annual report - asx.com.au continue to believe strongly in the case for investing in emerging...

ANNUAL REPORTFOR THE YEAR ENDED 30 JUNE 2015

CORPORATE DIRECTORY

RESPONSIBLE ENTITY

Walsh & Company Investments Limited

Level 15, 100 Pacific HighwayNorth Sydney NSW 2060T 1300 454 801F 1300 883 159

DIRECTORS

Alex MacLachlanTristan OConnellTom Kline

SECRETARIES

Simon BarnettHannah Chan

REGISTERED OFFICE


PRINCIPAL OFFICE


SHARE REGISTRAR

Boardroom Pty LimitedLevel 12, Grosvenor Place225 George StreetSydney NSW 2000T 1300 737 760 (Australia)T +61 2 9290 9600 (International)F 1300 653 459

AUDITOR

KPMG

10 Shelley StreetSydney NSW 2000T +61 2 9335 7000F +61 2 9335 7001

LEGAL ADVISOR

Watson Mangioni Lawyers Pty Limited

Level 13, 50 Carrington StreetSydney NSW 2000T +61 2 9262 6666F +61 2 9262 2626

BANKERS

Macquarie BankANZ Bank

The Funds units are quoted on the official list of Australian Securities Exchange Limited (ASX). ASX Code is EMF.

www.emergingmarketsmastersfund.com.au

CONTENTS

1 REPORT TO UNITHOLDERS

3 INVESTMENT MANAGERS REPORT

17 CORPORATE GOVERNANCE STATEMENT

25 DIRECTORS REPORT

33 LEAD AUDITORS INDEPENDENCE DECLARATION

34 STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

35 STATEMENT OF FINANCIAL POSITION

36 STATEMENT OF CHANGES IN EQUITY

37 STATEMENT OF CASH FLOWS

39 NOTES TO THE FINANCIAL STATEMENTS

63 DIRECTORS DECLARATION

65 INDEPENDENT AUDITORS REPORT

69 ADDITIONAL SECURITIES EXCHANGE DISCLOSURE

EMERGING MARKETS MASTERS FUND | ANNUAL REPORT JUNE 2015 1

REPORT TO UNITHOLDERSFOR THE YEAR ENDED 30 JUNE 2015

Welcome to the Annual Report for the Emerging Markets Masters Fund Limited (the Fund), for the financial year ended 30 June 2015 (FY15).

The fund performed extremely well during FY15, with the NTA increasing by 29.9% (including distributions), and outperforming all relevant peers. At 30 June 2015, the net tangible asset (NTA) backing of the Fund was $1.96 per unit, compared with $1.56 a year earlier and the pro forma NTA of $1.53 at launch. Since inception in October 2012, the funds NTA has increased by 42.6%. The profit attributable to unitholders for the year to 30 June 2015 was $39.2 million.

The Funds portfolio, which was valued at $169.3 million at 30 June 2015, is invested in 16 leading funds and at 30 June 2015, the Fund was 99% invested.

DISTRIBUTIONSThe Fund announced two distributions of 3 cents per unit for the year to 30 June 2015, with the first paid on 6 February 2015 and the second paid on 10 August 2015. This represents a yield of 3.0% on the 30 June unit price of $2.01. Information regarding the tax component of the distribution will be provided in the Tax Distribution Statement for the 2015 tax year.

Unitholders accounting for approximately 44% of units have elected to participate in the Distribution Reinvestment Plan, which raised an additional $2.2 million when the distributions were paid in September 2014 and February 2015.

OUTLOOKWe continue to believe strongly in the case for investing in emerging markets. Emerging markets continue to offer an opportunity to invest in countries and companies that are growing faster than developed markets, experiencing rapid structural changes, and in many cases, are joining the global capital markets for the first time. China is the most significant example as it transitions from export and investment to consumption-led growth, and opens up its capital markets. However the outlook for different emerging markets has considerably diverged in recent times. Emerging Asia continues to offer very attractive opportunities, but the relative attractiveness of commodity exporting markets, and politically challenged markets, such as Brazil and Russia, has diminished. For this reason we believe that the multi-manager approach adopted by the Fund is ideal for investing in emerging markets; it allows us to express investment views on both countries and sectors, and allows us to select managers who know the local markets intimately and who we believe will provide the best outcomes in each market. We believe the Fund is very well placed to take advantage of the key trends in emerging markets.

We would like to take this opportunity to thank you for your continued support of the Emerging Markets Masters Fund.

Yours sincerely

Alex MacLachlan

Chairman of Walsh & Company Investments Limited, Responsible Entity

Dated 14 August 2015


INVESTMENT MANAGERS REPORTFOR THE YEAR ENDED 30 JUNE 2015

OVERVIEW1

Emerging markets performance over FY15 was volatile, with wide dispersion in country and sector returns, highlighting the importance of the Managers ability to determine the Funds geographical exposure. Divergent monetary policies between the United States (US) and other major economies were a powerful driver of exchange rate fluctuations during the year. While the US ended their quantitative easing programme, Europe, China and Japan announced fresh monetary easing measures to address their growth concerns. Uncertainty over the timing of US interest rate hikes, the geopolitical crisis in Russia, and tense negotiations between Greece and its creditors, weighed on investor confidence.

The MSCI Emerging Markets Index (the Index) declined 5.1% in USD terms in FY15. However, the returns in Australian dollar (AUD) terms were positive, up 16.0%, due to the significant depreciation of the AUD against the USD during the period. The stand-out performer in FY15 was China, with China A-Shares gaining a staggering 158.2% and China H-Shares rising 59.8%. Equities rose as Chinese retail investors rotated from property and cash into the stock market, while an increase in margin financing also fuelled the rally. Attractive valuations and expectations of continued market opening following the launch of the Shanghai-Hong Kong Connect programme in November 2014 also supported the market. Chinas economy continued to slow during FY15, prompting the government to ease monetary policy, which further boosted investor sentiment. The market suffered a sharp correction from mid June, with the A-Share market declining 8.0% during the month, but it is still up 35.2% in the 2015 calendar year to 30 June.

India (+28.1%) also performed well, supported by lower crude oil prices and optimism over prospects of investor friendly reforms by the Narendra Modi led government. Overall, the Asian region (+26.1%) outperformed the broader emerging markets index primarily on the back of strong returns from China, India and the Philippines (+33.3%).

The Europe, Middle East and Africa (EMEA) region returned a marginal gain of 1.7%, as investor sentiment was adversely affected by Russias conflict with Ukraine and Greeces debt woes. Solid performances by Qatar (+41.0%) and the United Arab Emirates (+29.0%) were overshadowed by declines in Greece (-33.1%) and Russia (-11.4%).

Latin American markets performed poorly as their resources oriented economies suffered from the rout in commodity prices and the appreciation of the USD. Mexico (+8.1%) and Chile (+6.4%) posted positive returns, while Brazil (-12.9%), Peru (-15.4%) and Colombia (-33.4%) declined in FY15.

Frontier markets underperformed emerging markets, with the MSCI Frontier Markets Index rising 5.2% (-13.9% in USD terms) during FY15. Frontier markets are those least developed markets, which are yet to be included in the MSCI Emerging Markets Index.

1 All figures in Australian dollars unless specified otherwise

EMERGING MARKETS MASTERS FUND | ANNUAL REPORT JUNE 20154

The Australian dollar depreciated against most emerging market currencies, declining 18.3% against the US dollar in FY15. The AUD was under pressure amid weak global commodity prices, slower mining investments, interest rate cuts and the strengthening of the USD on expectations of an interest rate hike in the US in 2015.

FUND POSITIONING & PORTFOLIO UPDATEAt 30 June 2015, the Fund was invested in 16 leading funds.

MANAGER MANDATEWEIGHT AT

30 JUNE 2015

BMO LGM Frontier Markets Fund Global Frontier Markets 12.3%

Somerset Emerging Markets Dividend Growth Fund

Global Emerging Markets 11.7%

Steadview Capital Fund India country specialist 10.9%

Lazard Emerging Markets Fund Global Emerging Markets 10.4%

APS China A-Share Fund China country specialist 9.9%

Polunin Discovery Frontier Markets Fund

Global Frontier Markets 6.5%

Cephei QFII China Absolute Return Fund

China country specialist 5.0%

NCC China A-Share Fund China country specialist 5.0%

Arisaig Africa Consumer Fund Africa consumer specialist 4.8%

Arisaig Latin America Consumer Fund

Latin America consumer specialist

4.1%

Aberdeen India Opportunities Fund India country specialist 3.9%

JPMorgan China Pioneer A-Share Fund China country specialist 3.7%

GBM Crecimiento Fund Mexico country specialist 3.7%

Schroder International Emerging Europe Fund

Eastern Europe region 2.6%

BTG Pactual Fund Brazil country specialist 2.2%

East Capital Russian Fund Russia country specialist 1.5%

Cash* 1.8%

Total** 100.0%

* Excludes any cash held by underlying investment managers ** Figures may not reconcile due to rounding



There have been a number of changes in the portfolio over the last year, as a result of identifying attractive new managers, and due to our changing views on the outlook for various regions.

Overall, portfolio turnover for FY15 was around 33%. Although this is a reasonably low level of turnover, as long-term investors, we would typically expect it to be even lower. This years level of turnover has primarily been driven by realigning our Chinese exposure, and also the very rapid changes in the outlook for a number of emerging markets such as Brazil and Russia.

During the financial year, Walsh & Company Asset Management Pty Limited (the Manager) identified two new China A-Share funds, Cephei QFII China Absolute Return Fund (Cephei) and NCC China A-Share Fund (NCC). The Fund made new investments totalling $6.9 million in each of the funds, funded with redemptions from JPMorgan China Pioneer A-Share Fund. During FY15, the Fund redeemed a total of $19.6 million from JPMorgan China Pioneer A-Share Fund, partly to fund the new investments in NCC and Cephei, and also to reduce the exposure to China as the Manager took profits following the strong rally in China A-Shares. The Fund also redeemed $4.1 million from APS China A-Share Fund. In total, the Fund made net redemptions of approximately $10 million on its Chinese exposure over the year, while retaining a similar portfolio weight to China. The proceeds from these redemptions were reinvested into other parts of the portfolio. Each of the new China funds we have invested in takes a truly fundamental bottom-up approach to investing in domestic Chinese equities. Each holds a concentrated portfolio of 20-30 stocks, with a focus on generating absolute returns for investors. We like this approach, and believe it should do well in a market such as China which is inefficient, yet rich in opportunities.

The Fund also made a new investment of $4.0 million in BTG Pactual Fund, a Brazilian equities fund, replacing the investments in IP Brazil Fund ($4.2 million), Brasil Capital Equity Fund ($4.4 million) and Fama Brazil Challenger Fund ($2.9 million). The Manager significantly reduced the Funds exposure to Brazil during the year given the challenging economic and political environment. Furthermore, the new investment in Brazil provides the Fund with greater liquidity, ensuring the ability to quickly change exposure to Brazil should the outlook for that market deteriorate further or improve.

Pleasingly, each of the new investments initiated by the Fund has performed well to date.

The Manager also reduced the Funds exposure to Russia following the outbreak of the geopolitical conflict with Ukraine, with partial redemptions from East Capital Russian Fund ($3.7 million) and Schroder International Emerging Europe Fund ($2.0 million).


The Fund made redemptions from GBM Crecimiento Fund ($4.0 million) and Aberdeen Thailand Equity Fund ($3.3 million) in order to reduce the exposure to Mexico and Thailand, respectively. The Fund added $3.7 million to its investment in Aberdeen India Opportunities Fund as a result of the improving outlook for India.

During FY15, the Fund made further investments in Somerset Emerging Markets Dividend Growth Fund ($6.4 million), Lazard Emerging Markets Fund ($7.0 million), and BMO LGM Frontier Markets Fund ($7.6 million).

We believe the underlying funds in Emerging Markets Master Funds portfolio are the best managers in their fields of investment, a number of which are closed for subscriptions by new investors. We remain excited by the prospects for emerging markets as a whole, but we are particularly excited by what we expect the Funds underlying managers will be able to achieve.

We remain excited by the prospects for emerging markets as a whole, but we are particularly excited by what we expect the Funds underlying managers will be able to achieve



Indicative look-through region exposure at 30 June 2015:

Cash* 1.4%

Asia 57.0%

Latin America 14.8%

EMEA (Europe, Middle East & Africa) 26.8%

* Excludes any cash held by underlying investment managers

Indicative look-through country allocation mix at 30 June 2015:

Brazil 5.4%

Cash* 1.4%

China 25.5%

India 17.8%

Mexico 5.2%

Russia 3.6%

South Africa 2.7%

Other 18.4%

Frontier 20.0%



Indicative look-through sector allocation mix at 30 June 2015:

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The portfolio has a significant bias to the consumer sector because this is seen as one of the best ways to benefit from the development of the emerging economies. We believe the growing consumer class in emerging markets will be one of the key economic drivers over the long term.

The growing consumer class in emerging markets will be one of the key economic drivers over the long term



HEDGINGThe Fund has continued to implement its hedging strategy in line with its hedging policy and is currently approximately 20% hedged, using a basket of currencies. Hedging the currency exposure of the portfolio is a part of the Funds risk mitigation strategy and acts to reduce volatility resulting from foreign exchange movements.

TOP 20 HOLDINGS The Fund has exposure to over 690 underlying stocks through its investment managers. Below is an indicative look-through of the largest stock exposures derived from portfolio of underlying funds:

NAME COUNTRY WEIGHT

1 Page Industries Ltd India 1.8%

2 Flipkart Online Services Pvt Ltd India 1.5%

3 ANI Technologies Pvt Ltd India 1.3%

4 Eicher Motors Ltd India 1.2%

5 GRG Banking Equipment Co Ltd China 1.0%

6 Jiangsu Kangde Xin Composite Material Co Ltd China 1.0%

7 Yonghui Superstores Co Ltd China 1.0%

8 Motherson Sumi Systems Ltd India 0.9%

9 Shriram City Union Finance Ltd India 0.9%

10 China Vanke Co Ltd China 0.9%

11 Kangmei Pharmaceutical Co Ltd China 0.9%

12 Vietnam Dairy Products Jsc Vietnam 0.8%

13 Inner Mongolia Yi Li Industry Co Ltd China 0.8%

14 Taiwan Semiconductor Manufacturing Co Ltd Taiwan 0.8%

15 Pricesmart Inc Central America 0.8%

16 East African Breweries Ltd Kenya 0.8%

17 China Mobile Ltd China 0.8%

18 Guaranty Trust Bank Plc Nigeria 0.8%

19 OTP Bank Nyrt Hungary 0.8%

20 Samsung Electronics Co Ltd Korea 0.7%

Total 19.5%


PERFORMANCEThe Fund had an excellent year, generating a total unitholder return of 29.9% including distributions, over the year, and 42.6% since its launch in October 2012. This performance was driven by excellent returns in China, as well as the performance of the underlying funds.

The main contribution to the strong performance in FY15 was the Funds position in China, in particular the exposure to China A-Shares, which returned +158.2% in AUD terms during the year. We have been positive on the outlook for Chinese equities for a long time, and we believed Chinese stocks would re-rate at some stage. The A-Share market is dominated by retail investors, and as a result is not very efficient and tends to move quite quickly. For this reason, China A-Shares have been a significant exposure in the portfolio since the inception of the Fund; this resulted in drag on performance for a period, but ensured the Fund did not miss the Chinese equities rally. The Fund has benefited handsomely over the last year from this position in Chinese A-Shares. We have taken profits in China over FY15 following the enormous gains. The Fund currently has investments in four China A-Share funds. They are high quality managers who take a bottom-up approach and invest in high quality Chinese companies. This approach resulted in them slightly lagging the extraordinary gains of the Chinese index, but we take comfort from the fact they did not invest in the speculative elements of the Chinese market, which are often referenced in the financial media, and which have fallen sharply since mid June. We expect that even in a more volatile environment, these managers will be able to generate excellent returns from a market which we see as being particularly attractive over the medium to long term. Indeed having now received the performance numbers for July for each of these funds, in aggregate, the Funds Chinese exposure has comfortably outperformed the broader Chinese market, which fell 9.5% in AUD terms.

The Investment Manager has two main levers it can use to drive performance; country allocation, and manager selection. Pleasingly, both country allocation and manager selection contributed to the Funds strong performance in FY15.

The two largest country exposures in the portfolio, China and India, performed strongly in FY15, while the exposure to Russia and Brazil, which were the weaker markets among emerging markets in FY15, was reduced in the second half of 2014.

On the manager selection front, a number of managers made excellent contributions. Standout performers over the year were Steadview Capital, Aberdeen India Fund, and both of the Funds Frontier Markets funds (BMO LGM Frontier Markets Fund and Polunin Discovery Frontier Markets Fund). Each of these funds performed superbly relative to the markets in which they invest.



OUTLOOKDespite the extraordinary rally in Chinese equities and the recent correction, we remain positive on the outlook for Chinese stocks and this remains the largest single country exposure in the portfolio. We retain the view that the best way to access the Chinese market is through domestic listed China A-Shares, investing through high quality managers.

There have been a number of factors behind the rally in China A-Shares, which we believe will continue providing support to the market. Even before the recent correction, valuations of the significant elements of the market were not excessive. We are regularly in contact with our managers in China, and they note that they are still able to identify high quality companies on attractive valuations. The valuations of their portfolios certainly dont give us cause for concern. For example the NCC China A-Share Fund holds a portfolio of high quality Chinese companies with a weighted average price to earnings ratio (P/E ratio) of 11.4x, far from the lofty valuations often referenced in the financial media.

Secondly, monetary easing is expected to continue, resulting in a significant release of liquidity into the domestic Chinese equity market. With four interest rate cuts and three Reserve Requirement Ratio (RRR) cuts in the last six months, the market is gradually pricing in policy easing, and further monetary easing is expected. With still high interest rates, and very high RRR rates, the Peoples Bank of China has plenty of room to move.

Thirdly, we expect continued market opening, which would ultimately drive foreign investments into the domestic Chinese market. Chinas domestic stock market was closed to foreign investors until 2002. Since then, it has gradually opened up to qualified foreign institutional investors. November 2014 saw the opening of the Shanghai-Hong Kong Stock Connect programme, which allowed those with a Hong Kong brokerage account to buy shares in a large number of Shanghai listed stocks, and vice versa. The Chinese government has also announced that the Shenzhen-Hong Kong Connect programme will be launched by the end of the year.

In addition, index provider MSCI has announced it will include China A-Shares in its MSCI China Index and its correspondent composite indices (including MSCI Emerging Markets Index and MSCI Asia ex Japan Index) once certain accessibility criteria are reached. MSCI and the China Securities Regulatory Commission will form a working group to contribute to the successful resolution of these issues. MSCI has indicated it may announce the decision to include China A-Shares in the MSCI China Index as soon as the issues it has outlined are resolved. This may happen outside the regular schedule of its annual Market Classification Review. An inclusion of China A-Shares in the MSCI China Index would force passive managers to buy the index constituents, regardless of valuations.


It is important to highlight that the domestic Chinese market is dominated by retail investors and for this reason can be very volatile, and daily moves of +/-5% have become common. However, the Chinese government is willing to support a healthy increase in equity prices. Although the official Chinese response to the falling market has not been well handled, with new measures announced almost daily, and at one time nearly half the market suspended from trading, the market has stabilised, and we expect fundamentals to play a greater role in markets from here.

Although the official Chinese response to the falling market has not been well handled we expect fundamentals to play a greater role in markets from here

There is likely to be continued volatility in the Chinese market, however, the recent correction could have one important effect teaching the domestic Chinese investors that the value of investments can also go down. Following this period of volatility, we would expect the Chinese market to be more driven by fundamentals than has been the case to date. And the fundamentals for a great number of Chinese companies are very bright. We see the recent correction as a natural part of a multi-year re-rating in domestic Chinese equities which began in 2014, which we had been expecting, and had positioned the portfolio to benefit from. We remain excited by the long-term prospects for China, and expect to maintain exposure to China as part of a diversified portfolio of emerging market equity investments.

Following this period of volatility, we would expect the Chinese market to be more driven by fundamentals than has been the case to date we remain excited by the long-term prospects for China



India is another important market for the Fund, and one the Investment Manager remains very excited about. A year on from Narendra Modis historic election win, the reform agenda remains well and truly in place. Modi has targeted Indias crony capitalism, and has an enormous reform agenda he intends to implement in coming years. As an example, Modi has already removed Indias inefficient fuel subsidies, something which had cost the budget USD43 billion in 2014. The savings from these fuel subsidies are a large contributor to Indias planned spending of USD137 billion on its railway network. While some have argued the steps taken to date have been small, we would disagree, and note the reform that is yet to come has the potential to change India dramatically, and for the better.

The reform that is yet to come has the potential to change India dramatically, and for the better

We remain very positive on the outlook for frontier markets, which, given their recent underperformance relative to broader emerging markets, currently trade at an attractive discount to emerging markets. In addition, frontier markets provide strong diversification benefits to the Funds portfolio given they have a low correlation with other markets.

The outlook for Eastern European equities has improved considerably. The Russian conflict with Ukraine appears to have stabilised, and there are expectations that European and US sanctions may soon be eased. Greeces debt issues will likely continue for the some time yet, but we dont expect it to have significant impact on broader markets. Finally, the quantitative easing programme by the European Central Bank should continue to provide liquidity to support European markets.

The outlook for Latin America is challenging given the large commodity dependence of these economies. This has been reflected in the Funds reduced exposure to these markets over the last year. However, we have seen positive steps taken by Brazilian president Dilma Rousseff to try to solve the countrys fiscal deficit, and by the central bank which has raised interest rates to contain the rising inflation. In Mexico, reforms have progressed well with the first round of auctions to allocate oil fields to private investors taking place in July 2015. The Mexican economy will also be one of the biggest beneficiaries of an improvement in the US economy.


The United States Federal Reserve (Fed) is expected to start raising interest rates in the second half of 2015. Typically, the view among many investors is that higher US rates result in weaker emerging market assets. However, history suggests this is not the case. During previous periods of Fed tightening, equity markets have actually risen rather than fallen. One possible explanation is that higher US rates signal a stronger growth environment. In addition, emerging markets have been pricing in financial tightening since 2013 when the Fed indicated it would start tapering its quantitative easing programme.

During previous periods of Fed tightening, equity markets have actually risen rather than fallen

Valuations remain at attractive levels in emerging markets. On a price to book basis, emerging markets currently trade at a 29% discount to the broader MSCI World Index.

There is no question that risks remain within the emerging markets asset class, and investors should be willing to tolerate a reasonable level of volatility when investing in the asset class. However we believe emerging markets provide a compelling long-term investment case, and through the active selection of underlying managers, the Fund is well positioned to benefit from positive structural trends such as favourable demographics, continued urbanisation and rising consumerism.

Valuations remain at attractive levels in emerging markets. On a price to book basis, emerging markets currently trade at a 29% discount to the broader MSCI World Index



CORPORATE GOVERNANCE STATEMENTFOR THE YEAR ENDED 30 JUNE 2015

Emerging Markets Masters Fund (the Fund) is a listed Managed Investment Scheme whose units are traded on the Australian Securities Exchange Limited (ASX). The Fund has no employees, and its day-to-day functions and investment activities are managed by Walsh & Company Investments Limited (Responsible Entity) and Walsh & Company Asset Management Pty Limited (Investment Manager), respectively, in accordance with the Management Agreement. The Manager will be responsible for implementing the Companys strategic objectives and operating within the risk appetite as set out within the Investment Guidelines.

The ASX Corporate Governance Councils Corporate Governance Principles and Recommendations provides guidelines for good corporate governance. The Directors of the Responsible Entity (the Board), Walsh & Company Investments Limited, recognise the importance of good corporate governance.

The Funds Corporate Governance Charter, which incorporates the Funds policies referred to below, is designed to ensure the effective management and operation of the Fund and will remain under regular review. The Corporate Governance Charter is available on the Funds website www.emergingmarketsmastersfund.com.au.

A description of the Funds adopted practices in respect of the eight Principles and Recommendations from the 3rd Edition of the ASX Corporate Governance Principles and Recommendations are set out below. All these practices, unless otherwise stated, were in place throughout the year and to the date of this report.

1. LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT

BOARD ROLES AND RESPONSIBILITIES

The Board is responsible for the overall operation, strategic direction, leadership and integrity of the Fund. This involves undertaking the following functions:

providing and implementing the Funds strategic direction;

overseeing the Managers implementation of the companys strategic objectives and monitoring its performance;

reviewing and overseeing the operation of systems of risk management ensuring that the significant risks facing the Fund are identified, that appropriate control, monitoring and reporting mechanisms are in place and that risk is appropriately dealt with;

overseeing the integrity of the Funds accounting and corporate reporting systems, including the external audit;

ensuring that the Board is comprised of individuals who are best able to discharge the responsibilities of directors having regard to the law and the best standards of governance;

reviewing and overseeing internal compliance and legal regulatory compliance;


ensuring compliance with the Funds Constitution and with the continuous disclosure requirements of the ASX Listing Rules and the Corporations Act 2001;

overseeing the Funds process for making timely and balanced disclosures of all material information concerning the Fund; and

communication with and protecting the rights and interests of all unitholders.

The Board has established a formal policy which sets out its functions and responsibilities. A review of the policy is conducted annually.

2. STRUCTURE THE BOARD TO ADD VALUE

COMPOSITION OF THE BOARD

The Board is structured to maintain a mix of directors from different backgrounds with complementary skills and experience. Details of each director at the date of this report are given in the Directors Report, including the years in office, skills, experience, and expertise relevant to the position of director.

The Directors of the Responsible Entity at the date of this report are:

Alex MacLachlan Non-Executive Director

Tristan OConnell Non-Executive Director

Tom Kline Non-Executive Director

Having regard to the size of the Fund and the nature of its business, the Board has determined that a Board with three members is the appropriate composition for the Board and will enable it to continue to effectively discharge its responsibilities to the Fund. However, the composition of the Board will be reviewed periodically.

The current Board is not independent. The Board however has established a Compliance Committee with a majority of independent members who are responsible for; monitoring the extent the Responsible Entity complies with the Funds relevant regulations, compliance plan, constitution and report the findings to the Board, reporting to ASIC if the Committee is of the view that the Responsible Entity has not complied with the Compliance Plan or any relevant laws, and to assess at regular intervals whether the Funds compliance plan is adequate and make recommendations to the Responsible Entity about any changes that the Committee considers should be made to the compliance plan.

The Fund recognises the ASX Recommendations with respect to establishing remuneration and nomination committees as good corporate governance. However, considering the size of the Fund, the functions that would be performed by these committees are best undertaken by the Board.

The Board will review its view on committees in line with the ASX Recommendations and in light of any changes to the size or nature of the Fund and, if required, may establish committees to assist it in carrying out its functions. At that time, the Board will adopt a charter for such committees in accordance with the ASX Recommendations and industry best practices.



It is the Boards policy to determine the terms and conditions relating to the appointment and retirement of non-executive directors on a case-by-case basis and in conformity with the requirements of the ASX Listing Rules and the Corporations Act 2001. In accordance with the corporate governance policy, directors are entitled to seek independent advice at the expense of the Fund. Written approval must be obtained from the chair prior to incurring any expense on behalf of the Fund.

PERFORMANCE EVALUATION

The performance of directors is assessed and reviewed by the Board at intervals it considers appropriate. This process includes consideration of feedback provided by directors via a questionnaire.

3. ACT ETHICALLY AND RESPONSIBLY

CODE OF CONDUCT

The Board has adopted a Code of Conduct to define the basic principles of business conduct of the Fund and the Responsible Entity. This Code requires the Funds personnel to abide by the policies of the Fund and the law. The Code is a set of principles giving direction and reflecting the Funds approach to business conduct and is not a prescriptive list of rules for business behaviour.

UNIT TRADING POLICY

The Board of the Fund has established a Unit Trading Policy to apply to trading in the Funds units on the ASX. This policy outlines the permissible dealing of the Funds units while in possession of price sensitive information and applies to all Directors of the Responsible Entity and the Investment Manager.

The Policy imposes restrictions and notification requirements, including the imposition of blackout periods, trading windows and the need to obtain pre-trade approval.

INSIDER TRADING POLICY

The Board of the Responsible Entity has established an Insider Trading Policy to apply to trading in the Funds units on the ASX. This policy applies to all directors, executives and employees of the Responsible Entity, Investment Manager, and their parent company, Dixon Advisory Group. All directors, executives and employees of the Responsible Entity, Investment Manager, and their parent company must not deal in the Funds units while in possession of price sensitive information. In addition, the general Unit Trading Policy sets out additional restrictions which apply to directors and executives of the Responsible Entity, Investment Manager, and their parent company.


4. SAFEGUARD INTEGRITY IN CORPORATE REPORTING

COMPLIANCE COMMITTEE

As a registered managed investment scheme, the Fund has a compliance plan that has been lodged with the Australian Securities and Investments Commission (ASIC). The compliance plan is reviewed comprehensively every year to ensure that the way in which the Fund operates protects the rights and interests of unitholders and that major compliance risks are identified and properly managed.

The Responsible Entity has formed a Compliance Committee to; ensure the Fund complies with the relevant regulations, its compliance plan and its constitution. The Committee meets and reports to the Board of the Responsible Entity on a quarterly basis.

The Committee is structured with three members, the majority of which are independent. Details of the Compliance Committee members are as follows:

TRISTAN OCONNELL (INTERNAL MEMBER)Refer to information on directors (page 25).

BARRY SECHOS (INDEPENDENT MEMBER)Barry is a Director of Sherman Group Limited, a privately owned investment company, and is responsible for managing the legal, financial and operational affairs of Sherman Group Limited. Barry has 25 years experience in corporate law and finance, having spent seven years as a banking and finance lawyer at Allen Allen & Hemsley (Sydney, Singapore and London), and eight years as a Director of EquitiLink Funds Management and Aberdeen Asset Management Australia. Barry is also a Director of See-Saw Films, a film production and finance group and winner of the 2011 Academy Award for Best Picture, DIF Capital Partners Limited, a licensed funds management company, and a Director of Sherman Contemporary Art Foundation, a charitable cultural organisation.

MICHAEL BRITTON (INDEPENDENT MEMBER)Michael has over 35 years of commercial and financial services experience, initially with Boral Limited (ASX: BLD) and culminating in 12 years as General Manager of the corporate businesses of The Trust Company Limited (ASX: TRU) where he established the companys reputation as a leader in the delivery of independent Responsible Entity services. He has represented The Trust Company as a director on the boards of both domestic and offshore operating subsidiary companies and a large number of special purpose companies delivering the Responsible Entity function in both conventional and stapled, ASX-listed and unlisted managed investment schemes. Michael has acted as a Responsible Manager, a member of committees of inspection in relation to large insolvency administrations and as an independent compliance committee member for substantial investment managers with portfolios of managed investment schemes. He is an independent director on the board of the unlisted Knights Capital Group Limited, a Perth-based investor and property fund manager and a Panel Member for the Financial Ombudsman Service Limited.



Michael holds degrees in Jurisprudence and Law from the University of New South Wales and is a Graduate Member of the Australian Institute of Company Directors and a Fellow of the Governance Institute of Australia.

The Board, having considered their overall responsibilities, the size and structure of the Fund and other duties performed by the Compliance Committee, does not consider it appropriate, at this time, to establish an audit committee.

5. MAKING TIMELY AND BALANCED DISCLOSURE The Board is committed to complying with its continuous disclosure obligations under the Corporations Act 2001 and ASX Listing Rules, as well as releasing relevant information to the market and unitholders in a timely and direct manner to promote investor confidence in the Fund and its securities.

The Fund has adopted a Continuous Disclosure Policy to ensure the Fund complies with its continuous disclosure requirements. This policy is administered by the Board and monitored by the Compliance Committee.

6. RESPECT THE RIGHTS OF UNITHOLDERS

RIGHTS OF UNITHOLDERS

The Fund promotes effective communication with unitholders. The Board of Directors has developed a strategy within its Continuous Disclosure Policy to ensure that unitholders are informed of all major developments affecting the Funds performance, governance, activities and state of affairs. This includes using a website to facilitate communication with unitholders. Each unitholder is also provided online access to the Registry to allow them to receive communications from, and send communication to, the Responsible Entity and the Registry. Information is communicated through announcements to the ASX, releases to the media and the dispatch of financial reports. Unitholders are provided with an opportunity to access such reports and releases electronically. Copies of all ASX announcements are linked to the Funds website at www.emergingmarketsmastersfund.com.au.

These include:

monthly net tangible asset backing announcements;

quarterly investment updates;

the half-year report;

the annual report;

occasional ASX announcements made to comply with the Funds continuous disclosure requirements; and

occasional correspondence sent to unitholders on matters of significance to the Fund.


The Board encourages full participation of unitholders at the general meetings to ensure a high level of accountability and identification with the Funds strategy. Unitholders who are unable to attend the general meeting are given the opportunity to provide questions or comments ahead of the meeting and where appropriate, these questions are answered at the meeting.

7. RECOGNISE AND MANAGE RISKThe Board has accepted the role of identification, assessment, monitoring and managing the significant areas of risk applicable to the Fund and its operations. It has not established a separate committee to deal with these matters as this responsibility will be undertaken by the Compliance Committee of the Fund. The Board also monitors and appraises financial performance, including the approval of annual and half-year financial reports and liaising with the Funds auditor.

In order to evaluate and continually improve the effectiveness of its risk management and internal control processes, the Responsible Entity has adopted a set of Risk Management Guidelines for the Fund. The Board conducts an annual review of the Funds Risk Management Guidelines to satisfy itself that the Risk Management framework continues to be sound. The last review took place on 18 June 2015.

The Responsible Entity provides declarations required by Section 295A of the Corporations Act 2001 for all financial periods and confirms that in its opinion the financial records of the Fund have been properly maintained and that the financial statements and accompanying notes comply with the Accounting Standards and give a true and fair view of the financial position and performance of the Fund, based on its review of the internal control systems, management of risk, the financial statements and the letter from the Funds external auditor.

Details of the Funds financial risk management are set out in the notes to the financial statements in the annual report.

8. REMUNERATE FAIRLY AND RESPONSIBLY

REMUNERATION POLICY

There is no remuneration paid directly to the directors as they are remunerated by the Responsible Entity. In accordance with the Funds Constitution, the Responsible Entity is entitled to a management fee for services rendered. Details of the Funds related party transactions are disclosed in the notes to financial statements within the annual report. The Funds Constitution is available to unitholders on the Funds website.



DIRECTORS REPORTFOR THE YEAR ENDED 30 JUNE 2015

The directors of Walsh & Company Investments Limited, the Responsible Entity of Emerging Markets Masters Fund (the Fund), present their report together with the annual financial statements of the Fund for the year ended 30 June 2015.

The directors of the Responsible Entity at any time during or since the end of the financial year are shown below:

Alex MacLachlan

Tristan OConnell

Tom Kline

Directors were in office since the date of registration to the date of the report unless otherwise stated.

INFORMATION ON THE DIRECTORS

ALEX MACLACHLAN

Alex is currently the Chairman of the responsible entity for the Fund, Australian Property Opportunities Fund I and II, US Select Private Opportunities Fund I and II, US Masters Residential Property Fund, and Managing Director of Global Resource Masters Fund Limited. Alex also serves as a director of the Australian Masters Yield Fund Series, the Australian Masters Corporate Bond Fund Series and Asian Masters Fund Limited.

Alex joined Dixon Advisory in 2008 to lead the Funds Management division. He is currently the CEO of Funds Management Dixon Advisory Australia.

Before joining Dixon Advisory, Alex was an investment banker specialising in the natural resources sector, most recently serving as Head of Energy, Australasia, for UBS AG in Sydney and prior to that as an investment banker at Credit Suisse First Boston. During his career as an investment banker, Alex advised many of Australias and the worlds leading natural resources companies, working with over 30 companies on more than $100 billion in announced mergers and acquisitions and capital markets transactions.

Before specialising in natural resources investment banking, Alex worked in the Japanese Government Bond derivatives markets in London, New York and Sydney.


Alex has a Bachelor of Arts from Cornell University and a Master of Business Administration from The Wharton School, University of Pennsylvania.

During the past three years, Alex has acted as a non-executive director or director of a responsible entity of the following Australian listed entities:

Asian Masters Fund Limited

Australian Masters Corporate Bond Fund No 4 Limited (delisted 14 January 2013)

Australian Masters Corporate Bond Fund No 5 Limited

Australian Masters Yield Fund No 1 Limited





Global Resource Masters Fund Limited

US Masters Residential Property Fund

US Select Private Opportunities Fund

US Select Private Opportunities Fund II

TRISTAN OCONNELL

Tristan joined Dixon Advisory in 2005 after 10 years experience in corporate financial and management roles within the wholesale financial markets industry, and is currently a director of the responsible entity of US Masters Residential Property Fund, Australian Property Opportunities Fund I and II, US Select Private Opportunities Fund I and II. Tristans previous roles included being financial controller of Tullett Prebon in Australia, one of the worlds leading inter-dealer broker firms specialising in over-the-counter interest rate, foreign exchange, energy and credit derivatives. Tristan subsequently held senior finance roles for the Tullett Prebon Group in Singapore and London.

Tristan returned to Australia to be responsible for the financial management and growth of Dixon Advisory. Tristan has a Bachelor of Commerce from the Australian National University, is a member of CPA Australia and is a Fellow of the Financial Services Institute of Australasia.



During the past three years, Tristan has acted as a non-executive director or director of a responsible entity of the following Australian listed entities:




TOM KLINE

Tom Kline is the Chief Operating Officer of the Funds Management division of Dixon Advisory. He works closely with the Dixon Advisory Investment Committee and Corporate Finance teams to deliver investment opportunities for Dixon Advisory clients. He is also a director of Australian Masters Yield Fund No 4 Limited, Australian Masters Yield Fund No 5 Limited, Fort Street Real Estate Capital and of the responsible entity for US Private Opportunities Fund I and II, US Masters Residential Fund and Australian Property Opportunities Fund I and II.

Before joining Dixon Advisory, Tom worked at UBS AG in Sydney. During his time at UBS, Tom was a member of the Infrastructure and Utilities team and advised on a wide range of public and private M&A and capital market transactions.

Prior to joining UBS AG, Tom worked at Deloitte in the Corporate Finance team. While at Deloitte, he worked in the Transaction Services, Business Modelling and Valuation team within this division.

Tom has a Bachelor of Commerce and Bachelor of Laws (with honours) from Australian National University.

During the past three years, Tom has acted as a non-executive director or director of a responsible entity of the following Australian listed entities:




Australian Masters Yield fund No 4 Limited



PRINCIPAL ACTIVITIES AND SIGNIFICANT CHANGES IN NATURE OF ACTIVITIESThe principal activities of the Fund during the financial year were to provide Australian investors access to leading global fund products and managers specialising in the emerging markets equity asset class. Through these investments, the Fund aims to achieve long-term returns through a combination of capital appreciation and a consistent distribution stream.

There were no significant changes in the nature of these activities of the Fund that occurred during the year.

REVIEW OF OPERATIONS AND RESULTSThe results of the operations of the Fund are disclosed in the Statement of Profit or Loss and Other Comprehensive Income of these financial statements. The profit attributable to unitholders for the year was $39,158,261 (2014: $5,720,599). The increase in profit is due to the solid performance of the underlying investments.

As at 30 June 2015, 98.5% of the Funds total portfolio is invested in 16 funds specialising in emerging markets. Further details are included in the Report to Unitholders and Investment Managers Report.

At 30 June 2015, the net asset value of the Fund was $1.96 per unit (2014: $1.56).

DISTRIBUTIONS PAID OR RECOMMENDEDDuring the year, the Fund paid two 3 cent per unit distributions on 24 September 2014 and 6 February 2015. Total distributions paid during the financial year amounted $5,028,188. A further distribution of 3 cents per unit totaling $2,546,908 was announced on 23 June 2015, which was paid on 10 August 2015. A distribution reinvestment plan is in place in relation to the distribution.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRSThere were no significant changes in the state of affairs of the Fund during the financial year ended 30 June 2015.

EVENTS SUBSEQUENT TO REPORTING PERIODThe distribution announced on 23 June 2015 totalling $2,546,908 was paid to unitholders on 10 August 2015. 527,657 units were issued under the Funds Distribution Reinvestment Plan.

Other than the matter discussed above, there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Responsible Entity, to affect significantly the operations of the Fund, the results of those operations, or the state of affairs in future financial years.



FUTURE DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONSThe Fund will continue to undertake its activities described in this report.

Currently, there are no significant developments expected in respect of the Fund. The performance of the Fund in the future will be subject to movements in the underlying investment markets over time.

BENEFICIAL AND RELEVANT INTEREST OF DIRECTORS OF THE RESPONSIBLE ENTITY IN UNITSThe following table details each directors relevant interest in the Fund at the date of this report:

DIRECTOR NUMBER OF UNITS

Alex MacLachlan 11,875

Tristan OConnell 3,475

Tom Kline 10,256

No options were issued over the interests of the Fund.

OPTIONSNo options were granted over issued or unissued units in the Fund during or since the end of the year.

OTHER RELEVANT INFORMATIONThe following lists other relevant information required under the Corporations Act 2001:

details of fees paid to the Responsible Entity during the financial year refer to note 16 to the financial statements

the Responsible Entity did not hold any interests in the Fund at the end of the financial year

details of issued interests in the Fund during the financial year refer to note 15 to the financial statements.

ENVIRONMENTAL REGULATIONThe Fund is not subject to any particular and significant environmental regulations under a law of the Commonwealth or a State or Territory.


INDEMNITIES AND INSURANCEUnder the Funds Constitution, the Responsible Entity, including its officers and employees, is indemnified out of the Funds assets for any loss, damage, expense or other liability incurred by it in properly performing or exercising any of its powers, duties or rights in relation to the Fund.

Insurance premiums have been paid during, or since the end of, the financial year for all of the directors of the Responsible Entity of the Fund. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium.

No indemnities have been given or insurance premiums paid during, or since the end of, the financial year for the auditor of the Fund.

NON-AUDIT SERVICESThe Directors of the Responsible Entity are satisfied that the provision of non-audit services, during the year, by the auditor, KPMG (or by another person or firm on the auditors behalf) is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.

The directors are of the opinion that the services disclosed in note 7 to the financial statements do not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:

all non-audit services are reviewed and approved prior to commencement to ensure they do not adversely affect the integrity and objectivity of the auditor; and

the nature of the services provided do not compromise the general principles relating to auditor independence in accordance with APES110: Code of Ethics for Professional Accountants set by the Accounting Professionals Ethical Standards Board.

Details of amounts paid or payable to the auditor, KPMG, for non-audit services are outlined in note 7 to the financial statements.

AUDITORS INDEPENDENCE DECLARATIONThe lead auditors independence declaration is set out on page 33 and forms part of the Directors Report for the year ended 30 June 2015.

Made in accordance with a resolution of the directors made pursuant to section 298(2) of the Corporations Act 2001.

Tom Kline

Director of Walsh & Company Investments Limited, Responsible Entity

Dated 14 August 2015



LEAD AUDITORS INDEPENDENCE DECLARATIONFOR THE YEAR ENDED 30 JUNE 2015


STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMEFOR THE YEAR ENDED 30 JUNE 2015

NOTE2015

$ 2014

$

Revenue 5 694,684 666,272

Net gain on financial assets at fair value through profit or loss 6 40,098,861 7,059,228

Foreign currency movements 1,015,874 151,645

Management and administration fees 16 (1,765,953) (1,378,494)

Listing and registry expenses (108,780) (104,606)

Investment transaction costs (60,351) (89,317)

Professional expenses (380,125) (322,669)

Custodian fees (33,597) (31,987)

Due diligence expenses (187,969) (115,500)

Other expenses (114,384) (113,973)

Profit for the year before income tax expense 39,158,261 5,720,599

Income tax expense

Profit for the year 39,158,261 5,720,599

Other comprehensive income

Items that will be reclassified subsequently to profit or loss

Total comprehensive income for the year 39,158,261 5,720,599

Earnings per unit

Basic earnings per unit (cents) 8 46.50 7.80

Diluted earnings per unit (cents) 8 46.50 7.80

The Statement of Profit or Loss and Other Comprehensive Income is to be read in conjunction with the notes to the financial statements.


STATEMENT OF FINANCIAL POSITIONAT 30 JUNE 2015

NOTE2015

$2014

$

Assets

Cash 9 2,496,243 2,500,608

Receivables 10 3,615,956 523,131

Financial assets 11 166,761,286 130,976,958

Other assets 24,899

Total Assets 172,873,485 134,025,596

Liabilities

Payables 12 2,426,949 112,164

Financial liabilities 13 1,410,939 1,046,486

Distributions payable 14 2,546,908 2,510,996

Total liabilities 6,384,796 3,669,646

Net assets 166,488,689 130,355,950

Equity

Issued capital 15 131,812,246 129,773,668

Retained earnings 34,676,443 582,282

Total equity 166,488,689 130,355,950

The Statement of Financial Position is to be read in conjunction with the notes to the financial statements.


STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 30 JUNE 2015

NOTEUNIT CAPITAL

$

RETAINED EARNINGS

$TOTAL

$

Balance at 1 July 2013 109,882,933 (472,998) 109,409,935


Other comprehensive income for the year


Issue of ordinary units 15 20,002,972 20,002,972

Issue and buyback costs 15 (112,237) (112,237)

Distributions declared/paid 14 (4,665,319) (4,665,319)

Balance at 30 June 2014 129,773,668 582,282 130,355,950

Balance at 1 July 2014 129,773,668 582,282 130,355,950


Other comprehensive income for the year


Issue of ordinary units 15 2,229,376 2,229,376

Issue and buyback costs 15 (488) (488)

Share Buyback 15 (190,310) (190,310)

Distributions declared/paid 14 (5,064,100) (5,064,100)

Balance at 30 June 2015 131,812,246 34,676,443 166,488,689

The Statement of Changes in Equity is to be read in conjunction with the notes to the financial statements.


STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 30 JUNE 2015

NOTE2015

$2014

$

Cash flow from operating activities

Interest income received 26,019 48,319

Distributions and rebates received 11,493 52,628

Payments to suppliers (385,092) (363,503)

Management and administration fees paid (1,795,712) (1,508,527)

Custody and professional fees paid (146,491) (113,447)

Net cash (used in) operating activities 9 (2,289,783) (1,884,530)

Cash flow from investing activities

Payments for investments (51,242,799) (46,420,478)

Receipts from disposal of investments 56,419,692 35,293,270

Net payments on settlement of forward contracts (600,900) (2,397,114)

Net cash generated by/(used in) investing activities 4,575,993 (13,524,322)

Cash flow from financing activities

Proceeds from issue of ordinary units 15 17,140,253

Payments for share buybacks (190,798) (120,449)

Distributions paid (2,798,812) (3,541,028)

Net cash (used in)/generated by financing activities (2,989,610) 13,478,776

Net (decrease) in cash and cash equivalents (703,400) (1,930,076)

Cash and cash equivalents at the beginning of the year 2,500,608 4,553,904

Effect of exchange rate changes on cash and cash equivalents 699,035 (123,220)

Cash and cash equivalents at the end of the year 9 2,496,243 2,500,608

The Statement of Cash Flows is to be read in conjunction with the notes to the financial statements.


NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2015

1. GENERAL INFORMATION Emerging Markets Masters Fund (the Fund) is a Managed Investment Scheme registered and domiciled in Australia. The Fund is a for-profit entity. The principal activities of the Fund are to invest in leading global fund products and managers specialising in the global emerging markets asset class to achieve a combination of long-term capital appreciation and consistent distributions.

The comparative period is the period from 1 July 2013 to 30 June 2014.

2. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS

ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS

The Fund has adopted all of the new and revised Standards and Interpretations issued by the AASB that are relevant to their operations and effective for the current year. These include:

AASB 1031 Materiality (2013)

AASB 2012-3 Amendments to Australian Accounting Standards Disclosures Offsetting Financial Assets and Financial Liabilities

AASB 2013-3 Amendments to AASB 136 Recoverable Amount Disclosures for Non-Financial Assets

AASB 2013-4 Amendments to Australian Accounting Standards Novation of Derivatives and Continuation of Hedge Accounting

AASB 2013-5 Amendments to Australian Accounting Standards Investment Entities

AASB 2013-9 Amendments to Australian Accounting Standards Conceptual Framework, Materiality and Financial Instruments

AASB 2014-2 Amendments to AASB 1053 Transition to and between Tiers, and related Tier 2 Disclosure

AASB 9 Financial Instruments, and the relevant amending standards

There are no other standards, interpretations or amendments to existing standards that are effective for the first time for the financial year beginning 1 July 2014 that have a material impact on the Fund.

ACCOUNTING STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE

Certain new accounting standards and interpretations have been published that are not mandatory for the 30 June 2015 reporting period and have not been early adopted by the Fund.



2. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS (CONT.)The directors assessment of the impact of these new standards (to the extent relevant to the Fund) and interpretations is set out below:

STANDARD/INTERPRETATION

EFFECTIVE FOR ANNUAL REPORTING PERIODS BEGINNING ON OR AFTER

EXPECTED TO BE INITIALLY APPLIED IN THE FINANCIAL YEAR ENDING

AASB 15 Revenue from Contracts with Customers

1 January 2017

The AASB 15 has issued a new standard for the recognition of revenue. This will replace AASB 118 Revenue which covers contracts for goods and services and AASB 111 Construction Contracts which covers construction contracts.

The directors do not expect the adoption of the new revenue recognition rules to have a significant impact on the Funds accounting policies or the amounts recognised in the financial statements. The Fund has not yet decided when to adopt AASB 15.

There are no other standards that are not yet effective and that are expected to have a material impact on the Fund in the current or future reporting periods and on foreseeable future transactions.

3. SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PREPARATION

The financial statements have been prepared on an accrual basis and are based on historical cost, except for the revaluation of certain non-current assets and financial instruments. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars unless otherwise noted.

STATEMENT OF COMPLIANCE

The financial statements are general purpose financial statements which have been prepared in accordance with Australian Accounting Standards issued by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. Compliance with Australian Accounting Standards ensures the financial statements and notes to the financial statements of the Fund comply with the International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board (IASB).

The financial statements were authorised for issue by the directors of the Responsible Entity on 14 August 2015.

The following accounting policies have been adopted in the preparation and presentation of the financial report.

A. FOREIGN CURRENCY TRANSLATION

The functional and presentation currency of the Fund is Australian dollars.

Transactions in foreign currencies are initially recorded in Australian dollars by applying the exchange rates ruling at the date of the transaction. Monetary assets and liabilities


denominated in foreign currencies that are outstanding at the reporting date are retranslated at the rate of exchange ruling at the Statement of Financial Position date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Foreign currency exchange differences arising on translation and realised gains and losses on disposals or settlements of monetary assets and liabilities are recognised in the Statement of Profit or Loss and Other Comprehensive Income. Foreign currency exchange differences relating to investments at fair value through profit or loss and derivative financial instruments are included in gains and losses on investments and derivatives, respectively. All other foreign currency exchange differences relating to monetary items, including cash and cash equivalents are presented separately in the Statement of Profit or Loss and Other Comprehensive Income.

B. FINANCIAL INSTRUMENTS

Financial Instruments, incorporating financial assets and financial liabilities, are recognised on trade date, when the Fund becomes a party to the contractual provisions of the instrument.

The Fund has elected to early adopt AASB 9 Financial Instruments, which was issued on 7 December 2009 effective 1 January 2017. AASB 9 includes requirements for the classification and measurement of financial assets.

i. Financial assets

Financial assets are classified as derivative and non-derivative instruments as appropriate. Financial assets at fair value through profit or loss are measured initially at fair value, with transaction costs recognised in the Statement of Profit or Loss and Other Comprehensive Income. Financial assets not at fair value through profit or loss are measured initially at fair value plus transaction costs that are directly attributable to its acquisition or issue and are subsequently measured at amortised cost using the effective interest rate method.

ii. Financial liabilities

Financial liabilities are classified as derivative or non-derivative instruments as appropriate. Financial liabilities at fair value through profit or loss are measured initially at fair value, with transaction costs recognised in the Statement of Profit or Loss and Other Comprehensive Income. Financial liabilities not at fair value through profit or loss are measured initially at fair value plus transaction costs and are subsequently measured at amortised cost using the effective interest rate method.

C. DERECOGNITION

Financial assets are derecognised where the contractual rights to receipt of cash flows expire or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are discharged or cancelled or expire.



3. SIGNIFICANT ACCOUNTING POLICIES (CONT.)

D. CASH AND CASH EQUIVALENTS

Cash and cash equivalents comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

E. TAXES

i. Income tax

Under current Australian income tax laws, the Fund is not liable to pay income tax provided its distributable income for each income year is fully distributed to Unitholders, by way of cash or reinvestment.

The Fund primarily invests in non-Australian securities and may incur reclaimable withholding tax by certain countries on investment income and realised gains. Such income is recorded gross of withholding tax in the Statement of Comprehensive Income.

ii. Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of an item of expense.

The Fund qualifies for reduced input tax credits at a minimum of 55%.

Where fees are stated to be exclusive of GST and GST is payable on any fee, the fee will be increased by an amount equal to the GST payable.

Cash flows are presented in the Statement of Cash Flows on a gross basis.

F. IMPAIRMENT OF ASSETS

The directors of the Responsible Entity assess at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, an estimate is made of the assets recoverable amount. When the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount through the statement of comprehensive income.

G. REVENUE RECOGNITION

Revenue is recognised and measured at the fair value of the consideration received or receivable to the extent it is probable that the economic benefits will flow to the Fund and the revenue can be reliably measured.

Interest income is recognised in profit or loss using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset.


Distribution income is recognised when the right to receive a distribution has been established, gross of any non-recoverable related foreign withholding tax.

All revenue is stated net of the amount of goods and services tax (GST).

H. EARNINGS PER UNIT

Basic earnings per unit is determined by dividing the profit or loss excluding any cost of servicing equity other than ordinary units by the weighted average number of ordinary units outstanding during the financial period. Diluted earnings per unit is the same as basic earnings per unit because there are no dilutive potential ordinary units.

I. UNIT CAPITAL

Ordinary units are classified as equity. Issued capital is recognised at the fair value of the consideration received by the Fund. Incremental costs directly attributable to the issue of ordinary units are recognised as a deduction from equity.

Distributions payable are recognised in the reporting period in which the distributions are declared, determined, or publicly recommended by the board of the Responsible Entity on, or before, the end of the financial period, but not distributed at balance sheet date.

J. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

The directors evaluate estimates and judgements incorporated into the financial statements based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data obtained both externally and within the Fund.

4. SEGMENT REPORTINGThe Fund operates in Australia and has one business operation, that being to invest in leading global fund products and managers specialising in the global emerging markets asset class to achieve a combination of long-term capital appreciation and consistent distributions.

5. REVENUE

2015 $

2014 $

Operating activities

Interest income 32,499 45,723

Distribution income 651,148 499,744

Other income 11,037 120,805

694,684 666,272



6. NET GAIN ON FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

2015 $

2014 $

Unrealised gain on revaluation of investments 30,001,046 1,919,992

Unrealised loss on revaluation of forward contracts (1,143,672) 2,774,009

Realised gain on disposal of investments 11,842,387 4,762,341

Realised loss on settlement of forward contracts (600,900) (2,397,114)

40,098,861 7,059,228

7. AUDITORS REMUNERATION

2015 $

2014 $

Audit and review services

Auditor of the Fund KPMG

Audit and review of financial statements 25,142 25,165

25,142 25,165

Other services

Auditor of the Fund KPMG

In relation to other assurance, taxation and due diligence services 21,141 12,153

21,141 12,153


8. EARNINGS PER UNIT

2015 $

2014 $

Earnings used in the calculation of earnings per unit

Profit from continuing operations used to calculate basic and diluted earnings per unit 39,158,261 5,720,599

No. No.

Weighted average number of ordinary units

Weighted average number of ordinary units used to calculate basic earnings per unit 84,203,441 73,349,242

Effect of dilution

Weighted average number of ordinary units used to calculate diluted earnings per unit 84,203,441 73,349,242

Cents Cents

Basic and diluted earnings per unit (cents) 46.50 7.80



9. CASH AND CASH EQUIVALENTS

2015 $

2014 $

Cash at bank 2,496,243 2,500,608

2,496,243 2,500,608

Reconciliation of cash flows from operating activities


Adjustments:

Net gain on financial assets at fair value through profit or loss (40,098,861) (7,059,228)

GST on issue costs 8,212

Transaction costs, including GST 60,351 90,230

Distributions reinvested (650,692) (173,775)

Foreign currency movements (1,015,874) (151,645)

Changes in assets and liabilities

Increase in receivables (6,617) (275,083)

Decrease/(increase) in other assets 24,899 (12,398)

Increase/(decrease) in payables 238,750 (31,442)

Net cash used in operating activities (2,289,783) (1,884,530)

10. RECEIVABLES

2015 $

2014 $

Unsettled trades 2,894,985

GST receivable 62,011 61,874

Distributions receivable 657,983 459,925

Interest receivable 977 1,332

3,615,956 523,131

There are no balances above that contain assets that are impaired and/or past due. All the receivables above are unsecured and non-interest bearing.


11. FINANCIAL ASSETS

2015 $

2014 $

Financial assets at fair value through profit or loss

Equity investments unlisted 166,352,043 129,788,496

Derivatives forward contracts 409,243 1,188,462

166,761,286 130,976,958

12. PAYABLES

2015 $

2014 $

Accrued expenses 216,944 97,498

Trade creditors 133,970 14,666

Unsettled Trades 2,076,035

2,426,949 112,164

The average credit period for trade creditors is generally 30 days. No interest is charged on trade creditors from the date of the invoice. The Fund has risk management policies in place to ensure invoices are paid within credit terms.

13. FINANCIAL LIABILITIES

2015 $

2014 $

Financial liabilities at fair value through profit or loss

Derivatives forward contracts 1,410,939 1,046,486

1,410,939 1,046,486

14. DISTRIBUTIONS PAID AND PAYABLE

2015 $

2014 $

Distributions declared and paid during the year 2,517,192 2,154,323

Distributions payable 2,546,908 2,510,996

5,064,100 4,665,319

Distributions per unit for the year 0.06 0.06



15. ISSUED CAPITAL

2015 $

2014 $

(a) Issued capital

Balance at the beginning of the year 129,773,668 109,882,933

1,182,033 fully paid ordinary units at $1.60 per unit 1,891,253

607,166 fully paid ordinary units at $1.60 per unit 971,466

10,891,939 fully paid ordinary units at $1.60 per unit 17,140,253

696,584 fully paid ordinary units at $1.61 per unit 1,121,500

633,072 fully paid ordinary units at $1.75 per unit 1,107,876

Share buybacks (190,310)

Issue and buyback costs (488) (112,237)

Balance at the end of the year 131,812,246 129,773,668

Date Details2015

No.2014

No.

(b) Movement in ordinary units

Balance at the beginning of the year 83,504,866 70,823,728

25 September 2013 Distribution reinvested 1,182,033

24 March 2014 Distribution reinvested 607,166

12 May 2014 Fully paid ordinary units 10,891,939

24 September 2014 Distribution reinvested 696,584

6 February 2015 Distribution reinvested 633,072

30 June 2015 Unit buybacks (116,315)

Balance at the end of the year 84,718,207 83,504,866

All units are fully paid. The holders of ordinary units are entitled to one vote per unit at meetings of the Fund and are entitled to receive distributions declared from time to time by the Responsible Entity.


16. RELATED PARTY TRANSACTIONSThe names of the persons who were directors of the Responsible Entity of the Fund, Walsh & Company Investments Limited, at any time during the financial year and to the date of these financial statements are:

Alex MacLachlanTristan OConnellTom Kline

At 30 June 2015, details of directors who hold units for their own benefit or have an interest in holdings through a third party and the total number of such units held are as follows:

2015

DIRECTOR

BALANCE AT 1 JULY 2014

No.

RECEIVED AS COMPENSATION

No.

OTHER CHANGES

No.

BALANCE AT 30 JUNE 2015

No.

Alex MacLachlan 11,875 11,875

Tristan OConnell 3,303 120 3,423

Tom Kline 9,750 352 10,102

Total 24,928 472 25,400

2014

DIRECTOR

BALANCE AT 1 JULY 2013

No.

RECEIVED AS COMPENSATION

No.

OTHER CHANGES

No.

BALANCE AT 30 JUNE 2014

No.

Alex MacLachlan 11,875 11,875

Tristan OConnell 3,125 178 3,303

Tom Kline 9,225 525 9,750

Total 24,225 703 24,928



16. RELATED PARTY TRANSACTIONS (CONT.)Transactions between related parties are on normal commercial terms and conditions unless otherwise stated and are as follows:

WALSH & COMPANY INVESTMENTS LIMITED MANAGEMENT FEES

As Responsible Entity, Walsh & Company Investments Limited is entitled to receive annualised management fees of 0.55% per annum (inclusive of GST) of the gross asset value of the Fund. The Responsible Entity has elected to reduce the fee to 0.088% per annum (inclusive of GST) for an indefinite period. In accordance with the Constitution of the Fund, the Responsible Entity can increase the management fees up to 0.55% per annum without seeking unitholder approval.

Total management fees paid or payable to the Responsible Entity for the year ending 30 June 2015 were $120,998 (2014: $92,695), exclusive of GST.

WALSH & COMPANY ASSET MANAGEMENT PTY LIMITED INVESTMENT MANAGER FEES

In connection with the provision of services as Investment Manager, Walsh & Company Asset Management Pty Limited is entitled to receive management fees of 2.2% per annum (inclusive of GST) of the gross asset value of the Fund. The Investment Manager has elected to reduce the fee to 1.1% per annum (inclusive of GST). In accordance with the Management Agreement of the Fund, the Investment Manager can increase the management fee up to 2.2% per annum on delivery of three months notice to the Fund.

Investment management fees paid or payable for the year ending 30 June 2015 were $1,512,474 (2014: $1,158,693), exclusive of GST.

AUSTRALIAN FUND ACCOUNTING SERVICES PTY LIMITED FUND ADMINISTRATION FEES

Australian Fund Accounting Services Pty Limited, a wholly-owned subsidiary of the Dixon Advisory Group Limited, the parent of the Responsible Entity, provides fund administration services to the Fund under an agreement with the Responsible Entity. These services include net asset valuation, management accounting, statutory reporting, capital management and taxation. Time spent by administrative staff is charged to the Fund at agreed market derived rates, currently subject to a cap.

Total fund administration fees paid or payable for the year ended 30 June 2015 were $120,000 (2014: $120,000), exclusive of GST.


17. FINANCIAL RISK MANAGEMENT

A. CAPITAL MANAGEMENT

The Fund manages its capital to ensure it will be able to continue as a going concern while maximising the return to unitholders. The capital structure of the Fund consists of issued capital amounting to $131,812,246 as at 30 June 2015 (2014: $129,773,668). The Fund is not subject to any externally imposed capital requirements.

B. FINANCIAL RISK MANAGEMENT POLICIES

The Funds financial instruments consist mainly of deposits with banks and unlisted investments. The main risks the Fund is exposed to through its financial instruments are interest rate risk, liquidity risk, credit risk, foreign exchange risk and market price risk.

I. INTEREST RATE RISK

Exposure to interest rate risk arises on financial assets recognised at reporting date whereby a future change in interest rates will affect future cash flows or the fair value of fixed rate financial instruments. Any variation in short and long-term interest rates, particularly in Australia and Asia, could affect the operating results of the Fund.

The Funds exposure to interest rate risk is minimal. At 30 June 2015, approximately 98% of the financial assets were non-interest bearing and 2% of the financial assets were at a floating rate, represented by the cash and cash equivalents balance on the Statement of Financial Position.

II. LIQUIDITY RISK

Liquidity risk is the risk that the Fund will encounter difficulty in meeting obligations arising from its financial liabilities that are settled by delivering cash or another financial asset, or that such obligations will have to be settled in a manner disadvantageous to the Fund.

The Funds exposure to liquidity risk is minimal, with 72% of the total investments having at least a monthly redemption facility. However, to the extent that the underlying funds are invested in illiquid securities that may be difficult to sell at short notice or at desired prices, this can result in diminished redemption prices for the Fund, or in declining markets, loss of capital through a decline in the value of the investment in the underlying fund.



17. FINANCIAL RISK MANAGEMENT (CONT.)

III. CREDIT RISK

The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial assets, is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the Statement of Financial Position and notes to the financial statements. The Fund does not have any material credit risk exposure to a single receivable or group of debtors under financial instruments entered into by the Fund. The Funds exposure to credit risk is minimised by the fact that they all can be settled within six months.

There are no amounts of collateral held as security at 30 June 2015. The carrying amount of financial assets that represents the maximum credit risk exposure at the end of reporting period are detailed below:

2015 $

2014 $

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