Understanding the GFL Convertible Notes Conversion Opportunity

A Brief Background

In November of 2021, Global Masters Fund (GFL) issued $10.0 million in convertible notes (GFL Notes) in order to expand its investment portfolio without diluting existing GFL shareholders. The funds raised through these notes have been used to expand GFL’s portfolio and provide investors with greater exposure to high-quality, global growth businesses. GFL was able to do this by leveraging the success of its existing, active portfolio while continuing to adhere to its established investment philosophy.

The convertible notes initially paid investors 5.5% interest per annum, which increased to 6.5% per annum on November 23, 2024, in line with movements in the Bank Bill Swap rate.

The Conversion Opportunity - What’s Available to You Now

With the GFL Notes now open for conversion, investors have a timely opportunity to assess whether converting their notes into shares is the right move for their investment strategy. In this article, we’ll explain the process of converting your notes into equity, key implications for investors, and how this all aligns with GFL’s ongoing long-term growth vision.

How Convertible Notes Work

A convertible note is a hybrid instrument that initially functions as a type of short-term debt or loan that pays interest to its investors but can be converted into equity (shares) at a later date, usually according to specific terms set by the issuer.

Investors who purchased GFL convertible notes back in November 2021 may convert their notes at their discretion any time after November 23, 2023 and up until 10 days before the maturity date or by the GFL Note terms.

The GFL Notes convert to GFL Ordinary Shares on a 1:1 ratio.

Key Implications for Investors

Before deciding whether to convert your GFL Notes into Ordinary Shares, it’s important to understand the potential benefits and trade-offs. We’ll outline what the conversion could mean for your investment down below.

Key Implications for Investors

By converting notes into equity, investors can directly benefit from any future increase in GFL’s share price. The GFL Notes were originally issued at $3.10 each, and while these notes can be traded on the ASX, the market for Ordinary Shares tends to be more active and liquid. As of the close on January 31, 2025, the price of GFL Ordinary Shares was $3.76, representing a 21.3% increase over the original issue price.

Forfeiting Yield

When noteholders convert to Ordinary Shares, they give up their right to receive interest payments. The GFL Notes pay interest quarterly, but GFL Ordinary Shares do not pay dividends since the main investment, Berkshire Hathaway, does not distribute cash dividends.

How to Convert Your GFL Notes

If you’ve considered the information above and are ready to convert your GFL Notes into Ordinary Shares, here’s how to complete the process in a few easy steps.

1. Download the attached conversion notice form.
2. Complete the form and return it to equiries@boardroomlimited.com.au or info@globalmastersfund.com.au along with a copy of your holding statement.
3. A Welcome letter is sent for new Ordinary Share holdings, and a CHESS holding statement will be sent for CHESS accounts.

Final Thoughts

The GFL Convertible Notes offer investors a strategic opportunity to earn a fixed interest return while also benefiting from potential growth in the value of GFL Ordinary Shares. Converting noteholders from creditors into shareholders supports GFL’s goal of expanding its investor base and increasing the size and scale of its investment portfolio, in line with the company’s long-term strategic vision. Interest has already been shown by investors seeking to capitalise on the current market position.

By converting now, you become part of a group of long-term shareholders positioned to benefit from disciplined capital allocation and global market opportunities, the core principles that have guided our strategy since inception.

If investors have any questions about the GFL Notes, please contact us.