Mercer Super Trust: Financial Analysis

This assignment analyzes Mercer Super Trust, an Australian superannuation fund. It examines their funding sources, investment portfolio (including shares, properties, and bonds), and application of time value of money principles. The analysis also covers the company's financial performance, participation in share and bond markets, and regulatory compliance with the Australian Securities and Investment Commission (ASIC).

Running head: FINANCIAL INSTITUTION AND MARKET
Financial Institution and Market
Name of the Student
Name of the University
Author’s Note

1FINANCIAL INSTITUTION AND MARKET
Table of Contents
Introduction......................................................................................................................................1
Activities and Performance of Mercer Super Trust.........................................................................2
Uses and Sources of Funds..........................................................................................................2
Time Value of Money..................................................................................................................2
Performance of Mercer Super Trust............................................................................................2
Participation of Mercer Super Trust in the Financial Markets........................................................3
Applicable Regulations....................................................................................................................3
Conclusion.......................................................................................................................................4
References........................................................................................................................................5

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Introduction
The Australian Financial System includes the major arrangements and these
arrangements cover the funds for the activities of borrow and lend including the transfer in the
ownership of different financial claims. The crucial participants of Australian financial system
are authorized deposit taking institutions like credit unions, banks, insurance companies,
superannuation funds, financial market and different payment systems. Thus, it can be said that
Australia has a very strong and well-structured financial system (rba.gov.au 2017). In the
financial system of Australia, three types of financial institutions can be seen; they are
‘Authorized Deposit-taking Institutions’ (ADIs), ‘Non-ADI Financial Institutions’ and Insurers
and Funds Managers. Under ADIs, the main institutions are banks, building societies and credit
unions; and Australian Prudential Regulatory Authority (APRA) controls them. Under non-ADI,
the main institutes are companies of the money market, finance firms and securitisers; and
Australian Securities and Investment Commission (ASIC) controls them. Others are life
insurance corporations, general insurance firms, health insurance organizations, public unit
trusts, trusts for managing cash, common funds and friendly societies (rba.gov.au 2017). The
major financial markets in Australia are the debt market that includes long-term and short-term
debt securities market, derivatives market and equity market. The main aim of this report is to
analyze and evaluate the financial system of Australia by using one Australian financial
institution (rba.gov.au 2017). For this report, Mercer Super Trust is taken into consideration. The
first part of the report shows activities and performance of Mercer Super Trust. In the second
part, the participation of Mercer Super Trust in two of the financial markets is discussed. The
next part is about the discussion of regulations.

3FINANCIAL INSTITUTION AND MARKET
Performance and Activities of Mercer Super Trust
Uses and Sources of Funds
The main work of Mercer Super Trust is to provide funds to the worker for their various
needs. Thus, Mercer Super Trust needs funds so that it can be provided to the workers in various
forms like pension and others. In addition, Mercer Super Trust also needs funds to fulfill their
working capital requirements. The annual report of Mercer Super Trust states that the company
has some major sources of finds. The first source of fund is shares of various Australian
companies like FIL Limited, Nikko AM Limited, IFM Investors Pty Ltd and many others. The
second source is overseas shares like Hexavest Inc, Arrowstree Capital and many others. The
other sources of funds are property, infrastructure, Australian Fixed Interest, Overseas Fixed
Interest, cash, natural resources, alternative assets and others (mercer-au.uberflip.com 2017).
Time Value of Money
It is essential for the financial institutions to have enough knowledge about the concept of
time value of money. The concept of time value of money states that available money in the
present time has more worth than the exact same amount of money in the future as a result of its
potential earning capacity. It implies that benefit is greater when receiving the money at present
(Mpakaniye 2014). As the financial institutes have to deal with money, it is essential for them to
know the application of time value of money in their businesses.
Performance of Mercer Super Trust
The annual report of Mercer Super Trust states that there has been an increase in the
overall revenue of Mercer Super Trust in 2017; that is $ 4,960,916,000 in 2017 and $
2,589,101,000 in 2016. In addition, the amount of total net assets has also increased in 2017; that

4FINANCIAL INSTITUTION AND MARKET
is $ 22,320,895,000 in 2017 and $ 19,825,399,000 in 2016. It shows the improved financial
performance of Mercer Super Trust in 2017. In this year, the performance of financial industry of
Australia has been also good (mercer-au.uberflip.com 2017).
Participation of Mercer Super Trust in the Financial Markets
The annual report of Mercer Super Trust shows the participation of the company in both
share market and bond market. As per the annual report of Mercer Super Trust, the company has
fetched 13.8% return from Australian shares and 14.7% return from global equities. It implies
that the company has been participating in share market for years. In addition, the annual report
of Mercer Super Trust states that the company has issues two bonds; that are Mercer Australian
Sovereign Bonds and Mercer Overseas Sovereign Bonds. The annual report also shows the
calculation of the return on these bonds based on 1 year, 5 years return % and 10 years return %
per annum. It shows the participation of Mercer Super Trust in the bond market (mercer-
au.uberflip.com 2017).
Applicable Regulations
In order to continue their business operations, Mercer Super Trust mainly needs to
comply with the laws and regulations of Australian Securities and Investment Commissions
(ASIC). It implies that ASIC is the main regulator that controls the business activities of Mercer
Super Trust. In addition, Mercer Super Trust complies with the principles of Companies Act
2001 for the development of their financial statements (mercer-au.uberflip.com 2017). In this
aspect also, it is the responsibility of ASIC for the enforcement of Corporations Act 2001.
Hence, one fact is clear that ASIC has direct control over the business activities of Mercer Super

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Trust, as the company will not be able to continue their operation without complying with the
laws and regulations of ASIC (asic.gov.au 2017).
Conclusion
The above discussions show that Australian financial system has three types of
institutions; they are ADI, non-ADI institutions, insurance companies and fund managers. As per
the discussion, Mercer Super Trust uses different sources for raising their funds like shares of
Australian companies, shares of overseas companies, investment in properties, infrastructures
and others. It is required for Mercer Super Trust to apply the concept of time value of money as
the company majorly deals with money, securities and bonds. The annual report shows the
improved financial performance of Mercer Super Trust in 2017. In the business operations,
Mercer Super Trust participates in the business of share market as well as bond market. In
addition, Mercer Super Trust has to comply with the principles of ASIC for continuing their
business operation.

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References
Asic.gov.au. (2018). Superannuation funds | ASIC - Australian Securities and Investments
Commission. [online] Available at: http://asic.gov.au/regulatory-resources/superannuation-funds/
[Accessed 2 Jan. 2018].
Mercer-au.uberflip.com. (2018). Mercer Super - MST Annual Report 2017. [online] Available at:
http://mercer-au.uberflip.com/i/906709-mst-annual-report-2017/11?m4= [Accessed 2 Jan. 2018].
Mpakaniye, J.P., 2014. Time Value of Money.
Rba.gov.au. (2018). Australian Financial Markets. [online] Available at:
https://www.rba.gov.au/publications/bulletin/1996/may/pdf/bu-0596-1.pdf [Accessed 2 Jan.
2018].
Rba.gov.au. (2018). The Australian Financial System. [online] Available at:
https://www.rba.gov.au/publications/fsr/2017/apr/pdf/aus-fin-sys.pdf [Accessed 2 Jan. 2018].
Reserve Bank of Australia. (2018). Main Types of Financial Institutions | RBA. [online]
Available at: https://www.rba.gov.au/fin-stability/fin-inst/main-types-of-financial-
institutions.html [Accessed 2 Jan. 2018].
Reserve Bank of Australia. (2018). The Structure of the Australian Financial System | Financial
Stability Review – March 2006 | RBA. [online] Available at:
https://www.rba.gov.au/publications/fsr/2006/mar/struct-aus-fin-sys.html [Accessed 2 Jan.
2018].

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