Global Masters Fund Limited ABN 84 109 047 618 Level 12, Corporate Centre One 2 Corporate Court BUNDALL QLD 4217 www.globalmastersfund.com.au Annual Report 30 June 2019 FINANCIAL YEAR END 30 June 2019 ANNUAL GENERAL MEETING The Annual General Meeting of Global Masters Fund Limited: WILL BE HELD AT: The office of Bentleys NSW Pty Ltd Level 14 60 Margaret Street Sydney NSW 2000 TIME: 2.00pm (NSW Time) DATE: Friday 15 November 2019 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 Emmanuel (Manny) Pohl AM, Murray d’Almeida, Jonathan Addison and Patrick Corrigan AM 5 6 11 12 14 29 30 34 35 39 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 2019 Highlights for the year ending June 2019 Revenue from dividends and interest increased $73,558 (32.0%) compared to the previous financial year. The Net Tangible Assets (NTA) value of the Company per share increased by 10.5% before recognising the net deferred tax liability, whilst the All Ordinaries Index of ASX increased by 6.5% over the twelve months ended 30 June 2019. Major Investments June 2019 BRK FSI ATY Other UK Cash OVERVIEW 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 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 business, investment and funds management. 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 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 also provides administration support. Dr Manny Pohl AM is the Managing Director and major Shareholder of EC Pohl & Co Pty Ltd. Information on the Investment Manager is available from www.ecpohl.com. ENVIRONMENT, SOCIAL, GOVERNANCE A business can only maintain a sustainable competitive advantage if it adequately respects all stakeholders in the business and environment in which it operates. Companies who are not engaged in sustainable practices, will not be able to generate above average economic returns throughout their life cycle. To this end, the Manager’s investment process scrutinises companies to see if they have the appropriate, and sensible Governance structures in place as well as incorporating sustainable practices into their day to day operations. Companies that don’t meet standards of respect and integrity with regard to compensation structures, internal controls, accounting treatment, rules, relationships, systems and process throughout the organisation are not included in the portfolio. Global Masters Fund Limited 4 THE INVESTMENT MANAGEMENT TEAM As noted above, the disciplined execution of the investment process is fundamental to our business. To that end, I want to record my personal appreciation and that of the Board as a whole, to our Investment Manager led by Dr Manny Pohl and his team of professionals at EC Pohl & Co (ECP). Our continuing success could not have been achieved without the outstanding contribution of these very committed individuals. THE BOARD industry revolves In a climate of increased focus on Corporate Governance, I am confident that the rigour and commitment from our Board ensures the best interests of Shareholders and other stakeholders are managed and protected. As an example, a particular topic within the investment ESG into the (Environmental, Social and Governance) principles investment process, this is in fact the case with ECP. The Annual Report summarises the Investment Manager’s implementation of the Principles of Responsible Investing (which incorporates an ESG framework). Importantly, at a Board level, we will continue to consider ESG principles to continue to enhance our social licence to operate. incorporating around It was very pleasing to see Dr Manny Pohl’s contribution to the finance sector and community recognised with an Order of Australia in the 2019 Queen’s Birthday Honours. It is a fitting distinction for a very deserving and humble recipient and the Board passes on its congratulations to Manny. In conclusion, I wish to record my appreciation for my fellow Board members and our Company Secretary for their support, hard work and engagement throughout the year and I also thank you as Shareholders for your support and loyalty for many years. Yours sincerely Murray d’Almeida Chairman CHAIRMAN’S REPORT Dear Shareholder, I am pleased to present the 14th Annual Chairman’s Report of Global Masters Fund Limited for the 2018/19 financial year. THE YEAR IN REVIEW The Company has enjoyed a good performance this year. The Net Tangible Asset (NTA) value per share increased by 10.5%, before recognising the net deferred tax liability. Contributing to this was an increase in value of its major investment, Berkshire Hathaway, listed on the New York Stock Exchange (up 19.4%). The increase in NTA was also supported by a fall in the Australian dollar compared to the US and UK currencies. As mentioned in previous years, your Board does not hedge the currency. Berkshire Hathaway represents approximately 65% of the portfolio (investments plus cash) and continues its long-term upward trend. During the year, the UK investments which comprise 16.6% of the portfolio performed well. With the resignation of Prime Minister Theresa May and the unresolved Brexit issue, there is still an inherent risk for the London Financial markets. Your Board, as well as the management of Athelney Trust Plc and EC Pohl & Co Pty Ltd (the Manager) are continually monitoring events so as to be in a position to react if necessary. Despite ongoing global uncertainty, the United States economy continues to show good growth. The gains in equities appear to be driven by the Federal Reserve’s stance and expectations of progress on trade, underpinned by tax cuts, strong corporate earnings and a strong job market. In Australia, after a drop in the All Ordinaries Index in the first and second quarters of the year, the equities market was delicately poised as the Federal Election loomed. The surprise election victory of the Coalition Party led by Scott Morrison, was viewed positively by the market and business confidence improved. The All Ordinaries Index recovered. With a cut in tax rates, the Reserve Bank of Australia cutting the cash rate to 1.25 % and the renewed sense of political stability, the outlook seems positive compared to the start of the financial year. THE MARKET OUTLOOK Nevertheless, the opportunities in the new financial year remain uncertain. Domestic monetary policy and government tax cuts could fuel the local economy, while the New York Fed’s indicator on potential recession at 33% is at its highest since the GFC. The optimism or otherwise towards the economic outlook is as long lasting as the latest survey inputs. As business, consumers and markets react to threats - real or imagined - the task at hand requires a disciplined and patient commitment to the investment process. Global Masters Fund Limited 5 DIRECTORS' REPORT Your Directors present their report on Global Masters Fund Limited for the financial year ended 30 June 2019. 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: M d’Almeida, Dr E Pohl AM, J Addison, P Corrigan AM and Jason Pohl is an Alternate Director to Dr Manny Pohl. 2. INFORMATION ON DIRECTORS Murray H d’Almeida FAICD Non-Executive Chairman Experience and expertise Director since 3 November 2016 Chairman since 9 November 2018. Over 37 years of diverse national and international business experience. Founded the Retail Food Group and developed a presence in seven overseas countries. Subsequently has maintained operating and board positions within a range of financial services, mining, commercial, academic, government and sporting businesses and organisations. Other Current directorships Chairman of Barrack St Investments Limited Chairman of Interhealthcare Pty Ltd Director Triple Energy Limited Deputy Chancellor Southern Cross University Trustee of Currumbin Wildlife Foundation Member of Gold Coast Light Rail Business Advisory Board Former Listed Company directorships in last 3 years Chairman IncentiaPay Limited Chairman EnviroSuite Limited Chairman of Management Resource Solutions PLC Interest in Shares 2,578 indirect Dr Emmanuel (Manny) C Pohl AM B.Sc (Eng), MBA, DBA, FAICD, MSAFAA, F Fin Managing Director 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 Managing Director of Athelney Trust Plc Chairman of EC Pohl & Co Pty Ltd Chairman of ECP Asset Management Pty Ltd Chairman and President of Bond University Rugby Club 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 Executive Director of Barrack St Investments Limited (retired June 2017) Interest in Shares Directly Held: 6,250 5,755,061 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 Jonathan L Addison B Ec, CFTP (Snr), FGIA, FCIS, MAICD Non-Executive Director Patrick Corrigan AM HonD (Bond University) Non-Executive Director Jason C Pohl B.Com, LLB, MBA Alternate Director Experience and expertise Non-Executive Chairman from 19 April 2005 to 9 November 2018. Over 33 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 Gardior Pty Ltd Chairman of Investment Committee of Centaur Property Funds Management Ltd Member of Investment Committee for Diversa Trustees Ltd Former Listed Company directorships in last 3 years Retired International Chairman of African Enterprise International (July 2016) Interest in Shares Nil Experience and expertise Director since 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 Emeritus Chairman of Gold Coast Regional Art Gallery Chairman of Qantas Art Scholarship Committee Director of Aboriginal Benefits Foundation Limited Director of National Portrait Gallery in Canberra Experience and expertise Appointed an Alternate Director to Dr Manny Pohl on 20 June 2016. Jason has seven 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 Deputy Chair of Air Freight Export Council of NSW Inc Former Listed Company directorships in last 3 years None Interest in Shares 1,000 Interest in Shares 1,000 Global Masters Fund Limited 7 9. EARNINGS PER SHARE Based on profit after income tax. Basic earnings per share Diluted earnings per share 2019 Cents (0.00) (0.00) 2018 Cents (1.26) (1.26) its The Company records fair value movement for some of investments in Other Comprehensive Income, therefore Total Comprehensive Income is a more appropriate base for detailing earnings per share. 2019 Cents 14.32 14.32 2018 Cents 18.08 18.08 Basic earnings per share Diluted earnings per share See Note 16 of the Financial Report. 10. COMPANY SECRETARY Brian Jones B.Com, FCA Brian Jones 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 37 years’ experience in the accounting and finance industries and is currently Company Secretary of one other Listed Investment Company. 11. MEETINGS OF DIRECTORS The number of Directors’ meetings attended by each of the Directors of the Company during the financial year were: Board Audit and Risk Committee Director Eligible to attend Attend Eligible to attend Attend M H d’Almeida Dr E C Pohl AM P Corrigan AM J L Addison 4 4 4 4 4 4 4 4 1 1 1 1 1 1 1 1 The Board resolved to disband the Audit and Risk Committee (‘ARC’) after the August 2018 meeting. All matters addressed in the past by the ARC, are now incorporated into the Board agenda. 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. Since the capital raising in November 2017, the Company has expanded its investments to include a selection of UK investments. 4. REVIEW OF OPERATIONS International politics has generated a volatile twelve months in the equities market in FY19. Pleasingly for the full year, our portfolio performance remained resilient returning 12.4%. This result was supported strongly by the performance of Berkshire Hathaway and the favourable USD exchange rate. NTA per share, before recognising the net deferred tax liability, increased by 10.5% over the past twelve months. When compared to the ASX benchmark, the All Ordinaries Index which increased by 6.5%, our Company has continued to achieve our objective of enhancing the NTA backing per share. During the year, revenue from dividends and interest has increased $73,558 (32.0%) compared to FY18 and revenue from realised gains increased $75,913 (98.1%). After a full twelve months of executing the UK investment strategy the Company is seeing tangible benefits of a diversified portfolio which will continue to develop over time. Excluding Management and Performance Fees, expenses decreased on prior year by $65,316, which was primarily due to the one-off costs incurred in FY18 for the Rights offer which cost $41,000. 5. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS There were no significant changes in the state of affairs of the Company during the financial year. 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. Global Masters Fund Limited 8 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 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 (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. DETAILS OF REMUNERATION No remuneration consultants were engaged during the year. The per annum remuneration of the Directors remains unchanged from the previous year: Chairman Other Directors $45,000 $40,000 There is no performance based remuneration for 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. Short-term Benefits Director Year Fees Performance Fees M d’Almeida * Non-executive Chairman ** Dr E C Pohl AM Managing Director J L Addison* Non-executive Director** P Corrigan AM * Non-executive Director Total Directors Remuneration 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 $ 43,563 41,000 40,000 50,500 43,562 46,125 41,000 41,000 168,125 178,625 $ - - - - - - - - Non- monetary Benefits $ - - - - - - - - Post- Employment Super Equity Shares Option s Total $ - - - - - - - - $ - - - - - - - - $ - - - - - - - - $ 43,563 41,000 40,000 50,500 43,562 46,125 41,000 41,000 168,125 178,625 * Inclusive of non-claimable GST amount ** The appointed Chairman changed at the close of the AGM on Friday 9 November 2018 - from J L Addison to M d’Almeida. (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 a self-employed Contractor 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 following transactions occurred with other related parties: Expenses paid or payable by the Company to: – A Performance Fee and Management Fee was payable in accordance with the Management Services Agreement as detailed in Note 22. – Dr E C Pohl has an interest in the transaction as during the year Dr E C Pohl was a Director of EC Pohl & Co Pty Ltd – – EC Pohl & Co Pty Ltd for Performance Fee EC Pohl & Co Pty Ltd for Management Fee. All related party transactions are made on an arm’s length basis using the standard terms and conditions. 2019 $ 2018 $ 68,560 50,925 67,918 35,898 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. DIRECTOR 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 M H d’Almeida Dr E C Pohl AM * P Corrigan AM J L Addison 2,578 6250 1,000 NIL - - - - - - - - 2,578 6,250 1,000 NIL * In addition to the securities owned directly by Dr EC Pohl, there are 5,755,061 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 2018 – Nil). 15. OPTIONS No options have been issued during or since the financial year (30 June 2018 – 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 Auditor’s 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 19 August 2019 Global Masters Fund Limited 10 AUDITOR’S INDEPENDENCE DECLARATION Global Masters Fund Limited 11 CORPORATE GOVERNANCE STATEMENT: FOR THE YEAR ENDED 30 JUNE 2019 The Directors of Global Masters Fund Ltd are committed to excellence in corporate governance. By adopting the ASX Corporate Governance Council’s Corporate Governance Principles and incorporating industry best practice the Company has built a framework that supports our business performance and enhances transparency and accountability which ultimately protects the interests of Shareholders. Below is a list of the Company’s Corporate Governance Framework documents set out against the relevant ASX Governance Principles and Recommendations, the details of which are available on the Company’s Website. The full Corporate Governance Statement for the year ending 30 June 2019 is also available on the website, at http://www.globalmastersfund.com.au/corporategovernance/. ASX GOVERNANCE PRINCIPLES RELEVANT DOCUMENT/INFORMATION Principle 1: Lay solid foundation for management oversight Principle 2: Structure the Board to add value Principle 3: Act ethically and responsibly Principle 4: Safeguard integrity in corporate reporting Principle 5: Make timely and balanced disclosure Board Charter Board Charter Code of Conduct Share Trading Policy Board Charter Code of Conduct Disclosure Policy Principle 6: Respecting the rights of security holders Communications Policy Privacy Policy Principle 7: Recognise and manage risk Principle 8: Remunerate fairly and responsibly Board Charter Board Charter Global Masters Fund Limited 12 The Corporate Governance Statement explains the extent to which the Company complies with the ASX Corporate Governance Principles and Recommendations including how the policies above support Corporate Governance in the Company. Under the “if not, why not” approach the Board provide explanations as to why a particular recommendation is not appropriate to its circumstances. For clarity the Board would like to highlight below the recommendations that have not been adopted and the reasons behind the decision: ASX GOVERNANCE PRINCIPLES COMPLIANCE STATEMENT Principle 1: Lay solid foundations for management and oversight Recommendation 1.5: Gender Diversity Compliant except for 1.5: Non-Compliant The Board seeks to develop a culture of diversity whereby a mix of skills and diverse backgrounds are employed maximizing the benefits of a collection of view-points. At this point in time and through previous recruitment processes gender diversity has not been achieved, however there is complete commitment to creating further diversity at the next opportunity. Principle 2: Structure the Board to add value Recommendation 2.1: Establish a Nomination Committee Principle 3: Act ethically and responsibly Principle 4: Safeguard integrity in corporate reporting Principle 5: Make timely and balanced disclosure Principle 6: Respect the rights of security-holders Principle 7: Recognise and manage risk Recommendation 7.1: Risk Committee Recommendation 7.3: Internal audit function Principle 8: Remunerate fairly and responsibly Recommendation 8.1 : Remuneration Committee Recommendation 8.3: Equity-based remuneration Compliant except for 2.1: Non-Compliant The Company has not established a formal Nomination Committee, as the Board considers that, due to the specific scope and nature of the Company’s activities, the whole Board should undertake the responsibility. Compliant Compliant Compliant Compliant Compliant except for 7.1 and 7.3: Non-Compliant The Board recently dissolved the Audit & Risk Committee, citing that the benefits of a separate committee were not being realised due to the composition of the committee and overlap with the Board. The Board has reviewed the Board Charter and its processes to ensure risk management is thoroughly managed. Non-Compliant The Company does not have an internal audit function given the size and nature of the Company. Instead, the Board liaises closely with the Company’s external auditor to identify potential improvements to the financial risk management and internal control process. The Board also interrogates the internal compliance and external audit of the Manager. Compliant except for 8.1 and 8.3: Non-Compliant The Company does not have a Remuneration and Nomination Committee, instead the full Board develops the remuneration policy balancing the need to attract high quality Directors, establishing appropriate incentives and commercial control of expenses. The establishment of a committee would not provide further efficiency to the operation of the Board given the Board size. Non-Compliant The Company does not have an equity-based remuneration scheme and does not intend to establish one. Recommendation 8.3 is not applicable. Global Masters Fund Limited 13 FINANCIAL REPORT CONTENTS OF FINANCIAL REPORT Page 15 16 17 18 19 29 30 34 35 39 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. 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 12 Corporate Centre One 2 Corporate Court BUNDALL QLD 4217 The financial report was authorised for issue by the Directors on 19 August 2019. 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 14 GLOBAL MASTERS FUND LIMITED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2019 Revenue Net unrealised gains/(losses) on investments through profit or loss Other expenses Profit /(Loss) before income tax Income tax benefit/(expense) Net Profit for the year Other Comprehensive Income Notes 2019 $ 2018 $ 5 6 7 456,675 307,204 (6,656) - (471,457) (521,104) (21,438) (213,900) 21,092 88,194 (346) (125,706) Realised and Unrealised gains on Financial Assets taken to equity, net of tax 7c 1,535,565 1,931,591 Total Comprehensive Income for the year 1,535,219 1,805,885 Earnings per share: Basic earnings per share Diluted earnings per share Comprehensive Income: Comprehensive earnings per share Cents (0.00) (0.00) Cents (1.26) (1.26) 16 16 16 14.32 18.08 The accompanying Notes form part of these Financial Statements. Global Masters Fund Limited 15 FINANCIAL REPORT GLOBAL MASTERS FUND LIMITED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2019 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 2019 $ 2018 $ 8 9 10 11 12 13 14 15 632,741 21,255 19,652 673,648 497,002 25,404 17,530 539,936 25,360,011 25,360,011 23,025,341 23,025,341 26,033,659 23,565,277 90,525 90,525 91,122 91,122 3,414,164 3,414,164 3,504,689 2,480,404 2,480,404 2,571,526 22,528,970 20,993,751 12,871,873 9,788,334 (131,237) 22,528,970 12,871,873 8,626,576 (504,698) 20,993,751 The accompanying Notes form part of these Financial Statements. Global Masters Fund Limited 16 GLOBAL MASTERS FUND LIMITED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2019 2018 Balance at 1 July 2017 Total Comprehensive Income Profit/(Loss) for the Year Other Comprehensive Income Total Comprehensive Income Issued Share Capital $ Retained Profits/ (Accumulated Losses) $ Reserves $ Total Equity $ 8,609,085 (498,532) 6,814,525 14,925,078 - - - (125,706) - (125,706) - 1,931,591 1,931,591 (125,706) 1,931,591 1,805,885 Transactions with Owners in their capacity as owners Shares issued as a result of Rights Issue Less: Capital Raising costs Total Transactions with Owners Other Transfer from reserves to accumulated losses Balance at 30 June 2018 4,289,126 (26,338) 4,262,788 - - - - - - 4,289,126 (26,338) 4,262,788 - 119,540 (119,540) - 12,871,873 (504,698) 8,626,576 20,993,751 2019 Balance at 1 July 2018 Total Comprehensive Income Profit/(Loss) for the Year Other Comprehensive Income Total Comprehensive Income Other Reclassify available for sale financial assets to financial assets held at fair value through profit or loss 2(i) Transfer from accumulated losses to reserves Note Issued Share Capital $ Retained Profits/ (Accumulated Losses) $ Reserves $ Total Equity $ 12,871,873 (504,698) 8,626,576 20,993,751 - - - - - (346) - (346) - 1,535,565 1,535,565 (346) 1,535,565 1,535,219 410,915 (410,915) (37,108) 37,108 - - Balance at 30 June 2019 12,871,873 (131,237) 9,788,334 22,528,970 The accompanying Notes form part of these Financial Statements. Global Masters Fund Limited 17 Net cash provided by/(used in) operating activities 24 FINANCIAL REPORT GLOBAL MASTERS FUND LIMITED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2019 CASH FLOWS FROM OPERATING ACTIVITIES Distributions and Dividends received Interest received Payments to suppliers and employees CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of Other UK Investments Purchase of shares in Athelney Trust Plc Purchase of Shares in Other UK Investments Net cash (used in)/provided by investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from Rights Issue – issue of new shares Capital Raising Costs Net cash provided by financing activities 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 Notes 2019 $ 2018 $ 306,549 897 (531,645) (224,199) 208,077 3,157 (416,911) (205,677) 3,340,967 (680,565) (2,300,464) 359,938 461,978 - (5,034,645) (4,572,667) - - - 135,739 497,002 632,741 8 4,289,126 (26,338) 4,262,788 (515,556) 1,012,558 497,002 The accompanying Notes form part of these Financial Statements. Global Masters Fund Limited 18 GLOBAL MASTERS FUND LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 The functional and presentation currency of Global Masters Fund Limited is Australian dollars. Its shares are publicly traded on the Australian Securities 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 19 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 The company holds investments in listed equities as its principle business, these investments are classified as either financial assets at fair value through profit or loss (FVPL) or financial assets at fair value through other comprehensive income (FVOCI). The election is on the basis of two primary criteria: - - The contractual cash flow characteristics of the financial asset; and The business model for managing financial assets Investments held in the actively managed UK portfolio have been designated as financial assets at fair value through profit or loss while all other investments, which are held for medium to long term capital appreciation, have been designated as financial assets at fair value through other comprehensive income. FINANCIAL REPORT GLOBAL MASTERS FUND LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 (e) Financial Instruments (continued) Financial Assets - Recognition The Company’s investments are recognised on the date that the company commits itself to the purchase of the asset (ie trade date accounting is adopted). Investments are measured at fair value, which is determined by quoted prices in an active market. Financial Assets - Subsequent Measurement Securities held in the portfolio are revalued to market values at each reporting date. For investments designated as financial assets at fair value through profit or loss the realised and unrealised net gains or losses on the portfolio are recognised each period in the profit or loss. For investments designated as financial assets at fair value through other comprehensive income the realised and unrealised net gains or losses on the portfolio are recognised in other comprehensive income. Loans and Receivables Loans and receivables are recognised initially at fair value and subsequently measured at amortised cost, less provision for doubtful debts. Trade 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. 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. Global Masters Fund Limited 20 (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. (i) New and Amended Accounting Standards adopted The Company has adopted AASB 9: Financial Instruments with an initial application date of 1 July 2018. As a result the Company has changed its financial instruments accounting policies as follows. fair value for amortised cost or The company has elected to present in profit or loss changes in fair value of the UK managed portfolio of equity investments (this excludes the investment in Athelney) previously classified as available for sale, as these investments do not fit the measurement criteria through other comprehensive income. For the remaining equity investments the Company has elected to designate equity investments as fair value through other comprehensive income. As a result, assets with a fair value of $5,148,280 were reclassified from available for sale financial assets to assets at fair value through profit or loss and cumulative unrealised gains net of tax of $410,915 were transferred from the investment revaluation reserve to retained earnings at 1 July 2018. Additionally, assets with a fair value of $17,877,061 were reclassified from available for sale financial assets to assets at fair value through other comprehensive income. AASB 9 has been adopted without restating comparative financial information. The reclassification adjustments arising have been recognised in the opening balance sheet on 1 July 2018. AASB 15: Revenue from contracts with Customers has an initial application date of 1 July 2018. The Company does not have any revenue to which AASB 15 is applicable and accordingly had no impact on the Company. 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. 4. OPERATING SEGMENTS Segment Information The Company operates in the investment industry. Its core business focuses on investing in International 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. GLOBAL MASTERS FUND LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 (j) New Accounting Standards and Interpretations The AASB has issued new and amended Accounting Standards and Interpretations that have mandatory application dates for future reporting periods. The following table summarises those future requirements, and their impact on the Company where the standard is relevant: AASB 16 Leases Effective Date 1 January 2019 AASB 16 introduces a single lessee accounting model by eliminating the current requirement to distinguish leases as either operating leases or finance leases depending on the transfer of risks & rewards of ownership. The impact of AASB 16 will 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. Global Masters Fund Limited 21 FINANCIAL REPORT GLOBAL MASTERS FUND LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 5. REVENUE AND OTHER INCOME Dividends Received Interest Received Gain on Sale of Other UK Investments Realised Foreign Exchange Gain 6. OTHER EXPENSES Auditors Remuneration ASX and Share Registry costs Management Fees Performance Fees Director Fees Administration Costs 7. INCOME TAX EXPENSE (a) Reconciliation of income tax to accounting profit Accounting profit/(loss) before tax Prima facie tax payable on ordinary activities before income tax rate at 30.0% (2018 – 27.5%) Adjust for tax effect of: - Tax losses at 30 June 2018 converted from 27.5% to 30% tax rate - Timing differences of transactions - Fully Franked Dividends received - Amendment to prior year return Rebateable Fully Franked Dividends Tax expense/(credit) shown in Profit and Loss statement (b) The components of tax benefit comprise: (Decrease)/increase in deferred tax asset Decrease/(increase) in deferred tax liability Income tax (expense)/credit (c) Amounts recognised directly in Other Comprehensive Income Aggregate current and deferred tax arising in the reporting period and not recognised in Profit or Loss, but directly debited or credited in Other Comprehensive Income. Amount before tax Tax Expense at 30.0% (2018: 27.5%) Adjustment for prior year deferred tax on unrealised gains converted from 27.5% to 30.0% Adjusted for tax effect of available losses Amount Net of Tax 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 Global Masters Fund Limited 22 2019 $ 2018 $ 302,460 897 21,834 131,484 456,675 15,409 48,508 50,925 68,560 168,125 119,930 471,457 (21,438) (6,431) (2,479) 19,234 13,483 45 (44,944) (21,092) 35,282 (14,190) 21,092 226,642 3,157 31,839 45,566 307,204 18,593 72,385 35,898 67,918 178,625 147,685 521,104 (213,900) (58,823) - 1,177 11,587 - (42,135) (88,194) 88,194 - 88,194 2,490,416 (747,125) (264,546) 56,820 1,535,565 2,587,388 (711,532) - 55,735 1,931,591 42,275 590,466 632,741 168,738 328,264 497,002 632,741 497,002 GLOBAL MASTERS FUND LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 9. TRADE AND OTHER RECEIVABLES CURRENT Dividends Receivable GST receivable Total current trade and other receivables 10. OTHER ASSETS CURRENT Prepayments Total Other Assets 11. FINANCIAL ASSETS Non-Current Financial Assets Notes 2019 $ 2018 $ 14,476 6,779 21,255 18,565 6,839 25,404 19,652 19,652 17,530 17,530 Listed Investments classified as available for sale at fair value Listed Investments classified as fair value through profit or loss Listed Investments classified as fair value through other comprehensive income 19 19 19 Total Available-for-sale Financial Assets - 4,312,618 21,047,393 23,025,341 - - 25,360,011 23,025,341 12. TRADE AND OTHER PAYABLES CURRENT Trade payables Accrued expenses 13. DEFERRED TAX Deferred Tax Assets Deferred Tax Liabilities Net deferred tax liabilities adjusted for deferred tax assets (a) Deferred Tax Assets attributable to: - Accruals - Tax losses (b) Deferred Tax Liabilities attributable to: - Unfranked dividend receivable - Unrealised Gain on Financial Assets Global Masters Fund Limited 23 5,346 85,179 90,525 6,253 84,869 91,122 13(a) 13(b) (667,401) 4,081,565 3,414,164 (575,299) 3,055,703 2,480,404 (3,705) (663,696) (667,401) (3,369) (571,930) (575,299) 4,343 4,077,222 4,081,565 - 3,055,703 3,055,703 FINANCIAL REPORT GLOBAL MASTERS FUND LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 14. ISSUED CAPITAL (a) Share Capital 10,723,159 (2018: 10,723,159) Ordinary Shares (b) Ordinary Shares Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. 2019 $ 2018 $ 12,871,873 12,871,873 711 (c) Movements in ordinary share capital Date 30 June 2017 October 2017 Details Balance Rights Issue Capital Raising Costs 30 June 2018 Balance Nil Movement in the year 30 June 2019 Balance Number of Shares Price $ 8,578,596 2,144,563 10,723,159 - 10,723,159 $2.00 8,609,085 4,289,126 (26,338) 12,871,873 - 12,871,873 15. RESERVES Revaluation Reserve The investment revaluation reserve was used to accumulate unrealised capital profits and losses on available for sale financial assets after provision for deferred tax. As a result of the adoption of AASB 9 on 1 July 2018 the investment revaluation reserve now records the unrealised capital profits and losses net of deferred tax, on investments classified as fair value through other comprehensive income (refer note 2(i)). The reserve can only be used in limited circumstances for payment of dividends. 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. Diluted earnings per share is calculated by dividing the profit attributable to owners of the company by the weighted average number of shares outstanding during the year. Including all convertible securities, for example convertible preferred shares, convertible debentures, stock options and warrants. 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 Weighted number of all shares, including convertible securities Basic earnings per share (cents per share) Diluted earnings per share (cents per share) Total Comprehensive Income per share (cents per share) Global Masters Fund Limited 24 (346) 1,535,219 (125,706) 1,805,885 10,723,159 10,723,159 9,987,737 9,987,737 Cents (0.00) (0.00) 14.32 Cents (1.26) (1.26) 18.08 GLOBAL MASTERS FUND LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 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: (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: 2019 AUD $ 2018 AUD $ Specific risks Carrying Amount Liquidity risk Credit risk Market risk - currency risk, interest rate risk and price risk Financial instruments used Cash and cash equivalents 590,410 328,151 Investments Total 23,065,985 20,849,294 23,656,395 21,177,445 The principal categories of financial instruments used by the Company are: (c) Credit risk Trade receivables Cash at bank Investments in listed shares Trade and other payables (a) Interest Rate Risk The Company's exposure to interest rate risk, which is the risk that a financial instrument’s 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 2019 % 2018 % 0.1 0.6 2019 $ 2018 $ 632,741 632,741 497,002 497,002 The Company does not rely on interest returns as a source of income, so the interest rate risk is deemed extremely low. All other financial assets and liabilities are non-interest bearing. 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. (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 Statement of Financial Position and Notes to the Financial Statements is the same as the net fair value. Global Masters Fund Limited 25 FINANCIAL REPORT GLOBAL MASTERS FUND LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 17. FINANCIAL RISK MANAGEMENT (continued) 19. FAIR VALUE MEASUREMENTS (e) Sensitivity Analysis The following table illustrates sensitivities to the Company’s exposure to changes in interest rates, exchange rates and commodity and equity prices. The table indicates the impact on how profit and equity values reported at balance date would have been affected by changes in the relevant risk variable that management considers to be reasonably possible. These sensitivities assume that the movement in a particular variable is independent of other variables. At 30 June 2019, the effect on profit and equity as a result of changes in the interest rate, exchange rate or equity prices 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 exchange rates 2019 $ +/- 7 2018 $ +/- 2,514 +/- 1,182,820 +/- 1,049,688 The Company measures the following assets and liabilities at fair value on a recurring basis: - Financial Assets at fair value through Other Comprehensive Income. - Financial Assets at fair value through Profit or Loss. Fair value hierarchy AASB 13 Fair Value Measurement requires all assets and liabilities measured at fair value to be assigned to a level in the fair value hierarchy as follows: Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date. Level 2 Inputs other than quoted prices included with level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 Unobservable inputs for the asset or liability. +/- 10% in listed investments +/- 2,536,001 +/- 2,302,534 The table below shows the assigned level for each asset and liability held at fair value by the Company: (f) Liquidity Risk Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The objective of the Company is to ensure as far as possible that it will always have sufficient liquidity to meet its liabilities when due, under both normal and distressed conditions. Prudent liquidity risk management implies maintaining sufficient cash and marketable Australian listed equity securities. The Manager controls liquidity risk by continuously monitoring the balance between equity securities and cash or cash equivalents and the maturity profiles of assets and liabilities to ensure this risk is minimal. 18. CAPITAL MANAGEMENT The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The capital structure of the Company consists of equity attributable to members of the Company. The Board monitors the return on capital, which is defined as net operating income divided by total Shareholders’ Equity. The Board also monitors the level of dividends to Shareholders. The capital of the Company is invested by the Investment Manager in accordance with the investment policy established by the Board. The Company has no borrowings. It is not subject to any externally imposed capital requirements. Level 1 $ Level 2 $ Level 3 $ TOTAL $ 30 June 2019 Recurring fair value measurements. Financial Assets - FVTPL - FVTOCI 4,312,618 21,047,393 4,312,618 21,047,393 Level 1 $ Level 2 $ Level 3 $ TOTAL $ 30 June 2018 Recurring fair value measurements. Financial Assets - Available for sale 23,025,341 23,025,341 Transfers between levels of hierarchy There were no transfers between levels of the fair value hierarchy. Highest and best use There were no changes in the Company’s approach to capital management during the year. The current use of each asset measured at fair value is considered to be its highest and best use. Global Masters Fund Limited 26 GLOBAL MASTERS FUND LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 20. AUDITORS REMUNERATION Remuneration of the auditor of the Company for: Audit or reviewing the financial statements Total remuneration of auditors 21. RELATED PARTY TRANSACTIONS Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. The following transactions occurred with related parties: EC Pohl & Co Pty Ltd for Management Fee and Performance Fee (payable in accordance with the Management Services Agreement as detailed in Note 22). Management Fee Performance Fee Total Fees Paid Dr E C Pohl has an interest in the transaction as during the year Dr E C Pohl was a Director, employee and Shareholder of EC Pohl & Co Pty Ltd. 22. MANAGEMENT SERVICES AGREEMENT 2019 $ 2018 $ 15,409 15,409 18,593 18,593 50,925 68,560 35,898 67,918 119,485 103,816 In accordance with a Management Services Agreement which was signed in May 2017, the Company agreed to engage the Manager to provide primary and secondary management services. Primary services are only provided for the actively managed portion of the portfolio and include: 1) managing the investment of the Company’s portfolio, including keeping it under review; 2) ensuring investments by the Company are only made in authorised investments; 3) complying with the investment policy of the Company; and 4) identifying, evaluating and implementing the acquisition and disposal of authorised investments. Secondary management services include: (i) provide the Company with quarterly investment performance reporting; (ii) promoting investment in the Company by the general investment community; (iii) providing investor relationship services; and (iv) provision of accounting, human resources, corporate and information technology services support. The agreement may be terminated if: a) b) c) d) e) either party ceases to carry on business, or either party enters into liquidation voluntarily or otherwise, or either party passes any resolution for voluntary winding-up, or a receiver of the property of either party, or any part thereof, is appointed, or the Shareholders of the Company at an abnormal meeting called in for that purpose, resolve by binding resolution to terminate the operations, or if the Company provides written notice to the Manager in the event of any material and substantial breach of the agreement by the Manager or if the Manager fails to remedy a breach of this agreement within 14 days following written notice of the breach. if the Manager provides written notice to the Company in the event of any material and substantial breach of the agreement by the Company or if the Company fails to remedy a breach of this agreement within 14 days following written notice of the breach. f) g) Under the agreement the Manager will receive a management fee of 1% per annum on the actively managed portion of the portfolio. In addition, a performance fee, payable annually in arrears, equal to 20% of the amount by which the Company’s actively managed portfolio performance exceeds the performance of the FTSE, subject to a high-water mark. If the Company’s net performance in the year is less than the Benchmark, then no performance fee will be payable. Global Masters Fund Limited 27 FINANCIAL REPORT GLOBAL MASTERS FUND LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 2019 $ 2018 $ 23. KEY MANAGEMENT PERSONNEL DISCLOSURES The Company has no staff and therefore has no Key Management Personnel other than the Directors. No member of Key Management Personnel held options over shares in the Company during the year. There have been no other transactions with Key Management Personnel or their related entities other than those disclosed in Note 21. The compensation of Non-executive Directors (including the Managing Director) for the year ending 30 June 2019 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. The total remuneration paid is as follows: Short-term employment benefit 168,125 178,625 The Company’s Secretary, Brian Jones, was contracted directly during the financial year. 24. CASH FLOW INFORMATION (a) Reconciliation of result for the year to cash flows from operating activities Profit/(Loss) for the year Cash flows excluded from profit attributable to operating activities Non-cash flows in profit - net (gain)/loss on disposal of investments - net (gain)/loss on foreign exchange - net unrealised (gain)/loss on financial assets at fair value Changes in assets and liabilities, net of the effects of purchase and disposal of subsidiaries: - (increase)/decrease in prepayments - (increase)/decrease in trade and other receivables - increase/(decrease) in trade and other payables - increase/(decrease) in Deferred Tax Cash flow from operations (346) (125,706) (21,834) (168,304) (14,053) (2,122) 4,149 (597) (21,092) (31,839) (8,823) - 9,316 (23,040) 62,609 (88,194) (224,199) (205,677) 25. CONTINGENCIES In the opinion of the Directors, the Company did not have any contingencies at 30 June 2019 (30 June 2018: None). 26. 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. Global Masters Fund Limited 28 DIRECTORS’ DECLARATION The Directors of the Company declare that: (a) the Financial Statements and Notes set out on pages 14 to 28 are in accordance with the Corporations Act 2001, including: (i) (ii) 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 give a true and fair view of the financial position as at 30 June 2019 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 2019 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 AM Managing Director 19 August 2019 Global Masters Fund Limited 29 INDEPENDENT AUDITOR’S REPORT Global Masters Fund Limited 30 INDEPENDENT AUDITOR’S REPORT (continued) Global Masters Fund Limited 31 INDEPENDENT AUDITOR’S REPORT (continued) Global Masters Fund Limited 32 INDEPENDENT AUDITOR’S REPORT (continued) Global Masters Fund Limited 33 SHAREHOLDER INFORMATION The Shareholder information set out below was applicable as at 11 August 2019. 1. TWENTY LARGEST SHAREHOLDERS 2. DISTRIBUTION OF SECURITIES Shareholders Last year’s figures Ordinary Shares % Distributions No. of Shareholders CITICORP NOMINEES PTY LIMITED 5,757,863 53.7% BOND STREET CUSTODIANS LIMITEDBOND STREET CUSTODIANS LIMITED EMSDALE HOLDINGS PTY LTD PETER I H WONG PTY LTD ESKDALE INVESTMENT CO PTY LTD ROSETTA PTY LTD MR PETER LEECE J BARLOW CONSULTANTS PTY LTD DAYTON ENTERPRISES PTY LTD JACOBEAN PTY LTD LIC INVESTMENTS PTY LTD MRS JANINE ROSLYN HUCKER MRS SYLVIA MARIA VALMADRE BOND STREET CUSTODIANS LIMITED MR WILLIAM PAUL CHUN TIE & MS ORLEENA MOO POSEIDON NOMINEES PTY LTD RITCHIE FAMILY SUPER PTY LTD TIDALBAY PTY LTD KAJJA PTY LTD 303,227 2.8% 180,000 1.7% 162,000 1.5% 160,000 1.5% 157,000 1.5% 155,700 120,737 102,317 93,903 80,000 1.5% 1.1% 1.0% 0.9% 0.7% 1 1,001 5,001 10,001 100,001 to to to to 1,000 5,000 10,000 100,000 and over Total Holdings of less than a marketable parcel 139 165 91 97 9 501 46 3. SUBSTANTIAL SHAREHOLDINGS 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 Number of Shares % of Total 80,000 0.7% Dr E C Pohl AM * 5,756,311 53.7 60,765 60,000 0.6% 0.6% 51,981 0.5% * Has the power to control voting and/or the disposal of securities in accordance with a Power Of Attorney in relation to 5,755,061 shares. 50,778 0.5% 4. VOTING RIGHTS 50,000 0.5% 50,000 50,000 0.5% 0.5% 50,000 0.5% 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. 5. ON-MARKET BUY BACK There is no current on-market buy back. Total 7,776,271 72.8% Global Masters Fund Limited 34 INVESTMENTS (1) HOLDINGS OF SECURITIES AT 30 JUNE 2019 Individual investments at 30 June 2019 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. Company Shares Market Value $ % ABC AHT ATY BA BNZL BOO BRBY BRK.A BRK.B CBG CPG DOM DPLM FEVR FSI GAMA GAW HLMA HSV JD JIM JUP LIO LXI MERL NG REL RMV SCT SGE SMS SPX STHR TEP TET XPP ORDINARY SHARES ABCAM PLC ASHTEAD GROUP PLC ATHELNEY TRUST PLC BAE SYSTEMS PLC BUNZL PLC BOOHOO GROUP PLC BURBERRY GROUP PLC BERKSHIRE HATHAWAY INC BERKSHIRE HATHAWAY INC CLOSE BROTHERS GROUP PLC COMPASS GROUP PLC DOMINO'S PIZZA GROUP PLC DIPLOMA PLC FEVERTREE DRINKS PLC FLAGSHIP INVESTMENTS LIMITED GAMMA COMMUNICATIONS PLC GAMES WORKSHOP GROUP PLC HALMA PLC HOMESERVE PLC JD SPORTS FASHION PLC JARVIS SECURITIES PLC JUPITER FUND MANAGEMENT PLC LIONTRUST ASSET MANAGEMENT PLC LXI REIT PLC MERLIN ENTERTAINMENTS PLC NATIONAL GRID PLC RELX PLC RIGHTMOVE PLC SOFTCAT PLC SAGE GROUP PLC SMART METERING SYSTEMS PLC SPIRAX-SARCO ENGINEERING PLC STHREE PLC TELECOM PLUS PLC TREATT PLC XP POWER LIMITED CASH (INCLUDING DIVIDENDS RECEIVABLE) Cash- Australian Dollar (AUD) Cash - Great British Pound (GBP) TOTAL 4,200 5,000 504,004 24,000 2,000 29,165 5,300 27 15,300 6,000 6,500 40,000 5,000 300 1,310,872 4,000 2,600 4,800 4,000 14,000 5,000 10,000 12,335 39,660 19,000 13,300 6,000 22,500 2,700 4,300 12,000 1,381 13,300 6,300 6,468 2,000 111,908.89 203,723.79 1,867,693.78 214,924.08 75,090.38 111,609.38 178,391.18 12,240,917.70 4,644,755.69 153,362.26 221,719.09 201,012.29 138,467.10 12,570.50 2,294,026.00 83,152.57 233,398.41 175,271.15 85,827.91 148,402.02 39,316.70 76,373.83 160,096.35 91,192.19 154,246.20 200,942.52 207,104.12 217,475.60 47,415.94 62,370.21 115,184.38 229,292.93 68,519.52 160,574.84 53,783.08 79,898.77 25,360,011.35 42,275.13 604,390.84 0.43 0.78 7.18 0.83 0.29 0.43 0.69 47.07 17.86 0.59 0.85 0.77 0.53 0.05 8.82 0.32 0.90 0.67 0.33 0.57 0.15 0.29 0.62 0.35 0.59 0.77 0.80 0.84 0.18 0.24 0.44 0.88 0.26 0.62 0.21 0.31 97.51 0.16 2.33 26,006,677.32 100.00 (2) TRANSACTIONS AND BROKERAGE There were 81 (2018: 75) transactions in securities during the year on which brokerage of $20,075 (2018: $32,557) was paid. Global Masters Fund Limited 35 NOTES Global Masters Fund Limited 36 NOTES Global Masters Fund Limited 37 NOTES Global Masters Fund Limited 38 CORPORATE DIRECTORY GLOBAL MASTERS FUND LIMITED ABN 84 109 047 618 REGISTERED IN NEW SOUTH WALES 12 MAY 2004. BOARD OF DIRECTORS Murray H d’Almeida Non-Executive Chairman Dr Emmanuel (Manny) C Pohl AM Managing Director Patrick Corrigan AM Non-Executive Director Jonathan L Addison Non-Executive Director Jason Pohl Alternate Director COMPANY SECRETARY Brian E Jones REGISTERED OFFICE Level 12 Corporate Centre One 2 Corporate Court BUNDALL QLD 4217 Toll Free: 1800 352 474 Tel: Fax: +61 (0) 7 5644 4400 +61 (0) 7 5574 1457 POSTAL ADDRESS P O Box 7536 Gold Coast Mail Centre BUNDALL QLD 9726 AUDITORS WPIAS Pty Ltd 4 Helensvale Road HELENSVALE QLD 4210 INVESTMENT 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 SHARE REGISTRY Boardroom Pty Limited GPO Box 3993 SYDNEY NSW 2001 1300 737 760 Toll Free: International: +61 (0) 2 9290 9600 Fax: Email: +61 (0) 0 9279 0664 enquiries@boardroomlimited.com.au SOLICITORS McCullough Robertson Lawyers Level 32 MLC Centre 19 Martin Place SYDNEY NSW 2000 WEBSITE ADDRESS www.globalmastersfund.com.au FOLLOW US /GlobalMastersFund /global-masters-fund Global Masters Fund Limited ABN 84 109 047 618 Level 12, Corporate Centre One 2 Corporate Court BUNDALL QLD 4217 www.globalmastersfund.com.au Annual Report 30 June 2019