ASX:MGE - 2019 Interim Financial Report

INTERIM FINANCIAL REPORT

FOR THE HALF YEAR ENDED 31 DECEMBER 2018

MAGELLAN GLOBAL EQUITIES FUND: ARSN 603 395 302

Contents

Chairman's Report .......................................................................................................................................................... 3

Responsible Entity's Report ............................................................................................................................................. 4

Auditor's Independence Declaration ................................................................................................................................. 8

Statement Of Profit Or Loss And Comprehensive Income .................................................................................................. 9

Statement Of Financial Position ..................................................................................................................................... 10

Statement Of Changes In Equity .................................................................................................................................... 11

Statement Of Cash Flows .............................................................................................................................................. 12

Notes To The Financial Statements ................................................................................................................................ 13

• 1 Basis Of Preparation ................................................................................................................................................ 13

• 2 Distributions To Unitholders ..................................................................................................................................... 15

• 3 Investments ............................................................................................................................................................ 15

• 4 Unitholders' Equity .................................................................................................................................................. 16

• 5 Earnings Per Unit .................................................................................................................................................... 17

• 6 Net Asset Value Per Unit .......................................................................................................................................... 18

• 7 Contingent Assets, Contingent Liabilities And Commitments ....................................................................................... 18

• 8 Events Subsequent To The End Of The Half Year ...................................................................................................... 18

Directors' Declaration .................................................................................................................................................... 19

Independent Auditor's Report ........................................................................................................................................ 20

Corporate Information .................................................................................................................................................. 22

Chairman's Report

for the half year ended 31 December 2018

Chairman's Report

Dear Unitholders,

We are pleased to present the half year financial report for Magellan Global Equities Fund (Managed Fund) ("the Fund"). The Fund is a managed investment scheme for which Magellan Asset Management Limited ("Magellan") acts as both Responsible Entity and Investment Manager.

The Fund is quoted on the ASX (code: MGE) and commenced trading on 5 March 2015. As at 31 December 2018, the Fund had net assets of $1,134 million and a net asset value of $3.1873 per unit.

The Fund's portfolio is actively managed by Magellan and mirrors, to all intents and purposes, the unlisted Magellan Global Fund. Magellan aims to achieve attractive risk-adjusted returns over the medium to long term for unitholders, while reducing the risk of permanent capital loss. To achieve this, the Fund invests in a portfolio of between 20 and 40 high-quality global equity stocks, as assessed by Magellan, and has the ability to manage equity market risk by holding up to 20% of its net assets in cash. The portfolio is currency unhedged. For the six months to 31 December 2018, the Fund returned 1.4% net of fees. This compares with the MSCI World Net Total Return Index (AUD) of -4.6% over the same period in what was a volatile market environment.

We would encourage you to read our Investor Letters and monthly and quarterly Fund Reports which provide valuable insight into our investment strategies and portfolio managers' thoughts. These are released on ASX and can also be found on our website:www.magellangroup.com.au.

As at 31 December 2018, the Fund consisted of investments in 21 companies, with the top 10 investments (listed below) representing 48.7% of the Fund. The Fund's cash position was 19% which was predominantly held in US Dollars. The Fund's industry exposure by source of revenues is highlighted below.

Top 10 holdings (as at 31 December 2018) % of Fund
Alphabet - class A and class C shares	6.5
Facebook - class A shares	5.4
Microsoft	5.4
Visa - class A shares	5.3
Starbucks	5.3
Apple	5.1
HCA Healthcare	4.2
Yum! Brands	3.9
Kraft Heinz	3.8
Oracle	3.8
Top 10 Total	48.7

Industry Exposure by Source of Revenues

The following report contains relevant financial statements and information which we encourage you to read carefully.

Brett Cairns

Chairman

27 February 2019

Responsible Entity's Report

for the half year ended 31 December 2018

Responsible Entity's Report

The Directors of Magellan Asset Management Limited (ABN 31 120 593 946) ("MAM"), the Responsible Entity of Magellan Global Equities Fund ("the Fund" or "MGE") present their report on the Fund for the half year ended 31 December 2018.

1.0 Directors

The following persons were Directors of MAM during the half year and up to the date of this report:

Name	Directorship	Appointed
Brett Cairns	Chairman and Chief Executive Officer Chief Investment Officer(A)	22 January 2007 21 November 2006
Hamish Douglass Kirsten Morton
	Chief Financial Officer	5 October 2018
John Eales Robert Fraser	Non-Executive Director Non-Executive Director and Senior Independent Director	1 July 2017 23 April 2014
Paul Lewis	Non-Executive Director	20 December 2006
Hamish McLennan Karen Phin	Non-Executive Director Non-Executive Director	1 March 2016 23 April 2014

(A)

On 5 October 2018, Mr Douglass resigned as a Director of MAM and was appointed Chairman of Magellan Financial Group ("MFG") the parent company of MAM. Prior to this, Mr Douglass was Chief Executive Officer of MFG. Mr Douglass remains Chief Investment Officer.

1.1 Principal Activity

The Fund is a registered managed investment scheme domiciled in Australia and quoted on the Australian Securities Exchange ("ASX") under the AQUA Rules (ticker code MGE). It was registered on 24 December 2014 and commenced trading on 5 March 2015.

The Fund invests in a portfolio of between 20 and 40 high quality global equity stocks. To achieve this MAM undertakes rigorous company research to identify what it assesses to be high quality companies combined with an assessment of the macro-economic environment and a disciplined risk controlled approach to portfolio construction. The Fund has the ability to manage equity market risk by holding up to 20% of its net assets in cash. It can use foreign exchange contracts to facilitate settlement of stock purchases. It is not the Responsible Entity's intention to hedge the foreign currency exposure of the Fund arising from investments in overseas markets.

The Fund's investment objectives are to achieve attractive risk-adjusted returns over the medium to long term, while reducing the risk of permanent capital loss, in accordance with its investment strategy (as detailed in the current Product Disclosure Statement, issued 3 November 2018).

MAM, as Responsible Entity, is responsible for overseeing the operations of the Fund. As the Investment Manager, it is responsible for selecting and managing the assets of the Fund. In addition, the Responsible Entity, on behalf of the Fund, may also provide trading liquidity to investors on the ASX under the AQUA Rules by acting as a buyer and seller of units in the Fund. The Responsible Entity has appointed an independent market participant to act as its agent to execute its market making activities.

The Fund's principal place of business is Level 36, 19 Martin Place, Sydney, New South Wales 2000.

1.2 Significant Changes In State Of Affairs

There were no significant changes in the state of affairs of the Fund during the half year.

1.3 Distribution

No distribution was declared for the half year ended 31 December 2018 (December 2017: nil).

A distribution of 9.6178 cents per unit, amounting to $32,140,000 for the year ended 30 June 2018 was paid on 30 July 2018.

Responsible Entity's Report

for the half year ended 31 December 2018

1.4 Review Of Financial Results And Operations

a) Financial Results For The Half Year

The performance of the Fund, as represented by the results of its operations for the relevant half year ended 31 December, was as follows:

31 December 2018	31 December 2017
Results Total net investment income ($'000) Total expenses ($'000) Net Operating Profit/(Loss) ($'000) Net Asset Value ("NAV") Per Unit ($)(A)	22,319 8,975	77,129 7,048
	13,344 3.1873	70,081 2.9965

(A)

The NAV Per Unit represents the net assets of the Fund presented in the Statement Of Financial Position at reporting date divided by the number of units on issue at reporting date (refer Note 4 and Note 6 to the financial statements).

b) Total Indirect Cost Ratio ("ICR")

The ICR is the ratio of the Fund's actual management costs over the average portfolio value, expressed as a percentage.

Management costs, accrued within the Fund's unit price on a daily basis, include management, administration and performance fees but do not include transactional and operational costs such as brokerage or foreign withholding tax.

6 months to 31 December 2018	6 months to 31 December 2017	12 months to 31 December 2018	12 months to 31 December 2017
Indirect Cost Ratio Management fee (%) Performance fee (%) Total Indirect Cost Ratio (%)	0.68 0.02	0.68 -	1.35 0.21	1.35 0.12
0.70	0.68	1.56	1.47

c) Performance Returns

The performance returns for the six and 12 months ended 31 December shown in the table below have been calculated using the NAV per unit for the Fund, which is after fees and expenses, assuming the reinvestment of distributions at NAV. The returns are calculated daily, compounded to produce longer period returns.

6 months to 31 December 2018	6 months to 31 December 2017	12 months to 31 December 2018	12 months to 31 December 2017
Performance Growth return (%)(A) Distribution return (%)(B) Total Return (%)(C)	1.4 -	8.1 -	6.4 3.2	12.3 2.0
1.4	8.1	9.6	14.3

• (A) The Growth return is calculated daily as a percentage by dividing the NAV per unit (ex-distribution) by the previous day's NAV per unit

  (ex-distribution) minus 1; the daily Growth returns are then compounded to produce longer period returns.

• (B) The Distribution return is calculated as a percentage by subtracting the Growth return from the Total Return.

• (C) The Total Return is calculated daily as a percentage by dividing the NAV per unit (cum-distribution) by the previous day's NAV per unit

  (ex-distribution) minus 1; the daily Total Returns are then compounded to produce longer period returns.