2013
ANNUAL
REPORT
CONTENTS
Company Particulars 1
Manager’s Report 2
Market Value of Investments as at 30 June 2013 4
Directors’ Report to Shareholders 5
Auditor’s Independence Declaration 11
Corporate Governance Statement 12
Statement of Proit or Loss and Other Comprehensive Income 15
Statement of Financial Position 16
Statement of Changes in Equity 17
Statement of Cash Flows 18
Notes to the Financial Statements 19
Directors’ Declaration 41
Independent Auditor’s Report 42
ASX Additional Information 44
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
COMPANY PARTICULARS
CADENCE CAPITAL LIMITED
A.B.N. 17 112 870 096
DIRECTORS:
Karl Siegling
James Chirnside
Wayne Davies
Ronald Hancock
SECRETARY:
Karl Siegling
MANAGER OF THE COMPANY:
Cadence Asset Management Pty Limited
ABN: 68 106 551 062
REGISTERED OFFICE:
Level 11, 131 Macquarie Street,
Sydney, NSW, 2000
CONTACT DETAILS:
Level 11, 131 Macquarie Street,
Sydney, NSW, 2000
Telephone: (02) 8298 2444
Fax: (02) 8298 2499
Email: info@cadencecapital.com.au
Website: www.cadencecapital.com.au
For enquiries regarding net asset backing
(as advised each month to the Australian Securities Exchange)
refer to asx.com.au or call (02) 8298 2444
PRIME BROKER AND CUSTODIAN
OF THE COMPANY:
Citigroup Global Markets Australia Pty Ltd
Level 21, 2 Park Street
Sydney, NSW, 2000
SHARE REGISTRAR:
Boardroom Pty Limited
Mail Address: GPO Box 3993
Sydney, NSW, 2001
Telephone: (02) 9290 9600
Fax: (02) 9279 0664
For all enquiries relating to shareholdings, dividends
(including participation in the Dividend Reinvestment Plan)
and related matters, please contact the share registrar.
AUDITORS:
Moore Stephens Sydney
Level 15, 135 King Street
Sydney NSW, 2000
ASX CODE:
Cadence Capital Limited Ordinary Shares (CDM)
COUNTRY OF INCORPORATION:
Australia
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
1
MANAGER’S REPORT
SUMMARY OF RESULTS
• Gross portfolio increased +22.16% for the year ended 30 June 2013, outperforming the All Ordinaries
Accumulation Index by 1.49% and the Small Ordinaries Accumulation Index by 27.48%. This was achieved whilst
holding on average 36% in cash during the past inancial year.
• 11.0 cent per share fully franked dividend for FY 2013. This represents a 8.5% (12.1% grossed-up) fully franked
yield based on 30 June 2013 share price of $1.30.
• Increase in net proit before tax to $13.05m, up a record 884%.
• Increase in net proit after tax to $11.38m, up 312%.
SHAREHOLDER PERFORMANCE
Performance* to 30th June 2013
CDM**
All Ords
Outperformance
1 Month
1 Year
2 Years
3 Years
4 Years
5 Years
Since Inception (93 months)
Since Inception Annualised (93 months)
-1.99%
22.16%
28.86%
134.54%
186.89%
142.63%
295.49%
19.41%
-2.62%
20.67%
12.17%
25.83%
43.16%
11.46%
44.12%
4.83%
+0.63%
+1.49%
+16.69%
+108.71%
+143.73%
+131.17%
+251.37%
+14.58%
* Before Management and Performance Fees **These numbers include the franking value of the substantial RHG dividend received in May 2011
For the inancial year ended 30 June 2013, Cadence Capital Limited produced a gross performance of +22.16%
compared to an increase in the All Ordinaries Accumulation Index of +20.67% and a decrease in the Small
Ordinaries Accumulation Index of -5.32%. We are pleased that since its inception almost 8 years ago Cadence
Capital Limited has outperformed the All Ordinaries Accumulation Index by 14.58% per annum. It should also be
noted that this outperformance has been achieved with lower than market risk and exposure.
SECTOR PERFORMANCE (% RETURNS)
Capital Goods
Traspoaspo
Materials
Retailing
rtation
Energy
Health Care Equipment & Services
onsumer Durables & Apparel
Utilities
C
Media
Real Estate
Te
lecommunication Services
Consumer Services
Insurance
C
ommericial & Professional Services
Software & Services
Banks
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
2
-10%
0%
10%
20%
30%
40%
50%
60%
MANAGER’S REPORT Contd’
Sectors that performed well for the Company during the year were Banks and Diversiied Financials while the
sectors that underperformed for the company were Capital Goods and Materials. Stock positions that performed
well for the Company in 2013 were Australia & New Zealand Banking Group, Bluescope Steel Ltd, Bravura
Solutions Ltd, Flexigroup Ltd, Macquarie Group Limited, McMillan Shakespeare Ltd, QBE Insurance Group
Ltd and RHG Ltd. Stock positions that underperformed for the Company in 2012 were Arrium Ltd, Bathurst
Resources Ltd and Cofey International Ltd.
SUMMARY AND OUTLOOK
Cadence Capital Limited has performed well over what was another diicult and volatile year. During the year
our process of combining fundamental and technical analysis has yielded good risk adjusted returns. We believe
a strategy with an open mandate, able to selectively invest in undervalued companies and avoid (or short)
over valued companies is a distinct advantage. In addition, allocating risk between equities and cash remains a
compelling method to manage capital, particularly in this environment.
The equities market will continue to provide opportunities in individual companies and speciic industries with
speciic earnings proiles. The process of trying to guess where the overall market will trade in light of signiicant
macroeconomic events, uncertainty and ambiguity, will continue to be a diicult and risky process. Fortunately
this is not how we manage capital.
We remain committed to our investment strategy as outlined in our Prospectus eight years ago and are pleased
that this investment strategy has produced good returns for our shareholders and our own investments within
the Company.
I would like to take this opportunity to thank our investors for their continued support.
Karl Siegling
Managing Director
Cadence Asset Management Pty Limited
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
3
MARKET VALUE OF TOP 20 POSITIONS AT 30 JUNE 2013
LONG AND SHORT POSITIONS
LONG POSITIONS
COMPANY NAME
MARKET VALUE
RHG
MQG
MMS
NAB
ANZ
FXL
QBE
RFG
IIN
BSL
HGG
AMC
SDG
RKN
BVA
BXB
CYA
MLB
TOL
RHG Ltd
Macquarie Group Limited
McMillan Shakespeare Limited
National Australia Bank Ltd
Australia & New Zealand Banking Group
Flexigroup Limited
QBE Insurance Group Ltd
Retail Food Group
IInet Limited
Bluescope Steel Ltd
Henderson Group Plc
Amcor Limited
Sunland Group Ltd
Reckon Ltd
Bravura Solutions Ltd
Brambles Limited
Century Australia Investments Limited
Melbourne It Limited
Toll Holdings Limited
$ 13,394,649
$ 10,887,833
$ 7,821,008
$ 7,394,356
$ 7,364,752
$ 6,881,820
$ 5,448,999
$ 4,900,982
$ 4,613,420
$ 4,270,460
$ 3,703,333
$ 3,129,660
$ 3,019,610
$ 3,002,832
$ 2,982,876
$ 2,465,760
$ 1,455,619
$ 1,242,611
$ 859,180
SHORT POSITIONS
COMPANY NAME
MARKET VALUE
% OF
EQUITY
8.15%
6.62%
4.76%
4.50%
4.48%
4.19%
3.31%
2.98%
2.81%
2.60%
2.25%
1.90%
1.84%
1.83%
1.81%
1.50%
0.89%
0.76%
0.52%
% OF
EQUITY
OZL
Oz Minerals Ltd
$ 2,610,060
1.59%
Total Top 20 Long and Short Positions – Net Exposure %
$ 92,229,699 56.11%
MARKET VALUE OF TOTAL PORTFOLIO POSITIONS:
Total Portfolio Long Positions
Total Portfolio Short Positions
Total Portfolio Net Exposure
$ 97,967,357 59.60%
$ 2,610,060 1.59%
$ 95,357,297 58.01%
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
4
DIRECTORS’ REPORT TO SHAREHOLDERS
FOR THE YEAR ENDED 30 JUNE 2013
The Directors of Cadence Capital Limited (“the Company’) submit herewith their report together with the
financial report of Cadence Capital Limited for the financial year ended 30 June 2013.
PRINCIPAL ACTIVITY
The principal activity of the Company was investing primarily in securities listed on the Australian Stock
Exchange. The Company may take short positions and may also deal in derivatives for hedging purposes.
No significant changes in the nature of these activities occurred during the financial year.
OPERATING RESULTS
Investment operations over the year resulted in an operating proit before tax of $13,058,686 (2012: operating
proit before tax of $1,326,553) and an operating proit after tax of $11,382,348 (2012: operating proit after tax
of $2,763,546).
REVIEW OF OPERATIONS
Investments are valued continuously to market value. For the year ended 30 June 2013, net investments were
valued at $95,357,297 (2012: $34,898,635).
FINANCIAL POSITION
The net asset value of the Company for the current inancial period ended was $164,382,606 (2012: $52,153,951).
SIGNIFICANT CHANGES IN STATE OF AFFAIRS
During the inancial year the Company raised capital through a wholesale placement in October 2012 and a
retail placement in March/ April 2013 through a prospectus. The wholesale placement raised $11,444,564 and
the retail prospectus raised $72,123,596.
DIVIDENDS PAID OR RECOMMENDED
The Board has declared a 5.0 cent per share fully franked inal dividend payable on 30 September 2013. The Ex
Date for the dividend was 16 September 2013.
Dividends paid are as follows:
$
Fully franked 2013 interim dividend of 5.0 cents per share was paid on 30 April 2013
5,794,811
Fully franked 2013 special dividend of 1.0 cents per share was paid on 30 April 2013 1,158,962
Fully franked 2012 inal dividend of 4.0 cents per share was paid on 29 October 2012 2,561,779
2,561,779
Fully franked 2012 special dividend of 4.0 cents per share was paid on 29 October 2012
1,491,216
Fully franked 2012 interim dividend of 4.0 cents per share was paid on 2 April 2012
186,402
Fully franked 2012 special dividend of 0.5 cents per share was paid on 2 April 2012
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
5
DIRECTORS
DIRECTORS
The following persons were Directors of the Company during the inancial year and up to the date of this report:
Karl Siegling
Geofrey Wilson (Resigned 14 February 2013)
James Chirnside
Wayne Davies (Appointed 14 February 2013)
Ronald Hancock (Appointed 17 June 2013)
INFORMATION ON DIRECTORS
Karl Siegling (Chairman and Company Secretary)
Karl Siegling has over 17 years investment experience in the inancial sector both in Australia and overseas. He
holds a Bachelor of Commerce and a Law degree from the University of Melbourne and an MBA specialising
in Finance and Entrepreneurial Endeavours from INSEAD in France. Karl has also completed the Post Graduate
Diploma in Finance with the Securities Institute of Australia.
He commenced work in the Financial Services sector in Australia with Deutsche Morgan Grenfell, trading
overnight currencies, bonds and bond options on the Sydney Futures Exchange. Then he worked within the
Equities Research Division of Deutsche Morgan Grenfell before moving to the Equities Division of Goldman
Sachs in London. Upon returning to Australia, Karl was the Managing Director of eFinancial Capital Limited
(a subsidiary of Challenger International Limited), which was a private equity fund with Pooled Development
Fund status, focused on investing early stage and expansion capital. The fund invested in inancial services and
Australian internet based technology companies. For two and a half years Karl worked as a consultant for Wilson
Asset Management (International) Pty Limited researching stocks for the Wilson group of funds. He is also the
managing director of the manager, Cadence Asset Management Pty Limited.
James Chirnside (Non-executive Director)
James Chirnside has been focussed in Emerging Market equities, Commodities, and Bio Pharma investment
management for twenty-seven years in Sydney, Hong Kong, London, and Melbourne. Mr Chirnside is CEO of
Mann Distribution Australia. MDA is a subsidiary of Mann Bio Invest a specialist Healthcare investment manager
based in the Isle of Mann.
Mr Chirnside previously worked for Challenger Financial Group in Sydney developing alternative investment
strategies for distribution to Australian wholesale and retail clients. Prior to this he managed emerging market
hedge funds in Hong Kong and London, for Regent Fund Management (now Charlemagne Capital UK). Between
1988 and 1992 Mr Chirnside ran a proprietary-trading book for County NatWest Investment Bank based in
London. He was primarily focussed on country-funds and derivative instrument arbitrage investment strategies.
James Chirnside is also a director of WAM Capital Limited, India Equities Fund Limited and Mothercare Australia
Limited.
Ronald Hancock (Non-executive Director)
Ronald Hancock is a fellow of the Institute of Chartered Accountants Australia with extensive experience in the
inancial services industry. He was the Managing Director of Wide Bay Australia Limited and retired in February
2013. He was a foundation Director and Manager of the Burnett Permanent Building Society formed in 1966,
which subsequently merged with other Queensland societies to form Wide Bay Capricorn Building Society Ltd,
subsequently Wide Bay Australia Ltd.
Ronald Hancock was a practising Chartered Accountant and continued to practise during the establishment
period of the Society. He retired from accountancy in 1994 after 32 years. Ronald Hancock is also a director of
Mortgage Risk Management Pty Ltd and several private companies.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
6
DIRECTORS’ REPORT TO SHAREHOLDERS
FOR THE YEAR ENDED 30 JUNE 2013 Contd’
Wayne Davies (Non-executive Director)
Wayne Davies has over 11 years funds management experience in Equity Long/ Short Funds both in Australia
and overseas. He is both a member of the South African Institute of Chartered Accountants and the Chartered
Institute of Management Accountants.
Wayne Davies is a founding member of the Cadence Asset Management team and has been the Chief Operating
Oicer of Cadence Asset Management for the past 5 years. Wayne Davies worked with Theorema Asset
Management in London and still remains a director of Theorema Europe Fund and Theorema Europe Fund Plus.
COMPANY SECRETARY
Karl Siegling held the position of company secretary at the end of the inancial year.
DIRECTORS’ MEETINGS
Karl Siegling
Geofrey Wilson (Resigned 14 February 2013)
James Chirnside
Wayne Davies (Appointed 14 February 2013)
Ronald Hancock (Appointed 17 June 2013)
AUDIT COMMITTEE MEETINGS
Karl Siegling
James Chirnside
REMUNERATION REPORT (AUDITED)
No. eligible to attend
4
3
4
1
0
Attended
4
3
4
1
0
No. eligible to attend
2
2
Attended
2
2
This report details the nature and amount of remuneration for each Director of Cadence Capital Limited.
(a) Remuneration
There are no executives that are paid by the Company. Cadence Asset Management Pty Limited provides day to
day management of the Company and is remunerated as outlined in Note 16 – Related Parties Transactions.
Short-term Beneits - Directors Fees:
Geofrey Wilson
James Chirnside
Post-employment Beneits - Superannuation
2013
$
13,761
13,761
2,478
30,000
2012
$
13,761
13,761
2,478
30,000
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
7
DIRECTORS’ REPORT TO SHAREHOLDERS
FOR THE YEAR ENDED 30 JUNE 2013 Contd’
(b) Director Related Entities Remuneration
All transactions with related entities were made on normal commercial terms and conditions.
Karl Siegling is the sole Director and a beneicial owner of Cadence Asset Management Pty Limited, the entity
appointed to manage the investment portfolio of Cadence Capital Limited. Wayne Davies is also a beneicial
owner of Cadence Asset Management Pty Limited. In its capacity as Manager, Cadence Asset Management
Pty Limited was paid a management fee of $1,115,606 (inclusive of GST, 2012: $474,724). This is equivalent to
0.08333% of the value of the portfolio calculated on the last business day of each month. Over a full year, the
monthly management fee will be comparable to a fee of 1% of the gross value of the portfolio per annum. As at
30 June 2013, the balance payable to the manager was $102,856 (inclusive of GST, 2012: $25,796).
The duties of the manager are to manage the portfolio and to manage and supervise all investments, maintain
the corporate and statutory records of the Company, liaise with the ASX with respect to compliance with the
ASX listing rules, liaise with ASIC with respect to compliance with the Corporations Act and liaise with the share
registrar of the Company.
In addition, Cadence Asset Management Pty Limited is to be paid, annually in arrears, a performance fee, being
20% of:
• where the level of the All Ordinaries Accumulation Index has increased over that period, the amount by which
the level of the portfolio exceeds this increase, or
• where the All Ordinaries Accumulation Index has decreased over that period, the amount of the increase in the
value of the portfolio.
No performance fee is payable in respect of any performance period, where the portfolio has decreased in
value over that period. For the year ended 30 June 2013, a performance fee of $41,411 (inclusive of GST 2012:
$463,007) was payable to Cadence Asset Management Pty Limited. As at 30 June 2013, the balance payable to
the manager was $41,411 (inclusive of GST 2012: $463,007).
Cadence Asset Management Pty Limited employs accounting personnel to provide accounting services to
Cadence Capital Limited. These services are provided on commercial terms and include a standard charge
of $1,375 (inclusive of GST) per month and an additional charge of $3,500 (inclusive of GST) is charged for
preparing the half year and full year inancial statements.
Cadence Capital Limited has in place an Assignment Deed with Cadence Asset Management Pty Limited and
MAM Pty Limited. Geofrey Wilson is a Director of MAM Pty Limited and entities associated with him hold 80% of
its issued share capital. In its capacity as Manager, Cadence Asset Management Pty Limited assigns a percentage
of the management and performance fee to MAM Pty Limited. Subsequent to the initial capital raising, the
assignment rate was 4.05%. At 30 June 2013, an amount of $48,837 (2012: $39,581) was payable to MAM Pty
Limited. Geofrey Wilson resigned from the Board of Cadence Capital Limited on 14 February 2013.
(c) Compensation Practices
The Board from time to time determines remuneration of Non-Executive Directors within the maximum amount
approved by the shareholders. Non-Executive Directors are not entitled to any other remuneration.
Fees and payments to Non-Executive Directors relect the demands that are made on and the responsibilities
of, the Directors and are reviewed annually by the Board. The Company determines the remuneration levels and
ensures they are competitively set to attract and retain appropriately qualiied and experienced Directors.
Directors’ base fees are presently limited to a maximum of $55,000 per annum between the four directors.
Non-Executive Directors do not receive bonuses nor are they issued options on securities. Directors’ fees cover
all main board activities and membership of committees. Directors’ fees are not linked to the performance of the
Company.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
8
DIRECTORS’ REPORT TO SHAREHOLDERS
FOR THE YEAR ENDED 30 JUNE 2013 Contd’
(d) Shareholdings
As at 30 June 2013, the Company’s key management personnel indirectly held the following shares in the
Company:
Shareholdings
Karl Siegling
Wayne Davies
Ronald Hancock
Geofrey Wilson
James Chirnside
Balance at
1 July 2012
Acquisitions/ Balance
held on appointment
Balance held on
resignation
Balance at 30
June 2013
3,875,457
-
-
1,560,000
25,932
5,461,389
3,839,198
259,798
139,860
-
-
4,238,856
-
-
-
(1,560,000)
-
(1,560,000)
7,714,655
259,798
139,860
-
25,932
8,140,245
As at 30 June 2013, the Company’s key management personnel indirectly held the following options in the
Company:
Optionholdings
Karl Siegling
Balance at
1 July 2011
Disposals
Options
Exercised
Balance at 30
June 2012
3,007,112
3,007,112
-
-
(3,007,112)
(3,007,112)
-
-
End of Remuneration Report.
EVENTS AFTER THE REPORTING PERIOD
The Board of Directors of Cadence Capital Limited have declared a 5.0 cent per share fully franked inal dividend
payable on 30 September 2013. The Ex Date for the dividend was 16 September 2013.
Subsequent to year end two large positions held by the Company have made announcements to the market:
• RHG Limited, a 8.1% position in the portfolio, has received proposals from Pepper Australia Pty Limited (see
below) and Resimac Syndicate to acquire the Company.
• McMillan Shakespeare Ltd, a 4.8% position in the portfolio, has been negatively impacted by the Government’s
proposed changes to the FBT treatment of motor vehicles.
On 15 August 2013 Pepper Australia Pty Limited announced a Scheme of Arrangement to acquire 100% of RHG
Limited for a combination of cash and Cadence Capital Limited scrip. On 9 September 2013 an announcement
was made increasing the ofer of the Scheme of Arrangement. Under the scheme, Pepper would acquire RHG
Limited for consideration of 50.8 cents per share, comprising 36 cents per share cash and shares in Cadence
Capital Limited at the ratio of one fully paid up ordinary share in Cadence Capital Limited for every 10 ordinary
shares in RHG Limited held. Cadence Capital Limited would pay those RHG Limited shareholders who receive
Cadence Capital Limited shares under the scheme a fully franked dividend of 5 cents per Cadence Capital
Limited share.
No other matters or circumstances have arisen since the end of the inancial year which signiicantly afects or
may signiicantly afect the operations of the Company, the results of those operations, or the state of afairs of
the Company in subsequent inancial years.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
9
DIRECTORS’ REPORT TO SHAREHOLDERS
FOR THE YEAR ENDED 30 JUNE 2013 Contd’
FUTURE DEVELOPMENTS
The Company will continue to pursue its policy of investment during the next inancial year.
ENVIRONMENTAL ISSUES
The Company’s operations are not regulated by any environmental regulation under a law of the Commonwealth
or of a State or Territory.
INDEMNIFICATION AND INSURANCE OF OFFICERS OR AUDITORS
During the year the Company did pay a premium in respect of a contract insuring the Directors of the Company,
the Company Secretary and any related body corporate against liability incurred as such by a Director or
Secretary to the extent permitted by the Corporations Act 2001.
No indemnities have been given or insurance premiums paid during or since the end of the inancial period, for
any person who is or has been an auditor of the Company.
PROCEEDINGS ON BEHALF OF COMPANY
No person has applied for leave of court to bring proceedings on behalf of the Company or intervene in any
proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company
for all or any part of those proceedings.
The Company was not a party to any such proceedings during the year.
NON-AUDIT SERVICES
During the year Moore Stephens Sydney, the Company’s auditor, did not perform any other services in addition
to their statutory duties for the Company. Moore Stephens Sydney Pty Limited, a related party of the Company’s
auditor, performed taxation services for the Company. Details of the amounts paid to the auditors and their
related parties are disclosed in Note 2 to the inancial statements.
The Board of Directors, in accordance with advice from the Audit Committee, is satisied that the provision
of non-audit services during the year is compatible with the general standard of independence for auditors
imposed by the Corporations Act 2001. The Directors are satisied that the services disclosed in Note 2 did not
compromise the external auditor’s independence.
AUDITOR’S INDEPENDENCE DECLARATION
A copy of the Auditor’s Independence Declaration as required under Section 307C of the Corporations Act 2001 is
set out on page 11 of this Annual Report.
Signed in accordance with a resolution of the Board of Directors of the Company:
Karl Siegling
Director
Dated in Sydney this 25th day of September 2013
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
10
AUDITOR’S INDEPENDENCE DECLARATION
AUDITOR’S INDEPENDENCE DECLARATION
TO THE DIRECTORS OF CADENCE CAPITAL LIMITED
Level 15, 135 King Street
Sydney NSW 2000
Level (cid:1011), (cid:1006)(cid:1004) Hunter Street
Sydney NSW (cid:1006)(cid:1004)(cid:1004)(cid:1004)
T +61 (0)2 8236 7700
F +61 (0)2 9233 4636
T +(cid:1010)(cid:1005) (cid:894)(cid:1004)(cid:895)(cid:1006) (cid:1012)(cid:1006)(cid:1007)(cid:1010) (cid:1011)(cid:1011)(cid:1004)(cid:1004)
www.moorestephens.com.au
F +(cid:1010)(cid:1005) (cid:894)(cid:1004)(cid:895)(cid:1006) (cid:1013)(cid:1006)(cid:1007)(cid:1007) (cid:1008)(cid:1010)(cid:1007)(cid:1010)
In accordance with the requirements of section 307C of the Corporations Act 2001, I declare that, to the best of my
knowledge and belief, during the year ended 30 June 2013 there have been:
a)
aaaaaaaaudit; and
no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the
b)
no contraventions of any applicable code of professional conduct in relation to the audit.
Moore Stephens Sydney
Chartered Accountants
Scott Whiddett
Partner
Dated in Sydney this 25th day of September 2013
Moore Stephens Sydney ABN 90 773 984 843. Liability limited by a scheme approved under Professional Standards Legislation*
*Other than for the acts or omissions of inancial services licensees. An independent member of Moore Stephens International Limited -
members in principal cities throughout the world The Sydney Moore Stephens irm is not a partner or agent of any other Moore Stephens irm.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
11
CORPORATE GOVERNANCE STATEMENT
A description of the Company’s corporate governance practices are set out below. All these practices, unless
otherwise stated, were in place the entire year and comply with the ASX Principles of Good Corporate Governance
and Best Practice Recommendations.
BOARD OF DIRECTORS AND ITS COMMITTEES
Subject at all times to any written guidelines issued by the Board of Directors of Cadence Capital Limited, the
day-to-day management and investment of funds is carried out by Cadence Asset Management Pty Limited (the
“Manager”) pursuant to a management agreement.
The Board is responsible for the overall Corporate Governance of the Company including the strategic direction,
establishing goals for the appointed Manager and monitoring the achievement of these goals. The Board
reviews the reports of its Manager on the financial performance of the Company.
COMPOSITION OF THE BOARD
The skills, experience and expertise relevant to the position of each director who is in office at the date of the
Annual Report and their term in office are detailed in the Directors’ Report.
The independent directors of the Company are James Chirnside and Ronald Hancock.
The Board comprises of the Chairman and three other non-executive Directors who consider the composition
of the Board and appointment of new Directors. The Board identifies suitable candidates to fill vacancies as
they arise. The performance of each Director is reviewed by the Chairman periodically. At every annual general
meeting one third of the Directors must retire from office and be eligible for re-election. Shareholder approval is
required on the composition of the Board.
The Board is 50% independent. Whilst the Company agrees with the benefits of a majority of independent Directors,
it believes that it can better achieve the results of the Company with the current Board’s level of expertise and
without burdening shareholders with the potentially significant costs associated with adding further
independent Directors. The Chairman is not independent. The Company believes that an independent Chairman
does not necessarily improve the function of the Board. The Company believes that when the Chairman is a
significant driver behind the business and is a sizeable shareholder, it adds value to the Company.
Given the size of the Board a nomination committee has not been formed. The Board as a whole considers the
composition of the Board and appointment of new Directors. The Board identifies suitable candidates to fill
vacancies as they arise.
REMUNERATION OF DIRECTORS AND EXECUTIVES
The maximum total remuneration of the Directors of the Company has been set at $55,000 per annum to be
divided in such proportions as they agree. The scope of the Company’s operations, and the frequency of Board
meetings are principal determinants of the fee level. Further detail is provided in the Directors’ Report.
No separate Remuneration Committee has been established by the Company as the Company does not believe
that this adds any value to its Corporate Governance.
The Chairman of Cadence Capital Limited is the sole Director of Cadence Asset Management Pty Limited. Further
detail is provided in the Directors’ Report and Note 15 of the financial statements.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
12
CORPORATE GOVERNANCE STATEMENT Contd’
AUDIT COMMITTEE
The Company has formed an Audit Committee consisting of:
James Chirnside
Karl Siegling
Chairman
Executive Director
The Audit Committee consists of 2 members and is only 50% independent. Whilst the Company agrees with
the benefits of a larger Audit Committee and also of it consisting of a majority of independent Directors, due to
both the size of the Board and of the Company, it believes that the current Audit Committee has both the level of
expertise and independence that it requires.
The Committee’s responsibilities are to:
(a)
(b)
(c)
oversee the existence and maintenance of internal controls and accounting systems;
oversee the financial reporting process;
review the annual and half-year financial reports and recommend them for approval by the Board of
Directors;
nominate external auditors; and
review the existing external audit arrangements.
(d)
(e)
EXTERNAL AUDITOR
The Company and Audit Committee policy is to appoint an external auditor who clearly demonstrates quality
and independence. Moore Stephens Sydney was the external auditor in June 2013. It is Moore Stephens’ policy
to rotate audit engagement partners on listed companies in accordance with the Corporations Act 2001.
The external auditor is requested to attend the AGM and to be available to answer shareholder questions about
the conduct of the audit and the preparation of the audit report.
RISK MANAGEMENT POLICY
The Board acknowledges that it is responsible for the overall system of internal control but recognises that no
cost effective internal control system will preclude all errors and irregularities. The Board has delegated the
responsibility for reviewing the risk profile and reporting on the operation of the internal control system to the
Audit Committee.
Risks are identified and assessed by the Company’s Board as well as by the Company’s auditors. Controls are
implemented to deal with risks based on the assessment of:
• the nature and extent of the risk facing the Company;
• the extent and categories of risks which the board considers acceptable to bear;
• the likelihood of the risk materialising;
• the Company’s ability to minimize the risk of incident and its resultant impact on the business should
a particular risk materialise; and
• the sorts of operating particular controls relative to the benefit obtained by managing the relevant risk.
The Manager, Cadence Asset Management Pty Ltd, as well as by the Company’s auditors will report any
instances of control or policy failure or breach to enable the Board to consider whether relevant controls require
reassessment, strengthening or improvement and whether the level of monitoring by the board is adequate.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
13
CORPORATE GOVERNANCE STATEMENT Contd’
ETHICAL STANDARDS
The Board aims to ensure that all Directors and its Manager act with the utmost integrity and objectivity and
endeavour to enhance the reputation of the Company.
THE ROLE OF SHAREHOLDERS
The Board of Directors aims to ensure that the shareholders are informed of all major developments afecting
the Company’s state of afairs. Information is communicated to shareholders through the Annual Report,
quarterly webcasts, monthly investment updates and asset backing data, monthly estimated NTA’s and Half-Year
Financial Report lodged with the Australian Stock Exchange.
The Board encourages full participation of shareholders at the Annual General Meeting to ensure a high level of
accountability and identiication with the Company’s strategy and goals.
BOARD’S POLICY ON DEALING IN SHARES
Subject to them not being in possession of undisclosed price sensitive information, Directors may deal in
shares of the Company when appropriate. As Cadence Capital Limited is an investment company announcing
its estimated NTA’s, exposures and its top holdings on a monthly basis, the Board believes the shareholders are
generally fully informed.
INDEPENDENT PROFESSIONAL ADVICE AND ACCESS TO COMPANY INFORMATION
Each Director has the right to access all relevant information and subject to prior consultation with the
Chairman, may seek independent professional advice at the entity’s expense. A copy of advice received by the
Director is made available to all other members of the Board.
CONFLICT OF INTEREST
In accordance with the Corporations Act 2001, the Directors must keep the Board advised, on an ongoing basis,
of any interests that could potentially conlict with those of the Company. Where the Board believes that a
signiicant conlict exists the Director concerned does not receive the relevant Board papers and is not present at
the meeting whilst the item is considered.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
14
STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME FOR THE YEAR
ENDED 30 JUNE 2013
NOTES
2013
$
2012
$
INCOME
Proceeds from sale of investments
Cost of investments sold
Realised loss on investments
Unrealised gain/ (loss) on investments
Dividends received
Interest received
Underwriting fees
Other revenue from ordinary activities
Total Income
EXPENSES
Finance costs
Management fees
Performance fees
Assignment fees
Directors fees
Dividends on short positions
Stock loan fees
Brokerage expenses on share purchases
ASX fees
Registry fees
Other expenses from ordinary activities
Total Expenses
58,890,193
(64,739,633)
(5,849,440)
11,430,387
8,146,093
1,248,040
31,262
-
15,006,342
(67,649)
(1,039,542)
(38,587)
(45,507)
(30,000)
(53,000)
(7,825)
(427,506)
(55,616)
(78,550)
(103,874)
(1,947,656)
14,668,792
(15,127,951)
(459,159)
(3,811,648)
6,223,972
570,461
10,084
15,882
2,549,592
-
(442,356)
(431,439)
(36,882)
(30,000)
-
(128)
(70,047)
(13,034)
(40,350)
(158,803)
(1,223,039)
PROFIT BEFORE INCOME TAX
13,058,686
1,326,553
Income tax (expense) / beneit
PROFIT ATTRIBUTABLE TO MEMBERS OF THE COMPANY
3(a)
11
(1,676,338)
11,382,348
1,436,993
2,763,546
Other comprehensive income/(loss)
Other comprehensive income for the year, net of tax
-
-
Total comprehensive income for the year
11,382,348
2,763,546
Basic earnings per share
Diluted earnings per share
13
13
15.3 cents
8.3 cents
15.3 cents
8.3 cents
The accompanying notes form part of these inancial statements.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
15
STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2013
ASSETS
Cash and cash equivalents
Trade and other receivables
Financial assets
Deferred tax asset
NOTES
2013
$
2012
$
12(a)
5
6
3(b)
66,337,963
1,525,149
97,967,357
3,719,668
15,155,601
233,767
34,898,635
3,096,827
TOTAL ASSETS
169,550,137
53,384,830
LIABILITIES
Trade and other payables
Financial liabilities
Deferred tax liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Proits reserve
Accumulated losses
TOTAL EQUITY
7
8
3(c)
726,677
2,610,060
1,830,794
1,212,725
-
18,154
5,167,531
1,230,879
164,382,606
52,153,951
9
10
11
155,566,625
12,568,818
(3,752,837)
42,642,987
11,018,104
(1,507,140)
164,382,606
52,153,951
The accompanying notes form part of these inancial statements.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
16
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2013
Total equity as at 1 July 2012
Proit attributable to members of the Company
Shares issued in the year through DRP
Shares issued in the year through Options being exercised
Shares issued in the year through Placements
Shares issued in the year through Retail Prospectus
NOTES
11
9
9
9
9
2013
$
52,153,951
11,382,348
3,731,437
22,279,994
15,923,863
70,988,344
2012
$
40,131,337
2,763,546
1,407,339
11,385,857
-
-
176,459,937
55,688,079
Dividends paid or provided for
4
(12,077,331)
(3,534,128)
Total equity as at 30 June 2013 attributable to members of
the Company
164,382,606
52,153,951
The accompanying notes form part of these inancial statements.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
17
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2013
CASH FLOWS FROM OPERATING ACTIVITIES
Dividends received
Interest received
Other income received
Management fees paid
Performance fees paid
Brokerage expenses on share purchases
Interest paid
Dividends paid on shorts
Payments for administration expenses
NOTES
2013
$
$
7,552,781
1,195,026
31,262
(1,009,610)
(460,183)
(427,506)
(67,649)
(53,000)
(380,630)
2012
$
$
6,128,464
570,461
10,084
(438,333)
(2,328,930)
(70,047)
-
-
(364,612)
NET CASH PROVIDED BY OPERATING ACTIVITIES
12(b)
6,380,491
3,507,087
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the sale of investments
Payments for the purchase of investments
NET CASH (USED IN) INVESTING
ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid
Proceeds from shares issued
58,367,270
(113,925,168)
14,660,827
(23,694,520)
(55,557,898)
(9,033,693)
(8,345,894)
108,705,663
(2,126,789)
11,385,857
NET CASH PROVIDED BY FINANCING ACTIVITIES
100,359,769
9,259,068
NET INCREASE IN CASH HELD
CASH AND CASH EQUIVALENTS AS AT BEGINNING OF
THE FINANCIAL YEAR
CASH AND CASH EQUIVALENTS AS AT END OF
THE FINANCIAL YEAR
51,182,362
3,732,462
15,155,601
11,423,139
12(a)
66,337,963
15,155,601
The accompanying notes form part of these inancial statements.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
18
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
Cadence Capital Limited (“the Company”) is a listed public company, incorporated and domiciled in Australia.
BASIS OF PREPARATION
These general purpose inancial statements have been prepared in accordance with Australian Accounting
Standards and Interpretations, issued by the Australian Accounting Standards Board (‘AASB’) and the
Corporations Act 2001, as appropriate for for-proit oriented entities. These inancial statements also comply with
International Financial Reporting Standards as issued by the International Accounting Standards Board (‘IASB’).
Australian Accounting Standards set out accounting policies that the Australian Accounting Standards Board has
concluded would result in inancial statements containing relevant and reliable information about transactions,
events and conditions to which they apply. Compliance with Australian Accounting Standards ensures that the
inancial statements and notes also comply with International Financial Reporting Standards as issued by the
IASB. Material accounting policies adopted in the preparation of these inancial statements are presented below.
They have been consistently applied unless otherwise stated.
The inancial statements have been prepared under the historical cost convention, except for, where applicable,
cash low information, “held-for-trading” inancial assets and certain other inancial assets and liabilities, which
have been measured at fair value.
The preparation of the inancial statements requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of applying the Company’s accounting policies.
The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are
signiicant to the inancial statements are disclosed in note 1(j).
ACCOUNTING POLICIES
(a) Investments
i) Classiication
Investments consist of shares in publicly listed and unlisted companies and ixed interest securities.
It is considered that the information needs of shareholders in a company of this type are better met by stating
investments at fair value rather than historical cost and by presenting the proit or loss on a liquidity basis.
The Company makes short sales in which a borrowed security is sold in anticipation of a decline in the market
value of that security, or it may use short sales for various arbitrage transactions. Short sales are classiied as
inancial liabilities at fair value through the proit or loss.
ii) Recognition and Initial Measurement
Financial instruments, incorporating inancial assets and inancial liabilities, are recognised when the entity
becomes a party to the contractual provisions of the instrument. Trade date accounting is adopted for inancial
assets that are delivered within timeframes established by marketplace convention. Trade date is the date on
which the Company commits to purchase or sell the assets.
Financial instruments are initially measured at fair value plus transactions costs where the instrument is not
classiied as at fair value through proit or loss. Transaction costs related to instruments classiied as at fair value
through proit or loss are expensed to the proit or loss immediately.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
19
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013 Contd’
Financial assets are classiied and measured at fair value with changes in value being recognised in the proit or
loss.
iii) Derecognition
Financial assets are derecognised where the contractual rights to receipt of cash lows expires or the asset is
transferred to another party whereby the entity no longer has any signiicant continuing involvement in the
risks and beneits associated with the asset. Financial liabilities are derecognised where the related obligations
are either discharged, cancelled or expire. The diference between the carrying value of the inancial liability
extinguished or transferred to another party and the fair value of consideration paid, including the transfer of
non-cash assets or liabilities assumed, is recognised in the proit or loss.
iv) Valuation
All investments are classiied and measured at fair value, being market value, including the potential tax charges
that may arise from the future sale of the investments. These fair value adjustments are recognised in the proit
or loss. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent
arm’s length transactions and reference to similar instruments.
v) Unrealised Gains
Unrealised gains were previously included in the operating result for the year and were transferred to an asset
revaluation reserve, net of the potential tax charges that may arise from the future sale of the investments. The
Company will not make transfers to the Asset Revaluation Reserve going forward.
vi) Investment income
Dividend income is recognised in the proit or loss on the day on which the relevant investment is irst quoted
on an “ex-dividend” basis.
Interest revenue is recognised as it accrues, taking into account the efective yield on the inancial asset.
vii) Derivative Instruments
Derivative instruments are measured at fair value. Gains and losses arising from changes in fair value are taken to
the proit or loss.
viii) Financial Liabilities
Borrowed stock is classiied as inancial liabilities at fair value through the proit or loss. Realised and unrealised
gains and losses arising from changes in fair value are included in the proit or loss in the year in which they arise.
(b) Income Tax
The income tax expense or beneit for the period is the tax payable on that period’s taxable income based on
the applicable income tax rate for each jurisdiction, adjusted by changes in deferred tax assets and liabilities
attributable to temporary diferences, unused tax losses and the adjustment recognised for prior periods, where
applicable.
Deferred tax assets and liabilities are recognised for temporary diferences at the tax rates expected to apply
when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively
enacted, except for:
• When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or
liability in a transaction that is not a business combination and that, at the time of the transaction, afects
neither the accounting nor taxable proits; or
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
20
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013 Contd’
• When the taxable temporary diference is associated with investments in subsidiaries, associates or interests in
joint ventures, and the timing of the reversal can be controlled and it is probable that the temporary diference
will not reverse in the foreseeable future.
Deferred tax assets are recognised for deductible temporary diferences and unused tax losses only if it is
probable that future taxable amounts will be available to utilise those temporary diferences and losses.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed each reporting date.
Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable proits
will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are
recognised to the extent that it is probable that there are future taxable proits available to recover the asset.
Deferred tax assets and liabilities are ofset only where there is a legally enforceable right to ofset current tax
assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the
same taxable entity or diferent taxable entity’s which intend to settle simultaneously.
(c) Cash and Cash Equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with inancial institutions, other short-
term, highly liquid investments with original maturities of three months or less that are readily convertible to
known amounts of cash and which are subject to an insigniicant risk of changes in value. For the statement of
cash lows presentation purposes, cash and cash equivalents also includes bank overdrafts, which are shown
within borrowings in current liabilities on the statement of inancial position.
(d) Trade and Other Receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the
efective interest method, less any provision for impairment. Trade receivables are generally due for settlement
within 30 days.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable
are written of by reducing the carrying amount directly. A provision for impairment of trade receivables is raised
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. Signiicant inancial diiculties of the debtor, probability that the debtor
will enter bankruptcy or inancial reorganisation and default or delinquency in payments (more than 60 days
overdue) are considered indicators that the trade receivable may be impaired. The amount of the impairment
allowance is the diference between the asset’s carrying amount and the present value of estimated future cash
lows, discounted at the original efective interest rate. Cash lows relating to short-term receivables are not
discounted if the efect of discounting is immaterial.
Other receivables are recognised at amortised cost, less any provision for impairment.
(e) Trade and Other Payables
These amounts represent liabilities for goods and services provided to the Company prior to the end of the
inancial year and which are unpaid. Due to their short-term nature they are measured at amortised cost and are
not discounted. The amounts are unsecured and are usually paid within 30 days of recognition.
(f ) Impairment of Assets
At each reporting date, the Company reviews the carrying values of its non-inancial assets to determine
whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable
amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to
the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the
proit or loss.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
21
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013 Contd’
(g) Goods and Services Tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), unless GST
incurred is not recoverable from the Australian Taxation Oice (ATO). In this case it is recognised as part of the
cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of
GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in the
Statement of Financial Position.
Cash lows are presented on a gross basis. The GST components of cash lows arising from investing or inancing
activities which are recoverable from, or payable to the tax authority, are presented as operating cash lows.
(h) Segment Reporting
The inancial report is for the individual entity Cadence Capital Limited. It is a publicly listed company limited
by shares, incorporated and domiciled in Australia. The Company is engaged in investment activities conducted
predominantly in Australia and derives revenue and investment income from listed and unlisted securities and
ixed interest securities.
The Company has a diversiied portfolio of investments, with only the Company’s investments in RHG Limited,
Macquarie Group Limited, McMillan Shakespeare Limited, Flexigroup Limited and Bravura Solutions Limited
comprising more than 10% of the company’s income in year to 30 June 2013 (2012: RHG Limited, McMillan
Shakespeare Limited, Flexigroup Limited and Bravura Solutions Limited).
(i) Comparative Figures
Where required by accounting standards, comparative igures have been adjusted to conform with changes in
presentation for the current inancial year.
(j) Critical Accounting Estimates and Judgements
The Directors evaluate estimates and judgements incorporated into the inancial report based on historical
knowledge and best available current information. Estimates assume a reasonable expectation of future events
and are based on current trends and economic data, obtained both externally and within the Company.
Income tax
The entity is subject to income taxes in the jurisdictions in which it operates. Signiicant judgement is required
in determining the provision for income tax. There are many transactions and calculations undertaken during
the ordinary course of business for which the ultimate tax determination is uncertain. The Company recognises
liabilities for anticipated tax audit issues based on the Company’s current understanding of the tax law. Where
the inal tax outcome of these matters is diferent from the carrying amounts, such diferences will impact the
current and deferred tax provisions in the period in which such determination is made.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary diferences only if the Company considers it is
probable that future taxable amounts will be available to utilise those temporary diferences and losses.
There are no estimates or judgements that have a material impact on the Company’s inancial results for the
year ended 30 June 2013. All material inancial assets are valued by reference to quoted prices and therefore no
signiicant estimates or judgements are required in respect of their valuation.
(k) Proits Reserve
The proits reserve is made up of amounts allocated from retained earnings that are preserved for future
dividend payments.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
22
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013 Contd’
(l) New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet
mandatory, have not been early adopted by the entity for the annual reporting period ended 30 June 2013. The
Company’s assessment of the impact of these new or amended Accounting Standards and Interpretations, most
relevant to itself, are set out below.
AASB 9 Financial Instruments, 2009-11 Amendments to Australian Accounting Standards arising from AASB 9, 2010-
7 Amendments to Australian Accounting Standards arising from AASB 9 and 2012-6 Amendments to Australian
Accounting Standards arising from AASB 9
This standard and its consequential amendments are applicable to annual reporting periods beginning on
or after 1 January 2015 and completes phase I of the IASB’s project to replace IAS 39 (being the international
equivalent to AASB 139 ‘Financial Instruments: Recognition and Measurement’). This standard introduces new
classiication and measurement models for inancial assets, using a single approach to determine whether a
inancial asset is measured at amortised cost or fair value.
The accounting for inancial liabilities continues to be classiied and measured in accordance with AASB 139,
with one exception, being that the portion of a change of fair value relating to the Company’s own credit risk is
to be presented in other comprehensive income unless it would create an accounting mismatch. The Company
will adopt this standard from 1 July 2015 but the impact of its adoption is yet to be assessed by the Company.
AASB 13 Fair Value Measurement and AASB 2011-8 Amendments to Australian Accounting Standards arising from
AASB 13
This standard and its consequential amendments are applicable to annual reporting periods beginning on or
after 1 January 2013. The standard provides a single robust measurement framework, with clear measurement
objectives, for measuring fair value using the ‘exit price’ and it provides guidance on measuring fair value when
a market becomes less active. The ‘highest and best use’ approach would be used to measure assets whereas
liabilities would be based on transfer value. As the standard does not introduce any new requirements for the
use of fair value, its impact on adoption by the entity from 1 July 2013 should be minimal, although there will be
increased disclosures where fair value is used.
AASB 2011-4 Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel
Disclosure Requirement
These amendments are applicable to annual reporting periods beginning on or after 1 July 2013, with
early adoption not permitted. They amend AASB 124 ‘Related Party Disclosures’ by removing the disclosure
requirements for individual key management personnel (‘KMP’). The adoption of these amendments from 1
July 2014 will remove the duplication of information relating to individual KMP in the notes to the inancial
statements and the directors report. As the aggregate disclosures are still required by AASB 124 and during the
transitional period the requirements may be included in the Corporations Act or other legislation, it is expected
that the amendments will not have a material impact on the entity.
The inancial report was authorised for issue on 25 September 2013 by the Board of Directors.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
23
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013 Contd’
2. AUDITOR’S REMUNERATION
Remuneration of the auditor of the Company for:
Auditing or reviewing the inancial report
Non-audit Services
Other services provided by a related practice of the auditor:
Taxation services
Other services
3. TAXATION
(a) Current Income Tax Beneit
The prima facie tax on proit/(loss) from ordinary activities before
income tax is reconciled to the income tax expense/(beneit) as follows:
Prima facie tax expense/(beneit) on proit/(loss) from ordinary
activities before income tax at 30%
Imputation credit gross up
Penalties and ines
Franked dividends receivable – prior year
Franked dividends receivable – current year
Under provision of prior year income tax
Rebates/tax ofsets
Imputation credits converted to a loss
Total income tax expense results in a:
Movement in deferred tax liabilities
Movement in deferred tax assets
2012
$
2013
$
2011
$
2012
$
28,850
33,902
8,200
-
37,050
6,888
4,645
45,435
3,917,606
921,567
-
34,997
(125,943)
-
(1,134,465)
(1,937,424)
1,676,338
1,812,640
(136,302)
397,966
781,774
86
24,499
(34,997)
(408)
(2,298,205)
(307,708)
(1,436,993)
18,154
(1,455,147)
1,676,338
(1,436,993)
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
24
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013 Contd’
3. TAXATION (CONTINUED)
(b) Deferred Tax Assets
Provisions
Capitalised share issue costs
Fair value adjustments
Tax losses
Movement in deferred tax assets
Balance at the beginning of the year
Credited to the proit or loss
Charged to equity
(c) Deferred Tax Liabilities
Income provisions
Fair value adjustments
Movement in deferred tax liabilities
Balance at the beginning of the year
Debited to the proit or loss
At reporting date
2013
$
2012
$
8,108
395,604
-
3,315,956
3,719,668
3,096,827
136,302
486,539
5,790
8,984
1,703,522
1,378,531
3,096,827
1,641,680
1,455,147
-
3,719,668
3,096,827
105,202
1,725,592
1,830,794
18,154
1,812,640
1,830,794
18,154
-
18,154
-
18,154
18,154
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
25
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013 Contd’
4. DIVIDENDS
(a) Dividends paid
Dividends paid by the Company
2013
2013
$
2012
$
12,077,331
3,534,128
Dividends paid by the Company
for the year ended 30 June 2013
Cents per share
Date of
payment
Tax rate for
franking
credit
%
Franked
Total Amount
$
Interim 2013 Ordinary & special
Final 2012 Ordinary & special
6.0
8.0
30 April 13
29 October 12
30%
30%
100%
100%
Total Amount
6,953,773
5,123,558
12,077,331
The Board have declared a 5.0 cent per share fully franked inal dividend payable on 30 September 2013.
The Ex-Date for the dividend was 16 September 2013.
2012
Dividends paid by the Company
for the year ended 30 June 2012
Cents per share
Date of
payment
Tax rate for
franking
credit
%
Franked
Total amount
$
Interim 2012 Ordinary & special
Final 2011 Ordinary & special
4.5
6.0
2 April 12
6 October 11
30%
30%
100%
100%
1,677,618
1,856,510
Total Amount
(b) Dividend franking account
3,534,128
Balance of franking account at year end adjusted for franking credits,
arising from payment of provision for income tax and dividends
recognised as receivables and franking credits that may be prevented
from distribution in subsequent inancial years.
4,911,233
7,015,360
Subsequent to the reporting period, the franking account would be reduced by the proposed dividend disclosed in
(a) above. The Company’s ability to continue to pay franked dividends is dependent upon the receipt of franked
dividends from investments and the Company paying tax.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
26
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013 Contd’
5. TRADE AND OTHER RECEIVABLES
Trade debtors
Income receivable
Sundry debtors
2013
$
2012
$
530,888
823,497
170,764
1,525,149
7,965
177,171
48,631
233,767
Terms and Conditions
Trade debtors relate to outstanding settlements, are non-interest bearing and are secured by the Australian Securities
Exchange – National Guarantee Fund. They are settled within 3 days of the purchase being executed. Income receivable
relates to accrued income, it is non-interest bearing and is unsecured.
6. FINANCIAL ASSETS
Long positions - held for trading inancial assets:
Listed investments at fair value
Total inancial assets
7. TRADE AND OTHER PAYABLES
Trade creditors
Sundry creditors - related parties
Sundry creditors – other
97,967,357
97,967,357
34,898,635
34,898,635
489,416
196,604
40,657
726,677
646,675
531,886
34,164
1,212,725
Trade creditors relate to outstanding settlements. They are non-interest bearing and are secured by the Australian
Securities Exchange – National Guarantee Fund. They are settled within 3 days of the purchase being executed.
Sundry creditors – other, are settled within the terms of payment ofered, which is usually within 30 days.
Sundry creditors – related parties, includes fees payable of $147,767 (inclusive of GST) (2012: $492,305) to the
manager, Cadence Asset Management Pty Limited and $48,837 (2012: $39,581) that was payable to MAM Pty Limited
for assignment fees. Refer to Note 16 for further information on Related Parties.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
27
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013 Contd’
8. FINANCIAL LIABILITIES
Short positions - held for trading inancial liabilities:
Listed investments at fair value
Total inancial liabilities
2013
$
2012
$
2,610,060
2,610,060
-
-
The Company’s Financial Assets and Cash are used as collateral for its Financial Liabilities. Refer to Note 14(b) for further
information on Credit Risk.
9. ISSUED CAPITAL
(a) Paid-up Capital
Ordinary shares fully paid
Costs of share issue
Deferred tax asset on capitalised costs of share issue
157,026,984
42,968,094
(2,086,225)
625,866
(464,437)
139,330
155,566,625
42,642,987
2013
Date
Balance at the beginning of
the year
Details of the issue
Share Price
$
No. of Shares
Issue Value
$
37,867,313
42,968,094
August 2012
Exercise of Options
September 2012
Exercise of Options
3/4 October 2012
Placement
$1.2500
$1.2500
$1.3700
4,827,004
6,033,755
12,996,991
16,246,239
8,353,696
11,444,564
29 October 2012
DRP
$1.33958
1,415,130
1,895,679
11 March 2013
Prospectus Tranche 1
10 April 2013
30 April 2013
7 May 2013
Prospectus Tranche 2
DRP
DRP Shortfall Placement
$1.4300
$1.4300
$1.35519
$1.35519
29,457,060
42,123,596
20,979,021
30,000,000
1,354,613
1,835,758
3,305,292
4,479,299
120,556,120
157,026,984
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
28
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013 Contd’
9. ISSUED CAPITAL (CONTINUED)
2012
Date
Details of the issue
Share Price
$
No. of Shares
Issue Value
$
27,601,814
30,174,898
Balance at the beginning of
the year
6 October 2011
DRP
September 2011
Exercise of Options
February 2012
Exercise of Options
2 April 2012
May 2012
DRP
$1.16199
605,789
$1.2500
$1.2500
3,340,026
5,732,759
$1.27656
551,025
703,928
4,175,033
7,165,949
703,411
44,875
42,968,094
Exercise of Options
$1.2500
35,900
37,867,313
Holders of ordinary shares are entitled to receive dividends as declared from time to time, and are entitled to one vote
per share at shareholder meetings, otherwise each member present at a meeting or by proxy has one vote on a show
of hands. In the event of the winding up of the Company, ordinary shareholders rank after creditors and share in any
proceeds on winding up in proportion to the number of shares held.
(b) Capital Management
Management controls the capital of the Company in order to maintain a good debt to equity ratio, provide the
shareholders with adequate returns and ensure that the Company can fund its operations and continue as a going
concern.
The Company’s debt and capital includes ordinary share capital and inancial liabilities, supported by inancial assets.
There are no externally imposed capital requirements.
Management efectively manages the Company’s capital by assessing the Company’s inancial risks and
adjusting its capital structure in response to changes in these risks and in the market. These responses include the
management of debt levels, distributions to shareholders and share issues.
There has been no change in the strategy adopted by the Board to control the capital of the Company since the prior
year. The Company is not subject to any externally imposed capital requirements.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
29
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013 Contd’
10. PROFITS RESERVE
Proits Reserve
Movement in Proits Reserve
Opening balance
Transfer from retained earnings
Dividends paid (Note 4)
2013
$
2012
$
12,568,818
11,018,104
11,018,104
-
13,628,045
11,018,104
(12,077,331)
-
12,568,818
11,018,104
The Proit Reserve is made up of amounts allocated from retained earnings that are preserved for future dividend payments.
11. RETAINED EARNINGS
Opening balance
Proit attributable to members of the Company
Transfer to proits reserve
Dividends paid (Note 4)
12. CASH FLOW INFORMATION
(a) Reconciliation of cash
Cash at the end of the period as shown in the Statement of Cash Flows
is reconciled to the related items in the Statement of Financial Position
as follows:
Cash and cash equivalents
(1,507,140)
11,382,348
10,281,546
2,763,546
(13,628,045)
(11,018,104)
-
(3,752,837)
(3,534,128)
(1,507,140)
63,337,963
63,337,963
15,155,601
15,155,601
The weighted average interest rate for cash and cash equivalents as at June 2013 is 3.22% (June 2012: 3.25%). The
Company has a Prime Brokerage lending facility with Citigroup Global Markets Limited and Citigroup Global Markets
Australia Pty Ltd its Prime Broker and Custodian. This at call facility is secured by a irst charge over the inancial assets
of the Company.
The Company has granted a ixed and loating charge over all of the Company’s right, title and interest in the assets
transferred to the Custodian, including those transferred to the Custodian in accordance with Prime Brokerage
Agreement, and any right which arises after the date of the Charge to receive cash or return of property from Citigroup
under the Prime Brokerage Agreement, as security for payments and performance by the Company of all of its
obligations to Citigroup under the Prime Brokerage Agreement.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
30
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013 Contd’
12. CASH FLOW INFORMATION (CONTINUED)
(b) Reconciliation of Operating Proit after Income Tax
Operating proit after income tax
Add/(Less) items classiied as Investing/Financing Activities:
Realised loss on sale of investments
Add non-cash items:
Unrealised loss/(proit) on investments
Net cash provided by Operating Activities before changes in assets and
liabilities:
(Increase)/decrease in receivables
(Increase)/decrease in deferred tax assets
(Decrease)/increase in trade and other payables
(Decrease)/increase in deferred tax liabilities
Net cash provided by Operating Activities
(c) Non-cash Financing Activities
2013
$
2012
$
11,382,348
2,763,546
5,849,440
459,159
(11,430,387)
3,811,648
(768,455)
(136,305)
(328,791)
1,812,641
6,380,491
51,839
(1,455,147)
(2,142,112)
18,154
3,507,087
During the inancial year the Company issued the following shares through its Dividend Reinvestment Plan:
- 1,415,130 shares at $1.33958 on 29 October 2012
- 1,354,613 shares at $1.35519 on 30 April 2013
During the previous inancial year the Company issued the following shares through its Dividend Reinvestment Plan:
- 605,789 shares at $1.16199 on 6 October 2011
- 551,025 shares at $1.27656 on 2 April 2012
13. EARNINGS PER SHARE
Proit after income tax used in the calculation of earnings per share
11,382,348
2,763,546
Weighted average number of ordinary shares outstanding
during the year used in calculation of basic earnings per share
74,196,194
33,236,125
No.
No.
Weighted average number of ordinary shares and options
outstanding during the year used in calculation of
diluted earnings per share
74,196,194
33,236,125
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
31
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013 Contd’
14. FINANCIAL RISK MANAGEMENT
Financial Risk Management Policies
The Company’s inancial instruments consist of money market instruments, short and long term investments,
accounts receivable and payable.
(i) Financial Risk Exposures and Management
The main risks the Company is exposed to through its inancial instruments are interest rate risk, liquidity risk,
credit risk and market risk.
(a) Terms, Conditions and Accounting Policies
The Company’s accounting policies are included in Note 1, while the terms and conditions including interest rate
risk of each class of inancial asset, inancial liability and equity instrument, both recognised and
unrecognised at balance date are included under the appropriate note for that instrument.
(b) Credit Risk
The Company takes on exposure to credit risk, which is the risk that a counterparty (prime broker, custodian and
brokers) will be unable to pay amounts in full when due.
All transactions in listed securities are settled/paid for upon delivery using approved brokers. The risk of
default is considered minimal, as delivery of securities sold is only made once the broker has received
payment. Payment is made on a purchase once the securities have been received by the broker. The trade will
fail if either party fails to meet their obligation.
There are risks involved in dealing with custodians or prime brokers who settle trades. Under certain
circumstances, including certain transactions where the Company’s assets are pledged as collateral for
leverage from a prime broker/custodian, or where the Company’s assets are held at a prime broker/
custodian, the securities and assets deposited with the prime broker/custodian may be exposed to a credit risk
with regards to such parties. In addition, there may be practical or timing problems associated with
enforcing the Company’s rights to its assets in case of an insolvency of any such party.
The Company maintains a Prime Brokerage lending facility and custody account with its prime broker and
primary custodian Citigroup Global Markets Limited and Citigroup Global Markets Australia Pty Ltd. There is no
guarantee that Citigroup or any other prime broker/custodian that the Company may use from time to time, will
not become insolvent. In an insolvency or liquidation of a prime broker/custodian that has custody of Company
assets, there is no certainty that the Company would not incur losses due to its assets being unavailable for a
period of time or ultimately less than full recovery of its assets, or both. Because
substantially all of the Company’s assets are custodied with a single prime broker and in some cases a single major
Australian bank, such losses could be signiicant and materially impair the ability of the Company to achieve its
investment objective.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
32
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013 Contd’
14. FINANCIAL RISK MANAGEMENT (CONTINUED)
(c) Liquidity Risk
Liquidity risk represents the risk that an entity will encounter diiculty in meeting obligations associated with
inancial liabilities. The Company’s major cash outlows are the purchase of securities and dividends paid to
shareholders, the levels of which are managed by the Board and the management company. The Company’s inward
cash lows depend upon the level of sales of securities, dividends, interest received and any exercise of options that
may be on issue.
The Company monitors its cashlow requirements daily by reference to known transactions to be paid or received.
The Company may hold a portion of its portfolio in cash and short-term ixed interest securities suicient to ensure
that it has cash available to meet all payments. Alternatively, the Company can increase its level of sales of the readily
tradeable securities it holds to increase cash inlows or it can use its lending facility with its Prime Broker Citigroup.
(d) Market Risk
Market risk represents the risk that the fair value or future cash lows of a inancial instrument will luctuate because
of changes in market prices.
By its nature, as an investment company that invests in tradeable securities, the Company will always be subject to
market risk as it invests its capital in securities which are not risk free as the market price of these securities can
luctuate.
The Company can seek to reduce market risk by not being overly exposed to one company or one particular sector of
the market. The Company does not have set parameters as to a minimum or maximum amount of the portfolio that
can be invested in a single company or sector.
(e) Interest Rate Risk
Any excess cash and cash equivalents of the Company are invested at short-term market interest rates. Floating rate
instruments expose the Company to cash low risk, whereas short term ixed rate instruments expose the Company
to interest rate risk. Excess cash and cash equivalent balances are monitored closely and are generally moved into
short-term bank bills.
(ii) Financial instrument composition and maturity analysis
The tables on the next page relect the undiscounted contractual settlement terms for inancial instruments of a ixed
period of maturity, as well as the Company’s expectations of the settlement period for all other inancial instruments.
As such, the amounts may not reconcile to the Statement of Financial Position.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
33
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013 Contd’
14. FINANCIAL RISK MANAGEMENT (CONTINUED)
2013
Assets
Financial assets
Cash and cash equivalents
Other receivables
Total assets
Liabilities
Financial liabilities
Balances due to brokers
Other payables
Total liabilities
2012
Assets
Financial assets
Cash and cash equivalents
Other receivables
Total assets
Liabilities
Balances due to brokers
Other payables
Total liabilities
Interest bearing
Weighted Average
Interest Rate
Less than 90
days
$
More than 1
year
$
Non-interest
bearing
$
Total
$
-
3.22%
-
-
-
-
-
66,337,963
-
66,337,963
-
-
-
-
97,967,357
-
1,525,149
99,492,506
97,967,357
66,337,963
1,525,149
165,830,469
-
-
2,610,060 2,610,060
-
-
489,416 489,416
-
-
237,261 237,261
-
-
3,336,737 3,336,737
Interest bearing
Weighted Average
Interest Rate
Less than
90 days
$
More than 1
year
$
Non-interest
bearing
$
Total
$
-
3.25%
-
-
-
-
15,155,601
-
15,155,601
-
-
-
-
-
-
-
-
-
-
34,898,635
-
233,767
35,132,402
34,898,635
15,155,601
233,767
50,288,003
646,675
566,050
646,675
566,050
1,212,725
1,212,725
2013
$
2012
$
237,261
-
566,050
-
34
Other payables are expected to be paid as follows:
- Less than 6 months
- 6 months to one year
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013 Contd’
14. FINANCIAL RISK MANAGEMENT (CONTINUED)
(iii) Financial Instruments Measured at Fair Value
The inancial assets and liabilities recognised at fair value in the Statement of Financial Position have been analysed
and classiied using a fair value hierarchy relecting the signiicance of the inputs in making the measurements. The
fair value hierarchy consists of the following levels:
Level 1: Quoted prices in active markets for identical assets or liabilities
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either
directly (as prices) or indirectly (derived from prices).
Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs)
Included within level 1 of hierarchy are listed investments. The fair values of these inancial assets and liabilities have
been based on the closing quoted last sales prices at the end of the reporting period, excluding transaction costs.
2013
Financial assets
Financial liabilities
Total
2012
Financial assets
Financial liabilities
Total
(iv) Sensitivity Analysis
Level 1
$
Level 2
$
Level 3
$
Total
$
97,728,723
(2,610,060)
95,118,663
238,634
-
238,634
Level 1
$
Level 2
$
Level 3
$
34,620,622
-
34,620,622
278,013
-
278,013
-
-
-
-
-
-
97,967,357
(2,610,060)
95,357,297
Total
$
34,898,635
-
34,898,635
The Company has performed a sensitivity analysis relating to its exposure to interest rate risk, and market risk at
balance date. This sensitivity analysis demonstrates the efect on the current year results and equity which could result
from a change in these risks.
Interest Rate Sensitivity Analysis
The sensitivity analyses below have been determined based on the Company’s exposure to interest rates at the
reporting date and the stipulated change taking place at the beginning of the inancial year and held constant
through the reporting period. The efect on proit and equity as a result of changes in the interest rate, with all other
variables remaining constant would be as follows:
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
35
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013 Contd’
14. FINANCIAL RISK MANAGEMENT (CONTINUED)
Change in proit before tax
- Increase in interest rate by 1%
- Decrease in interest rate by 1%
Change in equity
- Increase in interest rate by 1%
- Decrease in interest rate by 1%
2013
$
2012
$
379,672
(379,672)
379,672
(379,672)
146,228
(146,228)
146,228
(146,228)
Market Risk Sensitivity Analysis
At 30 June 2013, the efect on proit and equity as a result of changes in the market risk, with all other variables remaining
constant would be as follows:
Change in proit before tax
- Increase in market price by 2%
- Decrease in market price by 2%
Change in equity
- Increase in market price by 2%
- Decrease in market price by 2%
2012
$
2012
$
1,907,196
(1,907,196)
1,907,196
(1,907,196)
697,953
(697,953)
697,953
(697,953)
15. KEY MANAGEMENT PERSONNEL COMPENSATION
The names and position held of the Company’s key management personnel (including Directors) in oice at any time
during the inancial year are:
Karl Siegling
Chairman and Company Secretary
Geofrey Wilson (Resigned 14 February 2013)
Wayne Davies (Appointed 14 February 2013)
Ronald Hancock (Appointed 17 June 2013)
James Chirnside
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
36
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013 Contd’
15. KEY MANAGEMENT PERSONNEL COMPENSATION (CONTINUED)
(a) Remuneration
There are no executives that are paid by the Company. Cadence Asset Management Pty Limited, the investment
manager of the Company, remunerates Karl Siegling as a consultant and as a director of the Company. The manager
also provides day to day management of the Company and is remunerated as outlined in Note 16 – Related Parties
Transactions.
Short-term Beneits - Directors’ Fees
Post-employment Beneits - Superannuation
(b) Compensation Practices
2013
$
2012
$
27,522
2,478
30,000
27,522
2478
30,000
The Board from time to time determines remuneration of Non-Executive Directors within the maximum amount
approved by the shareholders. Non-Executive Directors are not entitled to any other remuneration.
Fees and payments to Non-Executive Directors relect the demands that are made on, and the responsibilities of, the
Directors and are reviewed annually by the Board. The Company determines the remuneration levels and ensures they
are competitively set to attract and retain appropriately qualiied and experienced Directors.
Directors’ base fees are presently limited to a maximum of $55,000 per annum between the three Directors.
Non-Executive Directors do not receive bonuses nor are they issued options on securities. Directors’ fees cover all main
board activities and membership of committees. Directors’ fees are not linked to the performance of the Company.
(c) Shareholdings
As at 30 June 2013, the Company’s key management personnel indirectly held the following shares in the Company:
Director
Balance at 1 July
2012
Acquisitions /
Balance held on
appointment
Balance held on
resignation
Balance at 30 June
2013
Karl Siegling
Wayne Davies
Ronald Hancock
Geofrey Wilson
James Chirnside
3,875,457
3,839,198
-
-
1,560,000
25,932
259,798
139,860
-
-
5,461,389
4,238,856
-
-
-
(1,560,000)
-
(1,560,000)
7,714,655
259,798
139,860
-
25,932
8,140,245
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
37
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013 Contd’
15. KEY MANAGEMENT PERSONNEL COMPENSATION (CONTINUED)
As at 30 June 2013, the Company’s key management personnel indirectly held the following options in the Company:
Director
Balance at 1 July 2012
Disposals
Options
Exercised
Balance at 30 June
2013
Karl Siegling
3,007,112
3,007,112
-
-
(3,007,112)
(3,007,112)
-
-
As at 30 June 2012, the Company’s key management personnel indirectly held the following shares in the Company:
Director
Balance at 1 July
2011
Acquisitions
Disposals
Balance at 30
June 2012
Karl Siegling
Geofrey Wilson
James Chirnside
3,237,474
2,050,000
12,966
5,300,440
637,983
-
12,966
650,949
-
(490,000)
-
3,875,457
1,560,000
25,932
(490,000)
5,461,389
As at 30 June 2012, the Company’s key management personnel indirectly held the following options in the Company:
Director
Karl Siegling
Geofrey Wilson
James Chirnside
Balance at
1 July 2011
Bonus 1:1
Option Issue
Disposals
Options
Exercised
Balance at
30 June 2012
-
-
-
-
3,237,474
-
(230,362)
3,007,112
2,050,000
(2,050,000)
12,966
-
5,300,440
(2,050,000)
-
(12,966)
(243,328)
-
-
3,007,112
Directors and Director related entities disposed of and acquired ordinary shares in the Company on the same terms and
conditions available to other shareholders. The Directors have not, during or since the end of the inancial year, been
granted options over unissued shares or interests in shares of the Company as part of their remuneration.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
38
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013 Contd’
16. RELATED PARTIES TRANSACTIONS
All transactions with related entities were made on normal commercial terms and conditions
Karl Siegling is the sole Director and a beneicial owner of Cadence Asset Management Pty Limited, the entity
appointed to manage the investment portfolio of Cadence Capital Limited. Wayne Davies is also a beneicial owner
of Cadence Asset Management Pty Limited. In its capacity as Manager, Cadence Asset Management Pty Limited was
paid a management fee of $1,115,606 (inclusive of GST, 2012: $474,724). This is equivalent to 0.08333% of the value
of the portfolio calculated on the last business day of each month. Over a full year, the monthly management fee will
be comparable to a fee of 1% of the gross value of the portfolio per annum. As at 30 June 2013, the balance payable
to the manager was $102,856 (inclusive of GST, 2012: $25,796).
The duties of the manager are to manage the portfolio and to manage and supervise all investments, maintain the
corporate and statutory records of the Company, liaise with the ASX with respect to compliance with the ASX listing
rules, liaise with ASIC with respect to compliance with the Corporations Act and liaise with the share registrar of the
Company.
In addition, Cadence Asset Management Pty Limited is to be paid, annually in arrears, a performance fee, being 20%
of:
• where the level of the All Ordinaries Accumulation Index has increased over that period, the amount by which the
level of the portfolio exceeds this increase, or
• where the All Ordinaries Accumulation Index has decreased over that period, the amount of the increase in the
value of the portfolio.
No performance fee is payable in respect of any performance period, where the portfolio has decreased in value over
that period. For the year ended 30 June 2013, a performance fee of $41,411 (inclusive of GST 2012: $463,007) was
payable to Cadence Asset Management Pty Limited. As at 30 June 2013, the balance payable to the manager was
$41,411 (inclusive of GST, 2012: $463,007).
Cadence Asset Management Pty Limited employs accounting personnel to provide accounting services to Cadence
Capital Limited. These services are provided on commercial terms and include a standard charge of $1,375 (inclusive
of GST) per month and an additional charge of $3,500 (inclusive of GST) is charged for preparing the half year and full
year inancial statements.
Cadence Capital Limited has in place an Assignment Deed with Cadence Asset Management Pty Limited and MAM Pty
Limited. Geofrey Wilson is a Director of MAM Pty Limited and entities associated with him hold 80% of its issued share
capital. In its capacity as Manager, Cadence Asset Management Pty Limited assigns a percentage of the management
and performance fee to MAM Pty Limited. Subsequent to the initial capital raising, the assignment rate was 4.05%. At
30 June 2013, an amount of $48,837 (2012: $39,581) was payable to MAM Pty Limited. Geofrey Wilson resigned from
the Board of Cadence Capital Limited on 14th February 2013.
17. EVENTS AFTER THE REPORTING PERIOD
The Board of Directors of Cadence Capital Limited have declared a 5.0 cent per share fully franked inal dividend
payable on 30 September 2013. The Ex-Date for the dividend was 16 September 2013.
Subsequent to year end two large positions held by the Company have made announcements to the market:
• RHG Limited, a 8.1% position in the portfolio, has received proposals from Pepper Australia Pty Limited (see below)
and Resimac Syndicate to acquire the Company.
• McMillan Shakespeare Ltd, a 4.8% position in the portfolio, has been negatively impacted by the Government’s
proposed changes to the FBT treatment of motor vehicles.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
39
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013 Contd’
17. EVENTS AFTER THE REPORTING PERIOD (CONTINUED)
On 15 August 2013 Pepper Australia Pty Limited announced a Scheme of Arrangement to acquire 100% of RHG
Limited for a combination of cash and Cadence Capital Limited scrip. On the 9 September 2013 an announcement was
made increasing the ofer of the Scheme of Arrangement. Under the scheme, Pepper would acquire RHG Limited for
consideration of 50.8 cents per share, comprising 36 cents per share cash and shares in Cadence Capital Limited at the
ratio of one fully paid up ordinary share in Cadence Capital Limited for every 10 ordinary shares in RHG Limited held.
Cadence Capital Limited would pay those RHG Limited shareholders who receive Cadence Capital Limited shares under
the scheme a fully franked dividend of 5 cents per Cadence Capital Limited share.
Other than the above there has not arisen in the interval between the end of the inancial year and the date of this
report any other item, transaction or event of material and unusual nature likely, in the opinion of the Company, to
signiicantly afect the operations of the entity, the results of those operations, or the state of afairs of the entity, in
future inancial years.
18. CONTINGENT LIABILITIES
There were no contingencies as at 30 June 2013 (2012: nil).
19. CAPITAL COMMITMENTS
There were no capital commitments for the Company entered into before June 2013, which settle after year end (2012:
nil)
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
40
DIRECTORS’ DECLARATION
The Directors of Cadence Capital Limited declare that:
1. The financial statements and notes set out on pages 15 to 40 and the additional disclosures included in the Directors’
Report designated as Remuneration Report, set out on pages 7 to 9, of the Company are in accordance with the
Corporations Act 2001, including:
(a) 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
(b) giving a true and fair view of the financial position of the Company as at 30 June 2013 and of its performance for
the year ended on that date;
2. The Director and the Chief Operating Officer of the Manager, Cadence Asset Management Pty Limited has declared
that:
(a) the financial records of the Company for the financial year have been properly maintained in accordance with
section 286 of the Corporations Act 2001;
(b) the financial statements and notes for the financial year comply with the Accounting Standards; and
(c) the financial statements and notes for the financial year give a true and fair view.
3. At the date of this declaration, in the Directors’ opinion there are reasonable grounds to believe that the Company
will be able to pay its debts as and when they become due and payable.
This declaration is made in accordance with a resolution of the Board of Directors.
Karl Siegling
Director
Dated in Sydney, this 25th day of September 2013
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
41
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS
OF CADENCE CAPITAL LIMITED
Level 15, 135 King Street
Sydney NSW 2000
Level (cid:1011), (cid:1006)(cid:1004) Hunter Street
Sydney NSW (cid:1006)(cid:1004)(cid:1004)(cid:1004)
T +61 (0)2 8236 7700
F +61 (0)2 9233 4636
T +(cid:1010)(cid:1005) (cid:894)(cid:1004)(cid:895)(cid:1006) (cid:1012)(cid:1006)(cid:1007)(cid:1010) (cid:1011)(cid:1011)(cid:1004)(cid:1004)
www.moorestephens.com.au
F +(cid:1010)(cid:1005) (cid:894)(cid:1004)(cid:895)(cid:1006) (cid:1013)(cid:1006)(cid:1007)(cid:1007) (cid:1008)(cid:1010)(cid:1007)(cid:1010)
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF CADENCE CAPITAL LIMITED
ABN 17 112 870 096
Report on the Financial Report
We have audited the accompanying financial report of Cadence Capital Limited (the “company”), which comprises the statement
of financial position as at 30 June 2013, the statement of comprehensive income, statement of changes in equity and statement
of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory
information and the directors’ declaration.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation and fair presentation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control
as the directors determine is necessary to enable the preparation of the financial report that is free from material
misstatement, whether due to fraud or error. In Note 1, the directors also state that, in accordance with Accounting Standard
AASB 101: Presentation of Financial Statements, that the financial statements comply with International Financial Reporting
Standards (IFRS).
Auditor’s Responsibility
Our responsibility is to express an opinion on the inancial report based on our audit. We conducted our audit in accordance
with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to
audit engagements and plan and perform the audit to obtain reasonable assurance about whether the inancial report is free
from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the inancial report.
The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement
of the inancial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity’s preparation and fair presentation of the inancial report in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the efectiveness of the entity’s internal
control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by the directors, as well as evaluating the overall presentation of the inancial report.
We believe that the audit evidence we have obtained is suicient and appropriate to provide a basis for our audit opinion.
Moore Stephens Sydney ABN 90 773 984 843. Liability limited by a scheme approved under Professional Standards Legislation*
*Other than for the acts or omissions of inancial services licensees. An independent member of Moore Stephens International Limited -
members in principal cities throughout the world The Sydney Moore Stephens irm is not a partner or agent of any other Moore Stephens irm.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
42
Independence
Level (cid:1011), (cid:1006)(cid:1004) Hunter Street
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
Sydney NSW (cid:1006)(cid:1004)(cid:1004)(cid:1004)
Auditor’s Opinion
In our opinion:
T +(cid:1010)(cid:1005) (cid:894)(cid:1004)(cid:895)(cid:1006) (cid:1012)(cid:1006)(cid:1007)(cid:1010) (cid:1011)(cid:1011)(cid:1004)(cid:1004)
F +(cid:1010)(cid:1005) (cid:894)(cid:1004)(cid:895)(cid:1006) (cid:1013)(cid:1006)(cid:1007)(cid:1007) (cid:1008)(cid:1010)(cid:1007)(cid:1010)
a) the financial report of Cadence Capital Limited is in accordance with the Corporations Act 2001, including:
i. giving a true and fair view of the company’s financial position as at 30 June 2013 and of its performance for the year ended
on that date; and
ii. complying with Australian Accounting Standards and the Corporations Regulations 2001.
b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1.
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 7 to 9 of the directors’ report for the year ended 30 June 2013. The
directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with
section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on
our audit conducted in accordance with Australian Auditing Standards.
Auditor’s Opinion
In our opinion the remuneration report of Cadence Capital Limited for the year ended 30 June 2013 complies with
section 300A of the Corporations Act 2001.
Matters Relating to the Electronic Publication of the Audited Financial Report
This auditor’s report relates to the financial report for the year ended 30 June 2013 included on Cadence Capital Limited’s web-
site. The Company’s directors are responsible for the integrity of Cadence Capital Limited’s website. We have not been engaged
to report on the integrity of Cadence Capital Limited’s website. The auditor’s report refers only to the subject matter described
above. It does not provide an opinion on any other information which may have been hyperlinked to/from these statements. If
users of the financial report are concerned with the inherent risks arising from publication on a website, they are advised to refer
to the hard copy of the audited financial report to confirm the information contained in this website version of the financial
report.
Moore Stephens Sydney
Chartered Accountants
Scott Whiddett
Partner
Dated in Sydney this 25th day of September 2013
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
43
ASX ADDITIONAL INFORMATION
Additional information required by the Australian Stock Exchange Limited Listing Rules and not disclosed elsewhere
in this report.
SHAREHOLDINGS
Substantial shareholders (as at 31 August 2013)
The following have advised that they are a substantial shareholder of Cadence Capital Limited. The holding of a
relevant interest does not infer beneficial ownership. Where two or more parties have a relevant interest in the same
shares, those shares have been included for each party.
Substantial ordinary shareholders as at ex-date
No. of shares
% of total
Esselmont Pty Ltd & associated entities
Yarandi Investments Pty Ltd & associated entities
7,714,655
6,585,245
Distribution of shareholders (as at 31 August 2013)
No. of shareholders
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
The number of shareholdings held in less than marketable parcels is 40.
6.401
5.464
99
379
517
1,596
173
2,764
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
44
ASX ADDITIONAL INFORMATION Contd’
Twenty largest shareholders - Ordinary shares (as at 31 August 2013)
Name
Number of ordinary
shares held
% of issued
capital held
Esselmont Pty Ltd and associates
Yarandi Investments Pty Ltd & associated entities
Berg Family Foundation Pty Ltd & associated entities
Mr Victor John Plummer
Mr David Teoh
Bannaby Investments Pty Ltd
Mr A Kavangh & Mr M Mahoney
Mr S. Gubbins & Mrs B.Gubbins
Corfam Pty Limited
Golden Words Pty Ltd
HSBC Custody Nominees (Australia) Limited
Huoncan Super Pty Ltd
Best & Morgan Pty Ltd
Mr Cameron McFarlane
Ms Valerie Mitchell
Mr Aaron Francis Quirk
Smaller Holdings Pty Limited
Robinson Page Management
Caforb Pty Limited
Kinsbrook Pty Limited
7,714,655
6,585,245
3,800,410
2,496,622
2,481,034
2,381,219
1,004,828
990,330
987,477
959,790
938,612
834,274
779,500
720,000
687,500
666,123
600,000
599,999
522,137
522,137
36,271,892
6.4%
5.5%
3.2%
2.1%
2.1%
2.0%
0.8%
0.8%
0.8%
0.8%
0.8%
0.7%
0.6%
0.6%
0.6%
0.6%
0.5%
0.5%
0.4%
0.4%
30.1%
STOCK EXCHANGE LISTING
Quotation has been granted for all of the ordinary shares of the Company on all Member Exchanges of the ASX
Limited.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2013
45