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 2020 FINANCIAL YEAR END 30 June 2020 ANNUAL GENERAL MEETING The Annual General Meeting of Global Masters Fund Limited: WILL BE HELD AT: The office of McCulllough Robertson Lawyers Level 11, Central Plaza Two 66 Eagle St Brisbane QLD 4000 TIME: 2.00pm (QLD Time) DATE: Friday 30 October 2020 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 CORPORATE DIRECTORY GLOBAL MASTERS FUND LIMITED ABN 84 109 047 618 REGISTERED IN NEW SOUTH WALES 12 MAY 2004. Dr Emmanuel (Manny) C Pohl AM BOARD OF DIRECTORS Murray H d’Almeida Non-Executive Chairman 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 HQ@Robina Suite 41, Level 4 58 Riverwalk Avenue Robina QLD 4226 Toll Free: 1300 737 760 International: +61 (0) 2 9290 9600 +61 (0) 0 9279 0664 Fax: Email: enquiries@boardroomlimited.com.au 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 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 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 2020 Highlights for the year ending June 2020 Major Investments June 2020 UK Portfolio Performance (in GBP terms) was a positive 12.3%, outperforming the FTSE which decreased by 16.9%. The Net Tangible Assets (NTA) value of the Company per share decreased by 9.5% before recognising the net deferred tax liability. By comparison the ASX All Ordinaries Index decreased by 10.4% over the twelve months ended 30 June 2020. BRK FSI BIP BCI 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 highly noted 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; 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 which 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 CHAIRMAN’S REPORT Dear Shareholder, I am pleased to present the 15th Annual Chairman’s Report of Global Masters Fund Limited for the 2019/20 financial year. THE YEAR IN REVIEW After a relatively uneventful first six months from July 2019 to December 2019, global equities markets experienced the fastest 30% drawdown in history during the March 2020 quarter due to widespread fear caused by the COVID-19 pandemic. This was closely followed by the largest 50-day advance after strict quarantine measures and massive government stimuli were launched in the June 2020 quarter. In the US, the S&P 500 finished 5.4% higher for the year after a technology stock rally drove an increase of 20.0% in the June quarter. In the UK the FTSE-100 decreased 16.9% while in Australia, the ASX All Ordinaries decreased by 10.4% over the financial year. The volatility had a mixed impact on the Global Masters Fund portfolio, performance for the year was a negative 7.2%. The portfolio of actively managed UK investments continues to deliver strong returns, outperforming the FTSE by 29.2 percentage points over the year. While the primary investment in Berkshire Hathaway declined by 14.7% in AUD terms and was a significant detractor in the Global Masters portfolio. For Berkshire directly, the losses attributed to airline investments due to the COVID-19 induced lockdowns, has caused a significant amount of bad press. Despite the market recovery in the last quarter, the reported record high cash position of Berkshire has been defended by Charlie Munger who said that he and Warren Buffett “just want to get through the typhoon”. We note their July 2020 acquisition of natural gas pipeline and storage assets and it will be interesting to see what other moves are made during this tumultuous period. During the year, the Company acquired an investment in BIP BCI Worldwide Flexible Fund to provide an exposure to emerging markets. This represents 5.9% of the value of the portfolio of the Company and has proved to be a sound investment decision. THE MARKET OUTLOOK The year 2020 will forever be synonymous with COVID-19, a global coronavirus pandemic that has impacted levels of society like never seen before and the isolation measures implemented have caused havoc on the earning power of many businesses throughout the world. There is a high degree of uncertainty in forecasts for the next 12 months and beyond. An optimistic scenario has economic output growing slowly as businesses slowly recover, while a pessimistic view would see a continuation of the pandemic, prompting strict lockdowns without governments being able to support economies sufficiently. Global Masters Fund Limited 5 At present, the Australian economy is tracking closer to the optimistic scenario, there is further government spending planned and a commitment from the federal reserve to maintain monetary policy to support growth. But a positive outlook should not be taken for granted and it is prudent for businesses to continue innovating and improving while maintaining sufficient cash reserves. Over the past few years, the Board has been of the view that it should be the aim of the Company to become an actively managed truly global fund. This process commenced when an active portfolio was established in the UK. Given the stellar performance, this has proved to be a wise decision. THE INVESTMENT MANAGEMENT TEAM investment incorporating The Investment Manager is actively pursuing and evaluating global ESG opportunities (Environmental, Social and Governance) principles, that will deliver excellent returns for Shareholders. In this regard, I wish to express my personal appreciation and that of the Board as a whole, to our Investment Manager EC Pohl & Co and the team led by Dr Manny Pohl. The Company’s success could not have been achieved without the disciplined execution of the investment process undertaken by him and the very committed individuals within the team. THE BOARD I wish to thank my fellow Board members for their support and input throughout the past year. In particular I would like to thank Jon Addison who joined the Board in April 2005 and will be retiring after the upcoming AGM on 30 October 2020. In a climate of volatility where there are new risks to consider, I am confident that the rigour and commitment from our Board will ensure the best interests of Shareholders and other stakeholders are managed and protected. In conclusion, long-term, supportive Shareholders are the backbone of any business and I sincerely thank our Shareholders for their on-going support. I, together with my Board, are humbled to serve our dedicated Shareholders. Yours sincerely Murray d’Almeida Chairman DIRECTORS' REPORT Your Directors present their report on Global Masters Fund Limited for the financial year ended 30 June 2020. 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 Dr Emmanuel (Manny) C Pohl AM B.Sc (Eng), MBA, DBA, FAICD, MSAFAA, F Fin Chairman, Non-Executive Director Managing Director 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 ECP Emerging Growth Limited Director Triple Energy Limited Deputy Chancellor Southern Cross University Chairman of Board of Trustees of Currumbin Wildlife Foundation Member of Gold Coast Light Rail Business Advisory Board Chairman Zooz Pty Ltd Former Listed Company directorships in last 3 years Chairman IncentiaPay Limited (Sept 2019) Chairman EnviroSuite Limited (Sept 2016) Interest in Shares 2,578 indirect 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 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 Barrack St Investments Limited (June 2017) Interest in Shares Directly Held: 6,250 Indirect: 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 34 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 and Member of Investment Committee of Centaur Property Funds Management Ltd Director CHIF Pty Lt Director Ballarat Water Pty Ltd Former Listed Company directorships in last 3 years None 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 eight 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 Alternate Director of Athelney Trust Plc Former Listed Company directorships in last 3 years None Former Listed Company directorships in last 3 years None Interest in Shares 1,000 Interest in Shares 1,000 Global Masters Fund Limited 7 DIRECTORS’ REPORT (Continued) 3. PRINCIPAL ACTIVITIES The principal activity of the Company is investing in Berkshire Hathaway Inc on NYSE and a diversified global portfolio of investments. 4. REVIEW OF OPERATIONS At 30 June 2020, the Net Assets of the Company decreased by $1,682,474 (7.5%) over the twelve-month period. The major contributor to this was the 14.7% decline in the value of Berkshire Hathaway shares which represented 61% of the portfolio at 30 June 2020. Against this, however, was the positive 12.3% performance of the UK portfolio (in GBP terms) over the past twelve months which is an outstanding result when compared to the FTSE-100 which declined by 16.9%. The UK investments comprise 21% of the portfolio and given the active management were monitored closely throughout the COVID-19 induced volatility. Net profit which includes the realised and unrealised gains on the UK portfolio increased by $68,927 on the prior year due to the into account the performance noted above and after taking performance fee payable. While Total Comprehensive Income decreased by $3,217,693 due to the market movement in the long term investment holdings including Berkshire Hathaway. It is important to note that the loss in Total Comprehensive Income is generated through unrealised market movements that would only be crystallised when the assets are sold. COVID-19 has had an impact on every element of society and has posed a significant challenge for businesses and governments across the globe. It is expected that the current market volatility will continue, therefore asset values will continue to fluctuate. It is also expected that companies will be protective of capital and therefore future dividends could be reduced from previous levels. While in the short-term earnings could be reduced the Company continues to focus on the long term potential of its investments and the opportunities that present themselves during this period. 5. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS During the year, the company expanded its global portfolio to include emerging markets with the investment in the BIP BCI Worldwide Flexible Fund listed on the Johannesburg Stock Exchange. There were no other 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. Global Masters Fund Limited 8 7. LIKELY DEVLOPMENTS AND EXPECTED RESULTS FROM OPERATIONS There are no planned changes to the principle activities. Any general decline in equity markets may have an adverse effect on results in future years. 8. ENVIRONMENTAL ISSUES The Company’s operations are not regulated by any significant environmental regulation under a law of the Commonwealth or of a State or Territory. 9. EARNINGS PER SHARE Based on profit after income tax. Basic earnings per share Diluted earnings per share 2020 Cents 0.64 0.64 2019 Cents (0.00) (0.00) 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. 2020 Cents (15.69) 2019 Cents 14.32 Comprehensive 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 39 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 MEETINGS Director Eligible to attend Attend M H d’Almeida E C Pohl AM P Corrigan AM J L Addison 4 4 4 4 4 4 3 4 12. REMUNERATION REPORT (AUDITED) The remuneration report is set out under the following main headings: (A) Principles used to determine the nature and amount of No remuneration consultants were engaged during the year. The per annum remuneration of the Directors remains unchanged from the previous year: remuneration (B) Details of remuneration (C) Service agreements (D) Share-based compensation (E) Related Party Transactions (F) Equity Instrument Disclosure relating to Key Management Personnel (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 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 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 $ 46,125 43,563 40,000 40,000 41,000 43,562 41,000 41,000 168,125 168,125 $ - - - - - - - - * Inclusive of non-claimable GST amount Non- monetary Benefits $ - - - - - - - - Post- Employment Super Equity Shares Options Total $ - - - - - - - - $ - - - - - - - - $ - - - - - - - - $ 46,125 43,563 40,000 40,000 41,000 43,562 41,000 41,000 168,125 168,125 (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. 2020 $ 2019 $ 293,912 51,608 68,560 50,925 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 2019 – Nil). 15. OPTIONS No options have been issued during or since the financial year (30 June 2019 – 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 28 August 2020. Global Masters Fund Limited 10 AUDITOR’S INDEPENDENCE DECLARATION Global Masters Fund Limited 11 CORPORATE GOVERNANCE STATEMENT: FOR THE YEAR ENDED 30 JUNE 2020 The Directors of Global Masters Fund Limited 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 2020 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 Board Charter Whistleblower Policy 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 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 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. Not Applicable 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 28 August 2020. 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 2020 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 2020 $ 2019 $ 5 6 7 326,549 456,675 361,158 (6,656) (679,798) (471,457) 7,909 60,672 68,581 (21,438) 21,092 (346) Realised and Unrealised gains on Financial Assets taken to equity, net of tax 7c (1,751,055) 1,535,565 Total Comprehensive Income for the year (1,682,474) 1,535,219 Earnings per share: Basic earnings per share Diluted earnings per share Comprehensive Income: Comprehensive earnings per share Cents 0.64 0.64 Cents (0.00) (0.00) 16 16 16 (15.69) 14.32 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 2020 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 2020 $ 2019 $ 8 9 10 11 12 13 14 15 133,283 14,109 21,422 168,814 632,741 21,255 19,652 673,648 23,634,995 23,634,995 25,360,011 25,360,011 23,803,809 26,033,659 315,476 315,476 90,525 90,525 2,641,837 2,641,837 2,957,313 3,414,164 3,414,164 3,504,689 20,846,496 22,528,970 12,871,873 8,037,279 (62,656) 20,846,496 12,871,873 9,788,334 (131,237) 22,528,970 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 2020 2019 Note Issued Share Capital $ Retained Profits/ (Accumulated Losses) $ Asset Revaluation Reserve $ Asset Realisation Reserve $ Balance at 1 July 2018 12,871,873 (504,698) 8,626,576 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 Transfer from accumulated losses to reserves - - - - - (346) - - 1,535,565 (346) 1,535,565 410,915 (410,915) (37,108) 37,108 Balance at 30 June 2019 12,871,873 (131,237) 9,788,334 - - - - - - - 2020 Issued Share Capital $ Retained Profits/ (Accumulated Losses) $ Asset Revaluation Reserve $ Asset Realisation Reserve $ Balance at 1 July 2019 12,871,873 (131,237) 9,788,334 Total Comprehensive Income Profit/(Loss) for the Year Other Comprehensive Income Total Comprehensive Income Other Transfer to realisation reserve - - - - 68,581 - - (1,751,055) 68,581 (1,751,055) - - - - Total Equity $ 20,993,751 (346) 1,535,565 1,535,219 - - 22,528,970 Total Equity $ 22,528,970 68,581 (1,751,055) (1,682,474) - (325,126) 325,126 - Balance at 30 June 2020 12,871,873 (62,656) 7,712,153 325,126 20,846,496 The accompanying Notes form part of these Financial Statements. Global Masters Fund Limited 17 FINANCIAL REPORT GLOBAL MASTERS FUND LIMITED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2020 CASH FLOWS FROM OPERATING ACTIVITIES Distributions and Dividends received Interest received Payments to suppliers and employees Net cash provided by/(used in) operating activities 24 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of Investments Payments for Investments Net cash (used in)/provided by investing activities CASH FLOWS FROM FINANCING ACTIVITIES Net cash provided by financing activities Notes 2020 $ 2019 $ 257,360 44 (456,843) (199,439) 306,549 897 (474,116) (166,670) 2,257,577 (2,576,035) (318,458) 3,340,967 (2,981,029) 359,938 - - Net increase/(decrease) in cash and cash equivalents held Effects of foreign currency exchange rate changes on cash and cash equivalents Cash and cash equivalents at the beginning of the year (517,897) 18,439 632,741 Cash and cash equivalents at end of year 8 133,283 193,268 (57,529) 497,002 632,741 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 2020 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. (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 AASB 16: Leases has an initial application date of 1 January 2019. The Company does not have any leases to which AASB 16 is applicable and accordingly the standard had no impact on the Company. FINANCIAL REPORT GLOBAL MASTERS FUND LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 (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 GLOBAL MASTERS FUND LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 (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: Conceptual Framework for Financial Reporting Effective date 1 January 2020 The revised Conceptual Framework contains new definition and recognition criteria as well as new guidance on measurement particularly relating to the new Accounting Standards. Where the Company has relied on the existing framework in determining for transactions, events or conditions that are not otherwise dealt with under the Australian Accounting Standards, the Company may need to review revised framework. such policies under accounting policies the its At this time, the application of the Conceptual Framework is not expected to have a material impact on the Company’s financial statements. AASB 1059 Service Concession Arrangements: Grantors Effective Date 1 January 2020 AASB 1059 is relevant for public sector agencies that are grantors in a service concession arrangement with private sector entities. It requires a grantor to recognise a service concession asset, and a corresponding liability in relation to a service concession arrangement when the grantor controls the underlying asset. 3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (a) Key Estimates There are no key assumptions or sources of estimation uncertainty that have a risk of causing material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period as investments are carried at their market value. (b) Key Judgements The preparation of financial reports in conformity with Australian Account Standards require the use of certain critical accounting estimates. This requires the Board to exercise their judgement in the process of applying the Company's accounting policies. The carrying amount of certain assets and liabilities are often determined based on estimates and assumptions of future events. In accordance with AASB 112 Income Taxes, deferred tax liabilities and deferred tax assets have been recognised for Capital Gains Tax (CGT) on the unrealised gains/losses in the investment portfolio at current tax rates. As the Directors do not intend to dispose of the portfolio, the tax liability/benefit may not be crystallised at the amount disclosed in Note: 13. In addition, the tax liability/benefit that arises on the disposal of these securities may be impacted by changes in tax legislation relating to treatment of capital gains and the rate of taxation applicable to such gains/losses at the time of disposal. The Company has an investment process which is anticipated will deliver medium to long-term capital growth - minimum investment period is three to five years. The deferred tax asset has been carried forward as it believed that this process will deliver growth over this period to utilise the deferred tax asset. The introduction of AASB 1059 will not have an impact on the Company. 4. OPERATING SEGMENTS Segment Information AASB 17 Insurance Contracts Effective Date 1 January 2021 AASB 17 replaces three standards that currently deal with insurance: definitions of insurance (AASB 4), general insurance (AASB 1023) and life insurance (AASB 1038). The concept behind the standard is to account for profit from insurance contracts in a way that considers risk associated with an insurance contract. There are three methods of accounting under the new standard, with the applicable method determined by the nature of the insurance contracts issued. The introduction of AASB 17 will not have an impact on the Company. 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 21 FINANCIAL REPORT GLOBAL MASTERS FUND LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 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% (2019 – 30.0%) 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)/Credit at 30.0% (2019: 30.0%) 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 2020 $ 2019 $ 249,988 44 19,663 56,854 326,549 15,391 48,307 51,608 293,912 168,125 102,455 679,798 7,909 2,373 - (30,646) 14,129 - (46,528) (60,672) 27,667 33,005 60,672 302,460 897 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 (2,462,709) 738,813 - (27,159) (1,751,055) 2,490,416 (747,125) (264,546) 56,820 1,535,565 52,330 80,953 133,283 42,275 590,466 632,741 133,283 632,741 GLOBAL MASTERS FUND LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 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 2020 $ 2019 $ 7,104 7,005 14,109 14,476 6,779 21,255 21,422 21,422 19,652 19,652 Listed Investments classified as fair value through profit or loss Listed Investments classified as fair value through other comprehensive income 19 19 Total Available-for-sale Financial Assets 5,001,752 18,633,243 4,312,618 21,047,393 23,634,995 25,360,011 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 8,663 306,813 315,476 5,346 85,179 90,525 13(a) 13(b) (667,909) 3,309,746 2,641,837 (667,401) 4,081,565 3,414,164 (3,645) (664,264) (667,909) (3,705) (663,696) (667,401) 2,131 3,307,615 3,309,746 4,343 4,077,222 4,081,565 FINANCIAL REPORT GLOBAL MASTERS FUND LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 14. ISSUED CAPITAL (a) Share Capital 10,723,159 Ordinary Shares (2019: 10,723,159) (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. 2020 $ 2019 $ 12,871,873 12,871,873 (c) Movements in ordinary share capital Date 30 June 2018 Details Balance 30 June 2019 Balance Nil Movement in the year Nil Movement in the year 30 June 2020 Balance 15. RESERVES (a) Asset Revaluation Reserve Number of Shares Price $ 10,723,159 - 10,723,159 - 10,723,159 12,871,873 - 12,871,873 - 12,871,873 7,712,153 9,788,334 325,126 - The asset revaluation reserve records the unrealised capital profits and losses, net of deferred tax, on investments classified as fair value through other comprehensive income. (b) Asset Realisation Reserve The asset realisation reserve records realised gains and losses from the sale of investments, net of tax, which are transferred from the Asset Revaluation Reserve, net of dividends paid from reserves Total Reserves 8,037,279 9,788,334 16. EARNINGS PER SHARE 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) 68,581 (346) (1,682,474) 1,535,219 10,723,159 10,723,159 10,723,159 10,723,159 Cents 0.64 0.64 (15.69) Cents (0.00) (0.00) 14.32 Global Masters Fund Limited 24 GLOBAL MASTERS FUND LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 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. (b) Currency Risk The Company‘s investment portfolio includes investments in USA, UK and South Africa, 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 most significant financial risks to which the Company is exposed to are described below: The carrying value of these foreign currency denominated assets at balance date was as follows: Specific risks Liquidity risk Credit risk Market risk - currency risk, interest rate risk and price risk Financial instruments used The principal categories of financial instruments used by the Company are: 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 2020 % 2019 % 0.0 0.1 2020 $ 2019 $ 133,283 133,283 632,741 632,741 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. Carrying Amount Cash and cash equivalents Investments Total (c) Credit risk 2020 AUD $ 80,898 2019 AUD $ 590,410 21,425,726 23,065,985 21,506,624 23,656,395 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 closing quoted market 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 2020 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 2020, 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 2020 $ +/- 1,372 2019 $ +/- 7 The Company measures the following assets and liabilities at fair value on a recurring basis: - Financial Assets at fair value through Other Comprehensive Income (FVTOCI). - Financial Assets at fair value through Profit or Loss (FVTPL). 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. +/- 1,075,331 +/- 1,182,820 Level 3 Unobservable inputs for the asset or liability. +/- 10% in listed investments +/- 2,363,500 +/- 2,536,001 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. There were no changes in the Company’s approach to capital management during the year. 30 June 2020 Recurring fair value measurements - Listed Equity Securities Level 1 Level 2 Level 3 Total FVTPL $5,001,752 FVTOCI $18,633,244 - - - - $5,001,752 $18,633,244 30 June 2019 Recurring fair value measurements - Listed Equity Securities Level 1 Level 2 Level 3 Total FVTPL $4,312,618 FVTOCI $21,047,393 - - - - $4,312,618 $21,047,393 Transfers between levels of hierarchy There were no transfers between levels of the fair value hierarchy. Highest and best use 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 2020 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 2020 $ 2019 $ 15,391 15,391 15,409 15,409 51,608 293,912 345,520 50,925 68,560 119,485 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 2020 2020 $ 2019 $ 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 2020 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 168,125 168,125 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 - (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 68,581 (346) (19,663) (56,854) (361,158) (21,834) (131,484) 6,656 (1,770) 7,146 224,951 (60,672) (2,122) 4,149 (597) (21,092) (199,439) (166,670) 25. CONTINGENCIES In the opinion of the Directors, the Company did not have any contingencies at 30 June 2020 (30 June 2019: 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 2020 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 2020 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 28 August 2020 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 18 August 2020. 1. TWENTY LARGEST SHAREHOLDERS 2. DISTRIBUTION OF SECURITIES Shareholders Last year’s figures Ordinary Shares % CITICORP NOMINEES PTY LIMITED 5,755,988 53.7% BOND STREET CUSTODIANS LIMITED303,227 2.8% EMSDALE HOLDINGS PTY LTD 253,518 2.4% BOND STREET CUSTODIANS LIMITED PETER I H WONG PTY LTD 180,000 1.7% 160,000 1.5% ROSETTA PTY LTD 155,700 1.5% POSEIDON NOMINEES PTY LTD MR PETER LEECE JACOBEAN PTY LTD J BARLOW CONSULTANTS PTY LTD MUNGER PTY LTD MRS JANINE ROSLYN HUCKER MRS SYLVIA MARIA VALMADRE BOND STREET CUSTODIANS LIMITED GUTHRIE WILLIAMSON PTY LTD MR WILLIAM PAUL CHUN TIE & MS ORLEENA MOO RITCHIE FAMILY SUPER PTY LTD VAL GARDENA PTY LTD TRENDPLAN PTY LTD J P MORGAN NOMINEES AUSTRALIA PTY LIMITED 150,000 1.4% 120,737 120,000 102,317 1.1% 1.1% 1.0% 73,347 0.7% 60,765 60,000 0.6% 0.6% 51,981 0.5% 51,080 0.5% 50,778 0.5% 50,000 0.4% 50,000 0.4% 47,566 0.4% 47,288 0.4% Total 7,844,292 73.2% Distributions 1 1,001 5,001 10,001 100,001 Total to to to to 1,000 5,000 10,000 100,000 and over Holdings of less than a marketable parcel No. of Shareholders % of shares held 0.70% 4.60% 6.65% 19.96% 68.09% 100.00% 134 164 94 87 10 489 13 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 Dr E C Pohl AM * 5,755,061 53.7 * 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. 4. VOTING RIGHTS On a show of hands every Shareholder present in person or by proxy shall have one vote and upon a poll each share shall have one vote. 5. ON-MARKET BUY BACK There is no current on-market buy back. Global Masters Fund Limited 34 INVESTMENTS (1) HOLDINGS OF SECURITIES AT 30 JUNE 2020 Individual investments at 30 June 2020 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 BEG BIPCFB BNZL BOO BRK.A BRK.B CBG CHH CPG DOM DPLM FEVR FOUR FSI GAMA GAW HLMA HSV JD JIM LIO LXI NG REL RMV SCT SGE SMS SPX TET XPP ORDINARY SHARES ABCAM PLC ASHTEAD GROUP PLC ATHELNEY TRUST PLC BAE SYSTEMS PLC BEGBIES TRAYNOR GROUP PLC BIP BCI Worldwide Flexible Fund Class B BUNZL PLC BOOHOO GROUP PLC Berkshire Hathaway Inc Berkshire Hathaway Inc CLOSE BROTHERS GROUP PLC CHURCHILL CHINA PLC COMPASS GROUP PLC DOMINO'S PIZZA GROUP PLC DIPLOMA PLC FEVERTREE DRINKS PLC 4IMPRINT GROUP PLC Flagship Investments Limited GAMMA COMMUNICATIONS PLC GAMES WORKSHOP GROUP PLC HALMA PLC HOMESERVE PLC JD SPORTS FASHION PLC JARVIS SECURITIES PLC LIONTRUST ASSET MANAGEMENT PLC LXI REIT PLC NATIONAL GRID PLC RELX PLC RIGHTMOVE PLC SOFTCAT PLC SAGE GROUP PLC SMART METERING SYSTEMS PLC SPIRAX-SARCO ENGINEERING PLC TREATT PLC XP POWER LIMITED CASH (INCLUDING DIVIDENDS RECEIVABLE) Cash- Australian Dollar (AUD) Cash - Great British Pound (GBP) TOTAL 4,200 6,500 204,951 24,000 20,000 15,797,997.7392 6,000 29,165 27 15,300 10,000 3,000 6,500 30,000 7,000 2,000 1,600 1,227,372 4,000 2,600 4,800 6,000 14,000 14,600 12,335 44,000 13,300 7,500 22,500 8,000 4,300 12,000 1,381 6,468 2,000 100,565.82 317,463.31 607,442.21 208,395.75 35,063.14 1,407,054.68 233,442.91 215,839.13 10,453,505.21 3,955,971.90 198,487.54 56,043.54 129,834.20 167,160.64 225,700.99 73,503.26 70,844.78 2,209,269.60 92,328.14 374,324.15 198,566.58 140,647.73 156,469.26 150,796.64 289,148.30 89,152.34 236,323.40 251,926.50 220,671.44 156,634.51 51,889.49 127,606.83 247,469.17 57,917.01 127,534.98 23,634,995.08 58,519.50 81,471.11 0.42 1.34 2.55 0.88 0.15 5.92 0.98 0.91 43.97 16.64 0.83 0.24 0.55 0.70 0.95 0.31 0.30 9.29 0.39 1.57 0.84 0.59 0.66 0.63 1.22 0.37 0.99 1.06 0.93 0.66 0.22 0.54 1.04 0.24 0.53 99.41 0.25 0.34 23,774,985.69 100.00 (2) TRANSACTIONS AND BROKERAGE There were 32 (2019: 81) transactions in securities during the year on which brokerage of $9,430 (2019: $20,075) 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 FINANCIAL YEAR END 30 June 2020 ANNUAL GENERAL MEETING INVESTING IN GLOBAL The Annual General Meeting of Global Masters Fund Limited: WILL BE HELD AT: The office of McCulllough Robertson Lawyers Level 11, Central Plaza Two 66 Eagle St Brisbane QLD 4000 2.00pm (QLD Time) TIME: DATE: Friday 30 October 2020 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 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 HQ@Robina Suite 41, Level 4 58 Riverwalk Avenue Robina QLD 4226 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 2020