Ironbark Capital Limited
ABN 89 008 108 227
Annual Report
For the year ended 30 June 2016
Ironbark Capital Limited
ABN 89 008 108 227
Annual Report
For the year ended 30 June 2016
Contents
Corporate Directory
Review of Operations and Activities
Corporate Governance Statement
Investment Manager Report
Portfolio Shareholdings at 30 June 2016
Directors’ Report
Auditor’s Independence Declaration
Financial Statements
Directors’ Declaration
Independent Auditor’s Report to the Members
Shareholder Information
Page
1
2
4
5
8
10
16
17
40
41
43
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, FFA
Principal Registered Office
Share Registrar
Investment Manager
Accounting & Administration
Auditors
Level 27
45 Clarence 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 27
45 Clarence Street
Sydney NSW 2000
Telephone: (02) 8917 0300
Kaplan Funds Management Pty Ltd
Level 27, 45 Clarence 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 2016
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 recorded a return of 1.03% over the period after
inclusion of franking and dividends. This level underperformed the new benchmark (one year swap
interest rate plus 6%) by 7.02% The Ironbark performance reflects the Investment Manager’s absolute
return focus, the portfolio’s balanced structure and income emphasis. In comparison, the portfolio
outperformed the ASX300 by 0.16%.
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.
NTA after provision for tax on unrealised losses was $0.540, compared to $0.550 from the previous
period. The NTA is after a 1.2 cents per share fully franked dividend paid in the period.
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 1.2 cents per
share in FY16 and will continue to pay fully franked dividends as corporate profits create the
opportunity to do so. Dividends will usually be paid twice a year at the end of December and June/July
to be most cost efficient.
Ironbark recently declared a fully franked dividend of 0.95 cents per share payable on 31 August, 2016
to supplement the previous dividend paid in June 2016 which was restricted due to a lack of
accounting profits.
Off-Market Ironbark Share Tender
A total of 26.51% of the issued shares were tendered by Ironbark shareholders under the Off-Market
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.
The 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, which remains a relevant part of an investor’s portfolio in today’s climate of low interest rates.
The Directors expect that a similar Tender Offer process will be repeated every three years to give
Shareholders certainty to obtain the full value of their shares at regular intervals. Following the recent
Share Buy Back sufficient Shareholders have retained their holdings to support a market capitalisation
that allows Ironbark to continue to offer its very attractive investment strategy through a listed
investment company (LIC) on the ASX.
2
Ironbark Capital Limited
ABN 89 008 108 227
Review of Operations and Activities
For the year ended 30 June 2016
Ironbark Corporate Outlook
There continues to be 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 assists in lowering
the MER of Ironbark to a very competitive level by peer group benchmarks.
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.
Since 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 was reset and applied from the 2015 financial year. A high water 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.
The joint impact of the fee realignments is reflected by a reduction in the MER from 1.16% to 0.86%
in the most recent financial year notwithstanding the reduction in the average funds under
management following the share Buy-Back. This MER is low by listed investment company (LIC)
industry standards.
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 2016
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 2016 Corporate Governance Statement is dated as at 30 June 2016 and reflects the corporate
governance practices in place throughout the 2016 financial year. The 2016 Corporate Governance
statement was approved by the Board on 19 August 2016.
The Corporate Governance Statement can be viewed on
www.ironbarkcapital.com/about/corporate-governance
the Company’s website at
4
Ironbark Capital Limited
ABN 89 008 108 227
Investment Manager Report
Year ended 30 June 2016
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 Ironbark’s (“IBC”) performance benchmark is the
1 year swap rate plus 6%. Performance measurement includes franking credits as franking credits are a
significant source of return from IBC’s hybrid investments and for shareholders.
IBC Performance vs Benchmark & ASX (since inception)
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
2
0
‐
c
e
D
3
0
‐
n
u
J
3
0
‐
c
e
D
4
0
‐
n
u
J
4
0
‐
c
e
D
5
0
‐
n
u
J
5
0
‐
c
e
D
6
0
‐
n
u
J
6
0
‐
c
e
D
7
0
‐
n
u
J
7
0
‐
c
e
D
8
0
‐
n
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J
8
0
‐
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D
9
0
‐
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J
9
0
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0
1
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0
1
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1
1
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1
1
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2
1
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2
1
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3
1
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3
1
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4
1
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4
1
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D
5
1
‐
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J
5
1
‐
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e
D
6
1
‐
n
u
J
IBC portfolio performance
1yr swap +6%
ASX300 Acc Index
The financial year was a challenging investment environment with volatile markets. IBC recorded a
portfolio return of 1.4% over the last six months and 1.0% over the year. Since inception, over 13.5 years
including two years of the disastrous GFC, the portfolio achieved a return of 9.2%pa. Returns over the
medium 3-6 year term ranged from 5.8%pa to 8.4%pa. The improved performance seen over the last
three months continued into July.
IBC Performance (%pa) period to 30 June 2016
n
r
u
t
e
r
a
p
%
12.0
10.0
8.0
6.0
4.0
2.0
0.0
9.2
8.8
8.4
8.0
11.1
6.8
7.2
7.4
7.7
5.8
3.2
1.9
1.0
0.9
1.4
1.2
4.0
3.3
13.5
Inception
6
5
4
3
Years
2
1
6 mths
3 mths
IBC portfolio+franking
ASX300 Accum Index
BENCHMARK (1 yr swap+6%)
The focus on income generation and capital preservation from a balanced portfolio structure has
delivered these returns with low to medium volatility. IBC’s portfolio risk as measured by volatility has
consistently ranged between 40%-50% of the ASX Index volatility.
5
Ironbark Capital Limited
ABN 89 008 108 227
Investment Manager Report
Year ended 30 June 2016
IBC Volatility vs ASX Index Volatility (risk measurement)
2
0
‐
c
e
D
3
0
‐
n
u
J
3
0
‐
c
e
D
4
0
‐
n
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J
4
0
‐
c
e
D
5
0
‐
n
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J
5
0
‐
c
e
D
6
0
‐
n
u
J
6
0
‐
c
e
D
7
0
‐
n
u
J
7
0
‐
c
e
D
8
0
‐
n
u
J
8
0
‐
c
e
D
9
0
‐
n
u
J
9
0
‐
c
e
D
0
1
‐
n
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J
0
1
‐
c
e
D
1
1
‐
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J
1
1
‐
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D
2
1
‐
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2
1
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D
3
1
‐
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3
1
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D
4
1
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4
1
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D
5
1
‐
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J
5
1
‐
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D
6
1
‐
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J
IBC Volatility
ASX Index Volatility
30%
25%
20%
15%
10%
5%
0%
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 Banks, BHP, Telstra and other
leading companies. The portfolio’s running yield was 7.2% inclusive of franking credits.
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 diversified across 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 with little
duration risk.
Approximately 42% of the portfolio was held in hybrids and corporate bonds and 30% in buy & writes
in Banks, Telstra and BHP. Of the balance, 22% was held in cash & option delta, 1.9% in mid-cap and
small companies, 1.2% in property trusts and 3.2% in utilities.
Asset allocation reflects a cautious stance.
IRONBARK CAPITAL ASSET ALLOCATION ‐ 30 June 2016
22.0%
17.7%
1.9%
11.9%
2.7%
1.9%
8.1%
19.1%
3.2%
1.2%
10.4%
portfolio running yield 7.2%
6
Hybrids‐Bank Basel III
Hybrids‐Bank Basel II & Prefs
Corporate Sub Notes
Hybrids‐Corporate Prefs
Utilities & Infrastructure
Property Trusts
Banks
Ironbark Capital Limited
ABN 89 008 108 227
Investment Manager Report
Year ended 30 June 2016
A volatile year for equity and credit markets produced a challenging environment to achieve positive
returns. The portfolio returned 1.03% for the financial year. Credit markets outperformed equities with
the hybrid Index up 2.71% and the ASX 300 Accumulation Index up 0.87%. Hybrids represented 42% of
the portfolio. Equities were weighed down by losses in BHP, banks and Telstra of -27%, -16% and -4%
respectively. Option writing under the buy & write strategy mitigated losses in these stocks. Strong
returns were delivered by the property trusts and utilities sectors of 25% each, however the contribution
was minor with a combined portfolio weighting of 4%. Good returns were achieved from a select
number of small and mid-cap stocks with a weighting near 2%.
The hybrid market posted most of the year’s gains in the second half. There was a marked improvement
in confidence in hybrids and corporate bonds as institutional investors saw value in the asset class
yielding around 6.5% compared to low Australian government bond yields of 1.88% and the $11 trillion
of global sovereign bonds trading on negative yields. In March this year, the European Central Bank
introduced investment grade corporate bonds as part of its asset purchase program, which had the
effect of driving down yields on some European corporate bonds to 1%. Following Brexit, the Bank of
England reintroduced quantitative easing including the purchase of corporate debt.
Demand from yield focused investors seeking alternatives to low/negative bond yields saw new hybrid
issues trade at good premiums to their issue price. New hybrids were launched in the last six months
by: CBA (520bps margin), WBC (490bps margin), NAB (495bps margin) and ANZ (US$ 6.75% perpetual
hybrid). The US$ ANZ hybrid issue received strong offshore institutional interest due to its unfranked
distribution and 6.75% yield, despite its perpetual structure. Unfranked hybrid capital can now be raised
offshore potentially reducing supply into the local market, which is positive for hybrid holders.
The major banks continued to build capital over the year and seek to reach unquestionably strong
capital positions under regulatory initiatives. The strengthening of bank core capital improves the capital
protection for bank hybrids at the expense of lower returns for equity holders.
The manager continues to see value in the hybrid and corporate bond asset class that produces a
running yield of 6.15% from a portfolio of securities.
Cash exposure (including option delta) was 22% at the end of the period.
Comparative Returns (accumulation)
Indices & Fund
12 months to 30 June 2016
Gold
Property Trusts
Utilities
24.57
24.53
1 yr swap rate + 6%
8.05
Industrials
Hybrid Index
IRONBARK CAPITAL
ASX 300 Accum INDEX
2.93
2.71
1.03
0.87
94.10
Telecoms
-0.71
Financials
-8.68
Resources
-12.04
-20 -10
0
10
30
20
50
% Percentage Return
40
60
70
80
90 100
Kaplan Funds Management Pty Limited
7
Ironbark Capital Limited
ABN 89 008 108 227
Portfolio Shareholdings as at 30 June 2016
Market
Value*
$'000
% of
portfolio
%
exposure**
2,608
6,396
73
1,708
6,416
17,201
814
315
1,248
1,018
939
769
831
2,692
1,947
1,087
3,197
2,502
609
1,322
2,972
582
2,540
247
1,900
27,531
8,749
8,749
2,707
2,707
4.0
9.8
0.1
2.6
9.8
26.3
1.2
0.5
1.9
1.6
1.4
1.2
1.3
4.1
3.0
1.7
4.9
3.8
0.9
2.0
4.6
0.9
3.9
0.4
2.9
42.2
13.4
13.4
4.2
4.2
2.1
7.5
0.1
1.7
7.7
19.1
1.2
0.5
1.9
1.6
1.4
1.2
1.3
4.1
3.0
1.7
4.9
3.8
0.9
2.0
4.6
0.9
3.9
0.4
2.9
42.2
8.0
8.0
2.7
2.7
Portfolio Shareholdings at 30 June 2016
ASX Code
Security
ANZ
CBA
CYB
NAB
WBC
Banks
ANZ Banking Group Limited
Commonwealth Bank of Australia Limited
CYBG PLC
National Australia Bank Limited
Westpac Banking Corporation Limited
Hybrids & Corporate Bonds
AGL Energy Limited - Subordinated Notes
AMP Limited Capital Note
ANZ Banking Group Limited - Convertible Preference Securities
APA Group - Subordinated Notes
Bendigo Bank - Convertible Preference Securities
AGLHA
AMPPA
ANZPA
AQHHA
BENPD/PE
BOQ (10/05/26) Bank of Queensland - Subordinated Notes
BOQPD
CBAPC/PD
CTXHA
CWNHA/HB
IAGPC
IANG
MQGPB
NABPA
ORGHA
RHCPA
SUNPC/PE
SVWPA
WBCPG
Bank of Queensland - Convertible Preference Securities
Commonwealth Bank Perls VI & VII
Caltex Australia Limited - Subordinated Notes
Crown Limited- Subordinated Notes
Insurance Australia Group - Convertible Preference Securities
Insurance Australia Group - Perpetual Reset Exchangeable Notes
Macquarie Group Limited - Capital Note 2
National Australia Bank Limited - Convertible Preference Securities
Origin Energy- Subordinated Notes
Ramsay Healthcare Limited - Perpetual Preference Securities
Suncorp Group Limited - Convertible Preference Securities
Seven Group Holdings Limited - Perpetual Preference Securities
Westpac Banking Group Corporation Limited - Convertible Preference
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
8
Ironbark Capital Limited
ABN 89 008 108 227
Portfolio Shareholdings as at 30 June 2016
Portfolio Shareholdings at 30 Jun 2016 (continued)
ASX Code
Security
FLK
GMF
MYX
RWC
SDF
DUE
SKI
Property Trusts
Folkestone Limited
GPT Metro Office Fund
Small Industrial
Mayne Pharma Group Limited
Reliance Worldwide Corporation Limited
Steadfast Group Limited
Utilities & Infrastructure
DUET Group
Spark Infrastructure Group
Cash
*Includes market value of options written against holdings
**Includes option delta written against holdings
Market
Value*
$'000
% of
portfolio
%
exposure**
47
734
781
29
37
1,195
1,261
2,028
61
2,089
4,875
0.1
1.1
1.2
0.1
0.1
1.8
2.0
3.1
0.1
3.2
7.5
65,194
100.0
0.1
1.1
1.2
0.1
0.1
1.8
2.0
3.1
0.1
3.2
21.6
100.0
9
Ironbark Capital Limited
ABN 89 008 108 227
Directors’ Report
Year ended 30 June 2016
Directors’ Report
Your Directors present their report on the Company for the year ended 30 June 2016.
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
2016
Ordinary shares -
Final
Ordinary shares -
Interim
2015
Ordinary shares -
Final
Ordinary shares –
Interim
15/06/2016
0.45cps
$566
30/06/2016
100
09/12/2015
0.75cps
$944
23/12/2015
100
20/03/2015
1.0cps
$1,712
09/04/2015
100
17/12/2014
2.0cps
$3,424
30/12/2014
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 $381,000 (2015: $1,215,000)
The net tangible asset backing for each ordinary share as at 30 June 2016 amounted to $0.520 per
share (2015: $0.544 per share).
Earnings per share
2016
Basic and diluted earnings per share (cents per share) 0.29
2015
0.72
10
Ironbark Capital Limited
ABN 89 008 108 227
Directors’ Report
Year ended 30 June 2016
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
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
2,400,000 shares
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
11
Ironbark Capital Limited
ABN 89 008 108 227
Directors’ Report
Year ended 30 June 2016
Information on directors (continued)
Ian J Hunter BA LLB (Syd), MBA (MGSM) Audit Committee Chairman
Experience and expertise
Banking and finance
Other current directorships
Director, Platinum Asia Investments Limited
Former directorships
During the past four 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 2016, 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 2016
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.
2016
Name
Michael J Cole
RJ Finley
IJ Hunter
2015
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 2016
(ii)
Share holdings
The relevant interest in the shares of the Company of each director and as notified to the ASX is as
follows:
2016
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
10,237,651
1,865,526
2,770,532
14,873,709
(7,837,651)
(1,365,526)
(1,370,532)
(10,573,709)
-
-
-
-
2,400,000
500,000
1,400,000
4,300,000
The Net Movement for the year represents the participation in the Buy-Back offer except for Michael
Cole who purchased an additional 400,000 shares on-market in the subsequent months after the
completion of the Buy-Back.
2015
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
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 represented the take up of shares under the 1:10 Entitlement Offer
and Shortfall.
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.
14
Ironbark Capital Limited
ABN 89 008 108 227
Directors’ Report
Year ended 30 June 2016
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 2016 (2015: $nil).
Auditor’s independence declaration
A copy of the auditor‘s independence declaration as required under section 307C of the Corporations
Act 2001 is set out on page 16.
Rounding of amounts
The Company is of a kind referred to in Instrument 2016/191, issued by the Australian Securities and
Investments Commission, relating to the ‘rounding off’ of amounts in the financial statements and
Directors’ Report. Amounts in the Directors’ Report have been rounded off in accordance with that
Instrument to the nearest thousand dollars, or in certain cases, to the nearest dollar.
This report is made in accordance with a resolution of the Directors.
Michael J Cole
Director
Sydney
24 August 2016
15
Ironbark Capital Limited
ABN 89 008 108 227
Statement of Profit or Loss and
Other Comprehensive Income
For the year ended 30 June 2016
2016
$'000
2015
$'000
3,428
(3,404)
24
(278)
(20)
(42)
(34)
(31)
(13)
(18)
-
(66)
(49)
(40)
(18)
(14)
(623)
(599)
980
381
-
381
Cents
0.29
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
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/(loss) 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
Notes
6
6
19 (b)
19 (a)
17
7
22
The above Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction
with the accompanying notes.
17
Ironbark Capital Limited
ABN 89 008 108 227
Statement of Financial Position
As at 30 June 2016
Notes
2016
$'000
2015
$'000
8
9
10
12
13
16
14
15
4,875
519
60,319
-
3
65,716
2,568
2,568
18,098
2,858
71,936
368
4
93,264
1,081
1,081
68,284
94,345
107
114
-
221
17
17
238
102
-
-
102
10
10
112
68,046
94,233
69,537
5
-
(1,496)
94,595
748
209
(1,319)
68,046
94,233
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
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 2016
Issued
capital
$'000
Profit
reserve
$'000
2015 Profit Accumulated
reserve
$'000
losses
$'000
Total
equity
$'000
Notes
-
-
-
-
-
-
-
Balance at 1 July 2015
94,595
Profit for the year
Transfer to profit reserve
Total comprehensive income for
the year
Transactions with owners in their
capacity as owners:
Dividends paid
Buy-back of shares
Balance at 30 June 2016
69,537
5
Balance at 1 July 2014
86,901
1,058
748
-
558
558
209
(1,319)
94,233
-
-
-
381
(558)
381
-
(177)
381
-
-
-
(1,496)
68,046
(613)
87,346
1,215
1,215
1,921
(1,921)
-
1,921
(706)
1,215
-
-
-
16
15(c),(d)
-
(25,058)
(1,301)
-
(209)
-
-
-
(1,510)
(25,058)
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
(310)
(1,712)
7,694
-
-
-
-
(2,022)
7,694
Balance at 30 June 2015
94,595
748
209
(1,319)
94,233
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 2016
Notes
2016
$'000
2015
$'000
21
16
664
16,455
(5,905)
2,767
11
(309)
(319)
(19)
13,345
(1,510)
-
-
(25,058)
(26,568)
(13,223)
18,098
668
67,528
(55,271)
3,993
54
(631)
(637)
(1,117)
14,587
(5,136)
7,750
(80)
-
2,534
17,121
977
8
4,875
18,098
Cash flows from operating activities
Interest received
Proceeds from sale of trading portfolio
Payments for purchase of trading portfolio
Dividends and trust distributions received
Other income received
Management fees paid
Other expenses paid
Net income taxes 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
Payments for shares bought back
Net cash (outflow)/inflow from financing activities
Net (decrease)/increase 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
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 2016
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 27, 45 Clarence Street, Sydney NSW 2000. The
financial statements of Ironbark Capital Limited are for the year ended 30 June 2016. The Company is
primarily involved in making investments, and deriving revenue and investment income from listed
securities and unit trusts in Australia.
2. 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.
Basis of preparation
(a)
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 24 August 2016.
(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 2015:
•
AASB 2015-3 Amendments to Australian Accounting Standards arising from the Withdrawal of
AASB 1031 Materiality: AASB 2015-3 completed the withdrawal of references to AASB 1031
Materiality in all Australian Accounting Standards and Interpretations, allowing AASB 1031 to be
effectively withdrawn.
The adoption of this standard 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, refer to Note 4.
21
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2016
2. Significant accounting policies (continued)
Revenue recognition
(b)
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as
revenue are net of returns and trade allowances.
(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.
(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 income for the period is the tax payable on the current period's taxable income
based on the applicable income tax rate 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 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.
22
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2016
2. Significant accounting policies (continued)
(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.
(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 are 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.
23
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2016
2. Significant accounting policies (continued)
(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.
(h)
Trade and other payables
Trade and other payables represent liabilities for goods and services provided to the Company prior to the
end of financial year that remain 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)
(i)
Earnings per share
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.
24
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2016
2. Significant accounting policies (continued)
(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 Australian Taxation Office (ATO). In this case it is recognised as part of
the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net
amount of GST recoverable from, or payable to, the ATO is included with other receivables or payables in
the Statement of Financial Position.
Cash flows are presented in the Statement of Cash Flows on a gross basis, except for the GST
components of cash flows arising from investing or financing activities which are recoverable from, or
payable to the ATO and are presented as operating cash flows.
(n)
Rounding of amounts
The Company is of a kind referred to in Instrument 2016/191, 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 Instrument 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)
Operating Segments
The Company operated in Australia only and the principal activity is investment.
(q)
New accounting standards for application in future periods
Certain new accounting standards and interpretations have been published that are not mandatory for 30
June 2016 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 revised requirements for the classification, measurement,
recognition 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.
25
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2016
2. Significant accounting policies (continued)
(ii)
AASB 2015-1 Amendments to Australian Accounting Standards – Annual improvements to
Australian Accounting Standards 2012–2014 Cycle (effective from 1 January 2016)
In January 2015, the AASB approved a number of amendments to Australian Accounting Standards as a
result of the 2012-2014 annual improvements project. No significant impact is expected upon adoption of
the amendments. The Company does not intend to early adopt AASB 2015-1 and will apply this is its
financial statements for the financial year commencing from 1 July 2016
(iii)
AASB 2015-2 Amendments to Australian Accounting Standards – Disclosure Initiative:
Amendments to AASB 101 (effective from 1 January 2016)
AASB 2015-2 amends AASB 101 Presentation of Financial Statements to clarify that entities should not
disclose immaterial information and that professional judgment can be used in determining where and in
what order information is presented in financial disclosures.
(iv) AASB 2016-2 Amendments to Australian Accounting Standards – Disclosure Initiative:
Amendments to AASB 107 (effective from 1 January 2017)
AASB 2016-2 amends AASB 107 Statement of Cash Flows to require entities to provide disclosure that
enables users of financial statements to evaluate cash and non-cash changes in their financing activities.
(v)
AASB 15: Revenue from Contracts with Customers (applicable to annual reporting periods
commencing on or after 1 January 2017)
When effective, this Standard will replace the current accounting requirement applicable to revenue with a
single, principles-based model. Except for a limited number of exceptions, including leases, the new
revenue model in AASB 15 will apply to all contracts with customers as well as non-monetary exchanges
between entities in the same line of business to facilitate sales to customers and potential customers.
The core principle of the Standard is that an entity will recognise revenue to depict the transfer of promised
goods or services to customers in an amount that reflects the consideration to which the entity expects to
be entitled in exchange for the goods or services. To achieve this objective, AASB 15 provides the
following five-step process:
identify the contract(s) with a customer;
identify the performance obligations in the contract(s);
determine the transaction price;
allocate the transaction price to the performance obligations in the contract(s); and
recognise revenue when (or as) the performance obligations are satisfied.
This Standard will require retrospective restatement, as well as enhanced disclosures regarding revenue.
There is no impact on the Company’s financial statements.
(vi)
AASB 16: Leases (applicable to annual reporting periods commencing on or after 1 January 2019).
When effective, this Standard will:
replace AASB 117 Leases and some lease-related Interpretations;
require all leases to be accounted for ‘on-balance sheet’ by lessees, other than short-term and low
value asset leases; and
require new and difference disclosures about leases.
This Standard will require retrospective restatement, as well as new and difference disclosures. There is no
impact on the Company’s financial statements.
There are no other standards that are not yet effective and are expected to have a material impact on the
entity in the current or future reporting periods and on foreseeable future transactions.
26
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2016
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.
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
Utilities
Small Industrials
Property Trust
Healthcare and biotechnology
Total
2016
(%)
2015
(%)
53.2
7.5
13.4
14.1
4.2
3.2
2.3
1.2
0.9
100.0
47.9
20.1
11.4
10.1
5.3
-
2.1
1.5
1.6
100.0
Securities representing over 5 percent of the trading portfolio at 30 June 2016 were:
Telstra Corporation Limited
Westpac Banking Corporation Limited
Commonwealth Bank of Australia Limited
2016
(%)
13.4
9.8
9.8
33.0
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% (2015: +5%/-5%)
Change in variable by +10%/-10% (2015: +10%/-10%)
27
Impact on post-tax profit
2016
2015
$'000
$'000
$'000
$'000
2,111
4,222
(2,111)
(4,222)
2,518
5,036
(2,518)
(5,036)
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2016
3. Financial risk management (continued)
(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.
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 2016
Financial Assets
Cash and cash equivalents
Trade and other receivables
Trading portfolio
Current tax asset
Financial liabilities
Trade and other payables
Current tax liability
Net exposure
30 June 2015
Financial Assets
Cash and cash equivalents
Trade and other receivables
Trading portfolio
Current tax asset
Financial liabilities
Trade and other payables
Floating
interest rate
$'000
Non-interest
bearing
$'000
4,875
-
9,216
-
14,091
-
-
-
-
519
51,103
-
51,622
(107)
(114)
(221)
Total
$'000
4,875
519
60,319
-
65,713
(107)
(114)
(221)
14,091
51,401
65,492
Floating
interest rate
$'000
Non-interest
bearing
$'000
18,098
-
9,122
-
27,220
-
2,858
62,814
368
66,040
Total
$'000
18,098
2,858
71,936
368
93,260
-
-
(102)
(102)
(102)
(102)
Net exposure
27,220
65,938
93,158
The weighted average interest rate of the Company's cash and cash equivalents at 30 June 2016 is
2.03% pa (2015: 1.95% pa).
Sensitivity
At 30 June 2016, 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 $73,902 higher/$73,902
lower (2015:changes of 75 bps/75 bps: $95,012 higher/$95,012 lower), mainly as a result of higher/lower
interest income from cash and cash equivalents and floating rate notes. The cash balance as at 30 June
2015 was significantly higher due to the partial sale of investments to fund the off-market buyback payable
to participating shareholders on 30 July 2015.
28
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2016
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 2016.
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 2016
Non-derivatives
Trade and other payables
Current tax liability
Total non-derivatives
At 30 June 2015
Non-derivatives
Trade and other payables
Current tax liability
Total non-derivatives
Less than 1
month
$'000
More than 1
month
$'000
107
114
221
-
-
-
Less than 1
month
$'000
More than 1
month
$'000
102
-
102
-
-
-
29
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2016
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 2016 and 30 June 2015:
Fair value hierarchy
30 June 2016
Financial assets
Trading portfolio
Total
30 June 2015
Financial assets
Trading portfolio
Total
Level 1
$'000
59,550
59,550
Level 1
$'000
71,936
71,936
Level 2
$'000
Level 3
$'000
769
769
-
-
Level 2
$'000
Level 3
$'000
-
-
-
-
Total
$'000
60,319
60,319
Total
$'000
71,936
71,936
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 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.
30
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2016
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, distribution and 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
2016
$'000
2,613
639
165
11
3,428
1,478
(4,882)
(3,404)
2015
$'000
3,871
684
123
54
4,732
1,271
(4,621)
(3,350)
24
1,382
(a) Income tax expense recognised in the Statement of Profit or Loss and Other Comprehensive
Income
Current tax
Deferred tax
Income tax (benefit) / expense is attributable to:
Profit from continuing operations
2016
$'000
516
(1,496)
(980)
2015
$'000
693
(1,787)
(1,094)
(980)
(1,094)
31
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2016
7. Income tax expense (continued)
(b)
Numerical reconciliation of income tax expense/(benefit) to prima facie tax payable
(Loss) / profit from continuing operations before income tax expense/(benefit)
Tax at the Australian rate of 30.0% (2015: 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
Risk exposure
2016
$'000
(599)
(180)
(1,129)
-
339
(19)
450
(442)
1
(980)
2015
$'000
121
36
(1,635)
(2)
491
(374)
760
(381)
11
(1,094)
2016
$'000
2015
$'000
4,875
18,098
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+ (2015: A+) by Standard & Poor's.
9. Trade and other receivables
Dividends and distributions receivable
Interest receivable
GST Receivable
Unsettled sales
2016
$'000
470
9
7
33
519
2015
$'000
458
35
18
2,347
2,858
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.
32
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2016
9. Trade and other receivables (continued)
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
Floating rate notes - unlisted
2016
$'000
50,322
781
8,447
769
60,319
2015
$'000
52,033
10,781
9,122
-
71,936
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.
33
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2016
11. Derivative financial instruments (continued)
At year end, the notional principal amounts of derivatives held by the Company were as follows:
Notional
principal
amounts
Notional
principal
amounts
2016
$'000
(1,021)
2015
$'000
(609)
2016
$'000
2015
$'000
2,535
33
2,568
1,081
-
1,487
2,568
2016
$'000
24
83
107
1,040
41
1,081
27
748
306
1,081
2015
$'000
55
47
102
2016
$'000
2015
$'000
17
17
10
7
-
17
10
10
754
4
(748)
10
Australian exchange traded options
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
Movements:
Opening balance
Charged/credited - to profit or loss
- to deferred tax assets
34
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2016
15. Issued capital
(a)
Issued capital
30 June
2016
Shares
30 June
2015
Shares
2016
$'000
2015
$'000
Ordinary shares - fully paid
125,820,582
171,215,466
69,537
94,595
(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 2015
Off-market share buy-back
Balance at 30 June 2016
(d)
Off-market share buy-back
Number of
shares
171,215,466
(45,394,884)
125,820,582
$'000
94,595
(25,058)
69,537
The 45,394,884 (26.5%) shares tendered under the off-market tender process (“Buy-Back”) were accepted
in July 2015 with the payment of proceeds of $25.058m. Following cancellation of the Buy-Back shares, the
total number of shares on issue is 125,820,582.
(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.
35
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2016
16. Dividends
(a)
Ordinary Shares recognised as paid
Final dividend
Interim dividend
2016
$'000
566
944
1,510
In respect of the financial year ended 30 June 2016, 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
(c)
Dividend rate
2016
$'000
612
1,129
18
(647)
1,112
114
165
279
1,391
2015
$'000
1,712
310
2,022
2015
$'000
61
1,635
1,117
(2,201)
612
(368)
174
(194)
418
Record
Date
Dividend
Rate
Total Amount
$’000
Date of
Payment
% Franked
2016
Ordinary shares -
Final
Ordinary shares -
Interim
2015
Ordinary shares -
Final
Ordinary shares –
Interim
15/06/2016
0.45cps
$566
30/06/2016
100
09/12/2015
0.75cps
$944
23/12/2015
100
20/03/2015
1.0cps
$1,712
09/04/2015
100
17/12/2014
2.0cps
$3,424
30/12/2014
100
36
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2016
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:
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
2016
$'000
30 June
2015
$'000
33
7
40
-
-
40
33
7
40
1
1
41
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 2016 (2015: 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):
Management fees paid or payable
2016
$'000
66
2015
$'000
66
30 June
2016
$'000
30 June
2015
$'000
278
632
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 2016 (2015: nil).
37
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2016
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
2016
$'000
24
2015
$'000
55
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
Since the end of the financial year, the Directors have declared a fully franked dividend of 0.95 cents per
share payable 31 August 2016 out of the Profit Reserve as at 31 July 2016.
No other 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
2015
$'000
2016
$'000
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
(Decrease)/increase in tax liabilities
Decrease/(Increase) in trading portfolio
Net cash inflow/(outflow) from operating activities
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
38
381
4,882
(1,478)
15
(6)
(999)
10,550
13,345
1,215
4,621
(1,271)
1
26
(2,262)
12,257
14,587
2016
Cents
2015
Cents
0.29
0.29
0.72
0.72
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2016
22. Earnings per share (continued)
(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
2016
Cents
2015
Cents
0.29
0.29
0.72
0.72
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
2016
Number
2015
Number
129,523,274
167,787,548
39
Ironbark Capital Limited
ABN 89 008 108 227
Shareholder Information
A.
Distribution of shareholdings
As at 31 August 2016 there were 1,959 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
Total
No. of
shareholders
266
384
252
924
133
1,959
Shares
93,736
1,122,136
1,908,270
30,284,646
92,411,794
125,820,582
There were 271 holders of less than a marketable parcel of 1,063 ordinary shares, based on a share
price of $0.47.
B.
Largest 20 shareholders
The largest 20 shareholders of the Company’s shares as at 31 August 2016 are listed below:
Holder Name
KAPLAN PARTNERS PTY LIMITED
EDSGEAR PTY LIMITED
IOOF INVESTMENT MANAGEMENT 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
RBC INVESTOR SERVICES AUSTRALIA PTY LIMITED
GRANTULLY INVESTMENTS PTY LIMITED
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
LANGSHAW PTY LIMITED
MR PETER JOHN GRENNING
Ordinary Shares
Number Held
%
41,073,074
32.64%
6,284,375
4,037,398
2,500,000
1,727,516
1,509,000
1,400,000
1,206,722
1,145,846
1,036,516
985,908
723,500
716,557
641,674
633,761
600,000
591,991
590,298
590,153
565,845
4.99%
3.21%
1.99%
1.37%
1.20%
1.11%
0.96%
0.91%
0.82%
0.78%
0.58%
0.57%
0.51%
0.50%
0.48%
0.47%
0.47%
0.47%
0.45%
68,560,134
54.49%
43
Ironbark Capital Limited
ABN 89 008 108 227
Shareholder Information
C.
Substantial shareholders
Substantial shareholders in the Company as at 31 August 2016 are set out below:
Holder Name
KAPLAN PARTNERS PTY LIMITED
D.
Transaction Summary
Ordinary Shares
%
Number Held
41,073,074
32.64%
The Company conducted 603 security transactions during the financial year. Brokerage paid during
the year net of RITC claimable was $20,282.
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 was reset and applied for the 2016 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 27
45 Clarence Street
Sydney, NSW 2000
Telephone: (02) 8917 0399
44
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: (within Australia) 1300 737 760
(outside Australia) +61 2 9290 9600
45