MGI Funds plc (an umbrella fund with segregated liability between Sub-Funds) Interim Report and Unaudited Financial Statements For the period from 1 July 2013 to 31 December 2013 MGI Funds plc Contents Management and Administration 2 Investment Manager’s Report 3 Portfolio Statements 11 Unaudited Balance Sheet – as at 31 December 2013 228 Comparative Audited Balance Sheet – as at 30 June 2013 230 Comparative Unaudited Balance Sheet – as at 31 December 2012 232 Unaudited Profit and Loss Account – for the period ended 31 December 2013 234 Comparative Audited Profit and Loss Account – for the year ended 30 June 2013 236 Comparative Unaudited Profit and Loss Account – for the period ended 31 December 2012 238 Unaudited Statement of Changes in Net Assets Attributable to Holders of Redeemable Participating Shares – for the period ended 31 December 2013 240 Comparative Audited Statement of Changes in Net Assets Attributable to Holders of Redeemable Participating Shares – for the year ended 30 June 2013 242 Comparative Unaudited Statement of Changes in Net Assets Attributable to Holders of Redeemable Participating Shares – for the period ended 31 December 2012 244 Notes to the Financial Statements 246 Supplemental Information 288 Significant Portfolio Movements 305 MGI Funds plc 1 MGI Funds plc Management and Administration REGISTERED OFFICE DISTRIBUTOR 70 Sir John Rogerson’s Quay Mercer Global Investments Europe Limited Dublin 2 25/28 Adelaide Road Ireland Dublin 2 Ireland COMPANY REGISTRATION NUMBER 421179 SPONSORING LISTING AGENT Investec INVESTMENT MANAGER AND PROMOTER The Harcourt Building Mercer Global Investments Europe Limited Harcourt Street 25/28 Adelaide Road Dublin 2 Dublin 2 Ireland Ireland CUSTODIAN ADMINISTRATOR, REGISTRAR & TRANSFER AGENT State Street Custodial Services (Ireland) Limited State Street Fund Services (Ireland) Limited 78 Sir John Rogerson’s Quay 78 Sir John Rogerson’s Quay Dublin 2 Dublin 2 Ireland Ireland FACILITIES AGENT (in the UK) INDEPENDENT AUDITOR Mercer Limited KPMG 1 Tower Place West Chartered Accountants Tower Place Statutory Audit Firm London EC3R 5 BU 1 Harbourmaster Place UK International Financial Services Centre Dublin 1 Ireland LEGAL ADVISER IN IRELAND Matheson 70 Sir John Rogerson’s Quay Dublin 2 Ireland SECRETARY Matsack Trust Limited 70 Sir John Rogerson’s Quay Dublin 2 Ireland DIRECTORS OF THE MANAGER Michael Dempsey Tom Finlay* Tom Geraghty** Paul Sullivan* MANAGER Mercer Global Investments Management Limited 70 Sir John Rogerson’s Quay Dublin 2 Ireland *Non-executive Directors independent of the Investment Manager. **Tom Geraghty was appointed to the Board of Directors of the Manager on 24 October 2013. MGI Funds plc 2 MGI Funds plc Investment Manager’s Report for the period ended 31 December 2013 The Sub-Funds of MGI Funds plc (the “Company”) are managed using a proprietary multi-manager investment strategy. This strategy involves allocating portions of the Sub-Fund to specialist third party managers or sub-advisors (“Sub-Investment Managers”), who are selected by the investment manager based on criteria for producing consistent superior returns and who, in aggregate, are most likely to achieve the overall objectives of the Company. Over the six month period to 31 December 2013 the economic outlook for the developed world gradually improved. Despite the noise in the financial markets, market sentiment improved as the recovery of all major developed economies began to broaden. Optimism was called into question from time to time such as at the beginning of the year during the Italian elections in early 2013 as well as the EU-IMF bail-out of Cyprus in March and the speech by Mr Bernanke on the potential tapering of the US Quantitative Easing programme. However, fears of deflationary pressures and recession significantly diminished in the second half of the year, as central banks around the world demonstrated a concerted effort to maintain liquidity in the markets. The overall positive performance to the end of the third quarter of the year was overshadowed by the US Government shutdown on 1 October 2013 and the rising confrontations between the two main US parties on fiscal policy and the Government’s debt ceiling issue. However, post the shutdown and this controversy, risky assets continued to rally. This momentum continued when the US Federal Reserve finally opted in December to start the tapering process as widely anticipated, particularly as the impact was sweetened with stronger forward rate guidance around interest rates. As a result, the US market finished the year at an all- time high. With the positive economic data seen in most regions during the second half of the year, global recovery gained strong momentum, with the Eurozone finally emerging out of recession. Despite the well-received news of its reform plans and the country’s stabilising economic data, the markets expressed concerns over the growth prospect of the Chinese economy. MGI Emerging Markets Equity Fund The MGI Emerging Markets Equity Fund returned -1.44%* for the period under review, expressed in euro terms, -4.33%* in sterling terms), underperforming the MSCI Emerging Market Index’s return of 1.60% in euro terms -1.37% in sterling terms). There were no sub-investment manager changes over the period. The target asset allocation for the Sub-Fund at the end of the period was: % of Sub-Fund Dimensional 33.0% Vontobel 14.0% Schroders 23.0% Mondrian 30.0% *Sub-Fund performance figures are gross of fees. MGI Euro Bond Fund The MGI Euro Bond Fund returned 2.02%* for the period under review, expressed in euro terms, performing in line with the Barclays Capital Euro Aggregate Index’s return of 2.04% in euro terms. There were no sub-investment manager changes during the period. The target asset allocation for the Sub-Fund at the end of the period was: % of Sub-Fund Irish Life Investment Managers 84.0% PIMCO 16.0% *Sub-Fund performance figures are gross of fees. MGI Funds plc 3 MGI Funds plc Investment Manager’s Report for the period ended 31 December 2013 (continued) MGI Euro Cash Fund The MGI Euro Cash Fund returned 0.00% for the period under review, expressed in euro terms, underperforming the composite benchmark return of 0.05% in euro terms. There were no sub-investment manager changes during the period. The target asset allocation for the Sub-Fund at the end of the period was: % of Sub-Fund Irish Life Investment Managers 100.0% *Sub-Fund performance figures are gross of fees. MGI Eurozone Equity Fund The MGI Eurozone Equity Fund returned 20.92%* for the period under review, expressed in euro terms, (17.38%* in sterling terms), outperforming the MSCI EMU Index’s return of 20.06% in euro terms (16.55% in sterling terms). The Sub-Investment Advisor Cazenove was replaced by Hermes Sourcecap during the period. The target asset allocation for the Sub-Fund at the end of the period was: % of Sub-Fund Linghor 33.0% Hermes 31.0% TT 36.0% *Sub-Fund performance figures are gross of fees. MGI Global Bond Fund The MGI Global Bond Fund returned -4.91%* for the period under review, expressed in euro terms underperforming the Barclays Capital Global Aggregate Index’s return of -3.46% in euro terms. There were no sub-investment manager changes during the period. The target asset allocation for the Sub-Fund at the end of the period was: % of Sub-Fund Irish Life Investment Managers 85.0% PIMCO 15.0% *Sub-Fund performance figures are gross of fees. MGI Global Equity Fund The MGI Global Equity Fund returned 11.40%* for the period under review, expressed in euro terms, (8.14%* in sterling terms), outperforming the MSCI World Index’s return of 10.21% in euro terms (6.98% in sterling terms). There were no sub-investment manager changes over the period. The target asset allocation for the Sub-Fund at the end of the period was: % of Sub-Fund Arrowstreet 18.0% Edinburgh Partners 14.0% Franklin Templeton 16.0% Global Thematic Partners 12.0% Baillie Gifford 14.0% Hexavest 18.0% Irish Life Investment Managers 8.0% *Sub-Fund performance figures are gross of fees. MGI Funds plc 4 MGI Funds plc Investment Manager’s Report for the period ended 31 December 2013 (continued) MGI Japanese Equity Fund The MGI Japanese Equity Fund returned 2.75%* for the period under review, expressed in euro terms, (-0.26%* in sterling terms), underperforming the TOPIX Index’s return of 3.26% in euro terms (0.24% in sterling terms). There were no sub- investment manager changes during the period. The target asset allocation for the Sub-Fund at the end of the period was: % of Sub-Fund JP Morgan 100.0% *Sub-Fund performance figures are gross of fees. MGI Pacific Basin (Ex Japan) Equity Fund The MGI Pacific Basin ex Japan Equity Fund returned 2.15%* for the period under review, expressed in euro terms (-0.83% in sterling terms), underperforming the MSCI Pacific ex Japan Index’s return of 4.37% in euro terms (1.32% in sterling terms). There were no sub-investment manager changes during the period. The target asset allocation for the Sub-Fund at the end of the period was: % of Sub-Fund Schroders 100.0% *Sub-Fund performance figures are gross of fees. MGI UK Bond Fund The MGI UK Bond Fund returned 0.78%* for the period under review, expressed in sterling terms, outperforming the composite benchmark return of 0.46% in sterling terms. Insight replaced Standard Life as a Sub-Investment Advisor during the period. The target asset allocation for the Sub-Fund at the end of the period was: % of Sub-Fund Henderson 50.0% Insight 50.0% *Sub-Fund performance figures are gross of fees.