Ironbark Capital Limited
ABN 89 008 108 227
Annual Report
For the year ended 30 June 2015
Ironbark Capital Limited
ABN 89 008 108 227
Annual Report
For the year ended 30 June 2015
Contents
Corporate Directory
Review of Operations and Activities
Corporate Governance Statement
Investment Manager Report
Portfolio Shareholdings at 30 June 2015
Directors’ Report
Auditor’s Independence Declaration
Financial Statements
Directors’ Declaration
Independent Auditor’s Report to the Members
Shareholder Information
Page
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4
5
8
10
16
17
39
40
42
Ironbark Capital Limited
ABN 89 008 108 227
Corporate Directory
Directors
Michael J Cole B Ec, M Ec (Syd), F Fin
Ross J Finley B Comm (NSW)
Ian J Hunter BA LLB (Syd), MBA (MGSM)
Company Secretary
Jill Brewster MBA (MGSM), AGIA, ACIS, FIPA
Principal Registered Office
Share Registrar
Investment Manager
Accounting & Administration
Auditors
Level 22
44 Market Street
Sydney NSW 2000
Telephone: (02) 8917 0399
Boardroom Pty Limited
GPO Box 3993
Sydney NSW 2001
Shareholder enquiries telephone: (02) 9290 9600
Kaplan Funds Management Pty Limited
Level 22
44 Market Street
Sydney NSW 2000
Telephone: (02) 8917 0300
Kaplan Funds Management Pty Ltd
Level 22, 44 Market Street
Sydney NSW 2000
Telephone: (02) 8917 0399
Fax: (02) 8917 0355
MNSA Pty Ltd
Level 1
283 George Street
Sydney NSW 2000
Website
www.ironbarkcapital.com
Company Secretarial & all other enquiries
Telephone: (02) 8917 0399
Email: enquiries@ironbarkcapital.com
Stock Exchange
Australian Securities Exchange
ASX code: IBC
1
Ironbark Capital Limited
ABN 89 008 108 227
Review of Operations and Activities
For the year ended 30 June 2015
Review of Operations and Activities
From a shareholder’s perspective, we believe that what is important is how the NTA has moved, the
dividends paid and the effect of capital raising.
The Ironbark Capital Limited (“Ironbark”) portfolio lifted 2.8% over the period after inclusion of
franking and dividend. This level underperformed the new benchmark (one year swap interest rate
plus 6%) by 5.6% The Ironbark performance reflects the Investment Manager’s absolute return
focus, the portfolio’s balanced structure and income emphasis.
Preservation of shareholder capital continues to be paramount and the markedly lower volatility of
the IBC portfolio means that the embedded risk is lower than the market.
The minimisation of the share price discount to NTA and the payment of fully franked dividends
continue to be the Directors’ focus.
Ironbark’s capacity to pay fully franked dividends continues to depend on the accumulation of
franking credits and income generation. Ironbark distributed fully franked dividends of 3.0 cents per
share in FY15 and will continue to pay fully franked dividends as corporate profits create the
opportunity to do so. Whilst these dividends are declared on an irregular basis they will be paid
twice a year at the end of December and June/July to be most cost efficient. The most recent
dividend deviated from the June payment date and was paid earlier in April due to the Buy-Back.
In September 2014, Ironbark announced the successful completion of its 1:10 non-renounceable
Entitlement Offer and Shortfall Offer raising $7.8 million, which closed oversubscribed. The offer
attracted strong support with approximately 78% take-up of the Entitlement Offer of shares by
eligible shareholders. Oversubscriptions under the Shortfall Offer were scaled back pro-rata in
proportion to each applicant's shareholding as at the Record Date.
Ironbark Buy-Back
At the Ironbark General Meeting held on 30 April 2015, the shareholders approved a resolution for
Ironbark to conduct a buy-back by an off-market tender process (‘Buy-Back’). This Buy-Back
provided the opportunity for Ironbark shareholders to tender all or some of their shares and either:
•
Exit their investment in Ironbark at NTA less transaction costs and deferred tax asset, or
Continue their investment in Ironbark, accessing Ironbark’s investment style with its income
•
focus, a relevant part of an investor’s portfolio in today’s climate of low interest rates.
A total of 26.51% of the issued shares were tendered by Ironbark shareholders under the Buy-Back
and the Buy-Back price of 55.2 cents per share was entirely a capital component. As a result of the
Buy-Back, as at 27 July 2015 the total number of shares on issue is 125,820,582.
It is the Board’s view that the buy-back mechanism was successful in closing the share price
discount to NTA. The intention is to offer a buy-back every three years for this purpose. This will
assist to positively influence the share price to fully reflect the NTA per share between share
buyback events.
2
Ironbark Capital Limited
ABN 89 008 108 227
Review of Operations and Activities
For the year ended 30 June 2015
Ironbark Corporate Outlook
In recent times, there has been a lot of capital raising activity in the LIC sector with their growing
appeal particularly to SMSF investors. Notwithstanding the recent Buy-Back of shares, this may
present opportunities to raise additional equity going forward through rights issues, share purchase
plans or the dividend reinvestment scheme. It is our view there continues to be investor demand for
a low volatility, absolute return and fully franked dividend focussed investment portfolio offered in a
LIC structure.
Ironbark Management Expense Ratio (MER)
A key determinant of the Ironbark MER is the investment manager payments by way of the base
rate and incentive payments.
As previously indicated, the Directors in conjunction with the fund manager, Kaplan Funds
Management (KFM) have reviewed the investment management agreement. It was agreed a
management fee at a reduced rate of 0.40% pa would apply from 1 July 2015. This will assist in
lowering the MER of Ironbark to a very competitive level by peer group benchmarks. We estimate
for FY 2016 the MER will be less than 1%.
The Directors believe that performance fees are an important tool to align the interests of the key
stakeholders of the shareholders and the fund manager. Accordingly the performance incentive has
been adjusted from an ASX relative benchmark to an absolute return.
Commencing 1 July 2014 performance has been measured by reference to the one year interest
swap rate plus 6%. This aligns with current interest rates and approximates to 9% per annum. The
investment return includes the benefit of franking credits received in the calculation. The
performance fee benchmark has been reset and applied for the 2015 financial year. A highwater
mark applies within each 3 year reset period.
The Directors believe the revised performance fee structure better aligns with the Ironbark
investment strategy to protect shareholders’ capital through a low volatility portfolio.
Conclusion
The Directors will continue to set a policy direction for Ironbark consistent with our view of the best
opportunities for the company in the current investment climate.
Michael J Cole
Chairman
3
Ironbark Capital Limited
ABN 89 008 108 227
Corporate Governance Statement
For the year ended 30 June 2015
Corporate Governance Statement
The Board of Ironbark Capital Limited are committed to achieving high standards of corporate
governance. Ironbark Capital Limited has reviewed its corporate governance practices against the
ASX Corporate Governance Principles and Recommendations (3rd edition) published by the ASX
Corporate Governance Council.
The 2015 Corporate Governance Statement is dated as at 30 June 2015 and reflects the corporate
governance practices in place throughout the 2015 financial year. The 2015 Corporate Governance
statement was approved by the Board on 12 August 2015.
The Corporate Governance Statement can be viewed on
www.ironbarkcapital.com and click on Corporate Governance.
the Company’s website at
4
Ironbark Capital Limited
ABN 89 008 108 227
Investment Manager Report
Year ended 30 June 2015
Investment Manager Report
The manager’s focus is to deliver consistent returns and a high fully franked dividend yield from the
portfolio. Commensurate with its investment objective IBC adopted a new performance benchmark,
being the 1 year swap rate plus 6%. Performance measurement now includes franking credits as
franking credits are a significant source of return from IBC’s hybrid investments and for shareholders.
IBC recorded a portfolio return of 2.8% for the 2015 financial year and 9.8%pa since inception over
12.5 years including two years of the disastrous GFC. Over the medium 3-6 year term the return has
ranged from 8.2%pa to 10.5%pa.
The focus on income generation and capital preservation from a balanced portfolio structure has
delivered these returns with low to medium volatility. By comparison, IBC’s portfolio risk as measured
by volatility has consistently ranged between 40%-50% of the ASX Index volatility.
The portfolio supported dividend payments of 3 cents per share fully franked over the financial year,
representing a grossed up dividend yield of 7.9% based on the share price at the beginning of the
period.
n
r
u
t
e
r
a
p
%
14
12
10
8
6
4
2
0
Inception
IBC Performance (%pa)
10.7
9.8
10.5
9.6
9.9
9.4
9.0
8.2
9.6
8.6
8.3
8.5
8.4
2.8
12.50
6.0
5.0
4.0
Years
3.0
2.0
1.0
IBC portfolio+franking
BENCHMARK (1 yr swap+6%)
Period
12.5 yrs
6 yrs
$100 is worth*
$274
$196
5 yrs
$166
4 yrs
$142
3 yrs
$131
2 yrs
$114
1 yrs
$104
(*share price return with reinvestment assumption plus franking credits)
IBC Volatility vs ASX Index Volatility (risk measurement)
30%
25%
20%
15%
10%
5%
0%
IBC Volatility
ASX Index Volatility
5
Ironbark Capital Limited
ABN 89 008 108 227
Investment Manager Report
Year ended 30 June 2015
Portfolio
The portfolio is structured with an emphasis on income through yield orientated securities (hybrids
and corporate bonds, utilities, property trusts) and buy & write positions in BHP, Telstra and other
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 portfolio is well diversified with investments in 27 different entities. Higher risk exposures in:
banks, industrials and resources are largely held through buy & write option positions for income
enhancement or added protection. The portfolio’s hybrid and corporate bond holdings are floating
rate securities, which benefit from higher interest rates with little duration risk.
Approximately 36% of the portfolio was held in hybrids and corporate bonds and 38.6% in buy &
writes in Banks, Telstra and BHP. Of the balance, 22% was held in cash, 2% in mid cap companies and
1.4% in property trusts.
Option writing reduced the total portfolio market exposure by 9.5% to 68.6% with the balance of
31.4% represented by cash and option delta.
The manager raised cash levels significantly over the June quarter, moving early to fund the
forthcoming end of July off market share buy-back.
The portfolio’s investments have a running yield of 6.7% but the large cash holding at the end of June
diluted the running yield to 5.7%.
Asset allocation reflects a cautious stance. Commodity intensive countries such as Australia are
struggling to produce economic growth and the US is expected to commence increasing interest rates
soon, creating a challenging environment for financial asset markets.
IRONBARK CAPITAL – Asset Allocation- 30 June 15
31.4%
3.6%
2.0%
9.0%
10.1%
6.8%
9.9%
9.2%
16.6%
1.4%
Hybrids‐Bank Basel III
Hybrids‐Bank Basel II & Prefs
Corporate Sub Notes
Hybrids‐Corporate Prefs
Property Trusts
Banks
Top 50 Industrials
Ex Top 50 Industials
Materials & Energy
Cash & Option Delta (Buy&Write)
Portfolio Running Yield 5.72%
6
Ironbark Capital Limited
ABN 89 008 108 227
Investment Manager Report
Year ended 30 June 2015
Portfolio Performance-financial year 2015
The portfolio return of 2.8% for the 12 month period was heavily influenced by the performance of
hybrids and corporate bonds that delivered a return of 2.3% and represented around 40%-50% of the
portfolio over the year. The weakness in credit markets was concentrated in bank Basel III hybrid
issues whilst bank Basel II and corporate subordinated notes produced positive gains. Bank Basel III
holdings represented around 30% of the portfolio’s credit holdings or 10% of the whole portfolio.
Bank Basel II issues represented 6.8% and non-bank corporate issues represented 19.1% of the
portfolio. The running yield on hybrid and corporate bond holdings was 5.9%.
Current regulatory driven initiatives aimed at strengthening bank core capital will improve the capital
protection for bank hybrids and the high trading margins (400+bps) for bank Basel III hybrids offering
yields above 6.1% should be supportive of future returns.
Buy & writes delivered a return of 2.4% and underperformed the ASX Index gain of 5.6%. Buy & write
holdings were concentrated in banks, BHP and Telstra. Banks and BHP performed poorly over the year
with share price returns of 0.14% and -12.3% respectively. The bank sector fell -12.6% in the June
quarter due to increased regulatory capital requirements and higher mortgage risk weights that will
negatively impact equity returns. Option premium writing reduced the portfolio’s bank exposure to
4.6% before the bank sell-off. Option premium writing against BHP was unable to offset the large fall
in BHP’s share price over the year. Telstra represented 11% of the portfolio and delivered a strong
return of 23.6% but option writing truncated the overall return from Telstra.
Property trusts and utilities produced good gains of 20.1% and 7.9% respectively over the year and
weightings were reduced into strength.
The high cash weighting towards the end of the financial year benefited performance when the share
market fell by 5.3% in the month of June. Cash levels were significantly reduced in the following
month of July as a result of funding the IBC off market share buy-back.
IRONBARK CAPITAL PERFORMANCE‐financial year 2015
Portfolio and Sectors returns
8.4%
7.9%
Benchmark 1 yr swap + 6 %
IRONBARK CAPITAL portfolio
2.8%
utilites
buy & writes & equities
2.4%
property trusts
hybrids & corporate bonds
cash
2.3%
2.3%
20.1%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
7
Ironbark Capital Limited
ABN 89 008 108 227
Portfolio Shareholdings at 30 June 2015
Portfolio Shareholdings at 30 June 2015
ASX Code
Security
SUN
ANZ
CBA
NAB
WBC
Banks
Suncorp Group Limited
ANZ Banking Group Limited
Commonwealth Bank of Australia Limited
National Australia Bank Limited
Westpac Banking Corporation Limited
Hybrids
ANZ Banking Group Limited - Convertible Preference Securities
APA Group - Subordinated Notes
AGL Energy Limited - Subordinated Notes
Bendigo Bank - Convertible Preference Securities
Bank of Queensland - Convertible Preference Securities
Caltex Australia Limited - Subordinated Notes
Crown Limited- Subordinated Notes
Insurance Australia Group - Convertible Preference Securities
Insurance Australia Group - Perpetual Reset Exchangeable Notes
National Australia Bank Limited - Convertible Preference Securities
Origin Energy- Subordinated Notes
ANZPA
AQHHA
AGLHA
BENPD/PE
BOQPD
CTXHA
CWNHA
IAGPC
IANG
NABPA
ORGHA
PCAPA/CBAPC/PD Commonwealth Bank Perls III & Perls VI & Perls VII
RHCPA
Ramsay Healthcare Limited
SUNPC/PE
Suncorp Group Limited - Convertible Preference Securities
SVWPA
Seven Group Holdings Limited - Convertible Preference Securities
WCTPA
Westpac - Step up Preference Securities
TLS
BHP
Large industrial
Telstra Corporation Limited
Materials & Energy
BHP Billiton Limited
*Includes market value of options written against holdings
**Includes option delta written against holdings
Market
Value*
$'000
% of
portfolio
%
exposure**
419
3,725
6,612
2,292
7,296
20,344
1,348
1,044
935
946
1,243
2,084
1,026
3,477
2,580
1,315
4,033
7,274
579
2,781
1,893
832
33,390
10,183
10,183
4,809
4,809
0.5
4.1
7.3
2.5
8.1
22.5
1.5
1.2
1.1
1.1
1.4
2.3
1.1
3.9
2.8
1.5
4.5
8.1
0.6
3.1
2.1
0.9
37.2
11.3
11.3
5.3
5.3
0.5
2.4
5.1
1.9
6.7
16.6
1.5
1.2
1.1
1.1
1.4
2.3
1.1
3.9
2.8
1.5
4.5
8.1
0.6
3.1
2.1
0.9
37.2
8.4
8.4
3.5
3.5
8
Ironbark Capital Limited
ABN 89 008 108 227
Portfolio Shareholdings at 30 June 2015
Portfolio Shareholdings at 30 June 2015 (continued)
ASX Code
Security
CMW
FLK
GMF
GPT
TIX
EHE
JHC
REG
SDF
Property Trusts
Cromwell Property Group
Folkestone Limited
GPT Metro Office Fund
General Property Group Units
360 Capital Industrial Fund
Small Industrial
Estia Health Limited
Japara Healthcare Limited
Regis Healthcare Ltd
Steadfast Group Limited
Cash
*Includes market value of options written against holdings
**Includes option delta written against holdings
Market
Value*
$'000
% of
%
portfolio exposure**
119
85
871
147
133
1,355
480
321
77
977
1,855
0.1
0.1
1.0
0.2
0.1
1.5
0.5
0.4
0.1
1.1
2.1
0.1
0.1
1.0
0.1
0.1
1.4
0.5
0.4
0.1
1.1
2.1
18,098
20.1
30.8
90,034
100.0
100.0
9
Ironbark Capital Limited
ABN 89 008 108 227
Directors’ Report
Year ended 30 June 2015
Directors’ Report
Your Directors present their report on the Company for the year ended 30 June 2015.
Directors
The following persons were Directors of Ironbark Capital Limited during the financial year and up to
the date of this report:
Michael J Cole
Ross J Finley
Ian J Hunter
Directors have been in office since the start of the financial year to the date of this report unless
otherwise stated.
Principal activities
During the year the principal activities of the Company included investments in securities listed on the
Australian Securities Exchange.
Dividends
Dividends paid to members since the end of the previous financial year were as follows:
Record
Date
Dividend
Rate
Total Amount
$’000
Date of
Payment
% Franked
2015
Ordinary shares -
Final
Ordinary shares –
Interim
2014
Ordinary shares -
Final
Ordinary shares –
Interim
20/03/2015
1.0cps
$1,712
09/04/2015
100
17/12/2014
2.0cps
$3,424
30/12/2014
100
13/06/2014
1.0cps
$1,557
27/06/2014
100
17/12/2013
1.25cps
$1,946
27/12/2013
100
Review of Operations
Information on the operations and financial position of the Company and its business strategies and
prospects is set out in the review of operations and activities on page 2 of this Annual Report.
The profit from ordinary activities after income tax amounted to $1,215,000 (2014: $7,675,000)
The net tangible asset backing for each ordinary share as at 30 June 2015 amounted to $0.544 per
share (2014: $0.585 per share). The NTA does not include dilution for the 1:10 rights issue in the
2015 year and franked dividends paid in the period.
10
Ironbark Capital Limited
ABN 89 008 108 227
Directors’ Report
Year ended 30 June 2015
Earnings per share
2015
Basic and diluted earnings per share (cents per share) 0.72
2014
4.99
Significant changes in the state of affairs
There were no significant changes in the state of affairs of the Company during the financial year
other than as disclosed in the financial statements.
Matters subsequent to the end of the financial year
At the General Meeting of the Company held on 30 April 2015, Ironbark’s shareholders approved a
resolution for the Company to conduct a buy-back by an off-market tender process (‘Buy-Back’). The
Buy-Back opened on 15 May 2015 and closed on 19 June 2015 with 45,394,884 (26.5%) shares
tendered by Ironbark shareholders under the Buy-Back.
The Buy-Back price of 55.20 cents per share was determined on 17 July 2015, the entire amount
representing a capital component.
The shares tendered under the Buy-Back were accepted on 27 July 2015 and payment of proceeds of
$25.058m occurred on 30 July 2015. Following cancellation of the Buy-Back shares, the total number
of shares on issue effective 27 July 2015 is 125,820,582.
Other than the Buy-Back, no matter or circumstance has occurred subsequent to year end that has
significantly affected, or may significantly affect, the operations of the Company, the results of those
operations or the state of affairs of the Company or economic entity in subsequent financial years.
Likely developments and expected results of operations
The Company will continue to be managed in accordance with the investment objectives set out in the
governing documents and in accordance with the Constitution. 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.
Environmental regulation
The Company is not affected by any significant environmental regulation in respect of its operations.
To the extent that any environmental regulations may have an accidental impact on the Company’s
operations the Directors of the Company are not aware of any breach by the Company of those
regulations.
Information on directors
Michael J Cole B Ec, M Ec (Syd), F Fin Chairman
Experience and expertise
Investment manager and investment banker
Other current directorships
Chairman of Platinum Asset Management Limited; Chairman, IMB Bank.
Former directorships
Director, NSW Treasury Corp; Chairman, Challenger Listed Investments Limited.
Interests in shares
2,000,000 shares
11
Ironbark Capital Limited
ABN 89 008 108 227
Directors’ Report
Year ended 30 June 2015
Information on directors (continued)
Ross J Finley B Comm (NSW)
Experience and expertise
Investment manager and stockbroker
Other current directorships
Director, Century Australia Investments Limited
Interests in shares
500,000 shares
Ian J Hunter BA LLB (Syd), MBA (MGSM) Audit Committee Chairman
Experience and expertise
Banking and finance
Former directorships
During the past three years, Mr Hunter also served as a Director of Rubik Financial Limited.
Interests in shares
1,400,000 shares
The particulars of directors’ interests in shares of the Company are as at the date of this report.
Company Secretary
Since April 2014, the Company Secretary is Ms Jill Brewster. She is the Company Secretary and
Group Finance Manager of Kaplan Funds Management Pty Limited and has held senior management
and advisory roles across corporate, finance and operations in the investment and financial services
industry. She is a member of The Governance Institute of Australia, formerly known as Chartered
Secretaries Australia.
Meetings of directors
The numbers of meetings of the Company’s Board of Directors and of each board committee held
during the year ended 30 June 2015, and the numbers of meetings attended by each Director were:
Meetings of Committees
Board meetings
Audit
A
4
4
4
B
4
4
4
A
2
2
2
Michael J Cole
Ross J Finley
Ian J Hunter
A = Number of meetings attended
B = Number of meetings held during the time the Director held office or was a member of the
Committee during the year
B
2
2
2
Nomination
A
B
1
1
1
1
1
1
Remuneration
A
B
1
1
1
1
1
1
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.
Remuneration report
This report details the nature and amount of remuneration for each Director and Key Management
Personnel of Ironbark Capital Limited in accordance with the Corporations Act 2001.
12
Ironbark Capital Limited
ABN 89 008 108 227
Directors’ Report
Year ended 30 June 2015
Remuneration policy
The Board determines the remuneration structure of Non-Executive Directors (based on the
recommendation of the Remuneration Committee), having regards 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, remuneration of Non-Executives is not explicitly linked to the Company’s
performance.
Notwithstanding this, Board members 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 Directors’ 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.
Details of remuneration
The following tables show details of the remuneration received by the Directors of the Company for
the current and previous financial year.
2015
Name
Michael J Cole
RJ Finley
IJ Hunter
2014
Name
Michael J Cole
RJ Finley
IJ Hunter
Cash salary
and fees
$
Superannuation
$
22,000
22,000
22,000
66,000
-
-
-
-
Cash salary
and fees
$
Superannuation
$
22,000
22,000
22,000
66,000
-
-
-
-
Total
$
22,000
22,000
22,000
66,000
Total
$
22,000
22,000
22,000
66,000
Directors are paid a maximum remuneration of $22,000 each per annum.
Accounting and company secretarial duties are outsourced to Kaplan Funds Management Pty
Limited. Ms Brewster received no fees as an individual. Kaplan Funds Management Pty Limited is
remunerated for services rendered pursuant to an Administrative Services Agreement effective 1 April
2014.
(a)
Equity instruments held by key management personnel
Options
(i)
No options were granted over issued shares or interests during the financial year or since the financial
year end by the Company to Directors or any other officers.
13
Ironbark Capital Limited
ABN 89 008 108 227
Directors’ Report
Year ended 30 June 2015
(ii)
Share holdings
2015
Name
Directors of Ironbark Capital Limited
Ordinary shares
Michael J Cole
Ross J Finley
Ian J Hunter
Balance at
the start of
the year
Net
movement
Other
changes
during
the year
Balance at
the end of
the year
9,000,000
1,640,000
2,435,596
13,075,596
1,237,651
225,526
334,936
1,798,113
-
-
-
-
10,237,651
1,865,526
2,770,532
14,873,709
The Net Movement for the year represents the take up of shares under the 1:10 Entitlement Offer and
Shortfall.
2014
Name
Balance at
the start of
the year
Net
movement
Other
changes
during
the year
Balance at
the end of
the year
Directors of Ironbark Capital Limited
Ordinary shares
Michael J Cole
Ross J Finley
Ian J Hunter
9,000,000
1,640,000
2,435,596
13,075,596
-
-
-
-
-
-
-
-
9,000,000
1,640,000
2,435,596
13,075,596
Insurance and indemnification of officers and auditors
During the financial year, the Company paid a premium in respect of a contract insuring the Directors
of the Company, the Company Secretary and any related body corporate against liability incurred as
such by a Director or Secretary to the extent permitted by the Corporations Act 2001. The contract of
insurance prohibits disclosure of the nature of the liability and the amount of the premium.
No indemnities have been given or insurance premiums paid during or since the end of the financial
year, for any person who is or has been an auditor of the Company.
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 in 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 or intervened in on behalf of the Company with leave of the Court
under section 237 of the Corporations Act 2001.
Non-audit services
No non-audit services were performed by the auditors or consultation fees were incurred by the
Company during the year ended 30 June 2015 (2014: $nil).
14
Ironbark Capital Limited
ABN 89 008 108 227
Statement of Profit or Loss and Other
Comprehensive Income
For the year ended 30 June 2015
Notes
2015
$'000
2014
$'000
6
6
19 (b)
19 (a)
17
7
22
4,732
(3,350)
1,382
(632)
(142)
(54)
(84)
(33)
(10)
(21)
(41)
(66)
(50)
(41)
(28)
(59)
(1,261)
121
1,094
1,215
-
1,215
Cents
0.72
4,583
5,933
10,516
(601)
(46)
(52)
(39)
(36)
(10)
(23)
(2)
(66)
(44)
(39)
(33)
(9)
(1,000)
9,516
(1,841)
7,675
-
7,675
Cents
4.99
Investment income from trading portfolio
Revenue
Net gains/(losses) on trading portfolio
Total investment income from trading portfolio
Expenses
Management fees
Brokerage expense
Accounting fees
Share registry fees
Custody fees
Tax fees
Directors' liability insurance
Legal fees
Directors' fees
ASX fees
Audit fees
Options expense
Other expenses
Total expenses
Profit before income tax
Income tax benefit/(expense)
Net profit for the year
Other comprehensive income/(loss) for the year net of tax
Total comprehensive income for the year
Basic and diluted earnings per share
The above Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the
accompanying notes.
17
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Trading portfolio
Current tax assets
Other assets
Total current assets
Non- current assets
Deferred tax assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Current tax liabilities
Provision for dividend
Total current liabilities
Non-current liabilities
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Profit reserve
2015 Profit Reserve
Accumulated losses
Total equity
Ironbark Capital Limited
ABN 89 008 108 227
Statement of Financial Position
As at 30 June 2015
Notes
2015
$'000
2014
$'000
8
9
10
12
13
16
14
15
18,098
2,858
71,936
368
4
93,264
1,081
1,081
977
3,792
86,820
-
4
91,593
27
27
94,345
91,620
102
-
-
102
10
10
112
336
70
3,114
3,520
754
754
4,274
94,233
87,346
94,595
748
209
(1,319)
86,901
1,058
-
(613)
94,233
87,346
The above Statement of Financial Position should be read in conjunction with the accompanying notes
18
Ironbark Capital Limited
ABN 89 008 108 227
Statement of Changes in Equity
For the year ended 30 June 2015
Issued
capital
$'000
Profit
reserve
$'000
2015 Profit Accumulated
reserve
$'000
losses
$'000
Total
equity
$'000
Notes
Balance at 1 July 2014
86,901
1,058
Profit for the year
Transfer to profit reserve
Total comprehensive income for
the year
Transactions with owners in their
capacity as owners:
Dividends paid
Contributions of equity from rights
issue, net of transaction costs
16
-
-
-
-
-
-
(613)
87,346
1,215
1,215
1,921
(1,921)
-
1,921
(706)
1,215
-
-
-
(310)
(1,712)
7,694
-
-
-
-
(2,022)
7,694
Balance at 30 June 2015
94,595
748
209
(1,319)
94,233
Balance at 1 July 2013
Profit for the year
Transfer to profit reserve
Total comprehensive income for
the year
Transactions with owners in their
capacity as owners:
Dividends declared
Dividends paid
16
16
86,901
-
-
-
-
-
-
1,058
1,058
-
-
Balance at 30 June 2014
86,901
1,058
(613)
86,288
7,675
(1,058)
7,675
-
6,617
7,675
(3,114)
(3,503)
(3,114)
(3,503)
(613)
87,346
-
-
-
-
-
-
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes
19
Ironbark Capital Limited
ABN 89 008 108 227
Statement of Cash Flows
For the year ended 30 June 2015
Notes
2015
$'000
2014
$'000
Cash flows from operating activities
Interest received
Proceeds from sale of trading portfolio
Purchase of trading portfolio
Dividends & trust distributions received
Other income received
Management fees paid
Other expenses paid
Income tax paid
Net cash inflow/(outflow)from operating activities
Cash flows from financing activities
Dividends paid to shareholders
Proceeds from rights issue
Transaction costs paid for rights issue
Net cash (outflow)/inflow from financing activities
21
16
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of financial year
Cash and cash equivalents at the end of the financial year
8
668
67,528
(55,271)
3,993
54
(631)
(637)
(1,117)
14,587
(5,136)
7,750
(80)
2,534
17,121
977
18,098
775
33,855
(32,999)
3,838
13
(597)
(409)
(119)
4,357
(3,503)
-
-
(3,503)
854
123
977
The above Statement of Cash Flows should be read in conjunction with the accompanying notes
20
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2015
1. General information
Ironbark Capital Limited (the "Company") is a listed public company domiciled in Australia. The address of
Ironbark Capital Limited's registered office is Level 22, 44 Market Street, Sydney NSW 2000. The financial
statements of Ironbark Capital Limited are for the year ended 30 June 2015. The Company is primarily
involved in making investments, and deriving revenue and investment income from listed securities and
unit trusts in Australia.
2. Summary of significant accounting policies
The principal accounting policies adopted in the preparation of these financial statements are set out
below. These policies have been consistently applied to all the years presented, unless otherwise stated.
The financial statements are for the entity Ironbark Capital Limited.
(a) Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting
Standards and interpretations issued by the Australian Accounting Standards Board and the Corporations
Act 2001. The Company is a ‘for profit’ entity.
The Financial Statements were authorised for issue by the directors on 21 August 2015.
(i) Compliance with IFRS
Australian Accounting Standards include Australian equivalents to International Financial Reporting
Standards (AIFRS). AIFRS ensures that the financial statements and notes comply with International
Financial Reporting Standards (IFRS).
(ii) New and amended standards adopted by the Company
The Company has adopted the following new standard for the first time for the annual reporting period
commencing 1 July 2014:
•
•
AASB 2013-3 Amendments to AASB 136 – Recoverable Amount Disclosures for Non-Financial
Assets
AASB 2014-1 Amendments to Australian Accounting Standards
The adoption of these standards did not have any impact on the current period or any prior period and is
not likely to affect future periods. The standards only affected the disclosures in the notes to the financial
statements.
(iii) Historical cost convention
These Financial Statements have been prepared under the accruals basis and are based on historical cost
convention, except that financial instruments are stated at their fair value through profit or loss.
(iv) Critical accounting estimates
The preparation of financial statements requires the use of certain critical accounting estimates. It also
requires management to exercise its judgment in the process of applying the Company's accounting
policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and
estimates are significant to the financial statements are disclosed in Note 4.
(b) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as
revenue are net of rebates and amounts collected on behalf of third parties.
(i) 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 Profit or Loss and Other Comprehensive Income in the year
they are earned/incurred.
21
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2015
2 Summary of significant accounting policies (continued)
(ii) Dividends and trust distributions
Dividends and trust distributions are recognised as revenue when the right to receive payment is
established.
(iii) Interest income
Interest income is recognised using the effective interest method.
(iv) Other income
The Company recognises other income when the amount of revenue can be reliably measured, it is
probable that future economic benefits will flow to the entity and specific criteria have been met for each of
the Company's activities as described below.
(c) Income tax
The income tax expense or revenue for the period is the tax payable on the current period's taxable income
based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets
and liabilities attributable to temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantially enacted at
the end of the reporting period. Management periodically evaluates positions taken in tax returns with
respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions
where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between
the tax bases of assets and liabilities and their carrying amounts in the Financial Statements. Deferred
income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the
end of the reporting period and are expected to apply when the related deferred income tax asset is
realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is
probable that future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax
assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax
assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends
either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax is recognised in profit or loss in the Statement of Profit or Loss and Other
Comprehensive Income, except to the extent that it relates to items recognised in other comprehensive
income or directly in equity. In this case, the tax is also recognised in other comprehensive income or
directly in equity, respectively.
(d) Cash and cash equivalents
For the purpose of presentation in the Statement of Cash Flows, cash and cash equivalents includes cash
on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with
original maturities of three months or less that are readily convertible to known amounts of cash and which
are subject to an insignificant risk of changes in value.
22
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2015
2 Summary of significant accounting policies (continued)
(e) Trade and other receivables
Trade and other receivables are recognised initially at fair value and subsequently measured at amortised
cost using the effective interest method, less provision for impairment. Trade and other receivables are
generally due for settlement within 30 days. They are presented as current assets unless collection is not
expected for more than 12 months after the reporting date.
Collectability of trade and other receivables is reviewed on an ongoing basis. Debts which are known to be
uncollectible are written off by reducing the carrying amount directly.
(f) Trading portfolio
Classification
The trading portfolio comprises securities held for short term trading purposes, including exchange traded
option contracts that are entered into, as described 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.
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 Profit or Loss and Other Comprehensive Income.
Securities in the trading portfolio are classified as "assets measured at fair value through profit or loss".
Recognition and derecognition
Purchases and sales of financial assets are recognised on trade date - the date on which the Company
commits to purchase or sell the asset. Financial assets are derecognised when the right to receive cash
flows from the financial assets have expired or have been transferred and the Company has transferred
substantially all the risks and rewards of ownership.
Measurement
At initial recognition, the Company measures a financial asset or financial liability at its fair value.
Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or
loss.
Subsequent to initial recognition, the financial instruments are measured at fair value with changes in their
fair value recognised in the Statement of Profit or Loss and Other Comprehensive Income.
When disposal of an investment occurs, the cumulative gain or loss is recognised as realised gains and
losses on trading portfolio in the Statement of Profit or Loss and Other Comprehensive Income.
The objective of determining fair value for a financial instrument that is traded in an active market is to
arrive at the price at which a transaction would occur at the end of the reporting period. The existence of
published price quotations in an active market is the best evidence of fair value and is used to measure the
financial asset or financial liability.
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 Profit or Loss and Other Comprehensive Income.
(g) Derivatives
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.
23
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2015
2 Summary of significant accounting policies (continued)
(h) Trade and other payables
These amounts represent liabilities for goods and services provided to the Company prior to the end of
financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of
recognition. Trade and other payables are presented as current liabilities unless payment is not due within
12 months from the reporting date. They are recognised initially at their fair value and subsequently
measured at amortised cost using the effective interest method.
(i)
Issued capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds.
(j) Profit reserve
The Profit Reserve is made up of amounts transferred from current and retained earnings that are
preserved for future dividend payments.
(k) 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.
(l) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing:
the profit attributable to owners of the Company, excluding any costs of servicing equity other than
ordinary shares
by the weighted average number of ordinary shares outstanding during the financial year,
adjusted for bonus elements in ordinary shares issued during the year and excluding treasury
shares.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take
into account:
the after income tax effect of interest and other financing costs associated with dilutive potential
ordinary shares, and
the weighted average number of additional ordinary shares that would have been outstanding
assuming the conversion of all dilutive potential ordinary shares.
(m) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST
incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of
acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net
amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or
payables in the Statement of Financial Position.
24
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2015
2 Summary of significant accounting policies (continued)
(m) Goods and Services Tax (GST) (continued)
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or
financing activities which are recoverable from, or payable to the taxation authority, are presented as
operating cash flows.
(n) Rounding of amounts
The Company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and
Investments Commission, relating to the 'rounding off' of amounts in the financial statements. Amounts in
the financial statements have been rounded off in accordance with that Class Order to the nearest
thousand dollars, or in certain cases, the nearest dollar.
(o) Functional and presentation currency
The functional and presentation currency of the Company is Australian dollars.
(p) Comparatives
Where necessary, comparative information has been reclassified to be consistent with the current reporting
period.
(q) Operating Segments
The Company operated in Australia only and the principal activity is investment.
(r) New accounting standards and interpretations
Certain new accounting standards and interpretations have been published that are not mandatory for 30
June 2015 reporting periods and have not yet been applied in the Financial Statements. The Company's
assessment of the impact of these new standards and interpretations is set out below.
(i) AASB 9 Financial Instruments, (effective from 1 January 2018)
AASB 9 Financial Instruments addresses the classification, measurement and derecognition of financial
assets and financial liabilities, including hedge accounting. The standard is not applicable until 1 January
2018 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 held for trading. The Directors
do not expect there will be any impact on the accounting for the Company’s financial assets or liabilities.
There are no other standards that are not yet effective and that are expected to have a material impact on
the entity in the current or future reporting periods and on foreseeable future transactions.
3. Financial risk management
The Company’s activities expose it to a variety of financial risks: market risk (including interest rate risk and
price risk), credit risk and liquidity risk. The Board of the Company has implemented a risk management
framework to mitigate these risks.
(a) Market risk
The standard defines this as the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in market prices.
(i) Price risk
The Company is exposed to equity securities price risk. This arises from investments held by the Company
and classified in the Statement of Financial Position as trading portfolio.
The Company seeks to manage and constrain market risk by diversification of the investment portfolio
across multiple stocks and industry sectors. The Investment Manager of the trading portfolio has been
granted specific risk tolerance boundaries as set out in the Investment Management Agreement.
25
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2015
3 Financial risk management (continued)
The Company's investments split by sector as at 30 June are set out below:
Sector
Financials
Cash
Telecommunications services
Corporate floating rate notes
Materials
Industrials
Healthcare and biotechnology
Property Trust
Utilities
Energy
Consumer discretionary
Total
2015
(%)
47.9
20.1
11.4
10.1
5.3
2.1
1.6
1.5
-
-
-
100.0
2014
(%)
54.9
1.1
11.5
10.9
10.2
3.4
2.9
2.7
1.4
0.5
0.5
100.0
Securities representing over 5 percent of the trading portfolio at 30 June 2015 were:
Telstra Corporation Limited
Westpac Banking Corporation Limited
Commonwealth Bank Perls III & Perls VI & Perls VII
Commonwealth Bank of Australia Limited
BHP Billiton Limited
2015
(%)
11.3
8.1
8.1
7.3
5.3
40.1
The Company is also not directly exposed to currency risk as all its investments are quoted in Australian
dollars.
The following table illustrates the effect on the Company's profit or loss based on a fall in market prices of
5% and 10% on the investment assets in the Company’s portfolio at reporting date, assuming a flat tax rate
of 30 percent:
Index
Change in variable by +5%/-5% (2014: +5%/-5%)
Change in variable by +10%/-10% (2014: +10%/-10%)
Impact on post-tax profit
2015
$'000
2014
$'000
2,518
5,036
3,039
6,078
(ii)
Cash flow and fair value 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. The risk is measured
using sensitivity analysis.
26
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2015
3 Financial risk management (continued)
The table below summarises the Company's exposure to interest rate risk. It includes the Company's
assets and liabilities at fair values, categorised by the earlier of contractual repricing or maturity dates.
30 June 2015
Financial Assets
Cash and cash equivalents
Trade and other receivables
Trading portfolio
Current tax asset
Financial liabilities
Trade and other payables
Net exposure
30 June 2014
Financial Assets
Cash and cash equivalents
Trade and other receivables
Trading portfolio
Financial liabilities
Trade and other payables
Current tax liability
Floating
interest rate
$'000
Non-interest
bearing
$'000
Total
$'000
18,098
-
9,122
-
27,220
-
2,858
62,814
368
66,040
18,098
2,858
71,936
368
93,260
-
-
(102)
(102)
(102)
(102)
27,220
65,938
93,158
Floating
interest rate
$'000
Non-interest
bearing
$'000
Total
$'000
977
-
9,599
10,576
-
-
-
-
3,792
77,221
81,013
(336)
(70)
(406)
977
3,792
86,820
91,589
(336)
(70)
(406)
Net exposure
10,576
80,607
91,183
The weighted average interest rate of the Company's cash and cash equivalents at 30 June 2015 is 1.95%
pa (2014: 2.5% pa).
Sensitivity
At 30 June 2015, if interest rates had increased or decreased by 75 basis points from the year end rates
with all other variables held constant, post-tax profit for the year would have been $95,012 higher/$95,012
lower (2014:changes of 75 bps/75 bps: $5,127 lower/$5,127 higher), mainly as a result of higher/lower
interest income from cash and cash equivalents. The cash balance as at 30 June 2015 is significantly
higher due to the partial sale of investments to fund the off-market buyback payable to participating
shareholders on 30 July 2015.
27
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2015
3 Financial risk management (continued)
(b) 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.
The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance
date to recognised financial assets, is the carrying amount, net of any provisions for impairment of those
assets, as disclosed in the Statement of Financial Position and Notes to the Financial Statements.
There are no material amounts of collateral held as security at 30 June 2015.
Credit risk is managed as noted in Note 8 with respect to cash and cash equivalents, Note 9 for trade and
other receivables and Note 10 for floating rate note trading portfolio. None of these assets are over-due or
considered to be impaired.
(c) Liquidity risk
The standard defines this as the risk that an entity will encounter difficulty in meeting obligations associated
with financial liabilities.
The Investment Manager monitors cash-flow requirements daily taking into account upcoming dividends,
tax payments and investing 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.
The assets of the Company are largely in the form of readily tradable 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 2015
Non-derivatives
Trade and other payables
Total non-derivatives
At 30 June 2014
Non-derivatives
Trade and other payables
Current tax liability
Total non-derivatives
Less than 1
month
$'000
More than 1
month
$'000
102
102
-
-
Less than 1
month
$'000
More than 1
month
$'000
336
-
336
-
70
70
28
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2015
3 Financial risk management (continued)
(d) Fair value measurements
The fair value of financial assets and financial liabilities must be estimated for recognition and
measurement or for disclosure purposes.
AASB 13 Fair Value Measurement requires disclosure of fair value measurements by level of the following
fair value measurement hierarchy:
(a) quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1)
(b) inputs other than quoted prices included within level 1 that are observable for the asset or liability,
either directly (as prices) or indirectly (derived from prices) (level 2), and
(c) inputs for the asset or liability that are not based on observable market data (unobservable inputs)
(level 3).
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 judgment, considering factors specific
to the asset or liability.
The determination of what constitutes ‘observable’ requires significant judgment 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.
The following table presents the Company's financial assets and liabilities (by class) measured and
recognised at fair value according to the fair value hierarchy at 30 June 2015 and 30 June 2014:
Fair value hierarchy
30 June 2015
Financial assets
Trading portfolio
Total
30 June 2014
Financial assets
Trading portfolio
Total
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
71,936
71,936
Level 1
$'000
Level 2
$'000
86,820
86,820
-
-
-
-
-
-
71,936
71,936
Level 3
$'000
Total
$'000
-
-
86,820
86,820
The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and
trading and available-for-sale securities) is based on quoted market prices at the end of the reporting
period. The quoted market price used for financial assets held by the Company is included in level 1.
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter
derivatives) is determined using valuation techniques. These valuation techniques maximise the use of
observable market data where it is available and rely as little as possible on entity specific estimates. If all
significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
If one or more of the significant inputs is not based on observable market data, the instrument is included in
level 3. This is the case for unlisted equity securities and loans.
29
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2015
4. Critical accounting estimates and judgments
Estimates and judgments are continually evaluated and are based on historical experience and other
factors, including expectations of future events that may have a financial impact on the entity and that are
believed to be reasonable under the circumstances.
5. 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.
6. Investment income
Revenue
Dividends
Interest
Distributions
Other income
Net gains/(losses) on trading portfolio
Net realised gains/losses on trading portfolio
Net unrealised gains/losses on trading portfolio
7. Income tax expense
2015
$'000
2014
$'000
3,871
684
123
54
4,732
1,271
(4,621)
(3,350)
3,471
755
344
13
4,583
1,105
4,828
5,933
1,382
10,516
(a) Income tax expense recognised
in the Statement of Profit or Loss and Other
Comprehensive Income
Current tax
Deferred tax
Income tax expense/(benefit) is attributable to:
Profit from continuing operations
2015
$'000
2014
$'000
693
(1,787)
(1,094)
520
1,321
1,841
(1,094)
1,841
30
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2015
7 Income tax expense (continued)
(b)
Numerical reconciliation of income tax expense/(benefit) to prima facie tax payable
Profit from continuing operations before income tax expense/(benefit)
Tax at the Australian rate of 30.0% (2014 - 30.0%)
Tax effect of amounts which are not deductible (taxable) in calculating taxable
income:
Franking credits on dividends received
Foreign income tax offsets
Imputation gross up on dividend income
Timing differences
Realised taxable investment loss/(gain)
Realised accounting investment (gain)/loss
Adjustments for current tax of prior year
Income tax (benefit) / expense
8. Cash and cash equivalents
Cash at bank and in hand
2015
$'000
121
36
2014
$'000
9,516
2,855
(1,635)
(2)
491
(374)
760
(381)
11
(1,094)
(1,432)
-
430
(163)
482
(331)
-
1,841
2015
$'000
2014
$'000
18,098
977
The cash balance as at 30 June 2015 is significantly higher due to the partial sale of investments to fund
the off-market buyback, payable to participating shareholders on 30 July 2015.
Risk exposure
The Company's exposure to interest rate risk is discussed in Note 3. The maximum exposure to credit risk
at the end of the reporting period is the carrying amount of each class of cash and cash equivalents
mentioned above.
Cash investments are made with JP Morgan which is rated A+ (2014: A+) by Standard & Poor's.
9. Trade and other receivables
Dividends and distributions receivable
Interest receivable
GST Receivable
Unsettled sales
2015
$'000
2014
$'000
458
35
18
2,347
2,858
457
19
18
3,298
3,792
Outstanding settlements are on the terms operating in the securities industry, which usually require
settlement within three days of the date of a transaction. None of the receivables is past due or impaired at
the end of the reporting period.
31
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2015
9 Trade and other receivables (continued)
(a)
Fair value and credit risk
Due to the short-term nature of these receivables, their carrying amount is assumed to approximate their
fair value.
Risk exposure
The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class
of receivables mentioned above.
10. Trading portfolio – held at fair value through profit or loss
Listed equities
Units in listed property trusts
Floating rate notes - listed
2015
$'000
2014
$'000
52,033
10,781
9,122
71,936
74,813
2,408
9,599
86,820
(a)
Risk exposure and fair value measurements
Information about the Company's exposure to price risk and about the methods and assumptions used in
determining fair value is provided in note 3.
11. Derivative financial instruments
In the normal course of business, the Company enters into transactions in derivative financial instruments
with certain risks. A derivative is a financial instrument or other 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 the Company's 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.
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.
32
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2015
11 Derivative financial instruments (continued)
At year end, the notional principal amounts of derivatives held by the Company were as follows:
Australian exchange traded options
(609)
(1,097)
Notional
principal
amounts
2015
$'000
Notional
principal
amounts
2014
$'000
12. Deferred tax assets
The balance comprises temporary differences attributable to:
Net unrealised losses of investments
Other temporary differences
Movements:
Opening balance:
Charged/credited:
- to deferred tax liabilities
- to profit or loss
13. Trade and other payables
Management fees payable
Other payables
14. Deferred tax liabilities
Notes
19(c)
The balance comprises temporary differences attributable to:
Accrued income
Unrealised gains on investments
33
2015
$'000
2014
$'000
1,040
41
1,081
27
748
306
1,081
-
27
27
606
(573)
(6)
27
2015
$'000
2014
$'000
55
47
102
2015
$'000
2014
$'000
10
-
10
54
282
336
6
748
754
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2015
754
4
(748)
10
11
170
573
754
14 Deferred tax liabilities (continued)
Movements:
Opening balance
Charged/credited - to profit or loss
- to deferred tax assets
15. Issued capital
(a)
Issued capital
30 June
2015
Shares
30 June
2014
Shares
2015
$'000
2014
$'000
Ordinary shares - fully paid
171,215,466
155,715,478
94,595
86,901
(b)
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the
Company in proportion to the number of and amounts paid on the shares held.
On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled
to one vote, and upon a poll each share is entitled to one vote.
(c)
Movements in ordinary share capital
Balance at 1 July 2014
Rights entitlement offer
Less: transaction costs (net of tax)
Balance at 30 June 2015
Number of
shares
155,715,478
15,499,988
-
171,215,466
$'000
86,901
7,750
(56)
94,595
(d)
Non-renounceable Entitlement Offer
On 22 August 2014, the Company invited its eligible shareholders to subscribe to a non-renounceable offer
of 1 share for every 10 fully paid ordinary shares held at an issue price of $0.50 per share. 15,499,988
ordinary shares were issued on 29 September 2014 and participated in the dividend paid on 30 December
2014. The issue was fully subscribed.
(e)
Dividend reinvestment plan
Under the Company's dividend reinvestment plan (DRP), 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 year.
(f)
Capital risk management
To achieve this, the Board of Directors monitor the monthly NTA results, investment performance, the
Company's Indirect Cost Ratio (formerly known as 'Management Expense Ratio') and share price
movements.
The Company is not subject to any externally imposed capital requirements.
34
16. Dividends
(a)
Ordinary Shares recognised as paid
Final dividend
Interim dividend
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2015
2015
$'000
2014
$'000
1,712
310
2,022
1,557
1,946
3,503
In respect of the financial year ended 30 June 2015, no further dividend has been declared
(b)
Dividend franking account
Opening balance of franking account
Franking credits on dividends received
Net tax paid during the year
Franking credits on ordinary dividends paid
Closing balance of franking account
Adjustments for tax payable/(refundable) in respect of the current year's profits
Franking credits on dividends received after year end
2015
$'000
2014
$'000
61
1,635
1,117
(2,201)
612
(368)
174
(194)
418
13
1,432
118
(1,502)
61
70
153
223
284
(c)
Dividend rate
Record
Date
Dividend
Rate
Total Amount
$’000
Date of
Payment
% Franked
2015
Ordinary shares -
Final
20/03/2015
1.0cps
$1,712
09/04/2015
100
Ordinary shares –
Interim
17/12/2014
2.0cps
$3,424
30/12/2014
100
2014
Ordinary shares -
Final
Ordinary shares –
Interim
13/06/2014
1.0cps
$1,557
27/06/2014
100
17/12/2013
1.25cps
$1,946
27/12/2013
100
35
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2015
17. Remuneration of auditors
During the year the following fees were paid or payable (GST inclusive) for services provided by the auditor
of the Company, its related practices and non-related audit firms:
(a)
Auditors
Audit and other assurance services
MNSA Pty Ltd - Audit and review of financial statements
Other assurance services
PWC - Audit of custodian statements
Total remuneration for audit and other assurance services
Other services
MNSA Pty Ltd - Consulting fees
Total remuneration for other services
Total auditor remuneration for assurance and other services
18. Contingencies
30 June
2015
$'000
30 June
2014
$'000
33
7
40
1
1
41
32
7
39
-
-
39
The Investment Management Agreement entered into by the Company with Kaplan Funds Management
Pty Ltd may be terminated by either party giving to the other no less than one-year written notice of its
intention to do so.
The Company had no other contingent liabilities at 30 June 2015 (2014: nil).
19. Related party transactions
(a) Key management personnel
Short-term benefits
(b)
Transactions with other related parties
The following transactions occurred with related parties (exclusive of RITC):
2015
$'000
2014
$'000
66
66
30 June
2015
$'000
30 June
2014
$'000
Management fees paid or payable
632
601
The Company has entered into a Management Agreement with Kaplan Funds Management Pty Ltd such
that it will manage investments of the Company, ensure regulatory compliance with all the relevant laws
and regulations, and provide administrative and other services for a fee.
No performance fees were paid or payable to Kaplan Funds Management Pty Ltd for the year ended 30
June 2015 (2014: nil).
36
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2015
19 Related party transactions (continued)
(c)
Outstanding balances
The following balances (GST inclusive) are outstanding at the end of the reporting period in relation to
transactions with related parties:
Management fees payable
(d)
Terms and conditions
2015
$'000
2014
$'000
55
54
Transactions between related parties are on normal commercial terms and conditions no more favourable
than those available to other parties unless otherwise stated.
20. Events occurring after the reporting period
At the General Meeting of the Company held on 30 April 2015, Ironbark’s shareholders approved a
resolution for the Company to conduct a buy-back by an off-market tender process (‘Buy-Back’). The Buy-
Back opened on 15 May 2015 and closed on 19 June 2015 with 45,394,884 (26.5%) shares tendered by
Ironbark shareholders under the Buy-Back.
The Buy-Back price of 55.20 cents per share was determined on 17 July 2015, the entire amount
representing a capital component.
The shares tendered under the Buy-Back were accepted on 27 July 2015 and payment of proceeds of
$25.058m occurred on 30 July 2015. Following cancellation of the Buy-Back shares, the total number of
shares on issue effective 27 July 2015 is 125,820,582.
Other than the Buy-Back, no matter or circumstance has occurred subsequent to year end that has
significantly affected, or may significantly affect, the operations of the Company, the results of those
operations or the state of affairs of the Company or economic entity in subsequent financial years.
21. Reconciliation of profit after income tax to net cashflow from operating
activities
Profit for the year
Unrealised (gains)/losses on trading portfolio
Realised (gains)/losses on trading portfolio
Change in operating assets and liabilities
Decrease/(increase) in trade and other receivables
(Decrease)/increase in trade and other payables
Increase/(decrease) in tax liabilities
Decrease/(Increase) in trading portfolio
Net cash inflow/(outflow) from operating activities
37
2015
$'000
2014
$'000
1,215
4,621
(1,271)
1
26
(2,262)
12,257
14,587
7,675
(4,828)
(1,105)
44
(9)
1,723
857
4,357
22. Earnings per share
(a)
Basic earnings per share
From continuing operations attributable to the ordinary
equity holders of the company
Total basic earnings per share attributable to the ordinary
equity holders of the company
(b)
Diluted earnings per share
From continuing operations attributable to the ordinary
equity holders of the company
Total diluted earnings per share attributable to the ordinary
equity holders of the company
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2015
2015
Cents
2014
Cents
0.72
0.72
4.99
4.99
2015
Cents
2014
Cents
0.72
0.72
4.99
4.99
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.
(c)
Weighted average number of shares used as denominator
Weighted average number of ordinary shares used as the
denominator in calculating basic and diluted earnings per
share
2015
Number
2014
Number
167,787,548
155,715,478
38
Ironbark Capital Limited
ABN 89 008 108 227
Shareholder Information
A.
Distribution of shareholdings
As at 31 August 2015 there were 2,016 shareholders of ordinary shares in Ironbark Capital Limited.
These holders were distributed as follows:
Holdings range
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001 and over
Totals
No. of
shareholders
269
398
269
952
128
2,016
Shares
95,675
1,160,946
2,049,286
31,130,698
91,383,977
125,820,582
There were 269 holders of less than a marketable parcel of 1,000 ordinary shares, based on a share
price of $0.50.
B.
Largest 20 shareholders
The largest 20 shareholders of the Company’s shares as at 31 August 2015 are listed below:
Holder Name
KAPLAN PARTNERS PTY LIMITED
EDSGEAR PTY LIMITED
QUESTOR FINANCIAL SERVICES LIMITED
ABTOURK (SYD NO 415) PTY LTD
LIANGROVE MEDIA PTY LIMITED
HPIC PTY LTD
SUPENTIAN PTY LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
BOND STREET CUSTODIANS LIMITED
LIANGROVE GROUP PTY LTD
BOND STREET CUSTODIANS LIMITED
BOND STREET CUSTODIANS LIMITED
BOND STREET CUSTODIANS LIMITED
77 SYSTEMS (AUSTRALASIA) PTY LIMITED
BOND STREET CUSTODIANS LIMITED
BOND STREET CUSTODIANS LIMITED
BOND STREET CUSTODIANS LIMITED
LANGSHAW PTY LIMITED
MR PETER JOHN GRENNING
NORBERT INVESTMENTS PTY LTD
Ordinary shares
%
Number held
41,052,574
32.63
6,266,875
4,420,101
2,000,000
1,727,516
1,509,000
1,400,000
1,206,722
1,145,846
1,036,516
934,378
778,658
727,835
682,000
641,674
633,761
591,991
590,153
565,845
554,167
4.98
3.51
1.59
1.37
1.20
1.11
0.96
0.91
0.82
0.74
0.62
0.58
0.54
0.51
0.50
0.47
0.47
0.45
0.44
68,465,612
54.40
42
Ironbark Capital Limited
ABN 89 008 108 227
Shareholder Information
C.
Substantial shareholders
Substantial shareholders in the Company as at 31 August 2015 are set out below:
Holder Name
KAPLAN PARTNERS PTY LIMITED
D.
Transaction Summary
Ordinary shares
%
Number held
41,052,574
32.63
The Company conducted 797 security transactions during the financial year. Brokerage paid during
the year net of RITC claimable was $142,118.
E.
Stock Exchange Listing
Ironbark has ordinary shares on issue. These are listed on the Australian Securities Exchange under
ASX code: IBC.
F.
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.
G.
Investment Management Agreement
The Investment Management Agreement with Kaplan Funds Management Pty Limited provides for
the payment of an investment management fee of 0.40% per annum effective 1 July 2015.
Commencing 1 July 2014 performance has been measured by reference to the one year interest
swap rate plus 6%. This aligns with current interest rates and approximates to 9% per annum. The
investment return includes the benefit of franking credits received in the calculation. The performance
fee benchmark has been reset and applied for the 2015 financial year. The agreement contains a
highwater mark which applies within each 3 year reset period.
H.
Company Secretary
The name of the Company Secretary is Ms Jill Brewster.
The registered office and principal place of business of the Company is:
Level 22
44 Market Street
Sydney, NSW 2000
Telephone: (02) 8917 0399
43
Ironbark Capital Limited
ABN 89 008 108 227
Shareholder Information
I.
Share Registry
Share registry functions are maintained by Boardroom Pty Limited and their details are as follows:
Boardroom Pty Limited
GPO Box 3993
Sydney, NSW 2001
Shareholder enquiries telephone: (02) 9290 9600
44