Annual Report 30 June 2016 FINANCIAL YEAR END 30 June 2016 ANNUAL GENERAL MEETING The Annual General Meeting of Global Masters Fund Limited: WILL BE HELD AT: The office of Rothsay Chartered Accountants Level 1 12 O’Connell Street Sydney NSW 2000 TIME: 2.00pm (NSW Time) DATE: Friday 18 November 2016 INVESTING IN GLOBAL MASTERS FUND LIMITED Investors can purchase shares in Global Masters Fund Limited through the Australian Securities Exchange. ASX code: GFL Global Masters Fund Limited ABN 84 109 047 618 Registered in NSW 12 May 2004 GLOBAL MASTERS FUND LIMITED DIRECTORS (from left to right) Dr Manny Pohl, Jonathan Addison and Patrick Corrigan AM 5 6 11 12 16 30 31 32 32 35 TABLE OF CONTENTS Chairman’s Report Directors’ Report Auditor’s Independence Declaration Corporate Governance Statement Financial Report Directors’ Declaration Independent Auditor’s Report Shareholder Information Investments Corporate Directory Global Masters Fund HIGHLIGHTS FOR 2016 Highlights for the year ending June 2016 The Net Tangible Assets (NTA) Value of the Company increased by 5% after recognising the deferred tax liability on unrealised gains, whilst the All Ordinaries Index of ASX decreased by 2.6% over the twelve months ended 30 June 2016. In April 2016 the Company acquired 21,850 shares in Athelney Trust PLC (ATH) for $97,634. Major June 2016 Investments BRK.A FSI ATY.LSE OVERIVEW COMPANY PROFILE Global Masters Fund Limited (the “Company”) was listed on the ASX in 2006 with the strategy to provide a vehicle for Australian investors, seeking long-term capital growth through investing in Berkshire Hathaway Inc listed on the New York Stock Exchange (NYSE) and other global investments. The Company’s policy is not to hedge the underlying currencies of its portfolio of global investments. The portfolio is managed by EC Pohl & Co Pty Ltd which has a strong funds management investment team. The composition and performance of the investment portfolio is monitored by the Board of Directors, which comprises business people with many years of experience in the business, investment and funds management. There is no fixed management fee and no performance fee payable to the Manager. OBJECTIVES The investment objectives of Global Masters Fund Limited are: To achieve medium to long-term capital growth and income through investing in listed international companies, including Berkshire Hathaway Inc (NYSE), Athelney Unit Trust Plc (LSE) and Flagship Investments Limited (ASX); and To preserve and enhance the NTA backing per share after allowing for inflation. INVESTOR BENEFITS The benefits for investors in Global Masters Fund Limited are: Reduced share investment risk through a diversified investment portfolio; Professional and disciplined management of an investment portfolio; No fixed management fees or performance fee; No entry or exit charges made by the Company; and Easy access to information via the Company’s website www.globalmastersfund.com.au. INVESTMENT MANAGER The management of the Company’s investment portfolio is undertaken by EC Pohl & Co Pty Ltd which provides administration support. Dr Manny Pohl is the Managing Director and major shareholder of EC Pohl & Co Pty Ltd. Information on the Investment Manager is available from www.ecpohl.com. Global Masters Fund Limited 4 With very low and sometimes negative interest rates, there has been a renewed interest in income producing shares and investors generally are looking more carefully at companies with good balance sheets and a profitable business. At a corporate level companies are finding debt cheaper than new equity to meet their capital requirements. The underlying Global Masters through Berkshire Hathaway, Athelney and Flagship’s, are well placed to continue to add value through their strategies. investments The Board I particularly want to thank my fellow Board members for their support and input in the past year. Special thanks must go to Dr Manny Pohl and his small but brilliant team of investment professionals at E C Pohl &Co. Our success would not be possible without the outstanding contribution of these very committed individuals. I thank Shareholders for their on-going support and look forward to another good year ahead. Yours sincerely Jonathan Addison Chairman CHAIRMAN’S REPORT Dear Shareholder, I am pleased to present the 11th Annual Chairman’s Report of Global Masters Fund Limited for the 2015/16 financial year. The Year in Review: During the past twelve months, global markets have been subjected to heightened uncertainty and increasing volatility, due to a number of concerns: Continued economic slowdown in Europe China’s increasing debt burden Historically low interest rates and the impact of negative interest rates. Immediately following the UK referendum to leave the European Union (EU), global markets initially reacted badly, but quickly recovered, have largely been resilient across most regions - “Brexit” was not seen as causing a global financial crisis. The longer term impact of Brexit may not be known for some time, possibly years. Sterling did fall in value, which affects the value of your investment through Athelney. The companies that they invest in have, in the past, proved to be reasonably recession proof. As a matter of policy, the overseas assets have not been hedged on the basis that most investors seeking off-shore assets seek both company and currency exposures. This policy is reviewed from time to time. The Australian share market, as represented by the All Ordinaries Index, decreased by 2.6% over the year ended 30 June 2016. The Net Tangible Asset per share (NTA) of the Company increased by 5% in 2015/16 compared with an increase of 13% in the prior year. The Market Outlook We remain cautiously positive about the outlook for markets generally but it is not without risks. The Australian economy is still dealing with a depressed commodity market but should see some benefits from the lower dollar and low interest rates. In our view, companies with strong market positions, strong balance sheets and good management, will continue to perform well and reward patient investors, although we expect market returns to be modest again in the coming year. Global Masters Fund Limited 5 DIRECTORS' REPORT Your Directors present their report on Global Masters Fund Limited for the financial year ended 30 June 2016. 1. DIRECTORS The following persons were Directors of Global Masters Fund Limited from the beginning of the financial year until the date of this report, unless otherwise stated: J Addison, Dr E Pohl, P Corrigan AM. Jason Pohl was appointed an Alternate Director to Dr Manny Pohl on 16 June 2016. 2. INFORMATION ON DIRECTORS Jonathan L Addison B Ec, ASIS, CFTP (Snr), MAICD Non-Executive Chairman Member of Audit and Risk Committee Experience and expertise Non-Executive Chairman since 19 April 2005 Over 32 years experience in the investment management industry. Investment consultant and former CEO of the Meat Industry Employees Superannuation Fund. Previous experience includes Director and Asset consultant with the Corporate Finance Section of Pricewaterhouse Coopers and Manager at Sedgwick Noble Lowndes. Other Current directorships Chairman of Investment Committee of Centaur Property Funds Management Hawkesbridge Private Equity Ltd Gardior Ltd Athelney trust PLC (Alternate to Dr E C Pohl) Diversa Trustees Ltd Investment Committee Member Former Listed Company directorships in last 3 years None Interest in Shares NIL Dr Emmanuel (Manny) C Pohl Pr Eng, B.Sc (Eng), MBA, DBA, FAICD, MSAA, F Fin Managing Director Member of Audit and Risk Committee Experience and expertise Managing Director since the inception of the Company in April 2005. Extensive experience in the funds management industry. Other current directorships Managing Director of Flagship Investments Limited Executive Director of Barrack Street Investments Limited Chair of Athelney Trust Plc Chairman of EC Pohl & Co Pty Ltd and its subsidiaries Director of Bond University Limited Director of Huysamer International Holdings (Pty) Ltd Trustee of Currumbin Wildlife Hospital Foundation Former Listed Company directorships in last 3 years None. Interest in Shares Directly Held: 5,000 4,639,049 ordinary shares Has a relevant interest in shares in the Company over which he holds a Power of Attorney arrangement with a number of Shareholders. Global Masters Fund Limited 6 Patrick Corrigan AM HonD (Bond University) Non-Executive Director Chairman of Audit and Risk Committee Experience and expertise Appointed a Non-Executive Director on 29 November 2006 Extensive experience in accounting, financial management and other commercial acumen, including investments. Chairman of an international freight forwarding company for numerous years. Other current directorships Non-Executive Chairman of UBI Logistics (Australia) Pty Ltd Chairman of Qantas Art Scholarship Committee Emeritus Chairman of Gold Coast Regional Art Gallery Deputy Chair of Air Freight Export Council of NSW Inc Director of Better Read Pty Ltd Director of Aboriginal Benefits Foundation Limited Director of National Portrait Gallery Former Listed Company directorships in last 3 years Director Flagship Investments Limited (Retired 6/11/15) Interest in Shares Nil ordinary shares Global Masters Fund Limited 7 Jason Pohl B.Com, LLB Alternate Director Experience and expertise Appointed an Alternate Director to Dr Manny Pohl on 20 June 2016. Jason has five years of professional experience in fundamental bottom-up investment research at ECP Asset Management Pty Ltd. Originally pursuing a legal career, Jason spent his initial stages of his professional career working for Ashurst (previously Blake Dawson) before being admitted as a Legal Practitioner in the NSW Supreme Court. Other current directorships Director of The Tabu Vodka Co Pty Ltd Former Listed Company directorships in last 3 years Interest in Shares Nil ordinary shares DIRECTORS’ REPORT (Continued) 3. PRINCIPAL ACTIVITIES The principal activity of the Company is investing in Berkshire Hathaway Inc on NYSE, Athelney Unit Trust Plc on LSE and Flagship Investments Limited on the ASX. There have been no significant changes in the nature of this activity during the year. 4. REVIEW OF OPERATIONS Our portfolio outperformed the market with the NTA increasing by 5% over the past twelve months, as compared to the ASX All Ordinaries Index, which declined by 2.6%. During the past twelve months global markets have been subject to a period of heightened uncertainty and increasing volatility due to the fear of economic slowdowns in the US and Europe; undesirable side-effects of negative interest rates; lagging corporate investment in the US; and, China’s increasing debt burden. Commodities have rebounded slightly but remained subdued for most of fiscal 2016. In June the world watched as Britain voted to exit (“Brexit”) the European Union (EU), leaving a political crisis with some adverse economic consequences. Despite Britain's vote to leave the EU, global markets have largely been resilient across most regions - supporting the notion that this was not a global financial crisis. In the US, the Federal Reserve raised interest rates in December causing global equity markets to come under pressure with bond markets declining significantly. The US economy is faced with the combined generational issue of retiring baby-boomers and weak gains in labour productivity. This has lead to supply constraints in the labour market and it is likely that this should soon be evident in goods and services. However, despite declining energy and commodity prices and cheaper imports due to the strong dollar, the current inflation environment is close to the Fed's two percent target. In Europe, we have seen another year of friction amongst regional countries with risks more likely to come from politics than economics. Brexit is expected to have an adverse effect across Europe and, to a much lesser extent, the world at both an economic and political level. The UK and the Eurozone account for 6% and 28% respectively of global GDP and scepticism toward the EU and the euro has been increasing in EU electorates and will be heightened by the Brexit vote. This financial year has proved to be another turbulent one for the Australian share market. While the ASX is likely to experience some increased volatility from global uncertainty, it's important to note that only around 5% of aggregate earnings are derived from the UK and Europe. Weakness in the economy was partly driven by the miners and energy stocks in the first half and a shift in sentiment toward the banks in the second half. The All Ordinaries Index posted gains over the quarter of 3.1% although posting a decline of 2.6% for the year. The AUD/USD exchange rate has fallen 3.3% over the year closing at 0.745 US cents. 5. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS Significant changes in the state of affairs of the Company during the financial year were as follows: The value of the portfolio before fees and taxes increased by 5.9%. Jason Pohl as appointed Alternate Director to Dr Manny Pohl. Global Masters Fund owns 13.78% of Athelney Trust Plc. Global Masters Fund Limited 8 6. MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR No other matter or circumstance not otherwise dealt with in the Director’s Report or Financial Report, which has arisen since the end of the year that has significantly affected, or may significantly affect the operations of the Company, the results of those operations or the state of affairs of the Company in future financial years. 7. LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS There are no planned changes to principal activities. Any general decline in equity markets may have an adverse effect on results in future years. 8. ENVIRONMENTAL ISSUES The Company’s operations are not regulated by any significant environmental regulation under a law of the Commonwealth or of a State or Territory. 9. EARNINGS PER SHARE Based on profit after income tax. Basic earnings per share Diluted earnings per share 2016 Cents 0.01 0.01 2015 Cents 0.18 0.18 As a result of moving to AASB 9 Total Comprehensive Income is a more appropriate base for detailing earnings per share. Basic earnings per share Diluted earnings per share See Note 16 of the Financial Report. 2016 Cents 7.50 7.50 2015 Cents 17.59 17.59 10. COMPANY SECRETARY Brian Jones B.Com, FCA Brian Jones is a Chartered Accountant and a partner of Rothsay Chartered Accountants in Sydney. He is a member of the Institute of Chartered Accountants and is a registered tax agent. He has been Company Secretary of Global Masters Fund Limited since 1 March 2007. He has over 35 years’ experience in the accounting and finance industries and is currently Company Secretary of two other listed Companies. 11. MEETINGS OF DIRECTORS The number of Directors’ meetings attended by each of the Directors of the Company during the financial year are: Board Audit and Risk Committee Director J L Addison Dr E C Pohl P Corrigan AM J C Pohl Eligible to attend 4 Attend 4 Eligible to attend 4 Attend 4 4 4 - 4 4 - 4 4 - 4 4 - 12. REMUNERATION REPORT (AUDITED) The remuneration report is set out under the following main headings: (A) Principles used to determine the nature and amount of No remuneration consultants were engaged during the year. The per annum remuneration of the Directors increased from previous year: remuneration (B) Details of remuneration (C) Service agreements (D) Share-based compensation (E) Related Party Transactions (F) Equity Instrument Disclosure relating to Key Management Personnel $46,125 Chairman Other Directors Remuneration of Directors is determined by the Board within the maximum amount of $150,000 previously approved by the Shareholders. $41,000 There is no performance based remuneration for Directors. (A) Principles used to determine the nature and amount of remuneration Fees and payments to Directors reflect the demands which are made on, and the responsibilities of, the Directors. (B) Details of remuneration Details of the remuneration of each Director of Global Masters Fund Limited and the executives of the Company are set out in the following table. DETAILS OF REMUNERATION Short-term Benefits Director Year Fees Performance Fees J L Addison Non-executive Chairman Dr E C Pohl Managing Director P Corrigan AM Non-executive Director Total Directors Remuneration 2016 2015 2016 2015 2016 2015 2016 2015 $ - - - - - - $ 46,125 30,750 41,000 20,500 41,000 20,500 128,125 71,750 Non- monetary Benefits $ - - - - - - Post- Employment Super Equity Shares Options Total $ - - - - - - $ - - - - - - $ - - - - - - $ 46,125 30,750 41,000 20,500 41,000 20,500 128,125 71,750 (C) Service agreements As the Company does not employ any staff, there are no employment service agreements entered into by the Company. The Company Secretary is employed by Rothsay Chartered Accountants and the Managing Director is employed by the Investment Manager – EC Pohl & Co Pty Ltd. (D) Share-based compensation No share-based compensation exists. (E) Related Party Transactions The Investment Manager of Global Masters Fund Limited is EC Pohl & Co Pty Ltd, of which Dr Manny Pohl is a Director. Dr Pohl is also Managing Director of Global Masters Fund Limited. The remuneration he received from the company (GFL) is in respect of his services as Managing Director. There have been no related party transactions during the year. Global Masters Fund Limited 9 DIRECTORS’ REPORT (Continued) (F) Equity Instrument Disclosure relating to Key Management Personnel The number of shares in the Company held during the financial year by each Director of Global Masters Fund Limited, including their related parties is set out below. There were no shares granted during the year as compensation. 2016 Balance At The Start Of The Year Received During The Year By Exercise Of Rights Other Changes During The Year Balance At the End Of The Year J L Addison Dr E C Pohl * P Corrigan AM NIL 5,000 NIL - - - - - - NIL 5,000 NIL In addition to the securities owned directly by Dr EC Pohl, there are 4,639,049 shares registered in entities associated with EC Pohl & Co Pty Ltd, of which he is a Director and Shareholder. END OF REMUNERATION REPORT (AUDITED) 13. GENERAL TRANSACTIONS 18. NON-AUDIT SERVICES Other than the Director’s remuneration, the Company does not directly contract with any of the Directors. 14. LOANS There are no loans issued to any of the Directors (30 June 2015 – Nil). 15. OPTIONS No options have been issued during or since the financial year (30 June 2015 – Nil). 16. INSURANCE OF OFFICERS AND/OR AUDITORS During the financial year the Company insured the Directors and Officers against certain liabilities as permitted by the Corporations Act 2001. The insurance policy prohibits disclosure of the nature of the cover, the amount of the premium, the limit of liability and other terms. The Company has entered into an agreement for the purpose of indemnifying Directors and Officers, to the extent permitted by law, against any liability (including the costs and expenses of defending actions for an actual or alleged liability) incurred in their capacity as a Director and Officer of the Company. The Company has not during or since the financial year indemnified or paid any insurance premiums to indemnify the auditors. 17. PROCEEDINGS ON BEHALF OF THE COMPANY No person has applied to the Court under Section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceeding to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under Section 237 of the Corporations Act 2001. The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Company are important. There have been no amounts paid or payable to the auditors for non-audit services provided during the year. The Directors have considered the position and are satisfied that the provision of any non-audit services (if necessary in future) is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Audit and Risk Committee is satisfied that the provision of any non-audit services by the auditor, would not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: All non-audit services would be reviewed by the Audit and Risk Committee to ensure they do not impact the impartiality and objectivity of the auditor; and None of the services undermine the general principles relating to auditor independence as set out in APES 110, including reviewing or auditing the auditor’s own work, acting in a management or a decision-making capacity for the Company, acting as advocate for the Company or jointly sharing economic risk and rewards. A copy of the Auditors’ Independence Declaration as required under section 307C of the Corporation Act 2001 is set out on page 11. Dr Emmanuel (Manny) C Pohl Managing Director 29 August 2016 Global Masters Fund Limited 10 CORPORATE GOVERNANCE STATEMENT: FOR THE YEAR ENDED 30 June 2016 Recommendation 1.3: Written agreement with each Director and senior executive setting out the terms of their appointment Compliant Upon appointment, each Director receives a letter of appointment which sets out the formal terms of their appointment, along with a deed of indemnity, insurance and access. Recommendation 1.4: The Company Secretary of a listed entity should be accountable directly to the Board, through the Chair, on all matters to do with the proper functioning of the Board Compliant The Company Secretary is employed by a third party as disclosed in the Directors’ Report and is directly accountable to the Board on matters relating to the proper functioning of the Board. Details regarding the Company Secretary, including experience and qualifications, are set out in the Directors’ Report. Recommendation 1.5: Gender Diversity Not Compliant In respect of diversity, the Board considers that diversity includes differences that relate to gender, age, ethnicity and cultural background. It also includes differences in background and life experience, communication styles, interpersonal skills, education and problem solving skills. The Board seeks to develop a culture of diversity whereby a mix of skills and diverse backgrounds are employed by the Company at all levels, through structuring the recruitment processes at all levels, so that a diverse range of candidates are considered and there are no excuses or unconscious biases that might discriminate against certain candidates. However, as the Company is an externally managed entity, this recommendation is not applicable. Recommendations 1.6 and 1.7: Board and Senior Executive Evaluation Compliant The Board is committed to formally evaluating its performance and the performance of the Audit and Risk Committee and individual Directors, as well as the governance processes supporting the Board. The Board does this through an annual assessment process. Any issues identified are addressed at subsequent Board meetings. PRINCIPLE 2: Structure the Board to add value Recommendation 2.1: Establish a Nomination Committee Non-Compliant The Company has not established a formal Nomination Committee, as the Board considers that, due to the scope and nature of the Company’s activities, the whole Board should undertake the responsibility. This statement outlines the main corporate governance practices that were in place for the year ended 30 June 2016. The statement explains the extent to which the Company complies with the ASX Corporate Governance Principles and Recommendations, including explanations of why certain recommendations have not been For ease of comparison with the Principles and followed. Recommendations, the Company’s compliance with each of the specific recommendations as follows. this section summarises PRINCIPLE 1: Lay solid foundations for management and oversight Recommendation 1.1: Respective roles and responsibilities of its Board and Management Compliant The Board is responsible for the overall corporate governance of the entity and its overriding objective is to protect and increase Shareholder value. The Board guides and monitors the business to ensure that the Company is properly managed in the best interest of Shareholders. The Board is accountable to its Shareholders. It is responsible for a broad range of matters including: monitoring the Investment Manager and the composition and performance of the investment portfolio; monitoring and assessing the performance of the Managing Director; undertaking Director nomination matters including succession planning for the Board to ensure an appropriate mix of skills, experience, expertise and diversity is maintained; approving and maintaining appropriate risk management and internal control systems to identify, assess, monitor and manage the Company’s business risks on an ongoing basis; overseeing the Company’s process communications; and for disclosure and developing and approving appropriate Company policies, procedures and codes of behaviour as required to maintain a culture of integrity and a strong framework of corporate governance. The Board has adopted a formal Board Charter that details the and Board’s operations, and the Company’s website www.globalmastersfund.com.au responsibilities, membership is available on authority, role, The Charter sets out the matters specifically reserved for the Board and the powers delegated to its Committees. Recommendation 1.2: election/re-election Compliant Information prior to Director Before the Board appoints a new Director or puts forward a candidate for election, the Board will ensure that appropriate background checks are undertaken. Shareholders are provided with all material information in our possession that is relevant to their decision on whether or not to elect or re-elect a Director through a number of channels, including via the Notice of Meeting, the Director Résumés and other information contained in the Annual Report. Global Masters Fund Limited 12 Recommendation 2.2: Have and disclose a Board skills matrix Compliant The Company’s objective is to have an appropriate mix of expertise and experience on our Board and its Committees so that the Board can effectively discharge its corporate governance and oversight responsibilities. This mix is described in the Board skills matrix below. Expertise Financial knowledge and experience Legal, governance and compliance Commercial acumen Risk management Experience Industry Finance Superannuation Market Australian Listed Securities Geographic Australia Recommendation 2.3: Independent Directors Compliant The Board has accepted that an Independent Director is as defined in Box 2.3 of the ASX Corporate Governance Principles and Recommendations (3rd Edition). Of the current Board members, Mr Jonathan Addison and Mr Patrick Corrigan AM are considered to be independent Directors. The length of service of each director is set out in the Directors Report. Recommendation 2.4: A majority of the Board of a listed entity should be independent Directors Compliant The structure of the Board does comply with this recommendation independent (refer in that a majority of the Directors are recommendation 2.3). Recommendation 2.5: The Chair of the Board of a listed entity should be an independent Director and, in particular, should not be the same person as the CEO of the entity Complaint The Company’s Chairman is Mr Jonathan Addison an independent Director. Recommendation 2.6: Director induction and professional development Compliant New Directors are inducted into the Company’s processes and policies in a suite of ways, including the provision of a ‘Board manual’, interviews with senior management of the Investment Manager and out of session meetings with other Directors. All Directors are encouraged to undertake ongoing professional development both in their area of technical expertise and in the skills required to effectively execute the role of Director. PRINCIPLE 3: Act ethically and responsibly Recommendation 3.1: Code of Conduct Compliant The Company has developed a Code of Conduct (the Code) which has been fully endorsed by the Board and applies to all Directors and officers. The Code is reviewed annually and updated as necessary to ensure it reflects the highest standards of behaviour and professionalism and the practices necessary to maintain confidence in the Company’s integrity. A summary of the Code is available on the Company’s website: www.globalmastersfund.com.au The Code sets out the Company’s commitment to conducting its business in accordance with all applicable laws and regulations while demonstrating and promoting the highest ethical standards. PRINCIPLE 4: Safeguard integrity in corporate reporting Recommendation 4.1: Audit Committee Compliant The Company has an Audit and Risk Committee which comprises three independent Directors. The composition of the Committee, a record of its meetings, and the relevant experience of each member of the Committee is set out in the Directors Report. The Audit and Risk Committee charter is available on the Company’s website: www.globalmastersfund.com.au Recommendation 4.2: CEO and CFO declaration on the financial records Compliant The Board has received a declaration from the CEO and CFO that the Company’s financial records have been properly maintained and that the financial statements comply with the appropriate accounting standards and give a true and fair view of the financial position and performance of the Company and that the opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively. A summary of the Code is available on the Company’s website: www.globalmastersfund.com.au Recommendation 4.3: The external auditor should attend the AGM and be available to answer questions from security holders relevant to the audit Compliant A partner of Joe Pien Chartered Accountants, the Company’s auditor, was available at the most recent AGM and will be available at the next AGM to answer questions from Shareholders. It is the policy of the Board to always request auditor presence at AGMs. Global Masters Fund Limited 13 CORPORATE GOVERNANCE STATEMENT: FOR THE YEAR ENDED 30 June 2016 (Continued) PRINCIPLE 5: Make timely and balanced disclosure Recommendation 5.1: Continuous Disclosure Policy Compliant The Company has a Continuous Disclosure Policy which sets out the obligations of the Company’s Directors and officers in relation to continuous disclosure as well as the Company’s obligations under the Corporations Act and the ASX Listing Rules. The policy also contains procedures for internal notification and external disclosure, as well as procedures for promoting understanding of compliance with the disclosure requirements and for the monitoring of Company compliance. The Disclosure Policy is available on the Company’s website: www.globalmastersfund.com.au PRINCIPLE 6: Respect the rights of security holders Recommendation 6.1: A listed entity should provide information about itself and its governance to investors via its website Compliant Investors and other stakeholders can find information about the Company on its website: www.globalmastersfund.com.au Information on the Company’s corporate governance practices can also be found at www.globalmastersfund.com.au Recommendation 6.2: A listed entity should design and investor relations program to facilitate implement an effective two-way communication with investors Compliant The Company’s Communications Policy sets out how the Company will communicate with Shareholders. Information is communicated to Shareholders through the distribution of a quarterly report, annual and half yearly financial reports, announcements through the ASX and the media, on the Company’s website and through the Chairman’s address at the Annual General Meeting. If requested, the Company will provide general information by email, facsimile or post. Through the Company’s information email address and phone number, and at AGMs, the Company encourages two-way communication with Shareholders. The Communication Policy is available on the Company’s website: www.globalmastersfund.com.au Recommendation 6.3: Disclose the policies and processes it has in place to facilitate and encourage participation at meetings of security holders Compliant The Company facilitates and encourages participation at meetings of security holders by having sections of each meeting dedicated to questions from the floor. Shareholders are given at least 30 days’ notice of security holder meetings and those that are unable to attend in person may email or fax questions they would like answered. The Company provides a direct voting facility to allow security holders to vote ahead of AGMs without having to attend or appoint a proxy. Recommendation 6.4: Give security holders the option to receive communications from, and send communications to, the entity and its security registry electronically Compliant Quarterly reports and other information required to be sent to Shareholders are sent by email to all persons who have requested their name to be added to the Company’s email list. If requested, the Company will provide general information by email, facsimile or post. PRINCIPLE 7: Recognise and manage risk Recommendation 7.1: Risk Committee Compliant The Audit and Risk Committee monitors the Company’s business risks. The composition of the Committee and a record of its meetings is set out in the Directors Report. The Audit and Risk Committee charter is available on the Company’s website: www.globalmastersfund.com.au Recommendation 7.2: Annual risk management framework review Compliant Each year, the Audit and Risk Committee, reviews the Company’s Ad hoc reviews may also be risk management framework. conducted when the Board perceives that the risk environment has shifted significantly. A review was conducted during the year. Recommendation 7.3: Internal audit function Non-Compliant The Company does not have an internal audit function as the Board has deemed it is not necessary giving consideration to the size and nature of the Company. Instead, the full Board through the Audit and Risk Committee liaises closely with the Company’s external auditor to identify potential improvements to the risk management and internal control processes. Global Masters Fund Limited 14 Recommendation 7.4: Exposure to economic, environmental and social sustainability risks Compliant The Board monitors the business risk and guides the affairs of the Company in the discharge of its stewardship responsibilities. The Board meeting agendas and reports advise the Board of current and forthcoming issues relevant to the Company’s operations and performance. The Board reviews the investment portfolio at their regular meetings. Management has designed and implemented a risk management and internal control system through a Risk Management Framework. The Framework is monitored by the Audit & Risk Committee with regular reporting to Committee meetings. The Framework is reviewed yearly by the Committee. The identified risks are grouped within the Framework under the following headings: Strategic Operational External Macro Environmental PRINCIPLE 8: Remunerate fairly and responsibly Recommendation 8.1: Remuneration Committee Non-Compliant Given the size of the Company and the nature of its activities, these functions are undertaken by the Board. Recommendation 8.2: Disclose its policies and practices regarding the remuneration of non-executive Directors and the remuneration of executive Directors and other senior executives Compliant The maximum amount of Directors’ fees is fixed by Shareholders at the Annual General Meeting and can only be varied by Shareholders in a similar manner. In determining the allocation of fees, the Board takes into account the time demands on each Director, together with the responsibilities undertaken by them and market practices of similar sized businesses in the Listed Investment Company sector. It is the policy of the Board not to issue Directors incentive shares or options. The details of the remuneration received by Directors in the 2015/2016 year are included in the Remuneration Report contained within the Directors’ Report. Recommendation 8.3: Equity-based remuneration Non-Compliant As the Company does not have an equity-based remuneration scheme, Recommendation 8.3 is not applicable. Global Masters Fund Limited 15 FINANCIAL REPORT CONTENTS OF FINANCIAL REPORT Page Financial Report Statement of Profit or Loss and Other Comprehensive Income Statement of Financial Position Statement of Changes in Equity Statement of Cash Flows Notes to the Financial Statements Directors’ Declaration Independent Auditor’s Report Shareholder Information Investments Corporate Directory 17 18 19 20 21 30 31 32 32 35 This financial report covers Global Masters Fund Limited as an individual entity. There are no controlled entities. Global Masters Fund Limited is a company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is: Global Masters Fund Limited Level 1 12 O’Connell Street SYDNEY NSW 2000 The financial report was authorised for issue by the Directors on 29 August 2016. A description of the nature of the entity’s operations and its principal activities is included in the Operating and Financial Review. Through the use of the internet, we have ensured that our corporate reporting is timely, complete and available globally at minimum cost to the Company. All media releases, financial reports and other information are available from the Company at the above address or from our website: www.globalmastersfund.com.au Global Masters Fund Limited 16 GLOBAL MASTERS FUND LIMITED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2016 Revenue Other expenses Profit before income tax Income tax expense Profit for the year Notes 2016 $ 2015 $ 5 6 7 250,384 200,274 (249,339) (185,081) 1,045 15,193 - - 1,045 15,193 Other Comprehensive Income, net of income tax Items that will not be reclassified subsequently to profit & loss when specific conditions are met Changes in fair value of available-for-sale Financial Assets Other Comprehensive Income for the year, net of tax Total Comprehensive Income for the year 642,079 1,493,997 642,079 1,493,997 643,124 1,509,190 Earnings per share: Basic earnings per share Diluted earnings per share Comprehensive Income: Earnings per share Cents Cents 0.01 0.01 0.18 0.18 16 16 16 7.50 17.59 The accompanying notes form part of these financial statements. Global Masters Fund Limited 17 FINANCIAL REPORT GLOBAL MASTERS FUND LIMITED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2016 ASSETS CURRENT ASSETS Cash and Cash Equivalents Trade and Other Receivables Other assets TOTAL CURRENT ASSETS NON-CURRENT ASSETS Financial Assets TOTAL NON-CURRENT ASSETS TOTAL ASSETS LIABILITIES CURRENT LIABILITIES Trade and Other Payables TOTAL CURRENT LIABILIITES NON-CURRENT LIABILITIES Deferred Tax Liabilities TOTAL NON CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued Capital Reserves Accumulated losses TOTAL EQUITY . Notes 2016 $ 2015 $ 8 9 11 10 12 13 14 15 56,302 1,787 6,575 64,664 53,766 1,321 7,824 62,911 15,078,717 15,078,717 15,143,381 14,233,144 14,233,144 14,296,055 13,407 13,407 12,475 12,475 1,623,812 1,623,812 1,637,219 1,420,542 1,420,542 1,433,017 13,506,162 12,863,038 8,609,085 5,463,876 (566,799) 8,609,085 4,821,797 (567,844) 13,506,162 12,863,038 The accompanying notes form part of these financial statements. Global Masters Fund Limited 18 GLOBAL MASTERS FUND LIMITED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2016 2015 Balance at 1 July 2014 Profit for the Year Other comprehensive income - Changes in fair value of available-for-sale financial assets Total comprehensive income for the year Note Issued Securities $ 8,609,085 - - - Accumulated Losses $ Reserves Total $ $ (583,037) 3,327,800 11,353,848 15,193 - 15,193 - 15,193 1,493,997 1,493,997 1,493,997 1,509,190 Balance at 30 June 2015 8,609,085 (567,844) 4,821,797 12,863,038 2016 Balance at 1 July 2015 Profit for the Year Other comprehensive income - Changes in fair value of available-for-sale financial assets Total comprehensive income for the year Note Issued Securities $ 8,609,085 - - - Accumulated Losses $ Reserves Total $ $ (567,844) 4,821,797 12,863,038 1,045 - 1,045 - 1,045 642,079 642,079 642,079 643,124 Balance at 30 June 2016 8,609,085 (566,799) 5,463,876 13,506,162 The accompanying notes form part of these financial statements. Global Masters Fund Limited 19 Notes 2016 $ 2015 $ 194,918) (247,622) (52,704) 23 56,926 93,799 2,149 (97,634) 55,240 2,536 53,766 56,302 (197,441) (184,751) 12,690 52685 - - (150,078) (97.393) (84,703) 138,469 53,766 FINANCIAL REPORT GLOBAL MASTERS FUND LIMITED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2016 CASH FLOWS FROM OPERATING ACTIVITIES Interest, distributions and dividends received Payments to suppliers and employees Net cash provided by/(used in) operating activities CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of FSI Proceeds from sale of Berkshire Hathaway Proceeds from sale of Colonial First State Units Purchase of shares in Athelney Trust Plc Net increase/(decrease) in cash and cash equivalents held Cash and cash equivalents at the beginning of the year Cash and cash equivalents at end of year 8 The accompanying notes form part of these financial statements. Global Masters Fund Limited 20 Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. Deferred tax assets are recognised for all deductible temporary differences and unused tax losses to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and losses can be utilised. Current and deferred tax is recognised as income or an expense and included in profit or loss for the period except where the tax arises from a transaction which is recognised in other comprehensive income or equity, in which case the tax is recognised in other comprehensive income or equity respectively. (c) Goods and Services Tax (GST) Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the Australian Taxation Office (ATO). Receivables and payable are stated inclusive of GST. The net amount of GST recoverable from, or payable to, the ATO is included as part of receivables or payables in the statement of financial position. Cash flows in the statement of cash flows are included on a gross basis and the GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified as operating cash flows. (d) Cash and Cash Equivalents Cash and cash equivalents comprises cash on hand, demand deposits and short-term investments which are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value. (e) Financial Instruments Financial Assets At Fair Value Through Profit Or Loss Financial assets at fair value through Profit or Loss are Financial Instruments convertible in to Equity Instruments. A financial asset is classified in this category if it is so designated by management and within the requirement of AASB 9 Financial Instruments. Realised and unrealised gains and losses arising from changes in the fair value of these assets are included in the profit or loss in the period in which they arise. GLOBAL MASTERS FUND LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 The functional and presentation currency of Global Masters Fund Limited is Australian dollars. Its shares are publicly traded on the Australian Stock Exchange (“ASX”). 1. BASIS OF PREPARATION The financial statements are general purpose financial statements that have been prepared in accordance with the Australian Accounting Standards and the Corporations Act 2001. These financial statements and associated notes comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. The financial statements have been prepared on an accruals basis and are based on historical costs modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. Significant accounting policies adopted in the preparation of these financial statements are presented below and are consistent with prior reporting periods unless otherwise stated. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Revenue and Other Income Revenue is recognised when the amount of the revenue can be measured reliably, it is probable that economic benefits associated with the transaction will flow to the Company and specific criteria relating to the type of revenue as noted below, has been satisfied. Revenue is measured at the fair value of the consideration received or receivable and is presented net of returns, discounts and rebates. All revenue is stated net of the amount of goods and services tax (GST). Interest Revenue Interest is recognised using the effective interest method Dividend Revenue Dividends are recognised when the entity’s right to receive payment is established. (b) Income Tax The income tax expense recognised in the statement of profit or loss and other comprehensive income comprises of current income tax expense plus deferred tax expense. Current tax is the amount of income taxes payable (recoverable) in respect of the taxable profit (loss) for the year and is measured at the amount expected to be paid to (recovered from) the taxation authorities, using the tax rates and laws that have been enacted or substantively enacted by the end of the reporting period. Current tax liabilities (assets) are measured at the amounts expected to be paid to (recovered from) the relevant taxation authority. Global Masters Fund Limited 21 FINANCIAL REPORT GLOBAL MASTERS FUND LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 (e) Financial Instruments (continued) Financial Assets At Fair Value Through Other Comprehensive Income The Company is a long-term investor in equity instruments. Under AASB 9, these investments are classified as fair value through Other Comprehensive Income. After initial recognition at fair value (being cost), the Company has elected to present in Other Comprehensive Income changes in fair value of equity instruments investments. Unrealised gains and losses on investments are recognised in the Asset Revaluation Reserve until the investment is sold or otherwise disposed of, at which time the cumulative gain or loss is transferred to the Profit and Loss Statement. The Company derecognises an investment when it is sold or it transfers the investment and the transfer qualifies for derecognition in accordance with AASB 9. Upon derecognition, unrealised gains/losses net of tax relating to the investment are transferred from the revaluation reserve to the realisation reserve. Available-For-Sale Financial Assets These investments are measured at fair value. Unrealised gains and losses arising from changes in the fair value of these assets are taken directly to Other Comprehensive Income and accumulated in Equity. When these financial Assets are sold, the accumulated fair value adjustments are reclassified from Equity to the profit or loss as gains and losses on sale. Available-For-Sale Financial assets are assessed at each reporting date to determine whether there is an objective evidence that it is impaired. In the case of Available-For-Sale Financial Instruments, a significant or prolonged decline in the value of the instruments below cost is considered to be evidence of whether or not impairment has arisen. Any cumulative impairment loss in respect of an Available-For-Sale Financial Asset previously recognised in equity is reclassified to profit or loss. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For Available-For-Sale Financial Assets that are debt securities, the reversal is recognised in profit or loss. For equity is recognised in Other Comprehensive securities, the reversal Income. Loans and Receivables Loans and receivables are recognised initially at fair value and less provision for subsequently measured at amortised cost, doubtful debts. Trades receivables are due for settlement no more than 30 days from the date of recognition. Collectability of loans and receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for impairment of trade receivables is established when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the receivables. Global Masters Fund Limited 22 Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The amount of the provision is the different between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial. The amount of the provision is recognised in the profit or loss in other expenses. Fair Value Estimation The fair value of financial instruments traded in active markets (such as publicly traded derivatives and securities) is based on quoted market prices at the Statement of Financial Position date. The quoted market price used for financial assets held by the Company is the current bid price. The appropriate quoted market price for financial liabilities is the current bid price. The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Company for similar financial instruments. (f) Trade And Other Payables Liabilities for trade payables and other amounts are carried at cost which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the Company. (g) Provisions Provisions are recognised when the Company has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. Provisions for Dividends Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period. (h) Share Capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options which vest immediately are recognised as a deduction from equity, net of any tax effects GLOBAL MASTERS FUND LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 (i) New Accounting Standards and Interpretations 4. OPERATING SEGMENTS Segment Information The Company operates in the investment industry. Its core business focuses on investing in Australian equities to achieve medium to long-term capital growth and income. Operating segments have been determined on the basis of reports reviewed by the Managing Director. The Managing Director is considered to be the chief operating decision maker of the Company. The Managing Director considers the business from both a product and geographic perspective and assesses performance and allocates resources on this basis. The Managing Director considers the business to consist of just one reportable segment. The AASB has issued new and amended Accounting Standards and Interpretations that have mandatory application dates for future reporting periods. The Company has decided not to early adopt these Standards. The following table summarises those future requirements, and their impact on the Company where the standard is relevant: AASB 9 Financial Instruments and amending standards AASB 2010-7 / AASB 2012-6 Effective Date 31 July 2016 Changes to the classification and measurement requirements for financial assets and financial liabilities The impact of AASB 9 did not have a material impact on the Company 3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (a) Key Estimates There are no key assumptions or sources of estimation uncertainty that have a risk of causing material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period as investments are carried at their market value. (b) Key Judgements The preparation of financial reports in conformity with Australian Account Standards require the use of certain critical accounting estimates. This requires the Board to exercise their judgement in the process of applying the Company's accounting policies. The carrying amount of certain assets and liabilities are often determined based on estimates and assumptions of future events. In accordance with AASB 112 Income Taxes, deferred tax liabilities and deferred tax assets have been recognised for Capital Gains Tax (CGT) on the unrealised gains/losses in the investment portfolio at current tax rates. As the Directors do not intend to dispose of the portfolio, the tax liability/benefit may not be crystallised at the amount disclosed in Note: 13. In addition, the tax liability/benefit that arises on the disposal of these securities may be impacted by changes in tax legislation relating to treatment of capital gains and the rate of taxation applicable to such gains/losses at the time of disposal. The Company has an investment process which is anticipated will deliver medium to long-term capital growth - minimum investment period is three to five years. The deferred tax asset has been carried forward as it believed that this process will deliver growth over this period to utilise the deferred tax asset. The Company does not hold any securities for short term trading purposes. Therefore the investment portfolio is classified as Financial Assets at fair value through Other Comprehensive Income. Global Masters Fund Limited 23 FINANCIAL REPORT GLOBAL MASTERS FUND LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 5. REVENUE AND OTHER INCOME Dividends Received Distributions Received Interest Received Gain on sale of Flagship Investments Gain on Sale of Berkshire Hathaway Realised Foreign Exchange Loss Gain on Sale of Colonial Units 6. OTHER EXPENSES ASX and Share Registry costs Administration Costs 7. INCOME TAX EXPENSE Notes 2016 $ 194,749 74 95 2,510 55,398 (3,178) 736 2015 $ 197,237 4 200 2,833 - - - 250,384 200,274 17,695 231,645 249,340 18,380 166,700 185,080 1,045 313 313 (313) - 55,684 618 56,302 15,193 4,558 4,558 (4,558) - 51,028 2,738 53,766 (a) Reconciliation of income tax to accounting profit Accounting profit before tax Prima facie tax payable on ordinary activities before income tax rate at 30% (2015 - 30%) Income tax expense Tax losses not recognised Tax expense shown in profit and loss statement 8. CASH AND CASH EQUIVALENTS Cash at bank and on hand Short-term deposits Balance as per Statement of Cash Flows Reconciliation of cash Cash and Cash Equivalents reported in the Statement of Cash Flows are reconciled to the equivalent items in the Statement of Financial Position as follows: Cash and Cash Equivalents 56,302 53,766 9. TRADE AND OTHER RECEIVABLES CURRENT GST receivable Total current trade and other receivables Global Masters Fund Limited 24 1,787 1,787 1,321 1,321 GLOBAL MASTERS FUND LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 10. OTHER FINANCIAL ASSETS (a) Available-for-sale Financial Assets comprise Listed investments, at fair value Shares in other Corporations Unlisted investments, at fair value Total Available-for-sale Financial Assets 11. OTHER ASSETS CURRENT Prepayments 12. TRADE AND OTHER PAYABLES CURRENT Trade payables Accrued expenses 2016 $ 2015 $ 15,078,174 15,078,174 14,230,352 14,230,352 543 543 2,892 2,892 15,078,717 14,233,144 6,575 6,575 7,824 7,824 1,931 11,476 13,407 - 12,475 12,475 13. NON CURRENT LIABILITIES Deferred tax liabilities Comprises tax on unrealised gains on currency exchange and market fluctuations of listed investments. 1,623,812 1,420,542 14. ISSUED CAPITAL 8,578,596 (2015: 8,578,596 ) Ordinary Shares 8,609,085 8,609,085 15. RESERVES (a) Revaluation Reserve The investment revaluation reserve is used to accumulate unrealised capital profits and losses. The reserve can only be used in limited circumstances for payment of dividends. Global Masters Fund Limited 25 FINANCIAL REPORT GLOBAL MASTERS FUND LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 2015 $ 2015 $ 16. EARNINGS PER SHARE Basic earnings per share is calculated by dividing the profit attributable to owners of the company by the weighted average number of ordinary shares outstanding during the year. Basic earnings per share is calculated by dividing the profit attributable to owners of the company by the weighted average number of ordinary shares outstanding during the year. Net gain (loss) used in calculating basic and diluted earnings per share Total comprehensive income used in calculating total comprehensive income per share Weighted average number of ordinary shares on issue used in the calculation of basic earnings per share Total ordinary shares on issue 1,045 643,124 8,578,596 8,578,596 15,193 1,509,190 8,578,596 8,578,596 (a) Weighted average number of ordinary shares outstanding during the year used in calculating basic EPS 8,578,596 8,578,596 Basis earnings per share (cents per share) Diluted earnings per share (cents per share) Total Comprehensive Income per share (cents per share) Cents 0.01 0.01 7.50 Cents 0.18 0.18 17.59 17. FINANCIAL RISK MANAGEMENT The Company is exposed to a variety of financial risks through its use of financial instruments. The Company‘s overall risk management plan seeks to minimise potential adverse effects due to the unpredictability of financial markets. The Company does not speculate in financial assets. The most significant financial risks to which the Company is exposed to are described below: Specific risks Liquidity risk Credit risk Market risk - currency risk, interest rate risk and price risk Financial instruments used The principal categories of financial instrument used by the Company are: Trade receivables Cash at bank Investments in listed shares Trade and other payables Global Masters Fund Limited 26 GLOBAL MASTERS FUND LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 17. FINANCIAL RISK MANAGEMENT (continued) (a) Interest Rate Risk The Company's exposure to interest rate risk, which is the risk that a financial instruments value will fluctuate as a result of changes in market interest rates and the effective weighted average interest rates on classes of financial assets and financial liabilities, is as follows: Effective Interest Rate Financial Assets Cash and cash equivalents 6 Months or less Financial Assets Cash and cash equivalents Total Financial Assets 2016 % 2015 % 0.17 3.05 2016 $ 2015 $ 56,302 53,766 56,302 53,766 All other financial assets and liabilities are non-interest bearing - apart from investment in Colonial Wholesale Funds which on average earned 2.5% (b) Currency Risk The Company‘s investment portfolio includes investments in USA and UK, cash on deposit and interest receivable denominated in US dollars and Pounds Sterling. As such, the Company's balance sheet can be affected significantly by movements in exchange rates. The Company's current policy is not to hedge its investment portfolio. The carrying value of these foreign currency denominated assets at balance date was as follows: Carrying Amount Cash and cash equivalents Investments Total (c) Credit risk 2016 AUD $ 2015 AUD $ 563 11,943,844 2,682 11,256,816 11,944,407 11,259,498 The Company is not a trading entity. The maximum exposure to credit risk at balance date in relation to each class of financial assets (excluding investments) is the carrying amount of those assets as indicated in the balance sheet. The Company has no commercial debtors and receivables are due from reputable companies listed on the world's stock exchange or major financial banking institutions. With respect to credit risk on cash and investment, the Company's exposure to credit risk arises from default of the counter party, with a maximum exposure equal to the carrying amount of those investments. The Company's business activities do not necessitate the requirement for collateral. . Global Masters Fund Limited 27 (d) Net Fair Value The following methods and assumptions are used to determine the net fair values of financial assets and liabilities: Cash, cash equivalents and short-term investments: The carrying amount approximates fair value because of their short term to maturity. Trade receivables and payables: The carrying amount approximates fair value as the time to receipt or payment is usually less than 30 days. Listed shares: The current quoted market bid price approximates fair value and the carrying amount. The carrying value of all the financial assets and liabilities of the Company as disclosed in the balance sheet and notes to the financial statements is the same as the net fair value. (e) Sensitivity Analysis in illustrates sensitivities to the Company’s The following table exposures to changes interest rates, exchange rates and commodity and equity process. The table indicates the impact on how profit and equity values reported at balance date would have in the relevant risk variable that been affected by changes management considers These sensitivities assume that the movement in a particular variable is independent of other variables. to be reasonably possible. At 30 June 2016, the effect on profit and equity as a result of changes in the interest rate, with all other variables remaining constant would be as follows: 6 Months or less Change in profit +/- 2% in interest rates Change in equity +/- 5% in $A/US$ +/- 10% in listed investments 2016 $ 2015 $ +/- 1,000 +/- 675,308 +/- 1,507,871 18. SEGMENT INFORMATION Company is domiciled and incorporated in Australia. The Company's principal activity is investment in quoted equities, Berkshire Hathaway Inc listed on the New York Stock Exchange, Athelney Trust Plc listed on the London Stock Exchange and Flagship Investments Limited listed on the Australian Securities Exchange. FINANCIAL REPORT GLOBAL MASTERS FUND LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 19. KEY MANAGEMENT PERSONNEL DISCLOSURES (a) Details of Key Management Personnel (KMP) for all of the financial year unless otherwise shown were Directors JL Addison Dr EC Pohl Chairman (Non-executive), appointed 19 April 2005 Managing Director (Executive), appointed 19 April 2005 P Corrigan AM Director (Non-executive), appointed 29 November 2006 (b) Other Key Management Personnel Transactions Compensation Policy The Board of Directors of the Company is responsible for determining and reviewing compensation arrangements for the key management personnel. The Board assesses the appropriateness of the nature and amount of emoluments of such officers on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit. Executive Personnel The Managing Director Dr Manny Pohl is an Executive Director but only gets remunerated as a Director as has been the case in prior years. The Company’s Non-executive Directors are Jon Addison and Pat Corrigan. Non-Executive Director Compensation In accordance with the Company’s Constitution and the ASX Listing Rules, the aggregate amount of remuneration payable to the Non-executive Directors (including the Managing Director) in any year is determined from time to time by Shareholders in a General Meeting. The last determination was at a General Meeting on 10 May 2006 when Shareholders fixed an aggregate amount not exceeding $150,000. Within the limit of aggregate amount determined by the Shareholders, the Board determines the remuneration for Non-executive Directors. The remuneration arrangements for the Non-executive Directors are reviewed annually by the Board. The Board assess the appropriateness of the remuneration for Non-executive Directors, having regard to market practice, the duties and accountability of the Non-executive Directors and the objective of maintaining a balanced Board which has appropriate expertise and experience, at a reasonable cost to the Company. The compensation of Non-executive Directors (including the Managing Director) for the year ending 30 June 2016 is shown in the table of detailed remuneration disclosures, provided in section 12 (A) to (F) of the Remuneration Report on pages 9 and 10. 2016 $ 2015 $ 11,275 11,275 11,275 11,275 20. AUDITORS REMUNERATION Remuneration of the auditor of the company, Joseph Pien - audit of the half year and annual financial report of the Company Total 21. CONTINGENCIES In the opinion of the Directors, the Company did not have any contingencies at 30 June 2016 (30 June 2015: None). 22. RELATED PARTIES There were no related party transactions during the year, other than shown below: Brian Jones (Company Secretary) is a partner of Rothsay Chartered Accountants, which provides company secretarial, accounting and taxation services to the Company at normal commercial rates. Fees Charged Total 64,332 64,332 56,375 56,375 Global Masters Fund Limited 28 GLOBAL MASTERS FUND LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016 23. CASH FLOW INFORMATION (a) Reconciliation of result for the year to cash flows from operating activities Profit for the year Cash flows excluded from profit attributable to operating activities Non-cash flows in profit - net (gain)/loss on disposal of investments - losses on foreign exchange Changes in assets and liabilities, net of the effects of purchase and disposal of subsidiaries: - (increase)/decrease in prepayments - (increase)/decrease in other assets - increase/(decrease) in trade and other payables Cash flow from operations 24. EVENTS OCCURRING AFTER THE REPORTING DATE No matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Company, the results of those operations, or the state of affairs of the Company in future financial years. 2016 $ 2015 $ 1,045 15,193 (58,644) 3,178 (2,833) - 1,252 (466) 931 - 327 3 (52,704) 12,690 Global Masters Fund Limited 29 DIRECTORS’ DECLARATION The Directors of the Company declare that: (a) the Financial Statements and Notes set out on pages 16 to 29 are in accordance with the Corporations Act 2001, including: (i) complying with Accounting Standards, which, as stated in accounting policy Note 1 to the financial statements, constitutes compliance with International Financial Reporting Standards (IFRS); and (ii) give a true and fair view of the financial position as at 30 June 2016 and of the performance for the year ended on that date; and in the Directors’ opinion, (b) (c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and the remuneration disclosures set out on pages 9 and 10 of the Directors’ Report (as part of the audited remuneration report) for the year ended 30 June 2016 comply with section 300A of the Corporations Act 2001. The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the Directors and is signed for and on behalf of the Directors by: Dr Emmanuel (Manny) C Pohl Managing Director 29 August 2016 Global Masters Fund Limited 30 SHAREHOLDER INFORMATION The Shareholder information set out below was applicable as at 22 August 2016. 1. DISTRIBUTION OF SECURITIES: 3. SUBSTANTIAL SHAREHOLDINGS Distributions 1 1,001 5,001 10,001 100,001 to to to to 1,000 5,000 10,000 100,000 and over Total No. of Shareholders 85 129 67 56 9 346 11 Holdings of less than a marketable parcel 2. TWENTY LARGEST SHAREHOLDERS Shareholders Ordinary Shares % CITICORP NOMINEES PTY LIMITED 4,639,049 54.1% MARA SUPER PTY LTDLIC INVESTMENTS PTY LTD 390,000 4.5% 335,000 3.9% TRADLAW PTY LTD 180,000 2.1% SECURITIES & ESTATES PTY LTD MR PETER LEECE PETER I H WONG PTY LTD ONE MANAGED INVT FUNDS LTD MR FRANCO DI LORENZO & MRS ANGELA DI LORENZO J BARLOW CONSULTANTS PTY LTD MRS SYLVIA MARIA VALMADRE MILBURN PTY LTD RITCHIE FAMILY SUPER PTY LTD HOWZAT SERVICES PTY LTD MR WILLIAM PAUL CHUN TIE & MS ORLEENA MOO MR DAVID GRAEME BERECHREE & MS HEATHER JULIE BERECHREE MR KENNETH MURRAY BARTLEY DR ROBERT JOHN LUGTON MR CHARLES RONALD SMITH MS HELEN-LOUISE BROWN 140,519 1.6% 120,737 1.4% 120,000 1.4% 115,274 1.3% 106,655 1.2% 85,854 60,000 53,632 1.0% 0.7% 0.6% 50,000 0.6% 50,000 0.6% 48,623 0.6% 45,000 0.5% 31,602 0.4% 30,000 30,000 0.3% 0.3% 30,000 0.3% Total 6,661,945 77.7% Global Masters Fund Limited 32 The names of the Shareholders who have notified the Company of a substantial holding in accordance with section 671B of the Corporations Act 2001 are: Substantial Shareholder Dr E C Pohl * Number of Shares % of Total 4,644,049 54.1 * Has the power to control voting and/or the disposal of securities in accordance with a Power Of Attorney in relation to 4,639,049 shares. 4. VOTING RIGHTS On a show of hands every Shareholder present in person or by proxy shall have one vote and upon a poll each share shall have one vote. INVESTMENTS (1) HOLDINGS OF SECURITIES AT 30 JUNE 2016 Individual investments at 30 June 2016 are listed below. The list should not, however, be used to evaluate portfolio performance or to determine the net asset backing per share at other dates. Individual holdings in the portfolio may change during the course of the year. ORDINARY SHARES Shares Market Value $ Berkshire Hathaway Inc A Class Shares Berkshire Hathaway Inc B Class Shares Athelney Unit Trust plc Flagship Investments Limited Colonial Total Cash TOTAL 27 7,888,938 15,300 2,983,150 297,359 2,132,19 7 1,071,757 3,134,329 15,078,174 543 15,078,717 56,302 15,135,019 (2) TRANSACTIONS AND BROKERAGE There were 5 (2015: 5) transactions in securities during the year on which brokerage of $750 (2015: $650) was paid. NOTES Global Masters Fund Limited 33 NOTES Global Masters Fund Limited 34 CORPORATE DIRECTORY GLOBAL MASTERS FUND LIMITED ABN 84 109 047 618 REGISTERED IN NEW SOUTH WALES 12 MAY 2004. BOARD OF DIRECTORS Jonathan L Addison Non-Executive Chairman Dr Emmanuel (Manny) C Pohl Managing Director Patrick Corrigan AM Non-Executive Director Jason Pohl Alternate Director COMPANY SECRETARY Brian E Jones Rothsay Chartered Accountants Level 1 12 O’Connell Street SYDNEY NSW 2000 PRINCIPAL PLACE OF BUSINESS Level 1 12 O’Connell Street SYDNEY NSW 2000 MANAGER EC Pohl & Co Pty Ltd ACN 154 399 916 Level 12 Corporate Centre One 2 Corporate Court BUNDALL QLD 4217 Tel: Fax: +61 (0) 7 5644 4400 +61 (0) 7 5574 1457 SOLICITORS McCullough Robertson Lawyers Level 32 MLC Centre 19 Martin Place SYDNEY NSW 2000 AUDITORS Joe Pien Chartered Accountants Suite 503 Level 5 276 Pitt Street SYDNEY NSW 2000 SHARE REGISTRY Boardroom Pty Limited GPO Box 3993 SYDNEY NSW 2001 Toll Free: International: +61 (0) 2 9290 9600 +61 (0) 0 9279 0664 Fax: 1300 737 760 REGISTERED OFFICE Level 1 12 O’Connell Street SYDNEY NSW 2000 WEBSITE ADDRESS www.globalmastersfund.com.au Global Masters Fund Limited ABN 84 109 047 618 Tel: 1300 552 660 (from within Australia) Int: +61 2 8815 5400 Fax: + 61 2 8815 5401 Email: info@globalmastersfund.com.au Internet: www.globalmastersfund.com.au Level 1, 12 O’Connell Street Sydney NSW 2000 Australia PO Box 542 Sydney NSW 2001 Australia