvested excluding Tobacco, Controversial and Nuclear Weapons companies (100% hedged to NZD on an after tax basis) FDR 139% O verseas Shares Index Portfolio MSCI World Index with net dividends reinvested excluding Tobacco, Controversial and Nuclear Weapons companies in NZD FDR 0% SIPO Mercer Investment Trusts New Zealand MERCER 25 1 NZ Equities dividends taxed on a PIE basis , Australian Equity exposure is taxed on a PIE or FDR basis depending on the stock. 2 Currency hedging is implemented on an after tax basis. For some asset classes or strategies, the level of hedging may be higher than 100% on a pre - tax basis, d ue to the method in which the underlying assets and hedges are taxed. The rate of tax is assumed to be at 28% PIR . Pre tax returns will be monitored using gross hedging ratios. 3 Hedging applies to AUD exposure where underlying assets are fully hedged to AUD . H edged Overseas Shares Index Portfolio MSCI World Index with net dividends reinvested excluding Tobacco, Controversial and Nuclear Weapons companies (100% hedged to NZD on an after tax basis) FDR 139% Listed Property FTSE EPR

26 A/NAREIT Developed Index (with net di
A/NAREIT Developed Index (with net dividends reinvested) (100% hedged to NZD on an after tax basis) FDR 139% Unlisted Property Composite: 70% MSCI/Mercer Australia Core Wholesale Monthly Property Fund Index (100% hedged to NZD on an after tax basis), & 30% MSCI/Property Council of New Zealand Annual Property Index published Quarterly FDR 139% 3 Listed Infrastructure FTSE Global Core Infrastructure 50/50 Index with net dividends reinvested (100% hedged to NZD on an after tax basis) FDR 1 14 % 3 Unlisted Infrastructure MSCI Australia Quarterly Private Infrastructure Fund Index (100% hedged to NZD on an after tax basis) FDR 139% 3 Natural Resources Bloomberg Commodities Index Total Return (100% hedged to NZD on an after tax basis ) FDR CV 43 % 3 57% Commodities Bloomberg Commodity Index Hedged (NZD) CV 100% New Zealand Sovereign Bonds S&P/NZX NZ Government Bond Index CV - Overseas Sovereign Bonds JP Morgan Global Government Bond Index (100% hedged to NZD on an after tax basis) CV 100% 3 Overseas Sovereign Bonds Index Portfolio JP Morgan Global Government Bond Index (100% hedged to NZD on an after tax basis) CV 100% 3 Global Credit Composite: 60% Bloomberg Barclays Global Aggregate Corporate Index (100% hedged to NZD on an after tax basis), & 40% Bloomberg Barclays Global Aggregate ex - Treasury ex - Government Related Index (100% hedged to NZD on an after tax basis) CV 100% 3 SR Global Credit Bloomberg Barclays Global Aggregate Corporate Index (100% hedged to NZD on an after tax basis) CV 100% 3 Overseas Fixed Interest Bloomberg Barclays Global Aggregate Return Index (100% hedged to NZD on an after tax basis) CV 100% 3 Other Fixed Interest S&P/NZX Bank Bill 90 - day Index CV - Cash S&P/NZX Bank Bill 90 - day Index CV - Alternative Assets HFRI FOF: Market Defensive

27 Index (100% hedged to NZD on an after
Index (100% hedged to NZD on an after tax basis) 4 FDR 100% SIPO Mercer Investment Trusts New Zealand MERCER 26 4 Alternative Assets have the following secondary benchmarks: - Mercer Alternative Assets Portfolio: To achieve a rate of return (after all fees) at least 3.0% per annum above the return on bank bills as measured by the S&P Bank Bills 90 - day index over rolling five year periods. - Mercer Select Alternative Assets Portfolio: To achieve a rate of return (after all fees) at least 2 .0% per annum above the return on bank bills as measured by the S&P Bank Bills 90 - day index over rolling five year pe riods. Tax Treatment The Portfolio s operate as Portfolio Investment Entities (PIEs) with Mercer calculating and paying tax on investment income that needs to be paid on behalf of MITNZ investor s under the PIE tax rules. The MITNZ pays tax on behalf of its investor s at 0% or 28% depending on each investo r’s elected p rescribed i nvestor r ate. The MITNZ has elected to use the Exit filer option whereby the PIE tax for the year ending 31 March for existing investor s is paid or refunded by the end of the month following the end of year. Where an investor exits during the year any tax will be reported and paid or refunded at the end of the month following their exit. The Manager will make necessary adjustments to the interests of these inv estors in the MITNZ by deducting the amount of net PIE tax payable or paying the amount of refundable PI E tax credits appropriate. Hedging Mercer considers currency hedging is an essential part of any long - term investment strategy. Mercer also believes that an active approach to currency hedging is appropriate for some Portfolios and therefore manages the level of currency exposures in th o se Portfolio s which are subject to the Dynamic Asset Allocation proce

28 ss (as described in section 6) . This
ss (as described in section 6) . This implies that certain Portfolio s will not maintain the same level of currency hedging at all times. Currency hedging is essentially protection against ch anges in currency exchange rates. Those overseas assets that are not hedged will have exposure to currency exchange rate movements resulting in a benefit when the New Zealand dollar goes down, and decrease in value when the New Zealand dollar goes up. Merc er sets a benchmark level of currency hedging for each overseas asset class , as detailed in the table above (Currency hedging) and each MITNZ I nvestment M anager must comply with these requirements. Where permitted, t he Dynamic Asset Allocation process, as detailed in Section 4 , establishes the target level of currency exposure͘ This is then monitored using Mercer’s d aily c ash f low m odel. Investment Manager List Details of the current I nvestment M anagers appointed to invest the MITNZ portfolios are available by emailing Mercer at NZPortfolios@mercer.com . Investment Policies The Mercer NZ Investment Policies can be found in the Mercer NZ Investment Process , Policies and Governance Framework document. Further information is available on request . SIPO Mercer Investment Trusts New Zealand MERCER 27 7. Glossary Active Management is an investment strategy in which the investor seeks to outperform a given benchmark. A ctive Ownership is exercising rights as a shareholder. This is often done as voting at shareholder meetings and engaging with company b oards. A lternatives include assets that are expected to generate returns that are different to shares and bonds, and therefore offer inc reased diversification to the relevant Portfolio . Asset Classes are the names given to the different financial categories or sectors in which your money may be invested. T

29 he major asset classes include shares, r
he major asset classes include shares, real assets, fixed interest, cash and alterna tive assets. These asset classes can be broken down further for example to include New Zealand or overseas shares, New Zealand or overseas sovereign bonds, direct (unlisted) or listed property investments. All asset classes have different risk and return c haracteristics. Certain asset classes, such as property, infrastructure and alternatives contain both growth and defensive characteristics. Mercer uses the equity and debt distinction as the primary differentiator between growth and defensive investments respectively. Benchmark Asset Allocation details the long term percentage target holding of each asset class for each Portfolio . Benchmark Portfolio means a list of market indices w eighted by the relevant Portfolio ’s B enchmark A sset A llocation and used to measure the performance of the Portfolio . Board means the board of directors of Mercer . Cash may include a range of cash related investments including cash deposit s, term deposits, bills, notes, and short term bonds. Derivatives incl ude currency exchange contracts, interest rate swaps, warrants, share market index futures, commodity futures, share options and similar financial instruments. Dynamic Asset Allocation or DAA means adjusting the Target A llocation to asset classes up or down to reflect a range of factors primarily for risk control, capital preservation, and incremental value add. This is also known as a tactical asset allocation. Hedging generally refers to the process of protecting investments against, or reducing the ri sk of, a loss. For example, in the context of currency, the value of overseas investments is affected by rises or falls in the value of the New Zealand dollar (e.g. if the New Zealand dollar rises in value, then overseas investments in New Zealand dollar t e rms will reduce in v

30 alue.) The M anager and underlying I nv
alue.) The M anager and underlying I nvestment M anagers can use various techniques to minimise the effect of currency movements on overseas investments – this is currency hedging. SIPO Mercer Investment Trusts New Zealand MERCER 28 Investment M anager , where appointed by Mercer, is a party responsible for buying and selling securities in a MITNZ Portfolio . Mercer or Manager means Mercer (N.Z.) Limited, the m anager of the MITNZ who is responsible for the investment of the MITNZ ’s assets in accordance with the Trust Deed and for ensuring this SIPO is adhered to . MITNZ refers to Mercer Investment Trusts New Zealand a series of wholesale unit trusts of which Mercer is the manager and TEL is the trustee. Multi - sector, diversified Portfolio is a Portfolio with exposure across more than one asset class in order to gain diversification benefits or to spread the risk. Passive Management aims to mirro r a market index return by rep licating as close as possible a benchmark index . Portfolio means an investment Portfolio offered under the MITNZ Information Memorandum. Portfolio Objectives These identify the type of return a Portfolio aims to achieve for investors over a specified time period. These can be stated in relation to a relevant index such as CPI. Please note that the objectives of any particular Portfolio should not be treated, or relied upon as a forecast, indicator or guarantee of any future returns or performance for that Portfolio. The value of each Portfolio may rise and fall. Prescribed Investor Rate means the tax rate that investments in the MITNZ can be taxed at. The rates are 0% or 28%͕ depending on the individual investor’s taxable income . For more information, see https://www.ird.govt.nz/roles/portfolio - investment - entities/find - my - prescribed - investor - rate .

31 Real Assets include listed property, l
Real Assets include listed property, listed infrastructure, unlisted property, unlisted infrastructure and natural resources. These assets are expected to generate returns that are different to shares, and therefore offer increased diversification to the relevant Port folio . Single - sector Portfolio is a Portfolio that invests in just one asset class or sector. SIPO means this Statement of Investment Policy and Objectives. Strategic Asset Allocation i nvolves setting a Benchmark Asset Allocation for the long term (but su bject to reviews). Value can be added to the performance of this Benchmark Asset Allocation through D ynamic A sset A llocation. TEL or Trustee means Trustees Executors Limited, the current trustee of the MITNZ . Target Allocation means the a sset a llocation being targeted to implement Dynamic Asset Allocation , taking account of each Portfolio ’s Strategic Asset Allocation and r anges . T rust Deed is the formal agreement between the Trustee and the Manager that outlines their respective powers, requirements and responsibilities in respect of the governance of the MITNZ . Unlisted Investments are investments into companies or assets that are not traded on the share market or public exchange. Examples include unlisted property and unlisted infrastructure. SIPO Mercer Investment Trusts New Zealand MERCER 29 8. Appendix Version Control Table Version Control Reason for Change Date Jan 2015 SIPO Update 25 November 2015 April 2017 SIPO Update 6 April 201 7 June 201 7 Addition al appendix – Socially Responsible Portfolios 30 June 201 7 July 2018 SIPO Update 1 July 2018 October 2018 Regulatory requirement from FMA & Additional Portfolios 19 September 2019 May 2020 SAA changes & additional portfolios 31 August 2020 March 2021 Change of trust