ABN 89 008 108 227
IRONBARK CAPITAL LIMITED
APPENDIX 4E
PRELIMINARY FINAL REPORT
YEAR ENDED 30 JUNE 2011
(previous corresponding period
being the year ended 30 June 2010)
IRONBARK CAPITAL LIMITED
ABN 89 008 108 227
RESULTS FOR ANNOUNCEMENT TO THE MARKET
YEAR ENDED 30 JUNE 2011
2011
Year
$’000
2010
Year
$’000
% change
prior year
Up /
Down
Investment revenue from ordinary
activities
11,225
8,686
Gain/(Loss) before tax for the period
attributable to members
10,258
7,787
Gain/(Loss) from ordinary activities
after tax attributable to members (1)
7,876
5,931
Net Tangible Assets per share (2)*
$0.566
$0.546
Net Tangible Assets per share (3)*
$0.562
$0.535
DIVIDENDS
The following dividends were paid during the year:
29
32
33
4
5
Up
Up
Up
Up
Up
Dividend
Rate
Ordinary
2.0 cps
Total
Amount
$‘000
2,831
Date of
Payment
21/09/2010
Ordinary
1.5 cps
2,123
15/03/2011
Percentage
Franked
100%
100%
It is the Directors’ policy only to pay fully franked dividends. With the amendment of
Corporations Act provisions to allow the payment of dividends on a solvency basis, the
Directors intended to be able to pay dividends each year as IBC received fully franked
dividends from shares held in its investment portfolio. However, a draft ATO fact sheet
issued in June 2011 dealing with the franking of dividends under the new Corporations Act
provisions has cast doubt over whether such dividends can be franked. As a result of this
current uncertainty, a final dividend has not been declared by the Directors at this point in
time. The Directors will reassess their position as soon as the current situation is clarified.
Currently IBC holds franking credits sufficient to pay a fully franked dividend of around 1.5
cent per share.
BRIEF EXPLANATION OF ANY OF THE FIGURES REPORTED ABOVE
(1) Net profit/loss after tax increased by $1,945,000 (33%) compared to 30 June 2010.
(2) Net tangible asset backing per share post deferred income tax asset.
(3) Net tangible asset backing per share pre deferred income tax asset on unrealised
losses.
IRONBARK CAPITAL LIMITED
ABN 89 008 108 227
COMMENTARY ON THE RESULTS - PROVIDED BY THE CHAIRMAN
The Directors consider that the investment management performance of IBC has been
very satisfactory in the latest financial year. The IBC portfolio lifted 15.36% over the period.
This number has comfortably exceed our internal target of 1% per month as well as
exceeding the ASX 300 benchmark by a margin of 3.46%.
The latest performance continues very good investment returns over the past difficult five
years. The table in the Investment Managers Report highlights that IBC has generated
significant out-performance above the ASX 300 Index over the most recent 1year, 3 years
and 5 year periods. In addition, the share portfolio volatility is approximately half that of
the Index volatility over all of these periods.
Over the longer period approaching a decade since inception, the IBC portfolio has
captured 95% of the ASX 300 index performance but recorded only just over half the
volatility of the index. This performance is consistent with the solid growth, high yield and
low risk of the IBC portfolio.
The sound investment performance has continued into the current 2012 financial year with
IBC now having outperformed the ASX 300 Index over 1 year, 2 years, 3 years, 5 years
and the 9 years since inception.
As noted above the lower risk embedded in the IBC portfolio means the investment returns
are generally expected to be below long only managers. In this context it is interesting to
note the strength and consistency of the IBC’s investment performance is top quartile for
periods up to five years when compared to other domestic managers in the Mercer
Investment Performance survey
Whist the performance of the IBC investment portfolio has been good, the Directors
understand that IBC shareholders are frustrated by the large discount of the ASX share
price of IBC shares to the Net Tangible Asset (NTA) backing of the shares. On market
buy-backs have provided some liquidity but have not had a lasting positive impact on the
discount and gradually shrink the company, thereby reducing cost efficiencies.
The Directors considered that if there was certainty that the full NTA backing could be
realized at a specific future date, the discount of the ASX share price to the NTA backing
may narrow immediately and may be eliminated over time as that date approached.
In pursuit of this objective, IBC sought shareholder approval at a General Meeting of
shareholders held 21st July 2011 to amend the company’s Constitution to include a new
rule 4.12. In essence this Rule requires Directors to put a resolution to shareholders after
June 30th 2014 and before 30th April 2015 offering to buy-back all of the shares held by
IBC shareholders in mid 2015 at the NTA backing per share at that time, less transaction
costs and expenses.
The Resolution was passed by Shareholders and the new rule is now included in the IBC
Constitution.
With the benefit of the Constitutional amendment potentially providing certainty for
Shareholders to access the full NTA value of the shares in mid 2015 it is anticipated the
IRONBARK CAPITAL LIMITED
ABN 89 008 108 227
share price discount to NTA will narrow as investors focus on the sound investment
performance of the IBC portfolio with it its high fully franked yield and low volatility
features.
COMMENTARY ON THE RESULTS - PROVIDED BY KAPLAN FUNDS MANAGEMENT
PTY LIMITED
Performance
the year with significantly
We are pleased to report a return of 15.36% over the 12 month period to 30 June 2011.
The portfolio significantly outperformed the ASX 300 Accumulation Index return of 11.9%
the overall sharemarket.
less volatility/risk
over
Outperformance was largely attributed to the portfolio’s buy & write strategy producing
significant option premium income and gains from sound stock selection. Exposure to
hybrids, utilities and property trusts also contributed to performance and the portfolio
benefited from takeover activity in small stocks.
than
Over the quarter, the portfolio return of 0.72% contrasted with the sharemarket decline of -
4.26%.
A weaker growth outlook both globally and domestically altered the investment climate in
favour of defensive sectors that benefited the portfolio’s 56% exposure to: hybrids, utilities,
property trusts and cash.
IRONBARK CAPITAL LIMITED
ABN 89 008 108 227
A multitude of negative factors impacted the growth outlook: Globally, the fallout from
Japanese supply disruptions reverberated around the world with manufacturing activity
slowing abruptly. European sovereign debt problems threatened a Lehmans MkII and
Asian economies grappled with inflationary pressures. Domestically, high oil prices, rising
utility costs, carbon tax concerns, falling home prices, weak government and a hawkish
RBA collectively sapped consumer confidence. March quarter GDP was weaker than
expected and the positive growth contribution from resource investment has pushed
further out with cost blow outs and delays now common.
The portfolio is structured with an emphasis on income through yield orientated securities
and buy & write positions in leading companies. The buy & write strategy involves buying
selective shares and selling, subject to appropriate timing, call options over those shares.
This strategy gives away some of the upside potential from a shareholding but generates
option premium income consistent with the income emphasis of the portfolio.
The management style has delivered outperformance against the sharemarket Index over
1, 2, 3 and 5 year periods.
Our objective is to achieve absolute returns of at least 12% per annum over the medium to
long term with approximately half of the risk/volatility of the sharemarket.
Portfolio volatility/risk has consistently been lower than the ASX 300 Index.
Relative Performance to 30 June 2011
Inception
5 Yr
3 Yr
2 Yr
1 Yr
6 mths
3 mths
(31/12/02) % pa
% pa
% pa
% pa
%
%
%
Ironbark Capital Ltd
9.81
5.09
6.49
13.86
15.36
3.80
0.72
ASX 300 Accum Index
10.37
2.37
0.26
12.47
11.90
-1.27
-4.26
Relative Performance
-0.56
2.72
6.23
1.39
3.46
5.07
4.98
Volatility IBC
Volatility ASX
7.3
13.6
8.6
9.3
5.6
15.8
17.7
13.4
5.0
8.4
Absolute Performance
FY2005 FY2006 FY2007 FY2008 FY2009
FY2010
FY2011
%
%
%
%
%
%
%
Ironbark Capital Ltd
20.23
12.26
17.52
-9.71
-6.84
12.38
15.36
Absolute-Return Target
12.00
12.00
12.00
12.00
12.00
12.00
12.00
IRONBARK CAPITAL LIMITED
ABN 89 008 108 227
Portfolio commentary for the 3 months to 30th June 2011
The portfolio aims to produce consistent returns with low risk and has a balanced structure
consisting of a mix of income and growth assets designed to achieve its objective over the
medium to long term. The portfolio is structured with an income bias (Hybrids, Utilities,
Property Trusts) overlaid with buy & write positions in BHP and other leading companies.
The portfolio’s running yield was 7.1% (inclusive of franking credits). The running yield
excludes option premium income which would further increase the yield.
The portfolio is well diversified with investments in 37 different entities. Higher risk
exposures in: Banks, Industrials and Resources are largely held through buy & write option
positions for added protection and income enhancement. Moderately high option volatility
continues to provide good standstill returns and reasonable downside protection for the
buy & write strategy. The portfolio’s hybrid holdings are largely floating rate securities that
will benefit from higher interest rates.
During the quarter the major change was an increase of 6% in hybrids. Overall cash
exposure (cash plus option delta) was reduced to 24%.
IRONBARK CAPITAL LIMITED
ABN 89 008 108 227
The portfolio recorded a return of 0.72% over the 3 month period to 30 June 2011
compared to the ASX 300 Accumulation Index return of -4.26%. The quarterly result was
largely attributed to positive returns from utilities, Telstra and hybrid securities.
Kaplan Funds Management Pty Limited
Ironbark Capital Limited
ABN 89 008 108 227
Financial Statements
For the year ended 30 June 2011
Ironbark Capital Limited
ABN 89 008 108 227
Contents
For the year ended 30 June 2011
Directory
Directors' review
Corporate governance policy statement
Portfolio shareholdings at 30 June 2011
Directors' report
Auditor's Independence declaration
Statement of comprehensive income
Statement of financial position
Statement of changes in equity
Statement of cash flows
Notes to the financial statements
Directors' declaration
Independent audit report to the members
Members information
Pages
3
4-5
6-11
12-13
14-17
18
19
20
21
22
23-36
37
38-39
40-41
2
Share Registrar
Boardroom Pty Limited
GPO Box 3993
Sydney NSW 2001
Shareholder enquiries telephone: (02) 9290 9600
Company secretarial & all other enquiries
Telephone: (02) 8236 7701
Email: ironbarkcapital@whiteoutsourcing.com.au
Ironbark Capital Limited
ABN 89 008 108 227
Directory
Investment Manager
Kaplan Funds Management Pty Limited
Level 22
44 Market Street
Sydney NSW 2000
Telephone: (02) 8917 0300
Directors
Michael J Cole (Chairman)
Ross J Finley
Ian J Hunter
Company Secretary
Peter Roberts
Registered Office
Level 7, 20 Hunter Street
Sydney NSW 2000
Telephone: (02) 8236 7701
Accounting & Administration
White Outsourcing Pty Ltd
Level 7, 20 Hunter Street
Sydney NSW 2000
Telephone: (02) 8236 7701
Fax: (02) 9221 1194
Auditors
MNSA Pty Ltd
Level 2, 333 George Street
Sydney NSW 2001
3
Ironbark Capital Limited
ABN 89 008 108 227
Directors’ Review
The Directors consider that the investment management performance of IBC has been
very satisfactory in the latest financial year. The IBC portfolio lifted 15.36% over the
period. This number has comfortably exceed our internal target of 1% per month as
well as exceeding the ASX 300 benchmark by a margin of 3.46%.
The latest performance continues very good investment returns over the past difficult
five years. The table in the Investment Managers Report highlights that IBC has
generated significant out-performance above the ASX 300 Index over the most recent
1year, 3 years and 5 year periods. In addition, the share portfolio volatility is
approximately half that of the Index volatility over all of these periods.
Over the longer period approaching a decade since inception, the IBC portfolio has
captured 95% of the ASX 300 index performance but recorded only just over half the
volatility of the index. This performance is consistent with the solid growth, high yield
and low risk of the IBC portfolio.
The sound investment performance has continued into the current 2012 financial year
with IBC now having outperformed the ASX 300 Index over 1 year, 2 years, 3 years, 5
years and the 9 years since inception.
As noted above the lower risk embedded in the IBC portfolio means the investment
returns are generally expected to be below long only managers. In this context it is
interesting to note the strength and consistency of the IBC’s investment performance is
top quartile for periods up to five years when compared to other domestic managers in
the Mercer Investment Performance survey
Relative Performance to 30 June 2011
Inception
5 Yr
3 Yr
2 Yr
1 Yr
6 mths
3 mths
(31/12/02) % pa
% pa
% pa
% pa
%
%
%
Ironbark Capital Ltd
ASX 300 Accum
Index
Relative
Performance
9.81
5.09
6.49
13.86
15.36
3.80
0.72
10.37
2.37
0.26
12.47
11.90
-1.27
-4.26
-0.56
2.72
6.23
1.39
3.46
5.07
4.98
Volatility IBC
7.3
8.6
9.3
5.6
5.0
Volatility ASX
13.6
15.8
17.7
13.4
8.4
Whist the performance of the IBC investment portfolio has been good, the Directors
understand that IBC shareholders are frustrated by the large discount of the ASX share
price of IBC shares to the Net Tangible Asset (NTA) backing of the shares. On market
buy-backs have provided some liquidity but have not had a lasting positive impact on
the discount and gradually shrink the company, thereby reducing cost efficiencies.
The Directors considered that if there was certainty that the full NTA backing could be
realized at a specific future date, the discount of the ASX share price to the NTA
4
backing may narrow immediately and may be eliminated over time as that date
approached.
In pursuit of this objective, IBC sought shareholder approval at a General Meeting of
shareholders held 21st July 2011 to amend the company’s Constitution to include a new
rule 4.12. In essence this Rule requires Directors to put a resolution to shareholders
after June 30th 2014 and before 30th April 2015 offering to buy-back all of the shares
held by IBC shareholders in mid 2015 at the NTA backing per share at that time, less
transaction costs and expenses.
The Resolution was passed by Shareholders and the new rule is now included in the
IBC Constitution.
With the benefit of the Constitutional amendment potentially providing certainty for
Shareholders to access the full NTA value of the shares in mid 2015 it is anticipated
the share price discount to NTA will narrow as investors focus on the sound investment
performance of the IBC portfolio with it its high fully franked yield and low volatility
features.
M J Cole
Chairman
25 August 2011
5
Ironbark Capital Limited
ABN 89 008 108 227
Corporate Governance Policy Statement
This statement outlines the main corporate governance practices adopted by the Company, which comply
with the ASX Corporate Governance Council Principles and Recommendations (2nd Edition, August 2007)
unless otherwise stated.
Board of Directors and Its Committees
Structure of the Board
The skills, experience and expertise relevant to the position of each director in office at the date of the
annual report is included in the Director’s Report on page 15. Directors of Ironbark Capital Limited are
considered to be independent when they are independent of management and free from any business or
other relationship that could materially interfere with – or could reasonably be perceived to materially
interfere with – the exercise of their unfettered and independent judgment.
In the context of director independence, “materiality” is considered from both the company and individual
director’s perspective. The determination of materiality requires consideration of both quantitative and
qualitative elements. An item is presumed to be quantitatively immaterial if it is equal or less than 5% of the
appropriate base amount. It is presumed to be material (unless there is qualitative evidence to the
contrary) if it is equal to or greater than 10% of the appropriate base amount. Qualitative factors
considered include whether a relationship is strategically important, the competitive landscape, the nature
of the relationship and the contractual or other arrangements governing it and other factors which point to
the actual ability of the directors in question to shape the direction of the company’s loyalty.
In accordance with the definition of independence above, and the materiality thresholds set, the following
directors, being the entire Board, are considered to be independent:
Name
Michael J Cole
Ross J Finley
Ian J Hunter
Position
Chairman, Non-Executive Director
Non-Executive Director
Non-Executive Director
The Board consider that although Michael Cole is a substantial shareholder, this does not affect his
independence as he satisfies all other suggested criteria for assessing independence set out in
Recommendation 2.1.
The term in office held by each director in office at the date of this report is as follows:
Name
Michael J Cole
Ross J Finley
Ian J Hunter
Term in office
9 years
25 years
9 years
Recommendation 2.3 requires that “the role of the Chair and Chief Executive Officer of the Company
should not be exercised by the same individual”. The Company does not comply with this
recommendation as there is no Chief Executive Officer of the Company (for more information refer
“Executive Management” in this Statement).
Role of the Board
The Board’s primary role is the protection and enhancement of long-term shareholder value. To fulfill this
role the Board seeks to address:
(a) the prudential control of the Company’s operations;
(b) the resourcing, review and monitoring of executive management;
(c) the timeliness and accuracy of reporting to shareholders; and
(d) the determination of the Company’s broad objectives.
Board Processes
The Board has established a number of Board Committees including a Nomination Committee, a
Remuneration Committee and an Audit Committee. These committees have written mandates and
operating procedures which are reviewed on a regular basis. The Board has also established a range of
policies which govern its operation.
6
Ironbark Capital Limited
ABN 89 008 108 227
Corporate Governance Policy Statement (continued)
The Board will hold four scheduled meetings each year plus any other strategic meetings as and when
necessitated by the Company’s operations. The agenda for meetings is prepared through the input of the
Chairman and the Company Secretary. Standing items include matters of compliance and reporting,
financials, shareholder communications and investment strategy and outcomes. Submissions are
circulated in advance.
Composition of the Board
The names of the directors of the Company in office at the date of this Statement are set out in the
Directors’ Report on page 15.
The composition of the Board is determined using the following principles:
• A minimum of three directors;
• An independent, non-executive director as Chairman; and
• A majority of independent non-executive directors.
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 principal of 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.
Directors have a usual term of two years, and a maximum term of 3 years before standing for re-election.
Performance Evaluation of Directors
The Nomination Committee is responsible for the review of the Board’s performance as a whole. An
annual performance evaluation of the Board and all Board members is conducted annually. This review
took place in August for the 2011 calendar year. Individual directors are subject to continuous review by
the Chairman.
Recommendation 1.2 requires the disclosure of the process for evaluating the performance of senior
executives. The Company does not comply with this recommendation as there are no senior executive
officers of the Company (for more information refer “Executive Management” in this Statement).
Nomination Committee
The Nomination Committee considers the appropriate size and composition of the Board, criteria for
membership, identification of potential candidates and the terms and conditions of appointment to and
retirement from the Board.
The Committee is responsible for:
• Conducting an annual review of the Board membership with regard to the present and future
requirements of the Company and make recommendations as to composition and appointments;
• Review of Board succession plans, including succession of the Chairman, to maintain an appropriate
balance of skills, experience and expertise;
• Conducting an annual review of the time required from non-executive directors, and whether the
directors are meeting this;
• Requesting non-executive directors to inform the Chair and the Chair of the nomination committee
before accepting any new appointments as directors;
• Conducting an annual review of the independence of directors; and
• Recommendations to the Board on necessary and desirable competencies of directors.
The Committee’s target is to ensure that (as a minimum) directors collectively have investment accounting,
general business experience and shareholder representation. The terms and conditions of the
appointment and retirement of non-executive directors are set out in a letter of appointment. The
Committee is responsible for the performance review of the Board and its Committees. Individual directors
are subject to continuous review by the Chairman. Directors whose performance is unsatisfactory are
asked to retire.
In addition, the performance of service providers (JP Morgan, White Outsourcing Pty Limited and Kaplan
Funds Management Pty Ltd) is the subject of continuous oversight by the Chairman and the Board as a
whole.
7
Ironbark Capital Limited
ABN 89 008 108 227
Corporate Governance Policy Statement (continued)
The Nomination Committee comprised the following members during the year:
• Michael Cole (Chairman) - Independent Non-Executive
•
• Ross Finley - Independent Non-Executive
Ian Hunter - Independent Non-Executive
The Nomination Committee meets annually unless otherwise required. For details on the number of
meetings of the Nomination Committee held during the year and the attendees at those meetings, refer to
page 16 of the Director’s Report.
Director Dealing in Company Shares
The company encourages directors to have a significant personal financial interest in Ironbark Capital
Limited (“IBC”), by acquiring and holding shares on a long-term basis.
Short term trading in IBC’s shares by directors is not permitted.
The Board has adopted the following policy concerning dealing in IBC’s shares by directors.
•
Insider trading laws prohibit Directors and their associates from dealing in the Company’s shares
whilst in possession of price sensitive information that is not generally available.
• As a matter of practice, market disclosure will be made whenever the gross portfolio value moves by
more than 2.5% since the previous NTA announcement. Directors’ trading will be allowed, provided
such an announcement has been made and a reasonable amount of time allowed for the
dissemination of the information into the market.
Independent Professional Advice and Access to Company Information
Each director has the right of access to all relevant Company information and to the Company’s executives
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.
Remuneration Committee
The Remuneration Committee reviews and makes recommendations to the Board on remuneration of the
directors themselves. The Remuneration Committee meets once a year. Full details on Directors’
remuneration are provided in the Directors’ Report.
The members of the Remuneration Committee during the year were:
• Michael Cole (Chairman)
•
• Ross Finley
Ian Hunter
As previously noted, the executive function of the Company has been outsourced to White Outsourcing Pty
Limited (accounting and administration) and Kaplan Funds Management Pty Limited (funds management),
therefore, there are no executive directors of the Company. The responsibility for considering and
recommending appropriate remuneration of the non-executive directors’ packages for the Board lies with
the Remuneration Committee. Non-executive directors are remunerated by way of cash payments.
Recommendation 8.2 states that the Company should “clearly distinguish the structure of non-executive
directors’ remuneration from that of executive directors and senior executives”. The Company does not
comply with this recommendation as there are no executive directors or senior executives.
For details on the number of meetings of the Remuneration Committee held during the year and the
attendees at those meetings, refer to page 16 of the Director’s Report.
8
Ironbark Capital Limited
ABN 89 008 108 227
Corporate Governance Policy Statement (continued)
Audit Committee
The Audit Committee has a documented Charter, approved by the Board. All members must be non-
executive directors. The Chairman is not the Chairman of the Board. The Committee is responsible for
considering the effectiveness of the systems and standards of internal control, financial reporting and any
other matter at the request of the Board. The Audit Committee will meet at least two times per year.
The Audit Committee may have in attendance at their meeting such members of management as may be
deemed necessary to provide information and explanations. The external auditors attend meetings by
invitation to report to the Committee.
The members of the Audit Committee during the year were:
Ian Hunter (Chairman)
•
• Ross Finley
• Michael Cole
The responsibilities of the Audit Committee are to ensure that:
1. Relevant, reliable and timely information is available to the Board to monitor the performance of the
Company;
2. External reporting is consistent with committee members’ information and knowledge and is adequate
for shareholder needs;
3. Management processes support external reporting in a format which facilitates ease of understanding
by shareholders and institutions;
4. The external audit arrangements are adequate to ensure the maintenance of an effective and efficient
external audit. This involves:
(a) reviewing the terms of engagement, scope and auditor’s independence;
(b) recommendations as to the appointment, removal and remuneration of an auditor; and
(c) reviewing the provision of non-audit services provided by the external auditor ensuring they do
not adversely impact on audit independence;
5. Review the Company’s risk profile and assess the operation of the Company’s internal control system.
The external auditor is required to attend the Annual General Meeting and is available to answer
shareholder questions.
For details on the number of meetings of the Audit Committee held during the year and the attendees at
those meetings, refer to page 16 of the Director’s Report.
The Board as a whole monitor the performance of the annual & half-yearly audit performed by the external
auditor. If the Board consider that the external auditor of the Company should be changed a special
resolution will be put to shareholder vote at the following Annual General Meeting. External audit
engagement partners are required by legislation to rotate their appointment every five years.
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
responsibility for reviewing the risk profile and reporting on the operation of the internal control system to
the Audit Committee.
The Audit Committee (a) requires executive management to report annually on the operation of internal
controls, (b) reviews the external audit of internal controls and liaises with the external auditor and (c)
conducts any other investigations and obtains any other information it requires in order to report to the
Board on the effectiveness of the internal control system. In respect of the current financial year all
necessary declarations have been submitted to the Board.
The Board identifies the following business risks as having the potential to significantly or materially impact
the company’s performance (a) administrative risks including operational, compliance and financial
reporting (b) market related risks.
9
Ironbark Capital Limited
ABN 89 008 108 227
Corporate Governance Policy Statement (continued)
Administrative Risks
The Company has outsourced its administrative functions to service providers, JP Morgan (custody), White
Outsourcing Pty Limited (accounting and Company Secretarial) and Kaplan Funds Management Pty
Limited (investment management) accordingly risk issues associated with these activities are handled in
accordance with the service providers policies and procedures. White Outsourcing Pty Limited is
responsible for recognising and managing administrative risks including (a) operational, (b) compliance
and (c) financial reporting. Certificates of insurance currency are obtained annually from all key service
providers.
The Company Secretary provides a declaration to the Board twice annually, to certify that the Company’s
financial statements and notes present a true and fair view, in all material respects, of the Company’s
financial condition and operational results and that they have been prepared and maintained in accordance
with relevant Accounting Standards and the Corporations Act 2001. In respect of the current financial year
all necessary declarations have been submitted to the Board. In addition, White Outsourcing Pty Ltd
(accounting and Company Secretarial) will confirm half-yearly in writing to the Board that the declaration
provided above is founded on a sound system of risk management and internal control and that the system
is operating effectively in all material respects in relation to financial reporting risks.
Market Risks
The Board is primarily responsible for recognising and managing market related risks. By its nature as a
Listed Investment Company, the Company will always carry investment risk because it must invest its
capital in securities which are not risk free. However, the Company seeks to reduce this investment risk by
a policy of diversification of investments across industries and companies operating in various sectors of
the market. Kaplan Funds Management Pty Ltd (investment manager), is required to act in accordance
with the Board approved investment management agreement and reports to the Board quarterly on the
portfolio’s performance, material actions of the investment manager during that quarter and an explanation
of the investment manager’s material proposed actions for the upcoming quarter. In addition, the
investment manager is required to report half-yearly that Kaplan Funds Management Pty Ltd have invested
the Company’s assets in accordance with the approved investment mandate and complied with the
Investment Management Agreement requirements during the reporting period. In respect of the current
financial year all necessary declarations have been submitted to the Board. In assessing the Company’s
risk tolerance level the Board considers any instance which materially affects the Company’s monthly Net
Tangible Asset backing announcement released to the ASX.
The Audit Committee and the Board perform a risk review on an annual basis to ensure that adequate
controls are in place to mitigate risk associated with investment manager performance, market risk, fraud,
transaction reporting errors, material reporting risks and compliance risk.
Executive Management
The companies operations are conducted through Kaplan Funds Management Pty Ltd (Investment
Manager) and White Outsourcing Pty Limited (Administration Manager). These entities incorporate the
specialist wholesale investment and administration personnel who undertake the Company’s executive
operations.
The Company’s executive management arrangements have been structured to provide investors with a
cost efficient investment vehicle and access to a significant depth of professional resources.
Ethical Standards
The Board expects all non-executive directors to act professionally in their conduct and with the utmost
integrity and objectivity. All non-executive directors must comply with the Company’s Code of Conduct and
Ethics.
Shareholder Rights
Shareholders are entitled to vote on significant matters impacting on the business, which include the
election and remuneration of directors, changes to the constitution and are able to receive the annual and
interim financial statements if requested. Shareholders are strongly encouraged to attend and participate in
the Annual General Meetings of Ironbark Capital Limited, to lodge questions to be responded by the
Board, and are able to appoint proxies.
10
Ironbark Capital Limited
ABN 89 008 108 227
Corporate Governance Policy Statement (continued)
Shareholder Communications
The Board informs shareholders of all major developments affecting the Company’s state of affairs as
follows:
• All
information
is available on
www.ironbarkcapital.com via a direct link to the ASX website;
lodged with
the ASX
the Company’s website at
• An Annual Report will be mailed to shareholders at the close of the financial year, where
requested; and
• Net asset backing per share is released to the ASX by the 14th day following each month-end and
is sent via email to shareholders who register their interest.
The Company Secretary is responsible for ensuring Ironbark Capital Limited complies with its continuous
disclosure obligations. All relevant staff of White Outsourcing Pty Limited and Kaplan Funds Management
Pty Limited are made aware of these obligations and are required to report any price sensitive information
to the Company Secretary immediately they become aware of it. The Company Secretary in consultation
with the Chairman will decide whether the information should be disclosed to the ASX.
Where possible, all continuous disclosure releases to the ASX are approved by the Board, except the
monthly net asset backing per share which is approved by White Outsourcing Pty Limited in consultation
with Kaplan Funds Management Pty Limited. Where time does not permit approval by the Board, the
Chairman of directors must approve the release.
Any information of a material nature affecting the Company is disclosed to the market through release to
the ASX as soon as the Company becomes aware of such information, in accordance with the ASX
Continuous Disclosure requirement.
Board policies and charters covering the following are available on the Company’s website at
www.ironbarkcapital.com:
• Board charter
• Nomination Committee charter
• Audit Committee charter
• Remuneration Committee
• Disclosure policy
• Communication policy
• Risk management policy
•
• Code of Conduct and Ethics
Trading policy
11
Ironbark Capital Limited
ABN 89 008 108 227
Portfolio shareholdings at 30 June 2011
ASX code
Security
* Market Value
$'000
% of portfolio
2,318
5,346
3,196
3,649
2.9
6.7
4.0
4.6
14,509
18.2
3,898
819
734
3,922
5,083
1,203
3,682
1,208
155
1,496
1,985
1,881
846
2,736
2,668
2,297
4.9
1.0
0.9
5.0
6.4
1.5
4.6
1.5
0.2
1.9
2.5
2.4
1.1
3.5
3.4
2.9
34,613
43.7
226
86
2,492
2,804
0.3
0.1
3.1
3.5
ANZ
CBA
NAB
WBC
Banks
ANZ Banking Group Limited
Commonwealth Bank of Australia Limited
National Australia Bank Limited
Westpac Banking Corporation Limited
Hybrids
ANZPA & PB ANZ Banking Group Ltd - Convertible Preference Shares
AXJHA
AXA AsiaPacific Subordinated Notes
BENPB & PC Bendigo Bank - Preference Securities
Commonwealth Bank of Australia PERLS III
PCAPA
CBAPA & PB Commonwealth Bank of Australia PERLS V
IAGPA
Insurance Australia Group - Reset Convertible Preference
Securities
National Australia Bank Limited Income Securities
Orica Limited - Preference Securities
Paperlinx SPS
Perpetual Reset Exchangeable Notes
Ramsay Health Care Ltd - Convertible Equity Securities
Seven Group Holdings Limited - Convertible Redeemable
Preference Securities
SouthernCross Airports Corp. Holdings SKIES
SAKHA
SBKPA & PB Suncorp Metway Limited Convertible Preference Shares
WCTPA & PB Westpac Tps Trust Convertible Preferred Securities
WOWHB
Woolworths Limited - Perpetual Notes
NABHA
ORIPB
PXUPA
IANG
RHCPA
SVWPA
IAG
QBE
TLS
Large Industrial (Top 50)
Insurance Australia Group Ltd
QBE Insurance Group Limited
Telstra Corporation Limited
* Includes market value of options written against holdings
12
Ironbark Capital Limited
ABN 89 008 108 227
Portfolio shareholdings at 30 June 2011 (continued)
ASX code
Security
Market Value
$'000
% of portfolio
AMC
BHP
BTU
NCM
ORG
RIO
STO
WHC
WPL
CPA
DXS
IOF
MGR
AIO
CIF
DUE
HDF
SPN
SKI
EGP
NHR
Materials & Energy
Amcor Limited
BHP Billiton Ltd
Bathurst Resources Limited
Newcrest Mining Limited
Origin Energy Ltd
Rio Tinto Limited
Santos Limited
Whitehaven Coal Limited
Woodside Petroleum Limited
Property Trusts
Commonwealth Property Office Fund
Dexus Property Group
ING Office Fund
Mirvac Group
Utilities & Infrastructure
Asciano Limited
Challenger Infrastructure Fund
DUET Group Securities & Warrants
Hastings Diversified Utilities Fund
SP AusNet
Spark Infrastructure Group
Small Industrial (ex Top 50)
Echo Entertainment Group Limited
National Hire Group Limited
65
12,873
367
435
171
133
1,029
117
668
15,858
676
319
226
492
1,713
158
429
1,360
470
118
659
3,194
49
238
287
0.1
16.5
0.5
0.5
0.2
0.2
1.3
0.1
0.8
20.2
0.9
0.4
0.3
0.6
2.2
0.2
0.5
1.7
0.6
0.1
0.8
3.9
0.1
0.3
0.4
Cash and Term Deposit
Total
6,249
79,227
7.9
100.00
* Includes market value of options written against holdings
13
Ironbark Capital Limited
ABN 89 008 108 227
Directors' report
For the year ended 30 June 2011
In respect of the financial year ended 30 June 2011, the directors of the Company submit the following report together
with the financial report of Ironbark Capital Limited ("the Company").
Directors in office at any time during or since the end of the financial year and up to the date of this report are:
M J Cole (Chairman)
R J Finley
I J Hunter
Period of directorship
Appointed 31/10/2002 to current
Appointed 30/01/1987 to current
Appointed 31/10/2002 to current
The directors have been in office since the start of the financial year to the date of this report.
Principal Activities
The principal activity of
Exchange.
the Company during the year was investment
in securities listed on the Australian Stock
Dividends Paid or Recommended
Details of dividends in respect of the current year are as follows:
Interim Ordinary Dividend of 1.5c per share paid on 15th March 2011
Interim Ordinary Dividend of 2.0c per share paid on 21st September 2010
Interim Ordinary Dividend of 1.2c per share paid on 12th March 2010
Interim Ordinary Dividend of 1.3c per share paid on 4th November 2009
Interim Ordinary Dividend of 1.2c per share paid on 20th August 2009
Operating Results and Review of Operations for the year
Gain before income tax expense
Income tax expense
Gain after income tax expense
2011
$'000
2,124
2,831
-
-
-
10,258
(2,382)
7,876
2010
$'000
-
-
1,705
1,848
1,705
7,787
(1,856)
5,931
The net tangible asset backing of the Company as at 30 June 2011 was 56.4 cents per share excluding the deferred tax
asset on unrealised investment losses (2010: 53.5 cents per share).
Financial Position
The net assets of the company have increased by $2,838,000 from 30 June 2010 to $80,342,000 in 2011. This increase
has largely resulted from appreciation in the trading portfolio due to general rises in investment markets.
Earnings per share
Basic and diluted gain per share (cents per share)
2011
5.57
2010
4.17
Significant changes in state of affairs
No significant changes in the Company's state of affairs occurred during the financial year.
Share buy-back
A special resolution was passed at the General Meeting held on 21st July 2011 where the Constitution of the company
will be entrenched with a requirement (to the extent permissible by law) for the Directors to take steps to implement a
transaction under which Ironbark will offer to buy-back up to all of its Shares through an off-market tender process with
effect on or around 30 June 2015 at a price equal to the net tangible asset backing of the shares at the time, after
deduction of transaction costs associated with the transaction and, if determined by the Directors, costs to wind-up
Ironbark following completion of the transaction.
14
Ironbark Capital Limited
ABN 89 008 108 227
Directors' report (continued)
For the year ended 30 June 2011
After Balance Date Events
Other than the outcome of the 21st July 2011 General Meeting outlined above, no matter or circumstance has arisen
since 30 June 2011 to the signing date of this report that has significantly affected, or may significantly affect:
(a) the Company's operations in future financial years; or
(b) the results of those operations in future financial years; or
(c) the Company's state of affairs in future financial years.
Environmental Issues
The Company's operations are not subject to any significant environmental regulations under either Commonwealth or
State legislation.
To the extent that any environmental regulations may have an incidental
Directors of the Company are not aware of any breach by the Company of those regulations.
impact on the Company's operations, the
Future developments, Prospects and Business Strategies
The Company will continue to pursue its investment objectives for the long term benefit of the members. This will require
continual review of the investment strategies that are currently in place and may require changes to these strategies to
maximise returns.
Information on Directors
Director
Experience
Michael J Cole
B.Ec, M.Ec Sydney, F Fin
Investment manager
Investment banker
Ross J Finley
B.Comm NSW
Investment banker
Stockbroker
Special
responsibilities
Particulars of
directors' interest
in shares of the
company
Chairman
8,000,000
1,400,000
1,662,448
Ian J Hunter
B.A, LLB Sydney, MBA MGSM
Banking and
finance
Audit Committee
Chairman
Other current directorships
Ross J Finley is a Director of Century Australia Investments Ltd.
Ian Hunter is a Director of Rubic Financial Limited.
Michael Cole is the Chairman of Platinum Asset Management Limited; Chairman, IMB Ltd; Director, NSW Treasury Corp;
Chairman, Challenger Listed Investments Ltd.
The particulars of directors' interests in shares of the Company are as at the date of this report.
15
Ironbark Capital Limited
ABN 89 008 108 227
Directors' report (continued)
For the year ended 30 June 2011
Meetings of Directors of the Company
The following table sets out the numbers of meetings of the Company's directors held during the year ended 30 June
2011, and the numbers of meetings attended by each director of the Company:
Board meetings
Audit Committee meetings
Number of
meetings held
Meetings
attended
Number of
meetings held
Meetings
attended
Michael J Cole
Ross J Finley
Ian J Hunter
4
4
4
4
4
4
2
2
2
2
2
2
Remuneration Committee meetings
Nomination Committee meetings
Number of
meetings held
Meetings
attended
Number of
meetings held
Meetings
attended
1
1
1
1
1
1
1
1
1
1
1
1
Michael J Cole
Ross J Finley
Ian J Hunter
Company Secretary
Mr Peter Roberts is a member of the Institute of Chartered Accountants and is the Company Secretary for a number of
Listed Investment Companies.
Remuneration Report and Policy
The Board determines the remuneration structure of Non-Executive Directors (based on the recommendation of the
Remuneration Committee), having regard to the scope of the Company’s operations and other relevant factors including
the frequency of Board meetings as well as directors’
length of service, particular experience and qualifications. The
Board makes a recommendation to shareholders as to the level of Non-Executive Directors remuneration which is then
put to shareholders at the Annual General Meeting for approval.
As the Company does not provide share or option schemes to Directors and Executives, remuneration of Executives and
Non-executives is not explicitly linked to the Company’s performance. Notwithstanding this, Board members and
Company executives are subject to ongoing performance monitoring and regular performance reviews.
Directors' benefits
No Director of the Company has, since the end of the previous financial year, received or become entitled to receive a
benefit, other than a remuneration benefit as disclosed in the Director's Report, by reason of a contract made by the
Company or a related entity with the director or with a firm of which he is a member, or with a Company in which he has a
substantial interest.
Options
No options over issued shares or interests in the Company were granted during the financial year and there were no
options outstanding at the end of this report.
Audit committee
The Audit Committee consists of Mr Ian Hunter, Mr Michael Cole and Mr Ross Finley. The Chairman is Mr Ian Hunter,
who is not the Chairman of the Board.
16
Ironbark Capital Limited
ABN 89 008 108 227
Directors' report (continued)
For the year ended 30 June 2011
Company Executives' Remuneration
For the year ended 30 June 2011
Name of directors
Ross J Finley
Michael J Cole (Chairman)
Ian J Hunter
For the year ended 30 June 2010
Name of directors
Ross J Finley
Michael J Cole (Chairman)
Ian J Hunter
Base fee
$
Superannuation
$
Total
$
20,000
20,000
20,000
60,000
-
-
-
-
20,000
20,000
20,000
60,000
Base fee
$
Superannuation
$
Total
$
20,000
20,000
20,000
60,000
-
-
-
-
20,000
20,000
20,000
60,000
Directors are paid a maximum remuneration of $20,000 each per annum.
Mr Peter Roberts, Company Secretary, is a shareholder and employee of White Outsourcing Pty Ltd. During the year
White Outsourcing Pty Ltd received fees of $67,003 (2010: $65,721) for the administration of the Company, out of which
costs of accounting, administration and Company Secretarial are paid.
Insurance of directors
During the year ended 30 June 2011, the Company paid liability insurance premiums relating to directors' insurance. The
Directors have not included details of the nature of the liabilities covered or the amount of premium paid in respect of the
directors' and officers' liability and legal expense's insurance contracts, as such disclosure is prohibited under the terms
of the contract.
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on
behalf of the Company, or to intervene any proceedings to which the company is a party, for the purpose of taking
responsibility on behalf of the Company for all or part of those proceedings. No proceedings have been brought against
or intervened in on behalf of the Company with leave of the Court under section 237 of the Corporations Act 2001.
Non-Audit Services
The Directors of the Company are satisfied that the general standard of independence for auditors imposed by the
Corporations Act 2001 has been met as there has been no provision of non-audit services by the external auditor.
Rounding of amounts
The Company is of a kind referred to in Class Order 98/100 issued by the Australian Securities & Investment
Commission, relating to the "rounding off" of amounts in the directors' report and financial statements to the nearest
$1,000 or in certain cases to the nearest dollar. Amounts have been rounded off in the directors' report and financial
statements in accordance with this class order.
Auditor's Independence Declaration
Independence declaration for the year ended 30 June 2011 has been received and can be found on page 18.
This report is made in accordance with a resolution of the Directors of the Company.
M J Cole
Director
Dated at Sydney this 26th August 2011
17
Ironbark Capital Limited
Auditor's Independence Declaration
18
Ironbark Capital Limited
ABN 89 008 108 227
Statement of comprehensive income
For the year ended 30 June 2011
Notes
2011
$'000
2010
$'000
3
4
Investment income from trading portfolio
Revenue from trading portfolio
Net unrealised gains in the net fair value of investments
Realised gains/(loss) on sale of investments
Total investment income from trading portfolio
Other income
Other income
Total other income
Total income
Expenses
Investment manager's fees
Audit fees
Share registry fees
Directors fees
ASX listing and other fees
Accounting and company secretarial fees
Custody fees
Mailing fees
Tax fees
Legal fees
Brokerage expense
Futures and options expenses
Other (including insurances)
Total expenses
Profit before income tax expense
Income tax expense
5(a)
Profit after income tax expense attributable to members
of Ironbark Capital Limited
Other comprehensive income
Total comprehensive income
Basic and diluted earnings per share
18
4,231
3,784
3,201
11,216
9
9
3,238
5,545
(158)
8,625
61
61
11,225
8,686
(521)
(34)
(70)
(60)
(35)
(67)
(30)
(3)
(16)
(16)
(50)
(34)
(31)
(967)
10,258
(2,382)
7,876
-
7,876
Cents
5.57
(504)
(28)
(67)
(60)
(34)
(66)
(23)
-
(10)
(5)
(31)
(46)
(25)
(899)
7,787
(1,856)
5,931
-
5,931
Cents
4.17
The above Statement of comprehensive income should be read in conjunction with the accompanying notes to the
financial statements.
19
Ironbark Capital Limited
ABN 89 008 108 227
Statement of financial position
As at 30 June 2011
Current assets
Cash assets
Trade and other receivables
Trading portfolio (held for trading)
Current tax assets
Other
Total current assets
Non- current assets
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Current tax liabilities
Total current liabilities
Non-current liabilities
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed Equity
Retained earnings/(Accumulated losses)
Total equity
Notes
12(b)
6
7
5(f)
8
5(e)
9
5(c)
5(d)
10
11
2011
$'000
2010
$'000
6,249
496
72,978
13
22
79,758
959
959
16,236
459
57,543
17
19
74,274
3,341
3,341
80,717
77,615
374
-
374
1
1
375
105
-
105
6
6
111
80,342
77,504
80,156
186
80,342
80,239
(2,735)
77,504
The above Statement of financial position should be read in conjunction with the accompanying notes
to the financial statements.
20
Ironbark Capital Limited
ABN 89 008 108 227
Statement of changes in equity
For the year ended 30 June 2011
Balance at 1 July 2009
Profit for the period
Other comprehensive income for the year
Total comprehensive income for the period
Share
Capital
$'000
80,442
-
-
-
Retained
Earnings
$'000
(3,408)
5,931
-
Total
$'000
77,034
5,931
-
5,931
5,931
Dividends paid
Buy back of shares
-
(203)
(5,258)
-
(5,258)
(203)
Balance at 30 June 2010
80,239
(2,735)
77,504
Profit for the period
Other comprehensive income for the year
Total comprehensive income for the period
-
-
-
7,876
-
7,876
-
7,876
7,876
Dividends paid
Buy back of shares
-
(83)
(4,955)
-
(4,955)
(83)
Balance at 30 June 2011
80,156
186
80,342
The above Statement of changes in equity should be read in conjunction with the accompanying notes to the financial
statements.
21
Ironbark Capital Limited
ABN 89 008 108 227
Statement of cash flows
For the year ended 30 June 2011
Cash flows from operating activities
Proceeds from sale of trading portfolio
Purchase of trading portfolio
Dividends & trust distributions received
Interest received
Other income received
Investment manager's fees paid
Income tax paid
Other expenses paid
Net cash provided by/(used in) operating activities
Cash flows from financing activities
Share buy back
Dividends paid
Net cash used in financing activities
Net increase /(decrease) in cash held
Cash at the beginning of the financial year
Cash at the end of the financial year
Non-cash financial activities
Dividends paid by DRP
Notes
12(a)
12(b)
2011
$'000
46,907
(55,153)
3,997
197
9
(518)
-
(365)
(4,926)
(106)
(4,955)
(5,061)
(9,987)
16,236
6,249
-
-
2010
$'000
36,716
(30,664)
2,929
308
61
(503)
-
(402)
8,445
(240)
(5,258)
(5,498)
2,947
13,289
16,236
-
-
The above Statement of cash flows should be read in conjunction with the accompanying notes to the financial
statements.
22
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the financial statements
For the year ended 30 June 2011
1
2
(a)
Reporting Entity
Ironbark Capital Limited is a company domiciled in Australia. The Company's registered office is Level 7, 20
Hunter Street, Sydney NSW, 2000 . The Financial Statements of Ironbark Capital Limited are for the year ended
30 June 2011. The company is primarily involved in making investments and deriving revenue and investment
income from listed securities and unit trusts in Australia.
Summary of Significant Accounting Policies
Basis of Accounting
These general purpose financial statements have been prepared in accordance with Australian Accounting
Standards, Australian Accounting Interpretations, other authoritative pronouncements of
the Australian
Accounting Standards Board and the Corporations Act 2001.
Australian Accounting Standards set out accounting policies that the AASB has concluded would result in financial
statements containing relevant and reliable information about transactions, events and conditions. Compliance
with Australian Accounting Standards ensures that
the financial statements and notes also comply with
International Financial Reporting Standards.
The financial statements cover Ironbark Capital Limited which is a listed public company, incorporated and
domiciled in Australia. The financial statements have been prepared on an accruals basis, with the exception of
valuation of investments as described in Note 2(b) below.
The Statements are prepared from the records of the Company on an accrual basis and are based on historical
costs modified by the revaluation of selected financial assets and financial liabilities for which the fair value basis
of accounting has applied. The directors revalue the trading portfolio on a daily basis.
The following is a summary of the material accounting policies adopted by the Company in the preparation of the
financial statements. The accounting policies have been consistently applied, unless otherwise stated.
(b)
Trading portfolio
(i) Classification
The trading portfolio comprises securities held for short term trading purposes, including exchange traded option
contracts that are entered into, as described in Note 2(c) below. The purchase and the sale of securities are
accounted for at the date of trade. Trade date accounting is adopted for financial assets that are delivered within
timeframes established by market place convention.
Securities in the trading portfolio are classified as "assets measured at fair value through profit or loss".
23
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the financial statements (Continued)
For the year ended 30 June 2011
2
Summary of Significant Accounting Policies (Continued)
(ii) Recognition
Financial instruments incorporating financial assets and financial liabilities are initially measured at fair value on
trade date, which excludes transaction costs on trade date, where the related contractual rights or obligations
exist. Transaction costs are expensed to the profit and loss immediately. Trade date accounting is adopted for
financial assets that are delivered within time frames established by market place conventions. Subsequent to
initial recognition these instruments are measured as set out below.
Realised and unrealised gains and losses arising from changes in the fair value of these assets are included in
the statement of comprehensive income in the period which they arise and are transferred to the asset revaluation
reserve net of the potential tax charges that may arise from the future sale of the investments.
(iii) Valuation of Trading Portfolio
Securities are classified as held for trading financial assets as acquired principally for the purpose of selling in the
term or if so designated by management and within the requirements of AASB139: Recognition and
short
Measurement of Financial Instruments.
(iv) Valuation of options written portfolio
Options are initially brought to account at the amount received upfront for entering the contract (the premium) and
subsequently revalued to current market value. Increments and decrements are taken through the statement of
comprehensive income.
(v) Income from holdings of securities
Distributions relating to listed securities are recognised as income when those securities are quoted in the market
on an ex-distribution basis unless the distributions are capital returns on ordinary shares in which case the amount
of the distribution is treated as an adjustment to the carrying value of the shares.
The realised gain or loss on options written is not recognised until
is exercised or is
repurchased from the holder. All unrealised gains or losses which represents movements in the market value of
the options are recognised through the statement of comprehensive income.
the option expires,
Interest revenue on listed securities is recognised on the ex date, taking into account the effective yield on the
financial asset. Interest revenue on cash deposits is recognised as it accrues.
(vi) Unrealised gains and losses
The unrealised gains and losses are transferred to the unrealised profits and losses reserve to the extent the
Company is in a net unrealised gain position, net of any potential tax charge that may arise from the future sale of
trading portfolio. The balance in the unrealised profit and losses reserve is equal to the cumulative after tax
unrealised gains on trading portfolio.
(vii) Determination of Fair Value
AIFRS defines fair value for the purpose of valuing holdings of securities that are listed or traded on an exchange
to be based on quoted "bid" prices for securities prevailing at the close of business on the balance date. AASB
139 and AG72 states that the current bid price is usually the appropriate price to be used in measuring the fair
value of actively traded financial assets. Financial assets should be valued at
their fair value without any
deduction for transaction costs that may be incurred on sale or other disposal. Certain costs in acquiring
investments, such as brokerage and stamp duty are expensed in the statement of comprehensive income.
(c)
Current Assets - Trading Portfolio
The Company enters into option contracts in the trading portfolio for the purpose of enhancing returns, offsetting
risk or providing opportunities to acquire or sell securities at advantage prices.
As at balance date there were call options outstanding which potentially required the Company, if they were
exercised, to deliver securities to the value of $1.4 million (30 June 2010: $0.8 million) held by the Company in its
trading portfolio.
24
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the financial statements (Continued)
For the year ended 30 June 2011
2
(d)
Summary of Significant Accounting Policies (Continued)
Income to Pay Dividends
In accordance with the Corporations Act 2001, the Company may pay a dividend where the Company's assets
exceed its liabilities, the payment of the dividend is fair and reasonable to the Company's shareholders as a whole
and the payment of the dividend does not materially prejudice the Company's ability to pay its creditors.
It is the Directors’ policy to only pay fully franked dividends and to distribute the majority of franking credits
received each year. Franking credits are generated by receiving fully franked dividends from shares held in the
Company's investment portfolio, and from the payment of corporate tax on its other investment income, namely
share option premiums, unfranked income and net realised gains.
A provision for dividends payable is recognised in the reporting period in which dividends are declared, for the
entire undistributed amount, regardless of the extent to which they will be paid in cash.
(e)
Taxation
The income tax expense/(benefit) for the year comprises current income tax expense/(benefit) and deferred tax
expense/(benefit).
Current income tax expense charged to profit or loss is the tax payable on taxable income. Current tax liabilities
(assets) are measured at the amounts expected to be paid to (recovered from) the relevant taxation authority.
Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during
the year as well as unused tax losses.
Current and deferred income tax expense (income) is charged or credited outside profit or loss when the tax
relates to items that are recognised outside profit or loss.
No deferred income tax is recognised from the initial recognition of an asset or liability, excluding a business
combination, where there is no effect on accounting or taxable profit or loss.
Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the
asset is realised or the liability is settled and their measurement also reflects the manner in which management
expects to recover or settle the carrying amount of the related asset or liability.
Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that
it is probable that future taxable profit will be available against which the benefits of the deferred tax assets can be
utilised.
Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that
net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred
tax assets and liabilities are offset where: (a) a legally enforceable right of set-off exists; and (b) the deferred tax
assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity
or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of
the respective assets and liability will occur in future periods in which significant amounts of deferred tax assets or
liabilities are expected to be recovered or settled.
Trading Portfolio
A tax provision is made for the unrealised gain or loss on securities valued at fair value through the statement of
comprehensive income.
Where the Company disposes of such securities, tax is calculated on gains made according to the particular
parcels allocated to the sale for tax purposes offset against any losses carried forward.
25
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the financial statements (Continued)
For the year ended 30 June 2011
2
(f)
(g)
(h)
(i)
(j)
(k)
(l)
(m)
Summary of Significant Accounting Policies (Continued)
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, deposits held at call with bank, other short-term highly liquid
investments with original maturities of three months or less, and bank overdrafts.
For the purposes of the Statement of cash flows, cash includes deposits held at call with financial institutions net
of bank overdrafts.
Trade and Other Receivables
Trade and other receivables may include amounts for dividends, interest and securities sold. Dividends and
distributions are brought to account when the Company's right to receive a dividend is established. Interest
revenue is recognised as it accrues taking into account
the effective yield on the financial asset. Amounts
received for securities sold are recorded when a sale has occurred. Amounts are generally received within 30
days of being recorded as a receivable.
Revenue Recognition
• Trading Income - profits and losses realised from the sale of investments and unrealised gains and losses on
securities held at fair value are included in the statement of comprehensive income in the year they are incurred.
• Dividend Income - dividends and distributions are brought to account when the right to receive a dividend has
been established.
• Interest Income - interest income is recognised as it accrues, taking into account the effective yield on the
financial asset.
• Other Income - other revenue is recognised to the extent that it is probable that the economic benefits will flow to
the Company and when the revenue can be reliably measured.
Trade and Other Payables
Trade and other payables represent liabilities for goods and services provided to the Company prior to the end of
the financial year which are unpaid at the reporting date. Payables are unsecured and are usually paid within 30
days of recognition.
Derivative Financial Instruments
The Company may invest in financial derivatives. Derivative financial instruments are accounted for on the same
basis as the underlying investment exposure. Gains and losses relating to derivatives are included in investment
income as part of realised or unrealised gains and losses on investments.
Earnings/(Loss) per share
Basic and diluted earnings/(loss) per share is determined by dividing the operating result after income tax by the
weighted average number of ordinary shares on issue during the financial year, adjusted for any bonus element.
Goods and Services Tax (GST)
Revenue, expenses and assets are recognised net of the amount of GST, except where the amount of GST
incurred is not recoverable from the Australian Tax Office.
In these circumstances the GST is recognised as part
of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the
Balance sheet are shown inclusive of GST. Cash flows are presented in the Statement of cash flows on a gross
basis. The GST components of cash flows arising from investing activities which are recoverable from/or payable
to the ATO are classified in the cash flows from operating activities.
Contributed Equity
Ordinary shares are classified as equity.
options are shown in equity as a deduction, net of tax, from the proceeds.
Incremental costs directly attributable to the issue of new shares or
26
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the financial statements (Continued)
For the year ended 30 June 2011
2
Summary of Significant Accounting Policies (Continued)
(n)
Adoption of new and revised accounting standards
Certain new accounting standards and interpretations have been published that are not mandatory for the 30 June
2011 reporting period. The Responsible Entity's assessment of the impact of these standards (to the extent
relevant to the Fund) and interpretations is set out below:
(i) AASB 9 Financial Instruments and AASB 2009-11 Amendments to Australian Accounting Standards arising
from AASB 9 and AASB 2010 Amendment to Australian Accounting Standards arising from AASB9 (December
2010) (effective from 1 January 2013)
AASB 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets
and financial liabilities. The standard is not applicable until 1 January 2013 but is available for early adoption.
AASB 9 permits the recognition of fair value gains and losses in other comprehensive income if they relate to
equity investments that are not traded. The Fund has not yet decided when to adopt AASB 9. However, the
Responsible Entity does not expect this will have a significant impact on the Fund's financial statements as the
Fund does not hold any available-for-sale investments.
(ii) Revised AASB 124 Related Party Disclosures and AASB 2009-12 Amendments to Australian Accounting
Standards (effective from 1 January 2011)
In December 2009 the AASB issued a revised AASB 124 Related Party Disclosures. It is effective for accounting
periods beginning on or after 1 January 2011 and must be applied retrospectively. The amendment clarifies and
simplifies the definition of a related party and removes the requirement for government-related entities to disclose
details of all transactions with the government and other government-related entities. The Fund will apply the
amended standard from 1 July 2011. The amendments will not have any effect on the Fund's financial statements.
(iii) AASB 2010-6 Amendments to Australian Accounting Standards – Disclosures on Transfers of Financial
Assets (effective for annual reporting periods beginning on or after 1 July 2011)
In November 2010, the AASB issued AASB 2010-6 Disclosures on Transfers of Financial Assets which amends
AASB 1 First-time Adoption of Australian Accounting and AASB 7 Financial Instruments: Disclosures to introduce
additional disclosures in respect of risk exposures arising from transferred financial assets. The amendments will
affect particularly entities that sell, factor, securitise, lend or otherwise transfer financial assets to other parties.
The amendments will not have any impact on the Fund's disclosures. The Fund intends to apply the amendment
from 1 July 2011.
(iv) Amendments to AASB 2010-4 Further Amendments to Australian Accounting Standards arising from the
Annual Improvements Project (effective for annual reporting periods beginning on or after 1 July 2010 / 1 January
2011)
In June 2010, the AASB made a number of amendments to Australian Accounting Standards as a result of the
IASB's annual improvements project. The Fund does not expect that any adjustments will be necessary as the
result of applying the revised rules.
(v) AASB 1053 Application of Tiers of Australian Accounting Standards and AASB 2010-2 Amendments to
Australian Accounting Standards arising from Reduced Disclosure Requirements (effective from 1 July 2013)
On 30 June 2010 the AASB officially introduced a revised differential reporting framework in Australia. Under this
framework, a two-tier differential reporting regime applies to all entities that prepare general purpose financial
statements. The Company is listed on the ASX and is not eligible to adopt the new Australian Accounting
Standards – Reduced Disclosure Requirements. The two standards will therefore have no impact on the financial
statements of the entity.
(vi) AASB 2010-8 Amendments to Australian Accounting Standards – Deferred Tax: Recovery of Underlying
Assets (effective from 1 January 2012)
In December 2010, the AASB amended AASB 112 Income Taxes to provide a practical approach for measuring
deferred tax liabilities and deferred tax assets when investment property is measured using the fair value model.
AASB 112 requires the measurement of deferred tax assets or liabilities to reflect the tax consequences that
would follow from the way management expects to recover or settle the carrying amount of the relevant assets or
introduces a rebuttable presumption that
liabilities,
investment property which is measured at fair value is recovered entirely by sale. The Company will apply the
amendment from 1 July 2012. It is currently evaluating the impact of the amendment.
is through use or through sale. The amendment
that
(o)
(p)
Functional and presentation currency
The functional and presentation currency of the Company is Australian Dollars.
Operating segments
The company operated in Australia only and the principal activity is investment.
27
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the financial statements (Continued)
For the year ended 30 June 2011
2
(q)
(r)
Summary of Significant Accounting Policies (Continued)
Fair value of financial assets and liabilities
The fair value of cash and cash equivalents, and non-interest bearing monetary financial assets and liabilities of
the Company approximates their carrying value. The fair value for assets that are actively traded on market is
defined by AASB 139 as 'last bid price'.
Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors,
including expectation of future events that may have a financial impact on the entity and that are believed to be
reasonable under the circumstances.
The Company has recognised deferred tax assets relating to carried forward tax losses to the extent there are
sufficient taxable temporary differences (deferred tax liabilities) relating to the same taxation authority against
which the unused tax losses can be utilised. However, utilisation of the tax losses also depends on the ability of
the entity to satisfy certain tests at the time the losses are recouped. There are some concerns that the entity may
fail to satisfy the continuity of ownership test and therefore has to rely on the same business test. If the entity fails
to satisfy the test, carried forward losses of $563,379 that are currently recognised as deferred tax asset would
have to be written off to income tax expense.
3
Revenue from trading portfolio
Dividends and trust distributions
Interest
4
Auditor's remuneration
Amounts received and receivable, by
the auditor of the company for:
MNSA Pty Ltd Auditing or reviewing the accounts
PWC Audit report of Custodian statement
5
(a)
Income tax expense
Income Tax expense recognised in the Statement of comprehensive
income
Current income expense
Deferred tax expense/(income) relating to the origination
and reversal of temporary differences
Total income tax expense
(b)
Income tax expense
The prima facie income tax expense on pre-tax accounting
profit reconciles to income tax expense as follows:
Prima facie income tax expense
calculated at 30% on the operating profit
Imputation gross up on dividends received
Franking credits on dividends received
Temporary differences
Over provision in prior year
Realised taxable investment loss
Realised accounting investment gain
Income tax expense
2,011
$'000
4,049
182
4,231
30
4
34
1,291
1,091
2,382
3,077
295
(983)
(49)
(27)
(960)
1,029
2,382
2,010
$'000
2,928
310
3,238
24
4
28
2,336
(480)
1,856
2,336
216
(719)
236
-
(260)
47
1,856
The applicable weighted average effective tax rates are as follows:
23.22%
23.83%
28
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the financial statements (Continued)
For the year ended 30 June 2011
5
(c)
(d)
(e)
Income tax expense (Continued)
Current tax liabilities
Income tax payable
Deferred tax liabilities
Provision for deferred income tax comprises the estimated expense
at current income tax rates of 30% on the following items:
Interest
Deferred tax assets
Provision for deferred tax assets comprises the estimated benefit at
current income tax rates of 30% on the following item:
Provision for income tax on unrealised investments
Excess franking credits not deductible in current year
Carry forward losses
(f)
Current tax assets
Current tax assets comprises the estimated expense at
current income tax rates on the following items:
Expenses not deductible in current year
(g)
Reconciliation
The overall movement in the deferred tax account is as follow:
Opening balance
(Charges)/credit to statement of comprehensive income
Changes to equity
Closing balance
Trade and other receivables
Current
Accrued interest and dividends
Receivables are non-interest bearing and unsecured.
2011
$'000
2010
$'000
-
1
395
-
564
959
2011
$'000
-
6
1,487
1,663
191
3,341
2010
$'000
13
17
3,352
5
(2,386)
971
496
496
5,208
44
(1,900)
3,352
459
459
Outstanding settlements are on the terms operating in the securities industry, which usually require settlement
within three days of the date of a transaction.
The credit risk exposure of the Company in relation to receivables is the carrying amount.
Trading portfolio
Listed equities at fair value
Listed property trusts at fair value
Floating rate notes at fair value - listed
66,940
1,712
4,326
72,978
50,610
1,835
5,098
57,543
The fair value of the trading portfolio equals to the market value of the trading portfolio.
Credit risk exposures of the Company arise in relation to floating rate notes to the extent of their carrying values,
in the event of a shortfall on winding up the issuing Companies.
Term deposits are held with St George Bank which is rated A -1 by Standard and Poors.
Other Assets
Current
GST receivable
Prepayments
18
4
22
15
4
19
29
6
7
8
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the financial statements (Continued)
For the year ended 30 June 2011
9
Trade and other payables
Current
Trade creditors
Unsettled trades
Unsettled on-market share buy back
Payables are non-interest bearing and unsecured.
2011
$'000
119
255
-
374
2010
$'000
83
-
22
105
Unsettled trades are on the terms operating in the securities industry, which usually require settlement within three
days of the date of a transaction.
10
Contributed Equity
2011
2010
Ordinary shares
No.'000
141,560
$'000
No.'000
$'000
80,156
141,751
80,239
Movements in ordinary contributed equity of the company were as follows:
(a)
(b)
Opening balance 1 July
Bought back under on-market share
buy back
Closing balance
On market Share Buy Back
No.'000
141,751
(191)
141,560
2011
2010
$'000
No.'000
$'000
80,239
142,223
80,442
(83)
(472)
(203)
80,156
141,751
80,239
For financial year ended 30 June 2011, the Company bought back 190,978 (2010: 472,212) shares under an on market
share buy back.
Dividend reinvestment plan
Under the Company's dividend reinvestment plan, additional shares are allotted at a price calculated at 97.5% of the
weighted average share price. The DRP is currently suspended and as such, there were no shares issued under the
dividend reinvestment plan during the period.
Terms and conditions
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 winding up the Company ordinary shareholders rank after creditors and are fully entitled to any
proceeds of liquidation.
(c )
Capital Management
The Board's policy is to maintain a strong capital base so as to maintain investor and market confidence.
To achieve this the Board of Directors monitor the monthly NTA results,
management expense ratio (MER) and share price movements.
investment performance,
the Company's
There were no additional shares issued during the financial year.
The Company announced to the market
in November 2009 the introduction of an on-market share buy-back of
approximately 10% of the Company shares, to be conducted over a 12 month period, details of shares bought back are
included in note 10 (b).
The Company is not subject to any externally imposed capital requirements.
11
Retained Earnings
Balance at the beginning of the financial year
Net profit/(loss) for the current year
Dividends paid and payable
Balance at the end of the financial year
30
2011
$'000
(2,735)
7,876
5,141
(4,955)
186
2010
$'000
(3,408)
5,931
2,523
(5,258)
(2,735)
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the financial statements (Continued)
For the year ended 30 June 2011
12
(a)
Statement of cash flows
Reconciliation of net profit from ordinary
activities after income tax to net cash
utilised in operating activities
Gain from ordinary activities after income tax (expense)/benefit
Unrealised (gains) in the net fair value of investments
Realised (gains)/losses on sale of investments
Change in operating assets and liabilities:
(Increase)/decrease in accrued interest and dividends
(Increase)/Decrease in other current assets
(Increase)/decrease in trading portfolio
Increase/(Decrease) in trade creditors
Increase/(Decrease) in tax liabilities
Net cash provided by/(used in) operating activities
2011
$'000
2010
$'000
7,876
(3,784)
(3,201)
(37)
(3)
(8,195)
37
2,381
(4,926)
5,931
(5,545)
158
(1)
3
6,084
(41)
1,856
8,445
(b)
Components of cash
Cash at bank
6,249
16,236
The credit risk of the Company in relation to cash is the carrying amount and any unpaid interest. Cash
investments are made with JP Morgan which is rated AA-/A-1+ by Standards & Poors.
Date of
payment
15/03/2011
21/09/2010
12/03/2010
4/11/2009
20/08/2009
13
Dividends
Interim Dividend - Fully franked
Interim Dividend - Fully franked
Interim Dividend - Fully franked
Interim Dividend - Fully franked
Interim Dividend - Fully franked
Franking Account
Opening balance of franking account
Franking credits on dividends received
Tax paid / received during the year
Franking credits on ordinary dividends paid
Closing balance of franking account
2011
$'000
2010
$'000
2,124
2,831
-
-
-
-
-
1,705
1,848
1,705
2011
$'000
2010
$'000
1,617
983
(2,123)
477
3,152
719
(2,254)
1,617
Adjustments for tax payable/refundable in respect of the current year’s
profits and the receipt of accrued dividends
152
123
Impact on the franking account of dividends proposed or declared before
the financial report authorised for issue but not recognised as a
distribution to equity holders during the year
No unfranked dividends have been declared or paid during the year.
629
(1,213)
527
31
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the financial statements (Continued)
For the year ended 30 June 2011
14
(a)
Related party information
Key management personnel
The names of the persons who were the key management personnel of the Company during the financial year
were:
Michael J Cole (Chairman, Director)
Ross J Finley (Director)
Ian J Hunter (Director)
(b)
Key management personnel remuneration
Details of the remuneration of Ironbark Capital key management personnel and their related entities is set out as
below:
Short-term
Employee
Benefit
Cash Salary &
Fees
$
60,000
60,000
Post-Employment
Benefit
Other Benefit
Superannuation
$
Other
$
-
-
-
-
Total
$
60,000
60,000
2011
2010
Detailed remuneration disclosures are provided in the remuneration report in the Directors' Report.
The Remuneration Committee of the Board of Directors of Ironbark Capital Ltd is responsible for determining and
reviewing compensation arrangements for
the directors. The remuneration Committee assesses the
appropriateness of the nature and amount of emoluments of each director on a periodic basis by reference to
workload and market conditions. The overall objective is to ensure maximum stakeholder benefit
from the
retention of a high quality board whilst constraining costs.
(c )
Shareholdings of key management personnel (and their related entities)
2011
Ordinary Shares
Michael J Cole (Chairman)
Ross J Finley
Ian J Hunter
2010
Ordinary Shares
Michael J Cole (Chairman)
Ross J Finley
Ian J Hunter
Balance at
1 July 2010
Shares acquired
/ (disposed)
Balance at
30 June 2011
7,983,737
1,400,000
1,662,448
11,046,185
16,263
-
-
16,263
8,000,000
1,400,000
1,662,448
11,062,448
Balance at
1 July 2009
Shares acquired
/ (disposed)
Balance at
30 June 2010
7,983,737
1,400,000
1,662,448
11,046,185
-
-
-
-
7,983,737
1,400,000
1,662,448
11,046,185
Directors' transactions on ordinary shares are on the same terms and conditions applicable to ordinary members.
There were no shares granted during the reporting period as compensation.
15
Segment information
The Company has only one reportable segment. The Company operates predominantly in Australia and in one
industry being the securities industry, deriving revenue from dividend income, interest income and from the sale of
its trading portfolio.
32
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the financial statements (Continued)
For the year ended 30 June 2011
16
Financial risk management
The Company's financial instruments consist mainly of deposits with banks, trading portfolio, accounts receivable
and payables. The Company's activities expose it to a variety of financial risks: market risk (including price risk
and interest rate risk), credit risk and liquidity risk.
(i) Credit risk
The standard defines this as the risk that one party to a financial instrument will cause a financial loss for the other
party by failing to discharge an obligation.
Credit risk is managed as provided in Note 6 with respect to receivables, Note 7 with respect to floating rate note
investments and Note 12 with respect to cash assets. None of these assets are over-due or considered to be
impaired.
(ii) Liquidity risk
Liquidity risk is defined as the risk that an entity will encounter difficulty in meeting obligations associated with
financial liabilities.
The Investment Manager monitors its cash flow requirements daily in relation to the trading account taking into
account upcoming dividends, tax payments and trading activity.
The Company's inward cash-flows depend upon the level of dividend and distribution revenue received. Should
these decrease by a material amount, the Company would amend its outward cash-flows accordingly. As the
Company's major cash outflows are the purchase of securities and dividends paid to shareholders, the level of
both of these is managed by the Board and Investment Manager.
Furthermore, the assets of the Company are largely in the form of readily tradeable securities which can be sold
on-market if necessary.
The table below analyses the Company's non-derivative financial liabilities in relevant maturity groupings based
on the remaining period to the earliest possible contractual maturity date at the year end date. The amounts in the
table are contractual undiscounted cash flows.
At 30 June 2011
Trade and other payables
Current tax liabilities
Total financial liabilities
At 30 June 2010
Trade and other payables
Current tax liabilities
Total financial liabilities
Less than 1 month
$000
$'000
More than 1
month
$'000
Total
374
-
374
105
-
105
-
-
-
-
-
374
-
374
105
-
105
The Fund does not have net settled derivative financial instruments in a loss position.
(iii) Interest rate risk
The Company's interest bearing financial assets expose it to risks associated with the effects of fluctuations in the
prevailing levels of market interest rates on its financial position and cash flows.
Sensitivity analysis - interest rate risk
An increase of 75 basis points in interest rates as at the reporting date (assuming a flat tax rate of 30 per cent)
would have increased the Company's equity and revenue from trading portfolio by $32,807 (2010: $85,239). A
decrease of 75 basis points would have an equal but opposite effect.
33
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the financial statements (Continued)
For the year ended 30 June 2011
16
Financial risk management (Continued)
(iv) Market risk
The standard defined this as the risk that the fair value of future cash flows of a financial instrument will fluctuate
because of changes in market prices.
By its nature as a Listed Investment Company that invests, the Company can never be free of market risk as it
invests its capital in securities which are not risk free - the market price of these securities can fluctuate.
A general fall in market prices of 5 per cent and 10 per cent, if spread equally over all assets in the investment
portfolio would lead to a reduction in the Company's equity of $2.6 million (2010: $2.0 million) and $5.1 million
(2010: $4.0 million) respectively, assuming a flat tax-rate of 30 per cent.
The Company seeks to manage and constrain market risk by diversification of the investment portfolio across
multiple stocks and industry sectors. The Manager of the investment portfolio has been granted specific risk
tolerance boundaries as set out in the investment management agreement.
The Company's investment sector as at 30 June is as below:
Consumer discretionary
Consumer staple
Energy
Financials
Healthcare
Industrials
Materials
Property Trust
Telecommunications services
Utilities
Corporate floating rate notes
2011
%
0.07
0.00
2.72
55.14
2.72
4.28
19.22
2.35
3.41
4.16
5.93
100.00
2010
%
0.67
0.38
2.82
45.25
2.48
2.50
27.35
3.19
2.06
4.44
8.86
100.00
Securities representing over 5 per cent of the investment portfolio at 30 June 2011 were:
BHP Billiton Ltd
%
9.70
9.70
No other security represents over 5 per cent of the Company's trading portfolio.
The Company is also not directly exposed to currency risk as all its investments are quoted in Australian dollars.
34
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the financial statements (Continued)
For the year ended 30 June 2011
16
Financial risk management (Continued)
(v) Derivative financial instruments
A derivative is a financial contract whose value depends on, or is derived from, underlying assets, liabilities or
indices. Derivative transactions include a wide assortment of instruments, such as forwards, futures, options and
swaps.
Derivatives are considered to be part of the investment process. The use of derivatives is an essential part of
proper portfolio management. Derivatives are not managed in isolation. Consequently, the use of derivatives is
multi-faceted and includes:
(i) hedging to protect an asset of the company against a fluctuation in market values or to
reduce volatility;
(ii) as a substitute for physical securities; and
(iii) adjustment of asset exposures within the parameters set out in the investment strategy.
Derivative financial instruments require no initial net investment or an initial net investment that is smaller than
would be required for other types of contracts that would be expected to have a similar response to changes in
market factors.
The Company holds the following derivative instruments:
Options
An option is a contractual arrangement under which the seller (writer) grants the purchaser (holder) the right, but
not the obligation, either to buy (a call option) or sell (a put option) at or by a set date or during a set period, a
specific amount of securities or a financial instrument at a predetermined price. The seller receives a premium
from the purchaser in consideration for the assumption of future securities price. Options held are exchange-
traded.
As at 30 June 2011, the notional principal amounts of derivatives held by the Company were as follows:
Notional
principal
amounts
2011
$'000
Notional
principal
amounts
2010
$'000
Australian exchange traded options
1360
843
Fair value hierarchy
The Company has adopted the amendments to AASB 7, effective 1 July 2009. This requires the Company to
classify fair value measurements using a fair value hierarchy that reflects the subjectivity of the inputs used in
making the measurements. The fair value hierarchy has the following levels:
Level 1 - Quoted prices (unadjusted) 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 (that is, as prices) or indirectly (that is, derived from prices).
Level 3 - Inputs for the asset or liability that are not based on observable market data (that is, unobservable
inputs).
The level
in the fair value hierarchy within which the fair value measurement is categorised in its entirety is
determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety.
For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a
fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs,
that measurement is a level 3 measurement. Assessing the significance of a particular input to the fair value
measurement in its entirety requires judgement, considering factors specific to the asset or liability.
The determination of what constitutes ‘observable’ requires significant judgement by the Directors. The Directors
consider observable data to be that market data that is readily available, regularly distributed or updated, reliable
and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant
market.
35
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the financial statements (Continued)
For the year ended 30 June 2011
16
Financial risk management (Continued)
Fair value hierarchy (continued)
The table below sets out the Company’s financial assets and liabilities (by class) measured at fair value according
to the fair value hierarchy.
At 30 June 2011
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
Trading portfolio (held for
trading)
Total
At 30 June 2010
72,978
72,978
Level 1
$'000
Level 2
$'000
Trading portfolio (held for
trading)
Total
57,543
57,543
-
-
-
-
Level 3
$'000
-
-
-
-
72,978
72,978
Total
$'000
57,543
57,543
Investments whose values are based on quoted market prices in active markets, and therefore classified within
level 1, include active listed equities, certain unlisted unit trusts and exchange traded derivatives.
Financial instruments that trade in markets that are not considered to be active but are valued based on quoted
market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within
level 2. The Company has no investments that are classified within level 2.
Investments classified within level 3 have significant unobservable inputs, as they are infrequently traded. The
Company has no investments that are classified within level 3.
17
Events after the Statement of financial position date
A special resolution was passed at the General Meeting held on 21 July 2011 where the Constitution of the
company will be entrenched with a requirement (to the extent permissible by law) for the Directors to take steps to
implement a transaction under which Ironbark will offer to buy-back up to all of its Shares through an off-market
tender process with effect on or around 30 June 2015 at a price equal to the net tangible asset backing of the
shares at the time, after deduction of transaction costs associated with the transaction and, if determined by the
Directors, costs to wind-up Ironbark following completion of the transaction.
Other than the General Meeting outcome, no significant events have occurred since the reporting date which
would impact on the financial position of the Company as disclosed in the Statement of Financial Position as at 30
June 2011 and the results and cash flows of the Company for the year ended on that date. The financial report
was authorised for issue on 26th August 2011 by the board of directors.
18
Earnings per share
Basic and diluted earnings/(loss) per share (cents per share)
2011
5.57
2010
4.17
Weighted average number of ordinary shares outstanding used in the
calculation of basic earnings per share
141,566,636
142,100,336
Diluted earnings per share is the same as basic earnings per share. The Company has no securities outstanding
which have the potential to convert to ordinary shares and dilute the basic earnings per share.
19
Contingent liabilities
The Investment Management Agreement entered into by the company with Kaplan Funds Management states
that either party will be entitled to give the other no less than 12 months written notice of termination of the
t
No other contingent liabilities existed at 30 June 2011.
20
Other information
Ironbark Capital Limited, incorporated and domiciled in Australia, is publicly listed and limited by shares.
The registered office and principal place of business of the Company is:
Level 7, 20 Hunter Street
Sydney NSW 2000
Telephone (02) 8236 7701
36
Ironbark Capital Limited
ABN 89 008 108 227
Directors' declaration
The Directors of Ironbark Capital Limited declare that:
1
2
3
The financial statements and notes, as set out on page 19 to page 36, are in accordance with the Corporations
Act 2001 , and:
(a)
(b)
comply with Accounting Standards, which, as stated in accounting policy note 2 to the financial
statements, constitutes explicit and unreserved compliance with International Financial Reporting
Standards (IFRS); and
give a true and fair view of the financial position of the Company as at 30 June 2011 and of the
performance for the year ended on that date;
On behalf of White Outsourcing Pty Limited, Peter Roberts, as a person who performs the Chief Executive
Functions for the purposes of the Act declared that:
(a)
(b)
(c)
the financial records of the company for the financial year have been properly maintained in accordance
with section 286 of the Corporations Act 2001;
the financial statements and notes for the financial year comply with the Accounting Standards; and
the financial statements and notes for the financial year give a true and fair view.
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.
M J Cole
Director
Dated at Sydney this 26th August 2011
37
Independent audit report to the members of
Ironbark Capital Limited
ABN 89 008 108 227
38
Independent audit report to the members of
Ironbark Capital Limited
ABN 89 008 108 227
39
Ironbark Capital Limited
ABN 89 008 108 227
Members Information as at 23 August 2011
1. Shareholding
Substantial holders
Shareholders
Kaplan Partners Pty Limited
Abtourk (Syd No 415) Pty Ltd
Questor Financial Services Limited
Distribution of securities
(a)
Analysis of number of holders by size of holding:
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Number of
shares held
31,267,051
4,944,706
5,612,053
Number of
shareholders
Number of
shares held
283
518
375
1,358
164
2,698
109,302
1,527,065
2,870,646
42,426,229
94,626,283
141,559,525
(b)
(c)
There were 186 holders of less than a marketable parcel of shares.
The percentage of total holding of the 20 largest holders of ordinary shares currently comes to 45.71%
Twenty largest holders
The names of the 20 largest holders as at 23 August 2011 are listed below:
Name
KAPLAN PARTNERS PTY LIMITED
QUESTOR FINANCIAL SERVICES LIMITED
ABTOURK (SYD NO 415) PTY LTD
EDSGEAR PTY LIMITED
MR ANTHONY GEOFFREY HARTNELL & MRS MARYED HARTNELL
ABTOURK (SYD NO 415) PTY LTD
SUPENTIAN PTY LIMITED
DOWLING TAYLER PTY LTD
LIANGROVE MEDIA PTY LIMITED
BOND STREET CUSTODIANS LIMITED
BOND STREET CUSTODIANS LIMITED
MICHELLE ANN ANG & HENG HOCK ANG
BOND STREET CUSTODIANS LIMITED
BOND STREET CUSTODIANS LIMITED
MR DAVID STRINGER HILTON
BOND STREET CUSTODIANS LIMITED
LIANGROVE GROUP PTY LTD
QUESTOR FINANCIAL SERVICES LIMITED
COOLAL PTY LTD
TOLMIN PTY LIMITED
Number of
shares held
31,267,051
5,612,053
4,944,706
3,217,996
3,111,858
3,055,294
1,614,685
1,278,953
1,250,000
1,195,018
1,086,475
909,030
864,803
847,806
800,000
772,212
750,000
727,988
700,000
700,000
64,705,928
%
22.088
3.964
3.493
2.273
2.198
2.158
1.141
0.903
0.883
0.844
0.768
0.642
0.611
0.599
0.565
0.546
0.530
0.514
0.494
0.494
45.71
(d) Voting rights
At a general meeting, on the show of hands, every ordinary member present in person shall have one vote for every
share held. Proxies present at the meeting are not entitled to vote on a show of hands, but on a poll have one vote for
every share held.
40
Ironbark Capital Limited
ABN 89 008 108 227
Members Information as at 23 August 2011
2.
3.
The name of the Company Secretary is Mr Peter Roberts
The registered office and principal place of business of the Company is:
Level 7
20 Hunter Street
Sydney NSW 2000
Telephone: (02) 8236 7701
4.
Registry
Share registry functions are maintained by Boardroom Pty Limited and their details are as follows:
GPO Box 3993
Boardroom Pty Limited
Sydney NSW 2001
Shareholder enquiries telephone: (02) 9290 9600
5.
6.
7.
8.
9.
Stock Exchange Listing
Quotation has been granted for all ordinary shares of the Company on all Member Exchanges of the Australian
Stock Exchange Limited.
The Company has followed all applicable best practice recommendations set by ASX Corporate Governance
Council during the financial year.
The Company has used cash and assets in a form readily convertible to cash that it had at the time of admission
consistent with its business objectives.
The company conducted 722 security transactions during the financial year. Brokerage paid during the year net of
RITC claimable was $49,555.97.
The investment management agreement with Kaplan Funds Management Pty Limited provides for the payment of
an investment management fee of 0.65% per annum. In the event that the investment return on the IBC portfolio
exceeds the ASX300 index benchmark by a margin of 1% or more an additional performance fee of 15% of the
performance (adjusted for the value of franking credits received or accrued during the financial year and after the
deduction of
the
Benchmark plus 1% will be payable. The agreement contains a highwater mark in relation to the performance fee
to protect the interests of investors.
the Management Fee and any applicable GST) of
the Portfolio above the aggregate of
41