2018 ANNUA L
REPO RT
C A P I TA L L I M I T E D
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
2
3
5
6
12
13
16
17
18
19
20
38
39
44
CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
1
COMPANY PARTICULARS
COMPANY PARTICULARS
CADENCE CAPITAL LIMITED
A.B.N. 17 112 870 096
DIRECTORS
Karl Siegling
James Chirnside
Wayne Davies
Ronald Hancock
Jenelle Webster
SECRETARY
Wayne Davies
MANAGER OF THE COMPANY
Cadence Asset Management Pty Limited
ABN: 68 106 551 062
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.
REGISTERED OFFICE
AUDITORS
Level 11, 131 Macquarie Street,
Sydney, NSW, 2000
CONTACT DETAILS
Level 11, 131 Macquarie Street,
Sydney, NSW, 2000
Telephone: (02) 8298 2450
Fax: (02) 8298 2499
Email: info@cadencecapital.com.au
Website: www.cadencecapital.com.au
For enquiries regarding net asset backing
(as advised each month to the Australian Securities
Exchange) refer to asx.com.au or call (02) 8298 2450
Pitcher Partners
Level 22 MLC Centre
19 Martin Place
Sydney NSW 2000
ASX CODE
Cadence Capital Limited Ordinary Shares (CDM)
COUNTRY OF INCORPORATION
Australia
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CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
MANAGER'S REPORT
SUMMARY OF RESULTS
•
•
•
•
•
•
•
Revenue from ordinary activities of $68.7 million, up 3%
Record Profit before tax of $54.0 million, up 15%
Record Profit after tax of $41.2 million, up 11.4%
EPS of 13.5 cents
Fund gross performance of 18.2% outperforming the All Ords. Accum. Index by 4.5% whilst holding on
average 20% cash
4.0 cents fully franked final dividend
Annualised yield of 6.4% fully franked (9.1% grossed-up)
SHAREHOLDER PERFORMANCE
Performance* to 30 June 2018
1 Month
YTD
1 Year
3 Years (per annum)
5 Years (per annum)
8 Years (per annum)
10 Years (per annum)
Since Inception (12.8 years) (per annum)
CDM
0.9%
18.2%
18.2%
6.7%
9.6%
17.8%
14.4%
15.5%
All Ords
Outperformance
2.9%
13.7%
13.7%
9.5%
10.3%
9.4%
6.2%
6.9%
-2.0%
+4.5%
+4.5%
-2.8%
-0.7%
+8.4%
+8.2%
+8.6%
Since Inception (12.8 years) (total return)
526.7%
135.1%
+391.6%
* Before Management and Performance Fees
For the financial year ended 30 June 2018, Cadence Capital Limited (“the Company”) produced a positive gross
performance of 18.2% outperforming the All Ordinaries Accumulation Index by 4.5%. This outperformance was
achieved with lower than market exposure, with the Company holding on average 20% cash over this period.
We are pleased with the performance of the Company’s top holdings over the past year with ARQ Group (previously
Melbourne IT), Macquarie Group, Emeco Holdings, Noni B, Shine Corporate, Facebook, Money 3, Independence
Group, Navigator Global Investments and Mcphersons being our top performing stocks for the year. The
Company’s domestic and international holdings performed well over this period, generating both strong profits and
outperformance. Stock positions that underperformed the past year were Retail Food Group, Fortescue Metals
Group, Eclipx Group, Fleetwood Corp, BW Offshore, HT&E, Jervois Mining, Tesla (short position), Softbank and
Domino’s Pizza (short position).
DIVIDENDS
During the year the Company declared an 8.0 cent per share fully franked dividend which equated to a 6.4% annual
fully franked yield, or a 9.1% gross yield (grossed up for franking credits) based on the CDM share price as at 30th
June 2018 of $1.25. We are pleased that the Company has once again delivered a healthy fully franked yield over
the past year.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
3
MANAGER'S REPORT
MANAGER’S REPORT CONT’D
CHANGE OF DIRECTORS
On the 27th September 2018 Mr Ronald Ernest Hancock retired from the Board. Ronald has been a member of the
Board since 2013 and has made an outstanding contribution to Cadence Capital Limited over the past five years.
Ronald has extensive business experience founding Wide Bay Building Society (now Auswide Bank Limited) over 50
years ago. Cadence Capital Limited was an early investor in Wide Bay Building Society, and upon retirement from
Wide Bay, we were pleased to have Ronald on our Board providing extensive financial services experience as well as
experience in guiding and assisting a growing business. We will miss Ronald’s valuable contribution.
On the 27th September 2018 the Board welcomed Ms Jenelle Webster as a non-executive Director of the Company.
Jenelle is a member of Chartered Accountants, Chartered Secretaries, Institute of Internal Auditors and a
Registered Company Auditor, with 20 years financial accounting and reporting experience within both the public
and private sectors. Jenelle has been responsible for, and conducted, the audit of ASX listed companies, Listed
Investment Companies (LIC’s), funds, disclosing entities, large propriety limited companies and Not-For-Profit
organisations. In addition to performing statutory audits, Jenelle has provided internal audit and evaluation
services to a large number of public, private and community sector organisations.
SUMMARY AND OUTLOOK
I am pleased that Cadence Capital Limited produced a record full year profit after tax of $41.2m for the year ended
30th June 2018, up 11.4% on the previous financial year. The investment portfolio produced an 18.2% gross
performance, outperforming the All Ordinaries Accumulation Index by 4.5%. The Board declared an 8 cent fully-
franked dividend. This equated to an annualised yield of 6.4% (9.1% grossed up for franking).
Both small and large capitalisation stocks, as well as companies across a broad range of sectors contributed
positively to performance. The diversification of returns is important to achieving above-average risk-adjusted
returns over time.
Global markets have recovered from weakness earlier in the calendar year and appear again to be climbing ‘a wall
of worry’. The Australian market has more than recovered, with the All Ordinaries Accumulation Index making new
highs early in the new financial year. Although there have been pockets of relative economic weakness and strength
across the global economy, synchronized global growth remains an emerging theme which we believe will continue
to develop. Against this back drop, we continue to find opportunities that meet the Cadence investment process.
As Managers of your fund, we aim to provide shareholders with clear and transparent communication. We do this
through monthly investment updates, quarterly webcasts, regular investment news, market insights, as well as
annual and half yearly profit announcements. We would encourage you to register to receive regular updates at
https://www.cadencecapital.com.au/newsletter/.
Please feel free to contact us at info@cadencecapital.com.au with any feedback to improve our communication
and engagement with you.
I would like to take this opportunity to thank our investors for their continued support.
Karl Siegling
Managing Director
Cadence Asset Management Pty Limited
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CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
LONG AND SHORT POSITIONS
Long Positions
Company Name
ARQ
EHL
MQG
NBL
JHG
MNY
TEVA
NGI
SHJ
AMI
CCP
5930 KS
FB US
HOM
MAH
LYC
BOL
ARQ Group Ltd
Emeco Holdings Ltd
Macquarie Group Ltd
Noni B Ltd
Janus Henderson Group Plc
Money3 Corp Ltd
TEVA Pharmaceutical-SP
Navigator Global Investments Ltd
Shine Corporate Ltd
Aurelia Metals Ltd
Credit Corp Group Ltd
Samsung Electronics Co Ltd
Facebook Inc
Homeloans Ltd
Macmahon Holdings Ltd
Lynas Corp Ltd
Boom Logistics Ltd
Short Positions
Company Name
DMP
TSLA
MIN
Domino's Pizza Enterprises Ltd
Tesla Inc
Mineral Resources Ltd
TOP 20 POSITIONS
AS AT 30 JUNE 2018
Exposure
$
% Of
Equity
$68,551,705
16.61%
$29,119,546
$25,942,017
$19,844,624
$16,047,140
$15,059,004
$12,155,895
$11,776,815
$10,678,834
$10,444,073
$8,917,545
$8,635,821
$8,502,320
$8,112,240
$7,057,474
$6,509,576
$6,034,836
Exposure
$
$9,325,030
$9,135,299
$5,609,664
7.05%
6.28%
4.81%
3.89%
3.65%
2.94%
2.85%
2.59%
2.53%
2.16%
2.09%
2.06%
1.97%
1.71%
1.58%
1.46%
% Of
Equity
2.26%
2.21%
1.36%
Total Top 20 Long and Short Positions
$249,319,472
60.5%
TOTAL PORTFOLIO POSITIONS:
Portfolio Net Exposure Long Positions
Portfolio Net Exposure Short Positions
Total Portfolio Net Exposure
$359,262,503
$27,749,528
$331,512,975
87.0%
6.7%
80.3%
CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
5
DIRECTORS’ REPORT TO SHAREHOLDERS
FOR THE YEAR ENDED 30 JUNE 2018
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 2018.
PRINCIPAL ACTIVITY
The principal activity of the Company was investing primarily in securities listed both in Australia and internationally.
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 profit before tax of $54,022,429 (2017: operating
profit before tax of $47,076,329) and an operating profit after tax of $41,166,747 (2017: operating profit after tax of
$36,952,243).
REVIEW OF OPERATIONS
Investments are valued continuously to market value. For the year ended 30 June 2018, net investments were
valued at $299,248,664 (2017: $205,944,588). 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 $412,648,397 (2017: $340,290,676).
SIGNIFICANT CHANGES IN STATE OF AFFAIRS
During the year there were no significant changes in the state of affairs of the Company.
DIVIDENDS PAID OR RECOMMENDED
The Board have declared a 4.0 cent per share fully franked final dividend payable on 17 September 2018. The Ex-
Date for the dividend was the 7 September 2018.
Dividends paid are as follows:
Fully franked 2018 interim dividend of 4.0 cents per share was paid on 23 April 2018
Fully franked 2017 final dividend of 4.0 cents per share was paid on 18 September 2017
Fully franked 2017 interim dividend of 4.0 cents per share was paid on 28 April 2017
Fully franked 2016 final dividend of 4.0 cents per share was paid on 27 October 2016
$
12,628,489
10,960,453
10,879,381
10,811,403
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 (Retired on the 27th September 2018)
Jenelle Webster (Appointed on the 27th September 2018)
6
CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
DIRECTORS’ REPORT TO SHAREHOLDERS FOR
THE YEAR ENDED 30 JUNE 2018 CONTD’
INFORMATION ON DIRECTORS
Karl Siegling (Chairman)
Karl Siegling has 25 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 a MBA from INSEAD in France. Karl
holds a Post Graduate Diploma in Finance with the Securities Institute of Australia (FINSIA).
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. He then worked within the Equities Research
Division of Deutsche Morgan Grenfell before studying a MBA at INSEAD and working as a Summer Associate within
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) focused on investing in early stage and expansion capital for financial services and
technology companies. Karl worked as a consultant for Wilson Asset Management, researching stocks, before
setting up Cadence Asset Management Pty Limited.
Karl has been the Chairman and Managing Director of Cadence Asset Management Pty Limited (The Manager), for
15 and a half years. Karl has been the Chairman and Managing Director of Cadence Capital Limited for 15 years.
James Chirnside (Non-Executive Director)
James Chirnside has worked in financial markets for 33 years mostly as an equities fund manager across a broad
range of markets and sectors. As a fund manager, he was mainly focused in emerging and frontier markets. In
addition, he has also been a proprietary metals trader, derivatives broker, and fund promoter in Sydney, Hong Kong,
London, and Melbourne.
James studied for a Bachelor’s degree in Business Administration at Edith Cowan University in Perth. James is also
a director of Dart Mining NL (DTM), 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 13.5 years.
Ronald Hancock AM (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 33 years and is also a Director of several private
companies. In 2009 he was appointed a member of the Order of Australia for service to the finance sector and to
the community of Bundaberg. Ronald has been a Director of the Company for the past 5.3 years.
Wayne Davies (Non-Executive Director and Company Secretary)
Wayne Davies has over 16 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 11 years. Wayne Davies
previously worked with Theorema Asset Management in London and was a director of Theorema Europe Fund and
Theorema Europe Fund Plus. Wayne has been a Director of the Company for the past 4.5 years.
Jenelle Webster (Non-Executive Director)
Jenelle is a member of Chartered Accountants, Chartered Secretaries, Institute of Internal Auditors and a Registered
Company Auditor, with 20 years financial accounting and reporting experience within both the public and private
sectors. Jenelle has been responsible for, and conducted, the audit of ASX listed companies, Listed Investment
Companies (LIC’s), funds, disclosing entities, large propriety limited companies and Not-For-Profit organisations. In
addition to performing statutory audits, Jenelle has provided internal audit and evaluation services to a large
number of public, private and community sector organisations.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
7
DIRECTORS’ REPORT TO SHAREHOLDERS
FOR THE YEAR ENDED 30 JUNE 2018 CONTD’
COMPANY SECRETARY
Wayne Davies held the position of Company Secretary at the end of the financial year.
DIRECTORS’ MEETINGS
Karl Siegling (Chairman)
James Chirnside
Wayne Davies
Ronald Hancock
AUDIT COMMITTEE MEETINGS
Karl Siegling
James Chirnside (Chairman)
REMUNERATION REPORT (AUDITED)
No. eligible to attend
Attended
5
5
5
5
5
5
5
5
No. eligible to attend
Attended
2
2
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.
2018
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
2017
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
8
CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
DIRECTORS’ REPORT TO SHAREHOLDERS
FOR THE YEAR ENDED 30 JUNE 2018 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 $3,953,731 (inclusive of GST) (2017: $3,306,033). 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 2018,
the balance payable to the manager was $199,847 (inclusive of GST) (2017: $153,358).
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 2018 $2,979,620 (2017: $2,600,320, inclusive of GST) was payable to
Cadence Asset Management Pty Limited. As at 30 June 2018, the balance payable to the manager was $2,979,620
(inclusive of GST) (2017: $2,600,320, 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.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
9
DIRECTORS’ REPORT TO SHAREHOLDERS
FOR THE YEAR ENDED 30 JUNE 2018 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 2017
19,989,659
772,418
400,000
26,851
21,188,928
Acquisitions
Disposals
2,084,816
90,816
-
-
2,175,632
-
-
-
-
-
As at the date
of this Report
22,074,475
863,234
400,000
26,851
23,364,560
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 17 September 2018. The Ex-
Date for the dividend was the 7 September 2018.
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.
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 unless
otherwise stated.
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.
The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium.
10
CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
DIRECTORS’ REPORT TO SHAREHOLDERS
FOR THE YEAR ENDED 30 JUNE 2018 CONTD’
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 12 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 27th September 2018
CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
11
AUDITOR’S INDEPENDENCE DECLARATION
AUDITOR'S INDEPENDENCE DECLARATION
Auditor’s Independence Declaration
To The Directors Of Cadence Capital Limited
A.B.N 17 112 870 096
In relation to the independent audit of Cadence Capital Limited for the year ended 30 June 2018, 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 during the year.
C I Chandran
Partner
Pitcher Partners
Sydney
27th September 2018
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
12
CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
CORPORATE GOVERNANCE STATEMENT
FOR THE YEAR ENDED 30 JUNE 2018
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 measurable
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.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
13
CORPORATE GOVERNANCE STATEMENT
FOR THE YEAR ENDED 30 JUNE 2018 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.
14
CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
CORPORATE GOVERNANCE STATEMENT
FOR THE YEAR ENDED 30 JUNE 2018 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.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
15
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2018
Note
2018
$
2017
$
INCOME
Net realised and unrealised gain/(loss) on investments
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
2
Other expenses from ordinary activities
49,272,192
17,723,008
1,657,711
70,471
42,894,113
21,742,031
1,825,539
164,961
68,723,382
66,626,644
(2,293,339)
(3,684,158)
(2,776,464)
(272,700)
(75,000)
(2,420,591)
(3,080,621)
(2,423,026)
(232,306)
(75,000)
(3,891,037)
(9,662,339)
(501,788)
(711,468)
(100,953)
(132,360)
(473)
(111,911)
(97,066)
(52,236)
(463,049)
(706,310)
(185,703)
(120,731)
(8,541)
(74,261)
(52,578)
(45,259)
Total Expenses
Profit before income tax
Income tax expense
(14,700,953)
(19,550,315)
54,022,429
47,076,329
3(a)
(12,855,682)
(10,124,086)
Profit attributable to members of the Company
11
41,166,747
36,952,243
Other comprehensive income
Other comprehensive income for the period, net of tax
-
-
Total comprehensive income for the period
41,166,747
36,952,243
Basic earnings per share
Diluted earnings per share
13
13
13.5 cents
13.5 cents
13.5 cents
13.5 cents
The accompanying notes form part of these financial statements.
16
CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
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 liability
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Profits reserve
Accumulated losses
TOTAL EQUITY
STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2018
Note
2018
$
2017
$
12(a)
128,005,890
151,961,930
5
6
3,116,926
22,709,727
396,415,365
302,249,468
-
1,408,760
3(b)
19,283,217
19,863,607
546,821,398
498,193,492
12(a)
28,154,892
54,242,004
7
8
4,634,000
7,355,932
97,166,701
96,304,880
3(c)
4,217,408
-
134,173,001
157,902,816
412,648,397
340,290,676
9
10
11
427,219,613
372,439,698
39,265,003
21,687,197
(53,836,219)
(53,836,219)
412,648,397
340,290,676
The accompanying notes form part of these financial statements.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
17
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2018
Note
Issued Capital
$
Accumulated
Losses
$
Profits
Reserve
$
Total Equity
$
Balance at 1 July 2016
367,999,928
(53,836,219)
6,425,738
320,589,447
Balance at 30 June 2017
372,439,698
(53,836,219)
21,687,197
340,290,676
Profit for the year
Transfer to profits reserve
11
10
Other comprehensive income for the
year
-
-
-
Transactions with owners:
Shares issued via dividend
reinvestment plan
9
4,439,770
Dividends paid
4(a)
-
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 placement
Deferred tax on Capitalised share issue
cost
11
10
9
9
9
-
-
-
5,196,551
50,060,598
204,529
Capitalised share issue costs
(681,763)
Dividends paid
4(a)
-
36,952,243
-
36,952,243
(36,952,243)
36,952,243
(21,690,784)
(21,690,784)
41,166,747
-
41,166,747
(41,166,747)
41,166,747
-
-
4,439,770
-
-
5,196,551
50,060,598
204,529
(681,763)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(23,588,941)
(23,588,941)
Balance at 30 June 2018
427,219,613
(53,836,219)
39,265,003
412,648,397
The accompanying notes form part of these financial statements.
18
CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2018
Note
2018
$
$
2017
$
$
CASH FLOWS FROM OPERATING ACTIVITIES
Proceeds from the sale of investments
760,802,375
579,638,707
Payments for the purchase of investments
(789,870,784)
(464,386,810)
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
NET CASH (USED IN)/PROVIDED BY OPERATING
ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid
Share issue transaction costs, gross of tax
Proceeds from shares issued
NET CASH PROVIDED BY/(USED IN) FINANCING
ACTIVITIES
NET INCREASE IN CASH HELD
CASH AND CASH EQUIVALENTS AS AT BEGINNING OF
THE FINANCIAL YEAR
CASH AND CASH EQUIVALENTS AS AT END OF THE
FINANCIAL YEAR
19,628,114
1,657,711
70,471
(3,637,670)
(2,574,459)
(711,468)
(2,293,339)
(4,373,000)
(1,108,729)
(6,444,595)
22,092,715
1,825,539
164,961
(3,051,097)
-
(706,310)
(2,420,591)
(10,420,300)
(1,032,184)
(5,422,646)
12(b)
(28,855,373)
116,281,984
(18,392,390)
(17,251,014)
(681,763)
50,060,598
-
-
30,986,445
(17,251,014)
2,131,072
99,030,970
97,719,926
(1,311,044)
12(a)
99,850,998
97,719,926
NON-CASH TRANSACTIONS:
Shares issued via dividend reinvestment plan
5,196,551
4,439,770
The accompanying notes form part of these financial statements.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
19
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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 27th September 2018 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.
20
CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018 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.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
21
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018 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. The carrying amount of
trade and other receivables represent their fair value.
(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 nominal
amounts and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition.
The carrying amount of trade and other payables represent their fair value.
(f) Rounding of Amounts
In accordance with ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, the amounts
in the financial report has been rounded to the nearest dollar unless otherwise stated.
(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 securities
which are listed 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.
22
CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018 CONTD’
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(j) Critical Accounting Estimates and Judgements (Continued)
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.
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 2018. 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
2018
$
2017
$
43,300
42,088
-
-
52,095
95,395
10,490
52,578
CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
23
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018 CONTD’
3. TAXATION
(a) Current Income Tax Expense
2018
$
2017
$
The prima facie tax on profit from ordinary activities before income tax is reconciled to the income tax expense as
follows:
Prima facie tax expense on 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
Effective tax rate
16,206,729
14,122,899
1,679,983
1,645,141
813,724
918,946
(242,209)
(813,741)
(5,599,942)
(5,483,804)
(2,603)
(265,355)
12,855,682
10,124,086
23.8%
21.5%
The effective tax rate for FY2018 is 23.8%, reflecting the benefit to the Company of franking credits received on
dividend income during the year.
Total income tax expense results in a:
Current tax liability
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
(Debited)/Credited to the profit or loss
Charged directly to equity
(c) Current Tax Liabilities /(Assets)
Movement in current tax liabilities
Balance at the beginning of the period
Current year income tax on operating profit
Income tax paid
Income tax received
Prior year under/(over)
At reporting date
12,070,763
784,919
5,572,076
4,552,010
12,855,682
10,124,086
7,590
212,451
7,590
148,379
15,730,063
16,374,525
3,333,113
3,333,113
19,283,217
19,863,607
19,863,607
24,415,617
(784,919)
(4,552,010)
204,529
-
19,283,217
19,863,607
(1,408,760)
(1,558,190)
12,070,763
5,572,076
(7,841,570)
(5,422,646)
1,409,965
(12,990)
-
-
4,217,408
(1,408,760)
24
CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018 CONTD’
2018
$
2017
$
23,588,941
21,690,784
Cents
per
share
4.0
4.0
Date of
payment
23 April 18
18 September 17
Tax rate for
franking
credit
%
Franked
Total Amount
$
30%
30%
100%
100%
12,628,489
10,960,452
23,588,941
4. DIVIDENDS
(a) Dividends paid
Dividends paid by the Company
2018
Dividends paid by the Company
for the year ended 30 June 2018
Interim 2018 Ordinary
Final 2017 Ordinary
Total Amount
The Board have declared a 4.0 cent per share fully franked final dividend payable on 17 September 2018. The Ex-
Date for the dividend was the 7 September 2018.
2017
Dividends paid by the Company
for the year ended 30 June 2017
Interim 2017 Ordinary
Final 2016 Ordinary
Total Amount
Cents
per
share
4.0
4.0
Date of
payment
Tax rate for
franking
credit
%
Franked
Total Amount
$
28 April 17
27 October 16
30%
30%
100%
100%
10,879,381
10,811,403
21,690,784
(b) Dividend franking account
The balance of the franking account at year end is adjusted for franking
credits and debits arising from receipts or payments of income tax and
franking credits arising from dividends receivable.
2018
$
2017
$
11,106,856
4,083,873
Subsequent to the reporting period, the franking account would be reduced by the proposed dividend disclosed
in (a) above. The Company’s ability to continue to pay franked dividends is dependent upon the receipt of franked
dividends from investments and the Company paying tax.
5. TRADE AND OTHER RECEIVABLES
Trade debtors
Income receivable
Sundry debtors
1,958,769
19,679,751
807,363
350,794
2,712,469
317,507
3,116,926
22,709,727
Trade debtors relate to outstanding settlements, are non-interest bearing and are secured by the Australian
Securities Exchange – National Guarantee Fund. They are settled within 3 days of the purchase being executed.
Income receivable relates to accrued income, it is non-interest bearing and is unsecured. Trade and other
receivables are not past due or impaired and are of a good credit quality.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
25
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018 CONTD’
6. FINANCIAL ASSETS
Long positions - held for trading financial assets:
Investments at fair value
7. TRADE AND OTHER PAYABLES
Trade creditors
Sundry creditors - related parties
Dividends payable on shorts
Sundry creditors – other
2018
$
2017
$
396,415,365
302,249,468
396,415,365
302,249,468
987,666
3,475,620
-
170,714
3,745,168
2,757,197
481,963
371,604
4,634,000
7,355,932
Trade creditors relate to outstanding settlements. They are non-interest bearing and are secured by the Australian
Securities Exchange – National Guarantee Fund. They are settled within 3 days of the purchase being executed.
Sundry creditors – other, are settled within the terms of payment offered, which is usually within 30 days.
Sundry creditors – related parties, includes fees payable of $3,475,620 (inclusive of GST) (2017: $2,757,197) to the
manager, Cadence Asset Management Pty Limited.
8. FINANCIAL LIABILITIES
Short positions: Listed investments at fair value – held for trading
80,100,009
76,853,626
Swap positions – held for trading
17,066,692
19,451,254
97,166,701
96,304,880
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
430,116,042
374,858,893
(4,137,756)
(3,455,993)
1,241,327
1,036,798
427,219,613
372,439,698
26
CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018 CONTD’
9. ISSUED CAPITAL (Continued)
(a) Paid-up Capital (Continued)
2018
Date
Details of the issue
Share Price
$
No. of Shares
Issue Value
$
Balance at the beginning of the year
274,011,321
374,858,893
18 September 2017
3 November 2017
10 November 2017
23 April 2018
2017
Date
DRP
SPP
$1.25929
1,938,714
2,441,398
$1.25900
14,131,997
17,792,184
Placement
$1.25900
25,630,193
32,268,414
DRP
$1.22702
2,245,419
2,755,154
317,957,644
430,116,042
Details of the issue
Share Price
$
No. of Shares
Issue Value
$
Balance at the beginning of the year
270,285,076
370,419,123
27 October 2016
28 April 2017
DRP
DRP
$1.19290
$1.19030
1,699,462
2,027,291
2,026,783
2,412,479
274,011,321
374,858,893
Holders of ordinary shares are entitled to receive dividends as declared from time to time, and are entitled to one
vote per share at shareholder meetings, otherwise each member present at a meeting or by proxy has one vote on a
show of hands. In the event of the winding up of the Company, ordinary shareholders rank after creditors and share
in any proceeds on winding up in proportion to the number of shares held.
(b) Capital Management
Management controls the capital of the Company in order to maintain a good debt to equity ratio, provide the
shareholders with adequate returns and ensure that the Company can fund its operations and continue as a going
concern. The Company’s debt and capital includes ordinary share capital and 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.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
27
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018 CONTD’
10. PROFITS RESERVE
Profits Reserve
Movement in Profits Reserve
Opening balance
Transfer from retained earnings
Dividends paid (Note 4)
2018
$
2017
$
39,265,003
21,687,197
21,687,197
41,166,747
6,425,738
36,952,243
(23,588,941)
(21,690,784)
39,265,003
21,687,197
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
Profit attributable to members of the Company
Transfer to profits reserve
12. CASH FLOW INFORMATION
(a) Reconciliation of cash
(53,836,219)
(53,836,219)
41,166,747
36,952,243
(41,166,747)
(36,952,243)
(53,836,219)
(53,836,219)
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
128,005,890
151,961,930
(28,154,892)
(54,242,004)
99,850,998
97,719,926
The weighted average interest rate for cash and cash equivalents as at June 2018 is 1.42% (June 2017: 0.93%).
The weighted average interest rate for cash overdrafts as at June 2018 is 0.48% (June 2017: 0.97%). The Company
has Prime Brokerage facilities, including lending, and Custody arrangements with Deutsche Bank AG and Custody
arrangements with Bank of New York Mellon. The Prime Brokerage 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.
28
CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018 CONTD’
12. CASH FLOW INFORMATION (Continued)
(b) Reconciliation of Operating Profit after Income Tax
2018
$
2017
$
Operating profit after income tax
41,166,747
36,952,243
Movement in fair value on financial assets and liabilities
(93,304,076)
88,134,863
Changes in assets and liabilities:
(Increase)/Decrease in trade and other receivables
19,592,801
(19,094,433)
(Increase)/Decrease in deferred tax assets
Increase/(Decrease) in trade and other payables
(Increase)/Decrease in current tax asset
Increase/(Decrease) in current tax liability
784,919
(2,721,932)
1,408,760
4,217,408
4,552,010
5,587,871
149,430
-
Net cash (used in)/provided by Operating Activities
(28,855,373)
116,281,984
(c) Non-cash Financing Activities
During the financial year the Company issued the following shares through its Dividend Reinvestment Plan:
-
-
1,938,714 shares at $1.25929 on 18 September 2017
2,245,419 shares at $1.22702 on 23 April 2018
During the previous financial year the Company issued the following shares through its Dividend Reinvestment Plan:
-
-
1,699,462 shares at $1.19290 on 27 October 2016
2,026,783 shares at $1.19030 on 28 April 2017
13. EARNINGS PER SHARE
Basic earnings per share
Profit after income tax used in the calculation of
earnings per share
Weighted average number of ordinary shares outstanding
during the year used in calculation of basic earnings per share
2018 Cents
Per Share
2017 Cents
Per Share
13.5
2018
$
13.5
2017
$
41,166,747
36,952,243
No.
No.
304,188,912
273,040,973
Weighted average number of ordinary shares and options outstanding
during the year used in calculation of diluted earnings per share
304,188,912
273,040,973
Reconciliation of weighted average number of shares:
Weighted average number of ordinary shares used in calculation of basic
earnings per share
304,188,912
273,040,973
Add:
Weighted average number of potential ordinary shares used in the
calculation of diluted earnings per share
-
-
Weighted average number of shares used in the calculation of diluted
earnings per share
304,188,912
273,040,973
CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
29
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018 CONTD’
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.
(1) 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, foreign currency 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.
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 facilities, including lending, and Custody facilities with its prime broker
and custodian Deutsche Bank AG and Custody facilities with 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 or custodian that is being used by the Company, 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 AG 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 AG’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.
30
CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018 CONTD’
14. FINANCIAL RISK MANAGEMENT (Continued)
(c) Liquidity Risk (Continued)
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.
(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: $0.7405 (2017: 0.7683)
Euro:
2018
2017
$8,531,315
$14,738,103
Net Denominated Net Assets
(€153,052)
€69,853
AUD/EURO Exchange Rate: $0.6338 (2017: $0.6736)
(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.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
31
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018 CONTD’
14. FINANCIAL RISK MANAGEMENT (Continued)
(g) Financial instrument composition and maturity analysis (Continued)
Weighted
Average
Interest Rate
Interest bearing
Less than 90
days $
More than 1
year $
Non-interest
bearing
$
Total
$
Weighted
Average
Interest Rate
Interest bearing
Less than 90
days $
More than 1
year $
Non-interest
bearing
$
Total
$
2018
Assets
Financial assets
Cash and cash
equivalents
Balances owed by brokers
Other receivables
Total Assets
Liabilities
-
-
1.42%
128,005,890
-
-
-
-
128,005,890
Financial liabilities
-
-
Cash overdrafts
0.48%
28,154,892
Balances due to brokers
Other payables
Total liabilities
-
-
-
-
28,154,892
2017
Assets
Financial assets
Cash and cash
equivalents
Balances owed by brokers
Other receivables
Total Assets
Liabilities
-
-
0.93%
151,961,930
-
-
-
-
151,961,930
Financial liabilities
-
-
Cash overdrafts
0.97%
54,242,004
Balances due to brokers
Other payables
Total liabilities
-
-
-
-
54,242,004
Other payables are expected to be paid as follows:
- Less than 6 months
- 6 months to one year
32
-
-
-
-
-
-
-
-
-
-
396,415,365
396,415,365
-
128,005,890
1,958,769
1,958,769
1,158,157
1,158,157
399,532,291
527,538,181
97,166,701
97,166,701
-
28,154,892
987,666
987,666
3,646,334
3,646,334
101,800,701
129,955,593
-
-
-
-
-
-
-
-
-
-
302,249,468
302,249,468
-
151,961,930
19,679,751
19,679,751
3,029,976
3,029,976
324,959,195
476,921,125
96,304,880
96,304,880
-
54,242,004
3,745,168
3,745,168
3,610,764
3,610,764
103,660,812
157,902,816
2018
$
2017
$
3,646,334
3,610,764
-
-
CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018 CONTD’
14. FINANCIAL RISK MANAGEMENT (Continued)
(h) Financial Instruments Measured at Fair Value
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 Contracts for Difference, Financial
Liabilities, Initial Public Offerings and Placements in which the Company has subscribed to during the year. The
fair value of Contracts for Difference and Financial Liabilities have been determined using market inputs of the
underlying investments. Initial Public Offerings and Placements are investments that have not listed on the
Australian Stock Exchange as at 30 June 2018 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.
30 June 2018
Financial assets
Financial liabilities
Total
30 June 2017
Financial assets
Financial liabilities
Total
(i) Sensitivity Analysis
Level 1
$
Level 2
$
Level 3
$
Total
$
396,415,366
292,476
-
(97,166,700)
396,415,366
(96,874,224)
-
-
-
396,707,842
(97,166,700)
299,541,142
Level 1
$
Level 2
$
Level 3
$
Total
$
301,917,474
370,122
-
(96,304,878)
301,917,474
(95,934,756)
-
-
-
302,287,596
(96,304,878)
205,982,718
The Company has performed a sensitivity analysis relating to its exposure to interest rate risk, foreign currency 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.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
33
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018 CONTD’
14. FINANCIAL RISK MANAGEMENT (Continued)
(i) Sensitivity Analysis (Continued)
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%
2018
$
(210,553)
210,553
(147,387)
147,387)
2017
$
(8,948)
8,948
(6,264)
6,264
Foreign Currency Risk Sensitivity Analysis
At 30 June 2018, 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%
2018
$
2017
$
161,243
(161,243)
112,870
(112,870)
365,457
(365,457 )
255,820
(255,820)
Market Risk Sensitivity Analysis
At 30 June 2018, 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%
2018
$
2017
$
6,630,260
5,299,538
(6,630,260)
(5,299,538)
4,641,182
3,709,676
(4,641,182)
(3,709,676)
34
CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018 CONTD’
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
Chairman
Wayne Davies
Non-Executive Director and Company Secretary
Ronald Hancock
Non-Executive Director
James Chirnside
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 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
2018
$
68,493
6,507
75,000
2017
$
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 Directors. Non-
Executive Directors do not receive bonuses nor are they issued options on securities. Directors’ fees cover all main
board activities and membership of committees. Directors’ fees are not linked to the performance of the Company.
(c) Shareholdings
As at 30 June 2018, the Company’s key management personnel indirectly held the following shares in the
Company:
Balance at 1 July 2017
Acquisitions
Disposals
Balance at 30 June 2018
Karl Siegling
19,989,659
Wayne Davies
Ronald Hancock
James Chirnside
772,418
400,000
26,851
1,368,845
62,818
-
-
21,188,928
1,431,663
-
-
-
-
-
21,358,504
835,236
400,000
26,851
22,620,591
CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
35
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018 CONTD’
15. KEY MANAGEMENT PERSONNEL COMPENSATION (Continued)
(c) Shareholdings (Continued)
As at 30 June 2017, the Company’s key management personnel indirectly held the following options in the
Company:
Balance at 1 July 2016
Acquisitions
Disposals
Balance at 30 June 2017
Karl Siegling
18,959,583
Wayne Davies
Ronald Hancock
James Chirnside
723,060
400,000
26,851
20,109,494
1,030,076
49,358
-
-
1,079,434
-
-
-
-
-
19,989,659
772,418
400,000
26,851
21,188,928
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.
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 $3,953,731 (inclusive of GST) (2017: $3,306,033). 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
2018, the balance payable to the manager was $199,847 (inclusive of GST) (2017: $153,358 ).
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 2018 $2,979,620 (2017: 2,600,320 inclusive of GST) was payable to Cadence
Asset Management Pty Limited. As at 30 June 2018, the balance payable to the manager was $2,979,620 (inclusive
of GST) (2017: $2,600,320, inclusive of GST).
36
CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018 CONTD’
16. RELATED PARTY TRANSACTIONS (Continued)
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 17th September 2018. The Ex-
Date for the dividend is 7 September 2018.
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 2018 (2017: nil).
19. CAPITAL COMMITMENTS
Capital commitments exist for placements entered into before
30 June 2018, which settle after year end.
2018
$
-
2017
$
291,600
CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
37
DIRECTORS’ DECLARATION
DIRECTORS' DECLARATION
The Directors of Cadence Capital Limited declare that:
1. The financial statements as set out in pages 16 to 37 and the additional disclosures included in the Directors’
Report designated as ‘Remuneration Report’, as set out on pages 8 to 10 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 2018 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 27th day of September 2018
38
CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF CADENCE CAPITAL LIMITED
Independent Auditor’s Report
to the Cadence Capital Limited
A.B.N 17 112 870 096
REPORT ON THE AUDIT OF THE FINANCIAL REPORT
Opinion
We have audited the accompanying financial report of Cadence Capital Limited (“the Company”), which
comprises the statement of financial position as at 30 June 2018, the statement of financial performance, the
statement of changes in equity and the 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.
In our opinion the financial report of Cadence Capital Limited is in accordance with the Corporations Act 2001,
including:
a)
the financial report of Cadence Capital Limited is in accordance with the Corporations Act 2001, including:
i.
giving a true and fair view of the Company’s financial position as at 30 June 2018 and of its financial
performance for the year then ended; and
ii. complying with Australian Accounting Standards and the Corporations Regulations 2001.
b)
the financial report also complies with International Financial Reporting Standards as disclosed in Note 1.
Basis of Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor’s Responsibility section of our report. We are independent of
the Company in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting
Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (“the Code”)
that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical
responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given
to the Directors of the Company, would be on the same terms if given to the Directors as at the time of this
auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
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
CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
39
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF CADENCE CAPITAL LIMITED
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial report of the current period. We have communicated the key audit matters to the Audit
Committee, but they are not a comprehensive reflection of all matters that were identified by our audit and
that were discussed with the Audit Committee. These matters were addressed in the context of our audit of
the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion
on these matters.
Key audit matter
How our audit addressed the matter
Existence and Valuation of Financial Assets and completeness of Financial Liabilities
Refer to Note 6: Financial Assets and Note 8: Financial Liabilities
We focused our audit effort on the completeness,
the Company’s
valuation and existence of
financial assets and financial liabilities as they are
the largest asset and the liability and represent
the most significant driver of the Company’s Net
Tangible Assets and profits.
liabilities mostly
Financial assets and financial
consist of
International
listed Australian and
securities. Financial assets and financial liabilities
are valued by multiplying the quantity held by
the respective market price, cost or estimated
value per security for unlisted investments.
Our procedures included, amongst others:
• Understanding and evaluating the investment
•
management process and controls;
latest
Reviewing and understanding the
available
independent audit report on
internal controls (ASAE 3402 Assurance
Reports on Controls at a Service Organisation)
for the Custodian;
• Making enquiries as to whether there have
been any changes to these controls or their
effectiveness from the periods to which the
audit reports relate and where necessary
performing additional procedures;
• Obtaining a confirmation of the investment
•
•
•
the
Company’s
valuation
to
investment holdings
holdings directly from the Custodian;
Assessing
individual
of
independent sources;
Evaluating the accounting treatment of
revaluations of financial assets for current/
deferred tax and unrealised gains or losses;
Assessing the adequacy of disclosures in the
financial statements.
40
CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF CADENCE CAPITAL LIMITED
Accuracy of Management and Performance Fees
Refer to Note 7: Trade and Other Payables, Note 16: Related Party Transactions and Remuneration
Report
We focused our audit effort on the accuracy of
management and performance fees as they are
significant expenses of the Company and their
calculation may require adjustments for events
in accordance with the Investment Management
Agreement between the Company and the
Investment Manager.
In addition to their quantum, as these transactions
are made with related parties, there are additional
inherent risks associated with these transactions,
including the potential for these transactions to be
made on terms and conditions more favourable
than if they had been with an independent third-
party.
Our procedures included, amongst others:
• Making enquiries with
the
Investment
Manager and the Directors with respect to
any significant events during the period and
associated adjustments made as a result, in
addition to reviewing ASX announcements;
Testing key inputs used in the calculation
of management and performance fees and
performing a recalculation
in accordance
with our understanding of the Investment
Management Agreement;
Assessing the adequacy of disclosures made in
the financial statements.
•
•
Other Information
The Directors are responsible for the other information. The other information comprises the information
in the Company’s Annual Report for the year ended 30 June 2018, but does not include the financial report
and the auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially consistent with the financial report or our
knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
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 and the Corporations Act 2001 and for
such internal controls as the Directors determine is necessary to enable the preparation of the financial
report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the Directors are responsible for assessing the Company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the Directors either intend to liquidate the Company or to cease
operations, or have no realistic alternative but to do so.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
41
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF CADENCE CAPITAL LIMITED
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement
and maintain professional scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that
is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
•
•
• Obtain an understanding of internal control relevant to the audit 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 Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the Directors.
Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company’s ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify
our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s
report. However, future events or conditions may cause the Company to cease to continue as a going
concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events in a
manner that achieves fair presentation.
•
• Obtain sufficient appropriate audit evidence regarding the financial information of the entity or
business activities within the Company to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Company audit. We remain solely
responsible for our audit opinion.
We communicate with the Directors regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify
during our audit.
We also provide the Directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
42
CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF CADENCE CAPITAL LIMITED
From the matters communicated with the Directors, we determine those matters that were of most
significance in the audit of the financial report of the current period and are therefore the key audit matters.
We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about
the matter or when, in extremely rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.
REPORT ON THE REMUNERATION REPORT
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 8 to 10 of the Directors’ Report for the year
ended 30 June 2018. In our opinion, the Remuneration Report of Cadence Capital Limited for the year ended
30 June 2018, complies with section 300A of the Corporations Act 2001.
Responsibilities
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.
Pitcher Partners
C I Chandran
Partner
27th September 2018
CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
43
ASX ADDITIONAL INFORMATION
Additional information required by the Australian Stock Exchange Limited Listing Rules and not disclosed elsewhere in
this report.
SHAREHOLDINGS
Substantial shareholders (as at 31 August 2018)
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
21,358,504
6.71
Distribution of shareholdings (as at 31 August 2018)
Category
No. of Shareholders
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
330
1,141
1,461
5,142
441
8,515
The number of shareholdings held in less than marketable parcels is 122.
CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
44
ASX ADDITIONAL INFORMATION
Twenty largest shareholders - Ordinary shares (as at 31 August 2018)
Number of
ordinary shares
held
Percentage of
issued capital
held
Esselmont Pty Ltd and associates
Yarandi Investments Pty Ltd & associated entities
Southern Steel Investments Pty Limited
HSBC Custody Nominees (Australia) Limited
Avanteos Investments Limited
Netwealth Investments Limited
Citicorp Nominees Pty Limited
Nulis Nominees (Australia) Limited
Mr Cameron McFarlane
BNP Paribas Nominees Pty Ltd Hub24 Custodial Serv Ltd DRP
Mr Keith William Kerridge
Mr Paul & Mrs Karen & Mr Luke Van Ryn
Mrs Karen Lianne Van Ryn
Allowah HH Pty Ltd
Andonandon Pty Ltd
Netwealth Investments Limited
Arongi Pty Limited
Arazan Pty Ltd
Mr Clifford Law & Ms Susanne Bruhn
Mr Aaron Francis Quirk
21,358,504
12,172,433
3,274,800
2,746,475
2,206,108
1,704,697
1,411,840
1,404,119
1,221,914
1,151,070
895,643
889,418
883,727
881,100
835,236
809,623
805,762
798,592
787,028
773,994
6.717
3.828
1.030
0.864
0.694
0.536
0.444
0.442
0.384
0.362
0.282
0.280
0.278
0.277
0.263
0.255
0.253
0.251
0.248
0.243
57,012,083
17.931
STOCK EXCHANGE LISTING
Quotation has been granted for all of the ordinary shares of the Company on all Member Exchanges of the
ASX Limited.
45
CADENCE CAPITAL LIMITED ANNUAL REPORT 2018 | A.B.N. 17 112 870 096
C A P I TA L L I M I T E D
Level 11, 131 Macquarie Street,
Sydney, NSW, 2000
Telephone: 02 8298 2450
Fax: 02 8298 2499
Email: info@cadencecapital.com.au
Website: www.cadencecapital.com.au