2016
ANNUAL
REPORT
CADENCE CAPITAL LIMITED
A.B.N. 17 112 870 096
CONTENTS
Company Particulars
Manager’s Report
Top 20 Positions
Directors’ Report to Shareholders
Auditor’s Independence Declaration
Corporate Governance Statement
Statement of Profit or Loss and Other Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
ASX Additional Information
3
4
6
7
13
14
17
18
19
20
21
39
40
42
CADENCE CAPITAL LIMITED ANNUAL REPORT 2016 - A.B.N. 17 112 870 096
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CADENCE CAPITAL LIMITED
A.B.N. 17 112 870 096
DIRECTORS
Karl Siegling
James Chirnside
Wayne Davies
Ronald Hancock
SECRETARY
Wayne Davies
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
COMPANY PARTICULARS
PRIME BROKERS AND CUSTODIANS
OF THE COMPANY
Deutsche Bank AG
Winchester House,1 Great Winchester Street
London EC2N 2DB
The Bank of New York Mellon
160 Queen Victoria Street,
London EC4V 4LA
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
Pitcher Partners
Level 22 MLC Centre
19 Martin Place
Sydney NSW 2000
ASX CODE
Cadence Capital Limited Ordinary Shares (CDM)
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
COUNTRY OF INCORPORATION
Australia
CADENCE CAPITAL LIMITED ANNUAL REPORT 2016 | A.B.N. 17 112 870 096
3
MANAGER’S REPORT
SUMMARY OF RESULTS
4.0 cents fully franked final dividend,
•
• Annualised yield of 7.1% fully franked (10.1% grossed-up),
•
Fund’s gross performance was down 12.19% during the year giving the Company a net loss after tax of
$30.8 million
SHAREHOLDER PERFORMANCE
Performance* to 30th June 2016
CDM**
All Ords
Outperformance
1 Month
1 Year
3 Years
5 Years
8 Years
10 Years
Since Inception (10.8 years)
Since Inception Annualised (10.8 years)
-5.76%
-12.19%
14.40%
47.42%
177.56%
240.05%
352.44%
15.08%
-2.28%
2.01%
26.81%
42.24%
41.34%
61.85%
82.76%
5.77%
-3.48%
-14.20%
-12.41%
+5.18%
+136.22%
+178.20%
+269.68%
+9.31%
* Before Management and Performance Fees **These numbers include the franking value of the substantial RHG dividend received in May 2011
For the financial year ended 30 June 2016, Cadence Capital Limited produced a negative gross performance
of 12.19% compared to an increase in the All Ordinaries Accumulation Index of 2.01%. Over the past few
years the portfolio has benefitted from falling resource prices, a falling Australian dollar and the strength of
diversified financial services companies on the back of falling interest rates. During the last half of the financial
year each of these trends reversed and our portfolio underperformed the market by 15.94% over this six-month
period.
Stock positions that performed well for the Company in 2016 were Apiam Animal Health Ltd., IPH
Ltd., Melbourne IT Ltd., TPG Telecom Ltd., Visa Inc. and Woodside Petroleum Ltd. Stock positions that
underperformed for the Company in 2016 were Australia and New Zealand Banking Group, Gilead Sciences
Inc., Henderson Group Plc., Luxottica Group SPA, Macquarie Group Ltd. and Softbank Group Corp.
DIVIDENDS
During the year the Company declared a 9.0 cents per share fully franked dividend which equates to a 7.1%
annual fully franked yield, or a 10.1% gross yield (grossed up for franking credits) based on the CDM share
price on the date of writing this report of $1.27. Given the record low interest rate environment in Australia,
we are pleased that the Company has once again delivered a healthy fully franked yield.
4
CADENCE CAPITAL LIMITED ANNUAL REPORT 2016 | A.B.N. 17 112 870 096
MANAGER’S REPORT CONT’D
DIVIDENDS (Continued)
Calendar Year
Interim
Final
Special
Total
Gross
(Inc. Franking)
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2.0c
2.5c
-
2.0c
3.0c
4.0c
5.0c
5.0c
5.0c
5.0c
2.0c
2.2c*
2.0c
2.0c
3.0c
4.0c
5.0c
5.0c
5.0c
4.0c
2.0c
-
-
-
3.0c
4.5c
1.0c
-
1.0c
TOTAL
33.5c
34.2c
11.5c
6.0c
4.7c
2.0c
4.0c
9.0c
12.5c
11.0c
10.0c
11.0c
9.0c
79.2c
8.6c
5.8c
2.9c
5.7c
12.9c
17.8c
15.7c
14.3c
15.7c
12.9c
112.3c
* Off market Equal access buy back
SUMMARY AND OUTLOOK
The volatility in share prices in this calendar year has been high, but over time trends re-emerge, and as
always, present new investment opportunities. In July and August we have seen the first tentative signs of
recovery in markets and uncertainty has eased. Cadence continues to enter new positions in new emerging
trends, and stocks, following the Cadence Investment Process, which over time has proven to outperform the
market. As the largest shareholder in the Fund the negative performance, and the underperformance against
the All Ordinaries Accumulation Index, has not been pleasant. We remain committed to outperforming the
All Ordinaries Accumulation Index and to producing longer term risk adjusted returns in excess of what the
broader equity market provides.
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 2016 | A.B.N. 17 112 870 096
5
TOP 20 POSITIONS
AS AT 30 JUNE 2016
LONG AND SHORT POSITIONS
Long Positions
Company Name
MQG
MLB
AIO
HGG
Macquarie Group Ltd
Melbourne IT Ltd
Asciano Ltd
Henderson Group Plc
GOOG US
Alphabet Inc
RFG
MA US
FB US
9984 JP
SHV
5930 JP
AIG US
IPH
CBA
GILD US
LUX IM
ANZ
Retail Food Group
Mastercard Inc
Facebook Inc
Softbank Group Corp
Select Harvest Ltd
Samsung Electronics Co Ltd
American International Group
IPH Ltd
Commonwealth Bank of Australia
Gilead Sciences Inc
Luxottica Group SPA
Australia and New Zealand banking Group
Exposure
$
% Of
Equity
$42,743,011
13.33%
$25,760,078
$20,967,638
$17,530,563
$12,976,294
$12,960,866
$12,578,942
$11,449,473
$10,726,511
$9,756,157
$8,201,334
$7,141,661
$6,963,536
$6,562,706
$5,772,807
$5,298,260
$5,293,901
8.03%
6.54%
5.47%
4.05%
4.04%
3.92%
3.57%
3.35%
3.04%
2.56%
2.23%
2.17%
2.05%
1.80%
1.65%
1.65%
Short Positions
Company Name
WPL
MYO
RIO
Woodside Petroleum Ltd
MYOB Group Ltd
Rio Tinto Ltd
Exposure
$
$7,241,996
$5,989,8499
$5,576,092
% Of
Equity
2.26%
1.87%
1.74%
Total Top 20 Long and Short Positions
$ 203,875,801
63.59%
TOTAL PORTFOLIO POSITIONS:
Portfolio Net Exposure Long Positions
Portfolio Net Exposure Short Positions
Total Portfolio Net Exposure
$ 274,959,635
85.77%
$ 19,317,558
6.03%
$ 255,642,077
79.74%
6
CADENCE CAPITAL LIMITED ANNUAL REPORT 2016 | A.B.N. 17 112 870 096
DIRECTORS’ REPORT TO SHAREHOLDERS
FOR THE YEAR ENDED 30 JUNE 2016
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 2016.
PRINCIPAL ACTIVITY
The principal activity of the Company was investing primarily in securities listed globally. 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 loss before tax of $47,064,148 (2015: operating
profit before tax of $24,702,344) and an operating loss after tax of $30,882,043 (2015: operating profit after tax
of $19,348,194).
REVIEW OF OPERATIONS
Investments are valued continuously to market value. For the year ended 30 June 2016, net investments were
valued at $294,079,451 (2015: $280,018,162). Further information regarding the performance of the entity
during the reporting period is provided in the Manager’s Report, which precedes this report.
FINANCIAL POSITION
The net asset value of the Company for the current financial period ended was $320,589,447 (2015:
$315,829,479).
SIGNIFICANT CHANGES IN STATE OF AFFAIRS
In January 2014 the Company issued for free 159,194,579 Options (1 for 1 bonus issue) exercisable at $1.43
on or before 31st August 2015. During the past financial year 28,594,486 Options were exercised. (2015:
46,461,705 Options were exercised). On the 28th September 2015 the Company issued 12,793,415 Shares at
$1.43 in a placement of the Options shortfall. As at 30 June 2016 the Company had no Options on issue (2015:
109,602,077 Options).
DIVIDENDS PAID OR RECOMMENDED
The Board have declared a 4.0 cent per share fully franked final dividend payable on 27th October 2016. The
Ex-Date for the dividend is 18th October 2016.
Dividends paid are as follows:
$
Fully franked 2016 interim dividend of 5.0 cents per share was paid on 12 May 2016
Fully franked 2015 final dividend of 5.0 cents per share was paid on 29 October 2015
Fully franked 2015 special dividend of 1.0 cents per share was paid on 29 October 2015
Fully franked 2015 interim dividend of 5.0 cents per share was paid on 10 April 2015
Fully franked 2014 final dividend of 5.0 cents per share was paid on 30 September 2014
13,419,163
13,285,506
2,657,101
11,111,185
9,898,166
DIRECTORS
The following persons were Directors of the Company during the financial year and up to the date of this
report:
Karl Siegling
James Chirnside
Wayne Davies
Ronald Hancock
CADENCE CAPITAL LIMITED ANNUAL REPORT 2016 | A.B.N. 17 112 870 096
7
DIRECTORS’ REPORT TO SHAREHOLDERS FOR
THE YEAR ENDED 30 JUNE 2016 CONTD’
INFORMATION ON DIRECTORS
Karl Siegling (Chairman)
Karl Siegling has over 20 years investment experience in the financial 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 financial 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. Karl has been a Director
of the Company for the past 11.5 years.
James Chirnside (Non-executive Director)
James has worked in financial markets for 32 years - mainly as an equities fund manager across a broad range
of markets and sectors. James is currently Chairman and Managing Director of ASX listed Dart Mining NL. Dart
is a junior mining and exploration company with operations in North-east Victoria. The principle focus and
activities include Gold, Lithium, and base metals.
Historically James has worked as a fund manager, proprietary metals trader, and derivatives broker in Sydney,
Hong Kong, London, and Melbourne. James operated Asia Pacific Asset Management between 2002 and 2012.
APAM was an Australian and Asian equities fund manager. From 2000-2001 James worked for Challenger
Financial Group in Sydney as a product manager, responsible for hedge fund development and investments.
During the 1990’s James managed frontier and emerging market hedge funds in Hong Kong and London for
Regent Fund Management (now known as Charlemagne Capital). He was primarily focussed in the resources
sector spanning Russia and Eastern Europe as well as more developed markets in Asia including Japan. Between
1988 and 1992 James ran a Proprietary trading book for County NatWest Investment Bank, based in London.
At County he was focussed on closed-end Country Funds, Energy products and derivative arbitrage strategies.
James also worked for Bell Commodities in Melbourne and London and commodity trader - NYSE listed - Bunge
Inc. James Chirnside is also a director of WAM Capital Limited (WAM), Mercantile Investment Company Ltd
(MVT), and Ask Funding Ltd (ASK). James has been a Director of the Company for the past 11.5 years.
Ronald Hancock (Non-executive Director)
Ronald Hancock is a fellow of the Institute of Chartered Accountants Australia with extensive experience in the
financial services industry. He was the Managing Director of Wide Bay Australia Limited, which has moved to
a full banking license and now trades as Auswide Bank Ltd, 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 and is also a Director of several private
companies. Ronald has been a Director of the Company for the past 3.3 years.
Wayne Davies (Non-executive Director and Company Secretary)
Wayne Davies has over 14 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 Officer of Cadence Asset Management for the past 8 years. Wayne
Davies worked with Theorema Asset Management in London and still remains a director of Theorema Europe
Fund and Theorema Europe Fund Plus. Wayne has been a Director of the Company for the past 3.5 years.
8
CADENCE CAPITAL LIMITED ANNUAL REPORT 2016 | A.B.N. 17 112 870 096
DIRECTORS’ REPORT TO SHAREHOLDERS
FOR THE YEAR ENDED 30 JUNE 2016 CONTD’
COMPANY SECRETARY
Wayne Davies held the position of Company Secretary at the end of the financial year.
DIRECTORS’ MEETINGS
Karl Siegling
James Chirnside
Wayne Davies
Ronald Hancock
AUDIT COMMITTEE MEETINGS
Karl Siegling
James Chirnside
REMUNERATION REPORT (AUDITED)
No. eligible to attend
Attended
4
4
4
4
4
4
4
4
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 below.
2016
Short-term Employee Benefits - Directors Fees:
Cash Salary
$
Superannuation
$
James Chirnside
Ronald Hancock
Wayne Davies
27,397
27,397
13,699
68,493
2,603
2,603
1,301
6,507
2015
Short-term Employee Benefits - Directors Fees:
Cash Salary
$
Superannuation
$
James Chirnside
Ronald Hancock
Wayne Davies
27,397
27,397
13,699
68,493
2,603
2,603
1,301
6,507
Total
$
30,000
30,000
15,000
75,000
Total
$
30,000
30,000
15,000
75,000
CADENCE CAPITAL LIMITED ANNUAL REPORT 2016 | A.B.N. 17 112 870 096
9
DIRECTORS’ REPORT TO SHAREHOLDERS
FOR THE YEAR ENDED 30 JUNE 2016 CONTD’
REMUNERATION REPORT (AUDITED) (Continued)
(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 beneficial owner of Cadence Asset Management Pty Limited, the entity
appointed to manage the investment portfolio of Cadence Capital Limited. Wayne Davies is also a beneficial
owner of Cadence Asset Management Pty Limited. In its capacity as Manager, Cadence Asset Management Pty
Limited was paid a management fee of $3,535,646 (inclusive of GST) (2015: $3,019,310). 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 2016, the balance payable to the manager was $120,354 (inclusive of GST) (2015: $161,957).
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 2016 no performance fee (2015: $2,778,884, inclusive of
GST) was payable to Cadence Asset Management Pty Limited. As at 30 June 2015, the balance payable to the
manager was $2,778,884 (inclusive of GST).
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 financial statements.
(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 reflect 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 qualified and experienced Directors.
Directors’ base fees are presently limited to a maximum of $80,000 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.
10
CADENCE CAPITAL LIMITED ANNUAL REPORT 2016 | A.B.N. 17 112 870 096
DIRECTORS’ REPORT TO SHAREHOLDERS
FOR THE YEAR ENDED 30 JUNE 2016 CONTD’
REMUNERATION REPORT (AUDITED) (Continued)
(d) Shareholdings
As at the date of this Report, the Company’s key management personnel indirectly held the following shares in
the Company:
Shareholdings
Karl Siegling
Wayne Davies
Ronald Hancock
James Chirnside
Balance at
1 July 2015
9,833,185
416,447
279,860
26,851
10,556,343
Acquisitions
Disposals
9,126,398
306,613
120,140
-
9,553,151
-
-
-
-
-
As at the date
of this Report
18,959,583
723,060
400,000
26,851
20,109,494
As at the date of this report, the Company’s key management personnel indirectly held the following options
in the Company:
Optionholdings
Karl Siegling
Wayne Davies
Ronald Hancock
James Chirnside
Balance at
1 July 2015
8,113,666
309,442
279,860
25,932
8,728,900
Options
Exercised
8,113,666
250,000
120,140
-
8,483,806
Options
Lapsed
-
59,442
159,720
25,932
245,094
As at the date
of this Report
-
-
-
-
-
End of Remuneration Report.
EVENTS AFTER THE REPORTING PERIOD
The Board have declared a 4.0 cent per share fully franked final dividend payable on 27th October 2016. The
Ex-Date for the dividend is 18th October 2016.
Other than the above there has not arisen in the interval between the end of the financial 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 significantly affect the operations of the entity, the results of those operations, or the state of
affairs of the entity, in future financial years.
FUTURE DEVELOPMENTS
The Company will continue to pursue its policy of investment during the next financial year.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2016 | A.B.N. 17 112 870 096
11
DIRECTORS’ REPORT TO SHAREHOLDERS
FOR THE YEAR ENDED 30 JUNE 2016 CONTD’
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.
ROUNDING OF AMOUNTS
In accordance with ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, the
amounts in the directors’ report and in the financial report have been rounded to the nearest dollar.
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 financial 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 Pitcher Partners, the Company’s auditor, did not perform any other services in addition to
their statutory duties for the Company. Related entities of Pitcher Partners, 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
financial statements.
The Board of Directors, in accordance with advice from the Audit Committee, is satisfied 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 satisfied that the services disclosed in Note 2 did not
compromise the external auditor’s independence for the following reasons:
•
•
all non-audit services do not adversely affect the integrity and objectivity of the auditor; and
the nature of the services provided do not compromise the general principles relating to auditor
independence in accordance with the APES 110: Code of Ethics for Professional Accountants set by the
Accounting Professional and Ethical Standards Board.
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 13 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 30 September 2016
12
CADENCE CAPITAL LIMITED ANNUAL REPORT 2016 | A.B.N. 17 112 870 096
AUDITOR’S INDEPENDENCE DECLARATION
AUDITOR’S INDEPENDENCE DECLARATION
TO THE DIRECTORS OF CADENCE CAPITAL LIMITED
ABN 17 112 870 096
In relation to the independent audit for the year ended 30 June 2016, I declare that to the best of my
knowledge and belief there have been:
(i) no contraventions of the auditor independence requirements of the Corporations Act 2001;
and
(ii) no contraventions of any applicable code of professional conduct.
This declaration is in respect of Cadence Capital Limited.
S M WHIDDETT
Partner
PITCHER PARTNERS
Sydney
30 September 2016
An independent New South Wales Partnership. ABN 17 795 780 962.
Pitcher Partners is an association of independent firms
Level 22 MLC Centre, 19 Martin Place, Sydney NSW 2000
Melbourne | Sydney | Perth | Adelaide | Brisbane| Newcastle
Liability limited by a scheme approved under Professional Standards Legislation
An independent member of Baker Tilly International
CADENCE CAPITAL LIMITED ANNUAL REPORT 2016 | A.B.N. 17 112 870 096
13
CORPORATE GOVERNANCE STATEMENT
FOR THE YEAR ENDED 30 JUNE 2016
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 3rd Edition of the Australian Securities
Exchange (“ASX”) Corporate Governance Principles and Recommendations of the ASX Corporate Governance
Council (“ASX Principles and 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.
The board aims to ensure that all directors and the Manager act with the utmost integrity and objectivity,
and endeavours to enhance the reputation of the Company. The board should act in a manner designed to
create and build sustainable value for shareholders.
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. Each Director must not
hold office as a Director after the third annual general meeting held after the Director was last appointed or
elected or 3 years after the date on which the Director was last appointed or elected, whichever is the longer.
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.
An independent director is considered to be a director:
(a) who is not a member of management;
(b) who has not within the last three years been employed in an executive capacity by the Company or been a
professional adviser or consultant to the Company;
(c) is not a significant supplier to the Company;
(d) has no material contractual relationship with the Company other than as a director; and
(e) is free from any interest or business or other relationship which could materially interfere with the
director’s ability to act in the best interests of the Company.
As the Company’s operations are primarily conducted through Cadence Asset Management Pty Limited,
the Company does not presently have any full time employees and hence the Board considers setting
measureable diversity objectives is not appropriate.
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.
14
CADENCE CAPITAL LIMITED ANNUAL REPORT 2016 | A.B.N. 17 112 870 096
CORPORATE GOVERNANCE STATEMENT
FOR THE YEAR ENDED 30 JUNE 2016 CONTD’
REMUNERATION OF DIRECTORS AND EXECUTIVES
The maximum total remuneration of the Directors of the Company has been set at $80,000 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.
AUDIT COMMITTEE
The Company has formed an Audit Committee consisting of:
James Chirnside
Chairman
Karl Siegling
Non-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) oversee the existence and maintenance of internal controls and accounting systems;
(b) oversee the financial reporting process;
(c)
review the annual and half-year financial reports and recommend them for approval by the Board of
Directors;
(d) nominate external auditors; and
(e) review the existing external audit arrangements.
The external audit firm partner responsible for the Company’s audit attends Audit Committee meetings by
invitation and presents to the Audit Committee twice per year. The Audit Committee formally reports to the
Board after each of its meetings.
EXTERNAL AUDITOR
The Company and Audit Committee policy is to appoint an external auditor who clearly demonstrates quality
and independence. It is Pitcher Partners’ 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.
MAKE TIMELY AND BALANCED DISCLOSURES
The Company will operate under the continuous disclosure requirements of the ASX Listing Rules.The Company
will disclose:
• price sensitive information to the ASX as soon as it becomes aware of that information;
• ensure that the information is not false, misleading or deceptive so as to avoid creating what would
constitute a false market; and
• ensure that the information is disclosed clearly (expressed objectively), accurately and is complete.
In doing so the Company will ensure compliance with Listing Rule 15.7 that requires an entity not to release
information to anyone until it has given the information to the ASX and has received an acknowledgement
from the ASX that the information has been released to the market. The Company Secretary is responsible for
ensuring Cadence Capital Limited complies with its continuous disclosure obligations.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2016 | A.B.N. 17 112 870 096
15
CORPORATE GOVERNANCE STATEMENT
FOR THE YEAR ENDED 30 JUNE 2016 CONTD’
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.
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 affecting
the Company’s state of affairs. Information is communicated to shareholders through the Annual Report,
quarterly webcasts, monthly investment update 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 identification 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 conflict with those of the Company. Where the Board believes
that a significant conflict exists the Director concerned does not receive the relevant Board papers and is not
present at the meeting whilst the item is considered.
16
CADENCE CAPITAL LIMITED ANNUAL REPORT 2016 | A.B.N. 17 112 870 096
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2016
INCOME
Net realised and unrealised (loss)/ gain on investments
(50,540,928)
20,910,998
NOTE
2016
$
2015
$
Dividends received
Interest received
Other income
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
Legal fees
Custody fees
Audit and taxation fees
Other expenses from ordinary activities
Total Expenses
2
11,712,017
2,263,109
25,252
9,515,790
2,035,499
13,950
(36,540,550)
32,476,237
(1,795,854)
(3,294,579)
-
(139,063)
(75,000)
(3,669,676)
(252,503)
(854,814)
(134,099)
(178,144)
(7,299)
(19,165)
(54,294)
(49,108)
(683,116)
(2,813,448)
(2,589,415)
(228,052)
(75,000)
(212,479)
(62,244)
(575,514)
(158,926)
(157,704)
(23,334)
(88,474)
(60,850)
(45,337)
(10,523,598)
(7,773,893)
(Loss)/Profit before income tax
(47,064,148)
24,702,344
Income tax benefit/(expense)
3(a)
16,182,105
(5,354,150)
(Loss)/Profit attributable to members of the Company
11
(30,882,043)
19,348,194
Other comprehensive income
Other comprehensive income for the period, net of tax
-
-
Total comprehensive (loss)/income for the period
(30,882,043)
19,348,194
Basic (loss)/earnings per share
Diluted (loss)/earnings per share
13
13
(11.6) cents
9.5 cents
(11.6) cents
9.5 cents
The accompanying notes form part of these financial statements.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2016 | A.B.N. 17 112 870 096
17
STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2016
ASSETS
Cash and cash equivalents
Trade and other receivables
Financial assets
Current tax asset
Deferred tax asset
TOTAL ASSETS
LIABILITIES
Cash overdrafts
Trade and other payables
Financial liabilities
Current tax liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Profits reserve
Accumulated losses
TOTAL EQUITY
Note
2016
$
2015
$
12(a)
159,496,725
32,673,014
5
6
3(c)
3(b)
3,615,294
5,279,525
354,014,790
293,689,355
1,558,190
-
24,415,617
4,670,150
543,100,616
336,312,044
12(a)
160,807,769
2,596
7
8
3(c)
1,768,061
3,384,369
59,935,339
13,671,193
-
3,424,407
222,511,169
20,482,565
320,589,447
315,829,479
9
10
11
367,999,928
302,996,147
6,425,738
22,708,886
(53,836,219)
(9,875,554)
320,589,447
315,829,479
The accompanying notes form part of these financial statements.
18
CADENCE CAPITAL LIMITED ANNUAL REPORT 2016 | A.B.N. 17 112 870 096
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2016
Note
Issued Capital
$
Accumulated
Losses
$
Profits Reserve
Total Equity
$
$
Balance at 1 July 2014
231,197,359
(3,752,837)
18,247,325
245,691,848
Profit for the year
Transfer to profits reserve
Other comprehensive
income for the year
Transactions with owners:
Shares issued via dividend
reinvestment plan
Shares issued via exercise of
options
11
10
9
9
-
-
-
5,358,550
66,440,238
Dividends paid
4(a)
-
19,348,194
-
19,348,194
(25,470,911)
25,470,911
-
-
5,358,550
66,440,238
-
-
-
(21,009,351)
(21,009,351)
-
-
-
-
Balance at 30 June 2015
302,996,147
(9,875,554)
22,708,886
315,829,479
Loss for the year
Transfer to profits reserve
Other comprehensive
income for the year
Transactions with owners:
Shares issued via dividend
reinvestment plan
Shares issued via placement
Shares issued via exercise of
options
Capitalised share issue costs,
net of tax
11
10
9
9
9
9
-
-
-
6,103,927
18,294,586
40,890,115
(284,847)
Dividends paid
4(a)
-
(30,882,043)
(13,078,622)
-
-
-
-
-
-
-
(30,882,043)
13,078,622
-
-
-
-
-
-
-
6,103,927
18,294,586
40,890,115
(284,847)
(29,361,770)
(29,361,770)
Balance at 30 June 2016
367,999,928
(53,836,219)
6,425,738
320,589,447
The accompanying notes form part of these financial statements.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2016 | A.B.N. 17 112 870 096
19
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Proceeds from the sale of investments
Payments for the purchase of investments
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
Income tax paid
Note
2016
$
$
2015
$
$
766,842,447
540,473,533
(828,605,701)
(653,026,793)
10,510,401
2,263,109
25,252
(3,332,702)
(2,778,882)
(854,814)
(1,795,854)
(2,429,752)
(921,018)
8,761,126
2,035,499
13,950
(2,784,335)
(12,800)
(575,514)
(683,116)
(242,449)
(707,717)
(8,423,886)
(5,196,425)
NET CASH USED IN OPERATING ACTIVITIES
12(b)
(69,501,400)
(111,945,041)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid
Share issue transaction costs, gross of tax
Proceeds from shares issued
NET CASH PROVIDED BY FINANCING ACTIVITIES
NET DECREASE IN CASH HELD
(23,257,843)
(15,650,799)
(406,920)
-
59,184,701
66,440,227
35,519,938
50,789,428
(33,981,462)
(61,155,613)
CASH AND CASH EQUIVALENTS AS AT BEGINNING OF THE
FINANCIAL YEAR
CASH AND CASH EQUIVALENTS AS AT END OF THE
FINANCIAL YEAR
32,670,418
93,826,031
12(a)
(1,311,044)
32,670,418
NON-CASH TRANSACTIONS:
Shares issued via dividend reinvestment plan
6,103,927
5,358,550
The accompanying notes form part of these financial statements.
20
CADENCE CAPITAL LIMITED ANNUAL REPORT 2016 | A.B.N. 17 112 870 096
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016
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 financial 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-profit oriented entities. These financial 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 financial statements containing relevant and reliable information about
transactions, events and conditions to which they apply. Compliance with Australian Accounting Standards
ensures that the financial statements and notes also comply with International Financial Reporting Standards
as issued by the IASB. Material accounting policies adopted in the preparation of these financial statements are
presented below. They have been consistently applied unless otherwise stated.
The financial statements have been prepared under the historical cost convention, except for, where applicable,
cash flow information, “held-for-trading” financial assets and certain other financial assets and liabilities, which
have been measured at fair value.
The preparation of the financial 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
significant to the financial statements are disclosed in Note 1(j).
The financial report was authorised for issue on 30 September 2016, by the Board of Directors.
ACCOUNTING POLICIES
(a) Investments
i) Classification
Investments consist of shares in publicly listed and unlisted companies and fixed 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 profit 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 classified as
financial liabilities at fair value through the profit or loss.
ii) Recognition and Initial Measurement
Financial instruments, incorporating financial assets and financial liabilities, are recognised when the entity
becomes a party to the contractual provisions of the instrument. Trade date accounting is adopted for financial
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
classified as at fair value through profit or loss. Transaction costs related to instruments classified as at fair value
through profit or loss are expensed to the profit or loss immediately.
Financial assets are classified and measured at fair value with changes in value being recognised in the profit or
loss.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2016 | A.B.N. 17 112 870 096
21
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016 CONTD’
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(a) Investments (Continued)
iii) Derecognition
Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the asset is
transferred to another party whereby the entity no longer has any significant continuing involvement in the
risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations
are either discharged, cancelled or expire. The difference between the carrying value of the financial 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 profit or loss.
iv) Valuation
All investments are classified 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 profit 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) Investment income
Dividend income is recognised in the profit or loss on the day on which the relevant investment is first quoted
on an “ex-dividend” basis.
Interest revenue is recognised as it accrues, taking into account the effective yield on the financial asset.
vi) Derivative Instruments
Derivative instruments are measured at fair value. Gains and losses arising from changes in fair value are taken
to the profit or loss.
vii) Financial Liabilities
Borrowed stock is classified as financial liabilities at fair value through the profit or loss. Realised and unrealised
gains and losses arising from changes in fair value are included in the profit or loss in the year in which they
arise.
(b) Income Tax
The income tax expense or benefit 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 differences, unused tax losses and the adjustment recognised for prior periods,
where applicable.
Deferred tax assets and liabilities are recognised for temporary differences 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, affects
neither the accounting nor taxable profits; or
• When the taxable temporary difference 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
difference will not reverse in the foreseeable future.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is
probable that future taxable amounts will be available to utilise those temporary differences 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
profits 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 profits available to recover the
asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax
assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to
the same taxable entity or different taxable entity’s which intend to settle simultaneously.
22
CADENCE CAPITAL LIMITED ANNUAL REPORT 2016 | A.B.N. 17 112 870 096
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016 CONTD’
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(c) Cash and Cash Equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial 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 insignificant risk of changes in value. For the statement
of cash flows presentation purposes, cash and cash equivalents also includes bank overdrafts, which are shown
within the current liabilities on the statement of financial position.
(d) Trade and Other Receivables
Trade and other receivables relate to outstanding settlements as well as accrued income in relation to interest
and dividends receivable. Trade receivables are generally due for settlement within 30 days.
(e) Trade and Other Payables
These amounts represent liabilities for outstanding settlements as well as services provided to the Company
prior to the end of the financial 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-financial 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 profit or loss.
(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 Office (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 flows are presented on a gross basis. The GST components of cash flows arising from investing or
financing activities which are recoverable from, or payable to the tax authority, are presented as operating cash
flows.
(h) Segment Reporting
The Company has only one segment. The Company operates predominately in Australia and in one industry
being the securities industry, deriving revenue from dividend income, interest income and from the sale of its
financial assets at fair value through profit or loss, however the Company has foreign exposures as it invests in
companies which operate internationally.
(i) Comparative Figures
Where required by accounting standards, comparative figures have been adjusted to conform with changes in
presentation for the current financial year.
(j) Critical Accounting Estimates and Judgements
The Directors evaluate estimates and judgements incorporated into the financial 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. Significant 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 final tax outcome of these matters is different from the carrying amounts, such differences will impact the
current and deferred tax provisions in the period in which such determination is made.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2016 | A.B.N. 17 112 870 096
23
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016 CONTD’
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(j) Critical Accounting Estimates and Judgements (Continued)
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences only if the Company considers it is
probable that future taxable amounts will be available to utilise those temporary differences and losses.
There are no estimates or judgements that have a material impact on the Company’s financial results for the
year ended 30 June 2016. All material financial assets are valued by reference to quoted prices and therefore
no significant estimates or judgements are required in respect of their valuation.
(k) Issued Capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or
options are shown in equity as a deduction, net of tax, from the proceeds.
(l) Profits Reserve
The profits reserve is made up of amounts transferred from current and retained earnings that are preserved
for future dividend payments.
(m) Dividends
Dividends are recognised when declared during the financial year and no longer at the discretion of the
Company.
(n) New Accounting Standards and Interpretations not yet mandatory or early adopted
The Australian Accounting Standards Board has issued a number of new and amended Accounting
Standards and Interpretations that have mandatory application dates for future reporting periods, some of
which are relevant to the Company. The Company has decided not to adopt any of the new and amended
pronouncements. A new and amended pronouncement that is relevant to the Company, but applicable in
future reporting periods is AASB 9: Financial Instruments and its associated amending standards.
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard
replaces all previous versions of AASB 9 and completes the project to replace IAS 39 (AASB 139) - Financial
Instruments: Recognition and Measurement. This standard introduces new classification and measurement
models for financial assets, using a single approach to determine whether a financial asset is measured at
amortised cost or fair value. The accounting for financial liabilities continues to be measured in accordance
with AASB 139, with one exception, being that the portion of a change of fair value relating to the entity’s
own credit risk is to be presented in other comprehensive income unless it would create an accounting
mismatch. The Company has not early adopted AASB 9. This is not expected to have a significant impact on
the Company’s financial statements as the Company does not expect to elect any investments as not held for
trading
2. AUDITOR’S REMUNERATION
Remuneration of the auditor of the Company for:
Auditing or reviewing the financial report
Other assurance services
Non-audit services
Other services provided by a related practice of the auditor:
Taxation services
2016
$
2015
$
38,564
1,045
14,685
54,294
38,170
4,334
14,960
57,464
24
CADENCE CAPITAL LIMITED ANNUAL REPORT 2016 | A.B.N. 17 112 870 096
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016 CONTD’
3. TAXATION
(a) Current Income Tax (Benefit)/Expense
2016
$
2015
$
The prima facie tax on (loss)/profit from ordinary activities before income tax is reconciled to the income tax
expense as follows:
Prima facie tax (benefit)/ expense on (loss)/profit from ordinary activities
before income tax at 30%
Imputation credit gross up
Franked dividends receivable – prior year
Franked dividends receivable – current year
Franking credits on dividends received
Other
(14,119,244)
7,410,703
726,546
551,369
783,265
323,071
(918,956)
(551,369)
(2,421,820)
(2,610,882)
-
(638)
(16,182,105)
5,354,150
Effective tax rate
34.4%
21.7%
The effective tax rate for FY2016 is 34.4%, reflecting the benefit to the company of franking credits received
on dividend income during the year in addition to the tax benefit received on the loss before income tax.
Total income tax (benefit)/expense results in a:
Current tax expense
Movement in deferred tax liabilities
Movement in deferred tax assets
(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 period
Credited to the profit or loss
Under provision from prior year
Charged directly to equity
(c) Current Tax (Assets)/Liabilities
Movement in current tax (assets)/liabilities
Balance at the beginning of the period
Current year income tax on operating profit
Income tax paid
Under provision from prior year
At reporting date
3,441,289
7,674,405
-
(1,599,995)
(19,623,394)
(16,182,105)
(720,260)
5,354,150
7,590
345,237
20,729,677
3,333,113
24,415,617
4,670,150
19,623,394
-
122,073
496
421,915
914,626
3,333,113
4,670,150
3,880,442
720,260
69,448
-
24,415,617
4,670,150
3,424,407
3,441,289
20,571
7,674,405
(8,423,886)
(5,196,425)
-
(1,558,190)
925,856
3,424,407
CADENCE CAPITAL LIMITED ANNUAL REPORT 2016 | A.B.N. 17 112 870 096
25
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016 CONTD’
4. DIVIDENDS
(a) Dividends paid
Dividends paid by the Company
2016
Dividends paid by the Company
for the year ended 30 June 2016
Interim 2016 Ordinary
Final 2015 Ordinary
Final 2015 Special
Total Amount
2016
$
2015
$
29,361,770
21,009,351
Cents
per
share
5.0
5.0
1.0
Date of
payment
12 May 16
29 October 15
29 October 15
Tax rate for
franking
credit
%
Franked
Total Amount
$
30%
30%
30%
100%
100%
100%
13,419,163
13,285,506
2,657,101
29,361,770
The Board have declared a 4.0 cent per share fully franked final dividend payable on 27th October 2016. The Ex-
Date for the dividend is 18th October 2016.
2015
Dividends paid by the Company
for the year ended 30 June 2015
Interim 2015 Ordinary
Final 2014 Ordinary
Total Amount
(b) Dividend franking account
Cents
per
share
5.0
5.0
Date of
payment
10 April 15
30 September 14
Tax rate for
franking
credit
%
Franked
Total Amount
$
30%
30%
100%
100%
11,111,185
9,898,166
21,009,351
Balance of franking account at year end adjusted for franking credits
and debits, arising from receipts of income tax receivables and credits
arising dividends recognised as receivables and franking credits that
may be prevented from distribution in subsequent financial years.
2016
$
2015
$
2,440,138
9,069,012
Subsequent to the reporting period, the franking account would be reduced by the proposed dividend
disclosed in (a) above as well as the current tax asset which is refundable to the company. 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.
5. TRADE AND OTHER RECEIVABLES
Trade debtors
Income receivable
Sundry debtors
322,571
3,063,153
229,570
3,615,294
3,100,293
1,861,537
317,695
5,279,525
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 2 days of the purchase being
executed. Income receivable relates to accrued income, it is non-interest bearing and is unsecured.
26
CADENCE CAPITAL LIMITED ANNUAL REPORT 2016 | A.B.N. 17 112 870 096
6. FINANCIAL ASSETS
Long positions - held for trading financial assets:
Investments at fair value
Total financial assets
7. TRADE AND OTHER PAYABLES
Trade creditors
Sundry creditors - related parties
Dividends payable on shorts
Sundry creditors – other
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016 CONTD’
2016
$
2015
$
354,014,790
293,689,355
354,014,790
293,689,355
116,583
123,834
1,239,924
287,720
1,768,061
55,342
2,944,341
-
384,686
3,384,369
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 2 days of the purchase
being executed.
Sundry creditors – other, are settled within the terms of payment offered, which is usually within 30 days.
Sundry creditors – related parties, includes fees payable of $123,834 (inclusive of GST) (2015: $2,944,341) to
the manager, Cadence Asset Management Pty Limited.
8. FINANCIAL LIABILITIES
Short positions: Listed investments at fair value – held for trading
Swap positions – held for trading
Total financial liabilities
44,520,500
15,414,839
59,935,339
13,322,291
348,902
13,671,193
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
Capitalised share issue costs
Deferred tax asset on capitalised share issue costs
370,419,123
305,130,495
(3,455,993)
(3,049,073)
1,036,798
914,725
367,999,928
302,996,147
CADENCE CAPITAL LIMITED ANNUAL REPORT 2016 | A.B.N. 17 112 870 096
27
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016 CONTD’
9. ISSUED CAPITAL (Continued)
(a) Paid-up Capital (Continued)
2016
Date
Balance at the beginning of the year
July 2015
August 2015
September 2015
30 September 2015
29 October 2015
12 May 2016
2015
Date
Details of the issue
Share Price
$
No. of Shares
Issue Value
$
Exercise of Options
Exercise of Options
Exercise of Options
Placement
DRP
DRP
$1.4300
$1.4300
$1.4300
$1.4300
$1.40607
$1.23317
224,322,211
305,130,495
2,416,113
3,455,042
23,226,136
33,213,374
2,952,237
4,221,699
12,793,415
18,294,586
2,673,157
1,901,807
3,758,672
2,345,255
270,285,076
370,419,123
Details of the issue
Share Price
$
No. of Shares
Issue Value
$
Balance at the beginning of the year
173,967,657
233,331,707
July 2014
August 2014
September 2014
30 September 2014
October 2014
November 2014
December 2014
January 2015
February 2015
March 2015
April 2015
10 April 2015
Exercise of Options
Exercise of Options
Exercise of Options
DRP
Exercise of Options
Exercise of Options
Exercise of Options
Exercise of Options
Exercise of Options
Exercise of Options
$1.4300
$1.4300
$1.4300
$1.37049
$1.4300
$1.4300
$1.4300
$1.4300
$1.4300
$1.4300
326,419
466,779
5,209,414
7,449,462
18,459,823
26,397,547
1,808,346
2,478,320
50,100
78,669
9,580
29,495
71,643
112,497
13,699
42,178
165,435
236,572
22,118,770
31,629,841
Exercise of Options
$1.4300
14,000
20,020
DRP
$1.38173
2,084,503
2,880,230
224,322,211
305,130,495
As at 30 June 2016 the Company had no Options on issue (2015: 109,602,077 Options). The outstanding one
for one Bonus Options that were issued to Shareholders for free on 20 January 2014, giving Option holders the
right to acquire Ordinary Shares in the Company at $1.43 per Ordinary Share expired on 31 August 2015.
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.
28
CADENCE CAPITAL LIMITED ANNUAL REPORT 2016 | A.B.N. 17 112 870 096
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016 CONTD’
9. ISSUED CAPITAL (Continued)
(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 financial liabilities,
supported by financial assets.
Management effectively manages the Company’s capital by assessing the Company’s financial 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.
10. PROFITS RESERVE
Profits Reserve
Movement in Profits Reserve
Opening balance
Transfer from retained earnings
Dividends paid (Note 4)
2016
$
2015
$
6,425,738
22,708,886
22,708,886
13,078,622
18,247,326
25,470,911
(29,361,770)
(21,009,351)
6,425,738
22,708,886
The Profit Reserve is made up of amounts transferred from current and retained earnings that are preserved
for future dividend payments.
11. ACCUMULATED LOSSES
Opening balance
(Loss)/Profit attributable to members of the Company
Transfer to profits reserve
(9,875,554)
(30,882,043)
(3,752,837)
19,348,194
(13,078,622)
(25,470,911)
(53,836,219)
(9,875,554)
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
Cash overdrafts
159,496,725
32,673,014
(160,807,769)
(2,596)
(1,331,044)
32,670,418
CADENCE CAPITAL LIMITED ANNUAL REPORT 2016 | A.B.N. 17 112 870 096
29
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016 CONTD’
12. CASH FLOW INFORMATION (Continued)
The weighted average interest rate for cash and cash equivalents as at June 2016 is 1.42% (June 2015: 2.12%).
The weighted average interest rate for cash overdrafts as at June 2016 is 1.47% (June 2015: 1.59%). The
Company has Prime Brokerage lending facilities and Custody arrangements with Deutsche Bank AG and Bank
of New York Mellon. The Prime Brokerage lending facilities are secured by a first charge over the financial
assets of the Company.
The Company has granted a charge over all of the Company’s right, title and interest in the assets transferred
to the Prime Broker. This includes those transferred to the Custodians and sub-custodians in accordance with
Prime Brokerage Agreements, and any right which arises after the date of the charges to receive cash or return
of property from the parties under the Prime Brokerage Agreement, as security for payments and performance
by the Company of all of its obligations to the Prime Brokers under the Prime Brokerage Agreement.
(b) Reconciliation of Operating Profit after Income Tax
2016
$
2015
$
Operating profit after income tax
(30,882,043)
19,348,194
Fair value net gains on financial assets and liabilities
(14,061,289)
(142,282,592)
Changes in assets and liabilities:
Decrease in receivables
Increase in deferred tax assets
Decrease in trade and other payables
Decrease in deferred tax liabilities
(Decrease)/ Increase in current tax liabilities
Net cash used in Operating Activities
1,664,231
(19,623,394)
(1,616,308)
-
(4,982,597)
13,611,621
(789,708)
(2,779,989)
(2,456,403)
3,403,836
(69,501,400)
(111,945,041)
(c) Non-cash Financing Activities
During the financial year the Company issued the following shares through its Dividend Reinvestment Plan:
- 2,673,157 shares at $1.40607 on 29 October 2015
- 1,901,807 shares at $1.23317 on 12 May 2016
During the previous financial year the Company issued the following shares through its Dividend Reinvestment
Plan:
- 1,808,337 shares at $1.37049 on 30 September 2014
- 2,084,503 shares at $1.38174 on 10 April 2015
30
CADENCE CAPITAL LIMITED ANNUAL REPORT 2016 | A.B.N. 17 112 870 096
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016 CONTD’
13. EARNINGS PER SHARE
Basic (loss)/earnings per share
(Loss)/ Profit after income tax used in the calculation of
earnings per share
2016 Cents
Per Share
2015 Cents
Per Share
(11.6)
2016
$
9.5
2015
$
(30,882,043)
19,348,194
No.
No.
Weighted average number of ordinary shares outstanding
during the year used in calculation of basic earnings per share
265,511,543
202,656,107
Weighted average number of ordinary shares and options
outstanding during the year used in calculation of
diluted earnings per share
Reconciliation of weighted average number of shares:
265,511,543
203,648,089
Weighted average number of ordinary shares used in calculation of
basic earnings per share
265,511,543
202,656,107
Add:
Weighted average number of potential ordinary shares used in the
calculation of diluted earnings per share
-
991,982
Weighted average number of shares used in the calculation of
diluted earnings per share
265,511,543
203,648,089
14. FINANCIAL RISK MANAGEMENT
Financial Risk Management Policies
The Company’s financial instruments consist of money market instruments, short and long term investments,
accounts receivable and payable.
Financial Risk Exposures and Management
The main risks the Company is exposed to through its financial 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 financial asset, financial 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,
sub-custodian and broker) will be unable to pay amounts in full when due. The maximum exposure to credit
risk by class of recognised financial assets at the end of the reporting period excluding the value of any
collateral or other security held, is equivalent to the carrying amount and classification of those financial assets
(net of any provisions) as presented in the statement of financial position.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2016 | A.B.N. 17 112 870 096
31
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016 CONTD’
14. FINANCIAL RISK MANAGEMENT (Continued)
(b) Credit Risk (Continued)
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 or sub-
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 Prime Brokerage lending facilities and custody accounts with its prime broker and
custodian Deutsche Bank AG and Bank of New York Mellon. There is no guarantee that these or any sub-
custodian that Deutsche Bank AG may use or any other prime broker or custodian that the Company may use
from time to time, will not become insolvent. In the event of an insolvency or liquidation of a prime broker/
custodian that has custody of the Company’s 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. As substantially all of the Company’s assets may be held by a prime broker, custodian or sub-custodian
and in some cases a major Australian bank, such losses could be significant and materially impair the ability of
the Company to achieve its investment objective.
Any cash held by Deutsche Bank is not treated as client money, but rather held as collateral and is not subject to
the client monies protections conferred by the Financial Conduct Authority rules relating to client money. As a
consequence, the Company’s money is held by the Prime Broker as banker and not as a trustee or agent and the
Prime Broker will not be required to place the Fund’s money in a segregated client account, and the Company
will therefore rank equally with Deutsche Bank’s other account holders in relation thereto.
(c) Liquidity Risk
Liquidity risk represents the risk that an entity will encounter difficulty in meeting obligations associated with
financial liabilities. The Company’s major cash outflows 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 flows 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 cashflow 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 fixed interest securities
sufficient 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 inflows or it can use its lending facility
with its Prime Broker.
(d) Market Risk
Market risk represents the risk that the fair value or future cash flows of a financial instrument will fluctuate
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 fluctuate.
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.
32
CADENCE CAPITAL LIMITED ANNUAL REPORT 2016 | A.B.N. 17 112 870 096
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016 CONTD’
14. FINANCIAL RISK MANAGEMENT (Continued)
(e) Foreign Currency Risk
The Company undertakes certain transactions and holds assets and liabilities denominated in currencies other
than Australian Dollar (AUD), the reporting currency of the Company. The Company is therefore exposed to
currency risk, as the value of the assets and liabilities denominated in other currencies will fluctuate due to
changes in exchange rates.
The following table summarises the net amount of assets and liabilities which are denominated in currencies
that the Company is significantly exposed to:
United States Dollar:
Net Denominated Net Assets
AUD/USD Exchange Rate: $0.7437 (2015: $0.7707)
Euro:
Net Denominated Net Assets
AUD/EURO Exchange Rate: $0.6698 (2015: $0.6914)
2016
$
2015
$
11,040,512
85,185,201
2,814,483
21,576,892
(f) 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 flow risk, whereas short term fixed rate instruments expose the
Company to interest rate risk. Excess cash and cash equivalent balances are monitored closely and can be moved
into short-term bank bills or fixed term deposits.
(g) Financial instrument composition and maturity analysis
The tables below reflect the undiscounted contractual settlement terms for financial instruments of a fixed
period of maturity, as well as the Company’s expectations of the settlement period for all other financial
instruments. As such, the amounts may not reconcile to the Statement of Financial Position.
2016
Assets
Weighted
Average
Interest Rate
Interest bearing
Less than 90
days $
More than 1
year $
Non-interest
bearing
$
Total
$
Financial assets
-
-
Cash and cash equivalents
1.42%
159,496,725
Other receivables
-
-
Total assets
Liabilities
159,496,725
Financial liabilities
-
-
Cash overdrafts
1.47%
160,807,769
Balances due to brokers
Other payables
Total liabilities
-
-
-
-
160,807,769
-
-
-
-
-
-
-
-
-
354,014,790
354,014,790
-
159,496,725
3,615,294
3,615,294
357,630,084
517,126,809
59,935,339
59,935,339
-
160,807,769
116,583
116,583
1,651,478
1,651,478
61,703,400
222,511,169
CADENCE CAPITAL LIMITED ANNUAL REPORT 2016 | A.B.N. 17 112 870 096
33
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016 CONTD’
14. FINANCIAL RISK MANAGEMENT (Continued)
(g) Financial instrument composition and maturity analysis (Continued)
2015
Assets
Weighted
Average
Interest Rate
Interest bearing
Less than 90
days $
More than 1
year $
Non-interest
bearing
$
Total
$
Financial assets
-
-
Cash and cash equivalents
2.12%
32,673,014
Other receivables
Total assets
-
-
32,673,014
Liabilities
Financial liabilities
Cash overdrafts
Balances due to brokers
Other payables
Total liabilities
-
1.59%
-
-
-
2,596
-
-
2,596
Other payables are expected to be paid as follows:
- Less than 6 months
- 6 months to one year
(h) Financial Instruments Measured at Fair Value
-
-
-
-
-
-
-
-
-
293,689,355
293,689,355
-
32,673,014
5,279,525
5,279,525
298,968,880
331,641,894
13,671,193
13,671,193
-
55,342
2,596
55,342
3,329,027
3,329,027
17,055,562
17,058,158
2016
$
2015
$
1,651,478
3,329,027
-
-
AASB 13: Fair Value Measurement requires the disclosure of fair value information using a fair value hierarchy
reflecting the significance 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 are not based on observable market data (unobservable inputs).
Included within Level 1 of the hierarchy are listed investments. The fair values of these financial assets and
liabilities have been based on the closing quoted last prices at the end of the reporting period, excluding
transaction costs.
Investments included in Level 2 of the hierarchy include amounts in relation to Initial Public Offerings and
Placements in which the Company has subscribed to during the year. These investments have not listed on the
Australian Stock Exchange as at 30 June 2016 and therefore represent investments in an inactive market. In
valuing unlisted investments, included in Level 2 of the hierarchy, the fair value has been determined using the
valuation technique of the quoted subscription price and the amount of securities subscribed for by the Company
under the relevant offers.
34
CADENCE CAPITAL LIMITED ANNUAL REPORT 2016 | A.B.N. 17 112 870 096
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016 CONTD’
14. FINANCIAL RISK MANAGEMENT (Continued)
(h) Financial Instruments Measured at Fair Value (Continued)
30 June 2016
Financial assets
Level 1
$
Level 2
$
Level 3
$
352,659,765
1,355,025
Financial liabilities
(59,935,339)
-
Total
292,724,426
1,355,025
-
-
-
30 June 2015
Financial assets
Level 1
$
293,195,255
Financial liabilities
(13,671,193)
Level 2
$
494,100
-
Total
279,524,062
494,100
Level 3
$
-
-
-
Total
$
354,014,790
(59,935,339)
294,079,451
Total
$
293,689,355
(13,671,193)
280,018,162
(i) Sensitivity Analysis
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 effect 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 financial year and held constant
through the reporting period. The effect on profit and equity as a result of changes in the interest rate, with
all other variables remaining constant would be as follows:
Change in profit 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%
2016
$
296,613
(296,613)
296,613
(296,613)
2015
$
578,804
(578,804)
578,804
(578,804)
Foreign Currency Risk Sensitivity Analysis
At 30 June 2016, the effect on profit and equity as a result of changes in the foreign currency risk, with all
other variables remaining constant would be as follows:
Change in profit before tax
- Depreciation of the AUD by 2%
- Appreciation of the AUD by 2%
Change in equity
- Depreciation of the AUD by 2%
- Appreciation of the AUD by 2%
321,705
(321,705)
321,705
(321,705)
2,145,691
(2,145,691)
2,145,691
(2,145,691)
CADENCE CAPITAL LIMITED ANNUAL REPORT 2016 | A.B.N. 17 112 870 096
35
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016 CONTD’
14. FINANCIAL RISK MANAGEMENT (Continued)
(i) Sensitivity Analysis (Continued)
Market Risk Sensitivity Analysis
At 30 June 2016, the effect on profit and equity as a result of changes in the market risk, with all other
variables remaining constant would be as follows:
Change in profit 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%
2016
$
2015
$
5,115,195
5,607,341
(5,115,195)
(5,607,341)
3,580,637
3,925,138
(3,580,637)
(3,925,138)
15. KEY MANAGEMENT PERSONNEL COMPENSATION
The names and position held of the Company’s key management personnel (including Directors) in office at
any time during the financial year are:
Karl Siegling
Wayne Davies
Ronald Hancock
James Chirnside
Chairman
Non-Executive Director and Company Secretary
Non-Executive Director
Non-Executive Director
(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 Party Transactions.
Short-term Employee Benefits - Directors’ Fees
Post-employment Benefits - Superannuation
2016
$
68,493
6,507
75,000
2015
$
68,493
6,507
75,000
(b) 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 reflect 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 qualified and experienced Directors.
Directors’ base fees are presently limited to a maximum of $80,000 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.
36
CADENCE CAPITAL LIMITED ANNUAL REPORT 2016 | A.B.N. 17 112 870 096
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016 CONTD’
15. KEY MANAGEMENT PERSONNEL COMPENSATION (Continued)
(c) Shareholdings
As at 30 June 2016, the Company’s key management personnel indirectly held the following shares in the
Company:
Karl Siegling
Wayne Davies
Ronald Hancock
James Chirnside
Balance at 1 July 2015
Acquisitions
Disposals
Balance at 30 June 2016
9,833,185
416,447
279,860
26,851
10,556,343
9,126,398
306,613
120,140
-
9,553,151
-
-
-
-
-
18,959,583
723,060
400,000
26,851
20,109,494
As at 30 June 2016, the Company’s key management personnel indirectly held the following options in the
Company:
Balance at 1 July 2015
Karl Siegling
Wayne Davies
Ronald Hancock
James Chirnside
8,113,666
309,442
279,860
25,932
8,728,900
Options
Exercised
8,113,666
250,000
120,140
-
8,483,806
Options
Lapsed
-
59,442
159,720
25,932
245,094
Balance at 30 June 2016
-
-
-
-
-
As at 30 June 2015, the Company’s key management personnel indirectly held the following shares in the
Company:
Balance at 1 July 2014
Acquisitions
Disposals
Balance at 30 June 2015
Karl Siegling
Wayne Davies
Ronald Hancock
James Chirnside
8,792,686
353,989
279,860
26,851
9,453,386
1,040,499
62,458
-
-
1,102,957
-
-
-
-
-
9,833,185
416,447
279,860
26,851
10,556,343
As at 30 June 2015, the Company’s key management personnel indirectly held the following options in the
Company:
Balance at 1 July 2014
Acquisitions
Karl Siegling
Wayne Davies
Ronald Hancock
James Chirnside
8,519,166
344,442
279,860
25,932
9,169,400
-
-
-
-
-
Options
Exercised
405,500
35,000
-
-
Balance at 30 June 2015
8,113,666
309,442
279,860
25,932
440,500
8,728,900
Directors and Director related entities disposed of and acquired ordinary shares and options in the Company
on the same terms and conditions available to other shareholders. The Directors have not, during or since the
end of the financial year, been granted options over unissued shares or interests in shares of the Company as
part of their remuneration.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2016 | A.B.N. 17 112 870 096
37
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2016 CONTD’
16. RELATED PARTY TRANSACTIONS
All transactions with related entities were made on normal commercial terms and conditions.
Karl Siegling is the sole Director and a beneficial owner of Cadence Asset Management Pty Limited, the entity
appointed to manage the investment portfolio of Cadence Capital Limited. Wayne Davies is also a beneficial
owner of Cadence Asset Management Pty Limited. In its capacity as Manager, Cadence Asset Management Pty
Limited was paid a management fee of $3,535,646 (inclusive of GST) (2015: $3,019,310). 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 2016, the balance payable to the manager was $120,354 (inclusive of GST) (2015: $161,957).
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 2016 no performance fee (2015: $2,778,884, inclusive of
GST) was payable to Cadence Asset Management Pty Limited. As at 30 June 2015, the balance payable to the
manager was $2,778,884 (inclusive of GST).
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 financial statements.
17. EVENTS AFTER THE REPORTING PERIOD
The Board have declared a 4.0 cent per share fully franked final dividend payable on 27th October 2016. The Ex-
Date for the dividend is 18th October 2016.
Other than the above there has not arisen in the interval between the end of the financial 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 significantly affect the operations of the entity, the results of those operations, or the state of
affairs of the entity, in future financial years.
18. CONTINGENT LIABILITIES
There were no material contingencies as at 30 June 2016 (2015: nil).
19. CAPITAL COMMITMENTS
Capital commitments exist for placements entered into before
30 June 2016, which settle after year end.
2016
$
1,826,929
2015
$
930,776
20. SEGMENT REPORTING
The Company has only one segment. The Company operates predominately in Australia and in one industry
being the securities industry, deriving revenue from dividend income, interest income and from the sale of its
financial assets at fair value through profit or loss, however the Company has foreign exposures as it invests in
companies which operate internationally.
38
CADENCE CAPITAL LIMITED ANNUAL REPORT 2016 | A.B.N. 17 112 870 096
DIRECTORS’ DECLARATION
The Directors of Cadence Capital Limited declare that:
1. The financial statements as set out in pages 17 to 38 and the additional disclosures included in the Directors’
Report designated as ‘Remuneration Report’, as set out on pages 9 to 11 are in accordance with the
Corporations Act 2001, including:
(a) complying with Australian Accounting Standards, which, as stated in Note 1 to the financial statements,
constitutes compliance with International Financial Reporting Standards (IFRS), the Corporations
Regulations 2001 and other mandatory professional reporting requirements; and
(b) giving a true and fair view of the financial position of the Company as at 30 June 2016 and of its
performance for the year ended on that date;
2. The Directors have been given declaration required by section 295A of the Corporations Act 2001 from the
Manager, Cadence Asset Management Pty Limited declaring 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 30th day of September 2016
CADENCE CAPITAL LIMITED ANNUAL REPORT 2016 | A.B.N. 17 112 870 096
39
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF CADENCE CAPITAL LIMITED
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF CADENCE CAPITAL LIMITED
A.B.N 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 2016, the statement of profit or loss and other
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 of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards (including the Australian Accounting
Interpretations) 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 financial 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 whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial report. The procedures selected depend on the auditor’s judgement, including the assessment
of the risks of material misstatement of the financial report, whether due to fraud or error. In making
those risk assessments, the auditor considers internal controls relevant to the entity’s preparation of the
financial report that gives a true and fair view in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal controls. 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 financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
An independent New South Wales Partnership. ABN 17 795 780 962.
Pitcher Partners is an association of independent firms
Level 22 MLC Centre, 19 Martin Place, Sydney NSW 2000
Melbourne | Sydney | Perth | Adelaide | Brisbane| Newcastle
Liability limited by a scheme approved under Professional Standards Legislation
An independent member of Baker Tilly International
40
CADENCE CAPITAL LIMITED ANNUAL REPORT 2016 | A.B.N. 17 112 870 096
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF CADENCE CAPITAL LIMITED
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF CADENCE CAPITAL LIMITED
A.B.N 17 112 870 096
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act
2001.
Auditor’s Opinion
In our opinion:
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 entity’s financial position as at 30 June 2016 and of its
performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001;
and
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 9 to 11 of the directors’ report for the year
ended 30 June 2016. The directors of Cadence Capital Limited 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.
Opinion
In our opinion the Remuneration Report of Cadence Capital Limited for the year ended 30 June 2016,
complies with section 300A of the Corporations Act 2001.
S M WHIDDETT
Partner
30 September 2016
PITCHER PARTNERS
Sydney
An independent New South Wales Partnership. ABN 17 795 780 962.
Pitcher Partners is an association of independent firms
Level 22 MLC Centre, 19 Martin Place, Sydney NSW 2000
Melbourne | Sydney | Perth | Adelaide | Brisbane| Newcastle
Liability limited by a scheme approved under Professional Standards Legislation
An independent member of Baker Tilly International
CADENCE CAPITAL LIMITED ANNUAL REPORT 2016 | A.B.N. 17 112 870 096
41
ASX ADDITIONAL INFORMATION
Additional information required by the Australian Securities Exchange Limited Listing Rules and not disclosed
elsewhere in this report.
SHAREHOLDINGS
Substantial shareholders (as at 31 August 2016)
The following shareholder’s 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
18,959,583
7.015
Yarandi Investments Pty Ltd & associated entities
14,261,375
5.276
Distribution of holdings (as at 31 August 2016)
Category
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
No. of Shareholders
310
1,213
1,501
4,504
372
7,900
The number of shareholdings held in less than marketable parcels is 100.
42
CADENCE CAPITAL LIMITED ANNUAL REPORT 2016 | A.B.N. 17 112 870 096
ASX ADDITIONAL INFORMATION
Twenty largest shareholders - Ordinary shares (as at 31 August 2016)
Number of
ordinary shares
held
Percentage of
issued capital
held
Esselmont Pty Ltd and associates
Yarandi Investments Pty Ltd & associated entities
HSBC Custody Nominees (Australia) Limited
Avanteos Investments Limited
Southern Steel Investments Pty Limited
Mr Mark John & Mr Stephen William Toye
Mr Victor John Plummer
Mr Aengus Kavanagh & Mr Matthew Mahoney
Mr Keith William Kerridge
Mr Paul & Mrs Karen & Mr Luke Van Ryn
Mrs Karen Lianne Van Ryn
Andonandon Pty Ltd
Mr Clifford Law & Ms Susanne Bruhn
Golden Words Pty Ltd
Arongi Pty Limited
Mr Aaron Francis Quirk
Golden Words Pty Ltd
Arazan Pty Ltd
Netwealth Investments Limited
Appreciation Holdings Pty Ltd
18,959,583
14,261,375
2,095,650
2,031,282
1,579,910
1,300,000
1,000,000
863,531
786,945
781,476
776,476
723,060
700,880
699,301
698,900
691,123
649,650
627,821
614,825
600,000
7.015
5.276
0.775
0.752
0.585
0.481
0.370
0.319
0.291
0.289
0.287
0.268
0.259
0.259
0.259
0.256
0.240
0.232
0.227
0.222
50,441,788
18.662
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 2016 | A.B.N. 17 112 870 096
43
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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
CADENCE CAPITAL LIMITED ANNUAL REPORT 2016