Cadence Opportunities Fund Limited (CDO) Earnings Call Transcript

Ladies and gentlemen, welcome to the Share Purchase Plan webcast for Cadence Opportunities Fund. On this first slide, you can see a summary of CDO's performance over time. In the year just gone, we've done 30.3% performance against the All Ordinaries Accumulation Index of around 6%. Since inception, we're up around 22.8% per annum and the All Ordinaries Accumulation Index 10.1% -- and the accumulated return over 7.5 years is around 367% for CDO and 106% for the All Ordinaries Accumulation Index. This has allowed us to pay much higher than All Ordinaries Accumulation Index yield. You can see last year, we paid 7.4% fully franked yield against 3.2% fully franked yield or 10% -- 10.5% gross. Over 5 years, we've paid 10.6% gross yield against the All Ordinaries Accumulation Index of 4.9% -- during this period, we have accumulated 4 years' worth of profit reserves or $0.73 per share and 2.5 years' worth of franking credits or $0.162 per share. Since we've announced our results and dividends, we've traded at between a 3% and 18% premium to pre-tax NTA. And our 1-year share price move is around 41%, including the share price move and the dividends and franking shareholders have received. We're currently holding around 35% cash within our $36 million fund. The Share Purchase Plan is for eligible shareholders and will give each shareholder an opportunity to subscribe up to $30,000 worth of new CDO shares. The SPP price is at the pre-tax NTA of $2.21 per share as of the 28th of August 2026. This is a 3.5% discount to the CDO share price of $2.29 as at that same date. CDO has been trading since our announcement at between 3% and 18% premium. This is an opportunity for shareholders to buy CDO shares at NTA rather than a premium to NTA, which is important. Participants of the SPP will receive the upcoming final dividend of $0.075 fully franked and a special dividend of $0.02 fully franked. This equates to an annualized 11% gross yield or 7.7% fully franked yield, including that special dividend. The Board of Directors have committed to growing CDO importantly to improve liquidity. And to reduce the fixed expense ratio of the company. Board and management of CDO intend to participate in this Share Purchase Plan. The SPP opens on the 3rd of September and closes on the 17th of September. The financial year-to-date has seen CDO's portfolio up 30.3% and its share price, including dividends and franking up 41%. In the month that's just gone, August, we're up around 5% for the month. And the solid returns for the start of 2027 have been achieved despite holding high levels of cash. In addition to high levels of cash, the invested funds are very liquid with 90% of the portfolio able to be liquidated in 5 days. The fund is predominantly invested in stocks that can benefit in a rising interest rate and inflationary environment, reflecting the current investment landscape. In investment landscape has changed dramatically in the last 2 years, and CDO's mandate allows it to benefit from the current environment. CDO is one of Australia's top-performing investment companies, returning 22.8% per annum since inception 7.5 years ago. Dividends retained earnings and franking. The Board has declared fully franked dividends of $0.075 with the ex-date of 29th of September and a $0.02 special dividend with the ex-date of 15th of December. The fund has accumulated a profit reserve of $0.73 per share, which is more than 4 years' worth of dividends based on the current dividend payments. The fund has also accumulated franking credits of $0.162 per share, which is 2.5 years' worth of fully franked dividends based on current dividend payments. Profit reserves and franking credits have put CDO in a very strong position to pay dividends going forward before earning any future profits or franking. The current portfolio has a mix of higher-yielding assets, core positions and trading opportunities, which generate additional fully franked yield. Turning to the outlook. The Board of CDO have committed to growing the fund over time to improve liquidity and reduce the fixed expense ratio of the company. The Share Purchase Plan will create a fund that is still nimble and able to adapt easily to the changing investment environment. Some takeaways for the 2026 full year reporting season, which is now largely behind us. U.S. debt went through $40 trillion during this reporting season. Australian debt went through $1 trillion during this reporting season and interest rates went up during this reporting season. Australia's large exporters, coal, gas, iron ore, precious metals, critical minerals, on average reported very good earnings and strong cash flows, which puts Australia's revenue earning potential in a very good position. Consumer-facing stocks reported stalling or declining earnings. Companies with large debt exposed to rising interest rates face a very different business environment after 42 years of falling interest rates. Inflation remains stubborn and a longer-term risk for many economies and many businesses with increasing focus on how to contain inflation or alternatively, how we're going to operate in a higher interest rate environment. Company valuations in many sectors remain at historically high levels with what we term little room for error. And this has resulted in a lot of volatility and share price movement on the day that particular companies reported. It's just another word for risk. On the flip side, we have observed falling dividend yields in many sectors this reporting season. Against this backdrop, CDO is well positioned with a flexible mandate that can adapt to the existing investment environment. CDO will continue to operate using the CDO investment process, and we remain optimistic that the current environment will present opportunities for the fund. As the largest shareholder in the fund, we remain committed to the continued long-term performance of this fund. So, to apply for shares of the Share Purchase Plan, on the 3rd of September, Boardroom will send personalized SPP application forms out to all CDO shareholders. To apply for shares, CDO shareholders simply need to pay for the application via BPAY using the biller code and customer reference found on the SPP application form. Once you have made your application payment by BPAY, you do not need to send the form. If you're having any problems completing this SPP process or if you'd like to ask some questions on it, please do not hesitate to contact Boardroom or if you need to contact us as well. Ladies and gentlemen, thanks very much for your time listening to this webcast, and we look forward to having you as a continuing shareholder and, hopefully, as a shareholder that participates in the SPP. Thank you.