Ironbark Capital Limited
ABN 89 008 108 227
Annual Report
For the year ended 30 June 2017
Ironbark Capital Limited
ABN 89 008 108 227
Annual Report
For the year ended 30 June 2017
Contents
Corporate Directory
Review of Operations and Activities
Corporate Governance Statement
Investment Manager Report
Portfolio Shareholdings at 30 June 2017
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
9
14
15
38
39
44
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 2017
Review of Operations and Activities
The 2017 year was a good year for Ironbark for investment performance and results.
Investment Performance
The Ironbark Capital Limited (“Ironbark”) portfolio returned a pleasing 11.13% for the year inclusive
of franking credits, outperforming the benchmark (one year swap interest rate plus 6%) by 3.37%.
The Ironbark performance reflects the Investment Manager’s absolute return focus and income
emphasis. The performance was achieved with a portfolio that has a much lower volatility than the
market. The portfolio’s exposure to hybrids, utilities and written call options over selective stocks
contributed to the positive result. As a comparison, the ASX300 Accumulation Index inclusive of
franking returned 14.5% but with more than double the volatility of the Ironbark portfolio.
NTA after provision for tax on unrealised losses was $0.538, compared to $0.540 from the previous
period. The NTA is after a 3.0 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.
Results for the Full Year
The positive performance of the portfolio contributed to the $4.56m profit for the year, an increase
of $4.18m on the previous corresponding year. Income from the trading portfolio was $6.02m, up
$6.00m on the corresponding period’s negative income of $0.34m which was due to unrealised
losses.
2017 saw a continuing reduction in the MER from 0.86% in the prior year to 0.77% in the current
year, assisted by the increase in the average funds under management following the capital raising.
Dividends
Ironbark distributed fully franked dividends of 3.0 cents per share in FY17 as corporate profits
created the opportunity to do so. The profit results and accumulated franking credits allowed
Ironbark to declare three fully franked dividends in February 2017, December 2016, as well as in
August 2016 to supplement the dividend paid in June 2016 which was restricted due to lack of
accounting profits.
Ironbark has declared a fully franked dividend of 0.75 cents per share out of the Profit Reserve as at
31 July 2017 payable 20 September 2017. Based on current legislation, this dividend will be franked
at the 27.5% tax rate. As Ironbark has a policy of distributing the majority of franking credits
received each year as fully franked dividends, there is minimal adverse impact due to the change of
rate in the 2018 financial year.
Non-Renounceable Entitlement Offer
The 1:8 non-renounceable Entitlement Offer at a price of $0.45 announced in March 2017 closed on
24 April 2017 attracting strong support. The Entitlement Offer raised $5.2 million with a 73% take-
up by eligible shareholders. The Offer was not underwritten and there was no associated shortfall
offer.
2
Ironbark Capital Limited
ABN 89 008 108 227
Review of Operations and Activities
For the year ended 30 June 2017
Ironbark Corporate Outlook
There continues to be capital raising activity in the LIC sector with their growing appeal particularly
to SMSF investors.
The Directors have a policy of every three years offering Shareholders the opportunity to obtain the
full value of their shares. On this basis, it is anticipated that the next Tender Offer would be during
the second half of calendar 2018.
We uphold our view that there continues to be investor demand for a low volatility, absolute return
and fully franked dividend focussed investment portfolio offered in a LIC structure.
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 2017
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 2017 Corporate Governance Statement is dated as at 30 June 2017 and reflects the corporate
governance practices in place throughout the 2017 financial year. The 2017 Corporate Governance
statement was approved by the Board on 22 August 2017.
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 2017
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’s 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 recorded a portfolio return of 11.1% over the financial year outperforming its benchmark return of
7.8%. Since inception, over 14.5 years including two years of the disastrous GFC, the portfolio achieved
a return of 9.3%pa with risk measuring approximately 50% of equity market risk.
IBC Performance
since inception to 30 June 2017
10.3
9.3
9.7
9.3
8.8
8.9
7.6
5.9
8.1
8.3
7.1
8.2
8.1
4.9
11.1
7.9
7.8
6.0
n
r
u
t
e
r
%
12
10
8
6
4
2
0
IBC portfolio+franking
BENCHMARK (1 yr swap+6%pa)
IBC’s focus on income generation and capital preservation from a balanced portfolio structure has
delivered superior risk adjusted returns compared to the equity market. Over the 10 year period the
portfolio’s return of 5.9%pa exceeded the ASX200 Accumulation Index return inclusive of franking
credits of 4.2%pa. IBC’s return was achieved with half of the equity market risk measured in terms of
volatility. In the most recent year a return of 11.1% was delivered with 63% less risk than the equity
market.
14.8
11.1
IBC & ASX
IBC & ASX
IBC & ASX
Returns vs Risk
Returns vs Risk
Returns vs Risk
12.5
8.1
7.3
4.9
5.9
4.2
1yr
3yrs
5yrs
10yrs
‐51%
‐55%
‐50%
‐63%
a
p
%
n
r
u
t
e
R
k
s
i
R
e
v
i
t
a
e
R
l
17.0
14.0
11.0
8.0
5.0
2.0
‐1.0
‐4.0
‐7.0
‐10.0
‐13.0
‐16.0
0%
‐10%
‐20%
‐30%
‐40%
‐50%
‐60%
‐70%
30/6/17
IRONBARK CAPITAL (incl
Franking)
S&P ASX 200 Accum (incl
Franking)
Relative Volatility
5
Ironbark Capital Limited
ABN 89 008 108 227
Investment Manager Report
Year ended 30 June 2017
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 6.5% 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 33 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 39% of the portfolio was held in hybrids and corporate bonds and 28% in buy & writes
in Banks, Telstra and BHP. The balance is represented by: 9.3% in property trusts, 2.3% in mid-cap and
small companies, 0.6% in utilities and 20% held in cash & option delta.
Asset allocation reflects a cautious stance.
IRONBARK CAPITAL ASSET ALLOCATION ‐ 30 June 2017
20.3%
19.4%
3.5%
2.3%
6.7%
10.2%
9.7%
18.1%
0.6%
9.3%
Hybrids‐Bank Basel III
Corporate Sub Notes
Non Bank Hybrids & Corp
Prefs
Utilities & Infrastructure
Property Trusts
Banks
Top 50 Industrials
Ex Top 50 Industials
Materials & Energy
Cash & Option Delta
(Buy&Write)
6
Ironbark Capital Limited
ABN 89 008 108 227
Investment Manager Report
Year ended 30 June 2017
Portfolio Performance
The portfolio produced a very good return of 11.1% for the financial year. Both corporate credit and
equity markets rallied strongly. The ASX listed hybrid and corporate bond Index advanced 11.03%
(inclusive of franking credits) led by Bank Basel III hybrids with a gain of 12.15% and corporate bonds
10.4%. By contrast the 10 year government bond market declined -3.5% with yields rising from 1.99%
to 2.55%. The floating rate nature of the hybrid market ensured capital stability under rising bond
yields and the lack of new supply helped compress trading margins. New issuance was largely
confined to re-investment of the maturing bank hybrids. The corporate bond market was tight with
maturities not being replaced and few new
issuers. Bank capital ratios have approached
‘unquestionably strong levels’ to the benefit of hybrid and bond holders. The portfolio participated in
primary market issuance of replacement and new hybrid and corporate bond securities and
maintained its 40% weighting over the year.
The ASX 300 Accumulation Index gained 13.82%. Buy & writes in the banks, Telstra and BHP
comprised 40% of the physical portfolio reducing to 28% net exposure after adjusting for option delta.
The -17% decline in Telstra dampened the strong gain from BHP and the banks that rallied 28% and
20% respectively. Telstra’s physical weighting was reduced over the year from 14% to 9% and to 6.7%
after option delta.
Strong returns were delivered by utilities with returns of 25% for Duet Group and 13% for Spark
Infrastructure. Duet was profitably exited under takeover reducing the weighting to utilities from 3.2%
to 0.6%.
Property Trust exposure was increased from 1.2% to 9.3% over the year with the portfolio taking
advantage of the more favourable pricing environment and good distribution yields. Returns from the
portfolio’s investments were positive compared to losses recorded by the property trust sector index.
Cash exposure (including option delta) was 20% at the end of the period reflecting the manager’s
cautious outlook.
Comparative Returns (accumulation)
Indices & Fund
12 months to 30 June 2017
Resources
Financials
Utilities
ASX 300 Accum INDEX
Industrials
IRONBARK CAPITAL
Hybrid & Corp Bond Index
Benchmark (1yr swap+6%)
Property Trusts
Gold
Telecoms
-21.75
-6.26
-8.52
22.92
19.98
19.63
13.82
12.63
11.13
11.03
7.76
-24 -21 -18 -15 -12 -9
-6
-3
0
3
6
9
12 15 18 21 24 27
% Percentage Return
Kaplan Funds Management Pty Limited
7
Ironbark Capital Limited
ABN 89 008 108 227
Portfolio Shareholdings as at 30 June 2017
Portfolio Shareholdings at 30 June 2017
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 Capital Note
APA Group - Subordinated Notes
Bendigo Bank - Convertible Preference Securities
Bank of Queensland - Convertible Preference Securities
Commonwealth Bank Capital Notes
Challenger Limited Capital Note
Caltex Australia Limited - Subordinated Notes
Crown Limited- Subordinated Notes
Insurance Australia Group Capital Note
Insurance Australia Group - Perpetual Reset Exchangeable Notes
Macquarie Group Limited Capital Note
National Australia Bank Limited - Convertible Preference Securities
Qube Holdings Limited - Subordinated Notes
Ramsay Healthcare Limited - Perpetual Preference Securities
AGLHA
AMPPA
ANZPG
AQHHA
BENPD/PE
BOQPD
CBAPC/PD
CGFPB
CTXHA
CWNHA/HB
IAGPD
IANG
MQGPB
NABPA/PD
QUBHA
RHCPA
SUNPC/SUNPF Suncorp Group Limited - Convertible Preference Securities
SVWPA
WBCPG
Seven Group Holdings Limited - Perpetual Preference Securities
Westpac Banking Group Corporation Limited Capital Note
TLS
BHP
BLD
CHC
CIP
CLW
FLK
GOZ
VVR
ING
RWC
SCO
SDF
SKI
Large industrial
Telstra Corporation Limited
Materials & Energy
BHP Billiton Limited
Boral Limited
Property Trusts
Charter Hall Group
Centuria Industrial REIT
Charter Hall Long Wale REIT
Folkestone Limited
Growthpoint Properties Australia Limited
Viva Energy REIT Limited
Small Industrial
Inghams Group Limited
Reliance Worldwide Corporation Limited
Scottish Pacific Group Limited
Steadfast Group Limited
Utilities & Infrastructure
Spark Infrastructure Group
Cash
*Includes market value of options written against holdings
**Includes option delta written against holdings
8
Market
Value*
$'000
3,094
6,752
82
2,436
6,147
18,511
843
318
733
1,028
957
833
2,826
518
1,916
1,602
2,663
2,588
646
2,961
1,955
604
3,007
285
2,014
28,297
6,565
6,565
2,978
49
3,027
264
148
1,735
601
389
3,578
6,715
51
40
85
1,476
1,652
459
459
6,565
71,791
% of
portfolio
%
exposure**
4.3
9.4
0.1
3.4
8.7
25.9
1.2
0.4
1.0
1.4
1.3
1.2
4.0
0.7
2.7
2.2
3.7
3.6
0.9
4.1
2.7
0.8
4.2
0.4
2.8
39.30
9.2
9.2
4.1
0.1
4.2
0.4
0.2
2.4
0.8
0.5
5.0
9.3
0.1
0.1
0.1
2.1
2.4
0.6
0.6
9.1
100.0
3.0
5.5
0.1
2.7
6.7
18.0
1.2
0.4
1.0
1.4
1.3
1.2
4.0
0.7
2.7
2.2
3.7
3.6
0.9
4.1
2.7
0.8
4.2
0.4
2.8
39.30
6.7
6.7
3.5
0.1
3.6
0.4
0.2
2.4
0.8
0.5
5.0
9.3
0.1
0.1
0.1
2.1
2.4
0.6
0.6
20.1
100.0
Ironbark Capital Limited
ABN 89 008 108 227
Directors’ Report
Year ended 30 June 2017
Directors’ Report
Your Directors present their report on the Company for the year ended 30 June 2017.
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
2017
Ordinary shares -
Final
Ordinary shares –
Interim
Ordinary shares –
Interim
2016
Ordinary shares -
Final
Ordinary shares -
Interim
28/02/2017
1.05cps
$1,321
20/03/2017
100
15/12/2016
1.0cps
$1,258
16/01/2017
100
17/08/2016
0.95cps
$1,196
31/08/2016
100
15/06/2016
0.45cps
$566
30/06/2016
100
09/12/2015
0.75cps
$944
23/12/2015
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 $4,556,000 (2016: $381,000)
The net tangible asset backing for each ordinary share as at 30 June 2017 amounted to $0.528 per
share (2016: $0.520 per share).
Earnings per share
2017
Basic and diluted earnings per share (cents per share) 3.55
2016
0.29
9
Ironbark Capital Limited
ABN 89 008 108 227
Directors’ Report
Year ended 30 June 2017
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
Since the end of the financial year, the Directors have declared a fully franked dividend of 0.75 cents
per share payable 20 September 2017 out of the Profit Reserve as at 31 July 2017. Based on current
legislation, this dividend will be franked at the 27.5% tax rate.
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.
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
3,000,000 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
600,000 shares
10
Ironbark Capital Limited
ABN 89 008 108 227
Directors’ Report
Year ended 30 June 2017
Ian J Hunter BA LLB (Syd), MBA (MGSM) Audit Committee Chairman
Experience and expertise
Banking and finance
Other directorships
Director, Platinum Asia Investments Limited
Former directorships
During the past five years, Mr Hunter also served as a Director of Rubik Financial Limited.
Interests in shares
1,575,000 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 2017, 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.
Remuneration policy
The Board determines the remuneration structure of Non-Executive Directors, 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. The Company has no
employees as the investment management and administration services are outsourced.
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.
11
Ironbark Capital Limited
ABN 89 008 108 227
Directors’ Report
Year ended 30 June 2017
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 table shows details of the remuneration received by the Directors of the Company for
the current and previous financial year.
2017
Name
Michael J Cole
RJ Finley
IJ Hunter
2016
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.
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.
(ii)
Share holdings
The relevant interest in the shares of the Company of each director and as notified to the ASX is as
follows:
12
Ironbark Capital Limited
ABN 89 008 108 227
Directors’ Report
Year ended 30 June 2017
2017
Name
Balance at
the start of
the year
Net movement
Balance at
the end of
the year
Directors of Ironbark Capital Limited
Ordinary shares
Michael J Cole
Ross J Finley
Ian J Hunter
2,400,000
500,000
1,400,000
4,300,000
600,000
100,000
175,000
875,000
3,000,000
600,000
1,575,000
5,175,000
The net movement for the year represents the participation in the 1:8 rights entitlement offer as well
as additional on-market purchases by Michael Cole who purchased 275,000 shares and Ross Finley
who purchased 37,500 shares during the year.
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 2017 (2016: $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 14.
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 2017
13
Ironbark Capital Limited
ABN 89 008 108 227
Statement of Profit or Loss and
Other Comprehensive Income
For the year ended 30 June 2017
Notes
6
6
19 (b)
19 (a)
17
7
22
2017
$'000
2016
$'000
3,408
2,609
6,017
3,428
(3,404)
24
(279)
(28)
(47)
(41)
(27)
(9)
(16)
(66)
(43)
(35)
(28)
(6)
(625)
5,392
(836)
4,556
-
4,556
Cents
3.55
(278)
(20)
(42)
(34)
(31)
(13)
(18)
(66)
(49)
(40)
(18)
(14)
(623)
(599)
980
381
-
381
Cents
0.29
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
Directors' fees
ASX fees
Audit fees
Options expense
Other expenses
Total expenses
Profit/(loss) before income tax
Income tax (expense)/benefit
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.
15
Ironbark Capital Limited
ABN 89 008 108 227
Statement of Financial Position
As at 30 June 2017
Notes
2017
$'000
2016
$'000
8
9
10
12
13
14
15
6,565
456
65,226
102
3
72,352
1,722
1,722
4,875
519
60,319
-
3
65,716
2,568
2,568
74,074
68,284
114
-
114
7
7
121
107
114
221
17
17
238
73,953
68,046
74,663
786
(1,496)
69,537
5
(1,496)
73,953
68,046
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
Total current liabilities
Non-current liabilities
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Profit reserve
Accumulated losses
Total equity
The above Statement of Financial Position should be read in conjunction with the accompanying notes
16
Ironbark Capital Limited
ABN 89 008 108 227
Statement of Changes in Equity
For the year ended 30 June 2017
Issued
capital
$'000
Profit
reserve
$'000
Accumulated
losses
$'000
Total
equity
$'000
Notes
Balance at 1 July 2016
69,537
5
(1,496)
68,046
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
-
4,556
4,556
4,556
(4,556)
-
4,556
(3,775)
-
-
-
4,556
(3,775)
5,126
15(c),(d)
5,126
-
Balance at 30 June 2017
74,663
786
(1,496)
73,953
Balance at 1 July 2015
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
94,595
957
(1,319)
94,233
-
-
-
-
558
381
(558)
381
-
558
(177)
381
16
-
(25,058)
(1,510)
-
-
-
(1,510)
(25,058)
Balance at 30 June 2016
69,537
5
(1,496)
68,046
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes
17
Ironbark Capital Limited
ABN 89 008 108 227
Statement of Cash Flows
For the year ended 30 June 2017
Notes
2017
$'000
2016
$'000
493
21,190
(23,488)
2,884
61
(297)
(289)
(207)
347
(3,775)
5,147
(29)
-
1,343
1,690
4,875
664
16,455
(5,905)
2,767
11
(309)
(319)
(19)
13,345
(1,510)
-
-
(25,058)
(26,568)
(13,223)
18,098
21
16
15(c)
15(c)
8
6,565
4,875
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
Taxes paid
Net cash inflow 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 inflow/(outflow) from financing activities
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
The above Statement of Cash Flows should be read in conjunction with the accompanying notes
18
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2017
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 2017. 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 2017.
(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 standards for the first time for the annual reporting period
commencing 1 July 2016:
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.
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.
The adoption of these standards did not have any impact on the current period or any prior period and is
not likely to affect any future periods.
(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.
19
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2017
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.
20
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2017
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.
21
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2017
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.
(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.
22
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2017
2. Significant accounting policies (continued)
(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 2017 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.
(ii)
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.
23
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2017
2. Significant accounting policies (continued)
(iii)
AASB 15: Revenue from Contracts with Customers (applicable to annual reporting periods
commencing on or after 1 January 2018)
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.
(iv)
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.
24
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2017
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
Corporate floating rate notes
Property Trust
Cash
Telecommunications services
Materials
Small Industrials
Healthcare and biotechnology
Utilities
Consumer staples
Total
2017
(%)
2016
(%)
52.9
11.2
9.4
9.1
9.1
4.2
2.6
0.8
0.6
0.1
100.0
53.2
14.1
1.2
7.5
13.4
4.2
2.3
0.9
3.2
-
100.0
Securities representing over 5 percent of the trading portfolio at 30 June 2017 were:
Commonwealth Bank of Australia Limited
Telstra Corporation Limited
Westpac Banking Corporation Limited
(%)
9.4
9.1
8.7
27.2
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% (2016: +5%/-5%)
Change in variable by +10%/-10% (2016: +10%/-10%)
Impact on post-tax profit
2017
2016
$'000
$'000
$'000
$'000
2,283
4,566
(2,283)
(4,566)
2,111
4,222
(2,111)
(4,222)
25
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2017
3.
(ii)
Financial risk management (continued)
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 2017
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 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
Floating
interest rate
$'000
Non-interest
bearing
$'000
6,565
-
7,991
-
14,556
-
-
-
-
456
57,235
102
57,793
(114)
-
(114)
Total
$'000
6,565
456
65,226
102
72,349
(114)
-
(114)
14,556
57,679
72,235
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)
Net exposure
14,091
51,401
65,492
The weighted average interest rate of the Company's cash and cash equivalents at 30 June 2017 is
1.23% pa (2016: 2.03% pa).
Sensitivity
At 30 June 2017, 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 $76,419 higher/$76,419
lower (2016:changes of 75 bps/75 bps: $73,902 higher/$73,902 lower), mainly as a result of higher/lower
interest income from cash and cash equivalents and floating rate notes.
26
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2017
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 2017.
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 2017
Non-derivatives
Trade and other payables
Current tax liability
Total non-derivatives
At 30 June 2016
Non-derivatives
Trade and other payables
Current tax liability
Total non-derivatives
Less than 1
month
$'000
More than 1
month
$'000
114
-
114
-
-
-
Less than 1
month
$'000
More than 1
month
$'000
107
114
221
-
-
-
27
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2017
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 2017 and 30 June 2016:
Fair value hierarchy
30 June 2017
Financial assets
Trading portfolio
Total
30 June 2016
Financial assets
Trading portfolio
Total
Level 1
$'000
65,226
65,226
Level 1
$'000
59,550
59,550
Level 2
$'000
Level 3
$'000
-
-
-
-
Level 2
$'000
Level 3
$'000
769
769
-
-
Total
$'000
65,226
65,226
Total
$'000
60,319
60,319
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.
28
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2017
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 (losses)/gains on trading portfolio
Net unrealised gains/(losses) on trading portfolio
2017
$'000
2,563
508
276
61
3,408
(840)
3,449
2,609
6,017
2016
$'000
2,613
639
165
11
3,428
1,478
(4,882)
(3,404)
24
7. Income tax expense
(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
2017
$'000
(333)
1,169
836
2016
$'000
516
(1,496)
(980)
836
(980)
29
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2017
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% (2016: 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
2017
$'000
5,392
1,618
(1,103)
-
331
159
(399)
252
(22)
836
2016
$'000
(599)
(180)
(1,129)
-
339
(19)
450
(442)
1
(980)
2017
$'000
2016
$'000
6,565
4,875
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+ (2016: A+) by Standard & Poor's.
9. Trade and other receivables
Dividends and distributions receivable
Interest receivable
GST Receivable
Unsettled sales
2017
$'000
425
24
7
-
456
2016
$'000
470
9
7
33
519
Outstanding settlements are on the terms operating in the securities industry, which usually require
settlement within two days of the date of a transaction. None of the receivables is past due or impaired at
the end of the reporting period.
30
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2017
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
2017
$'000
50,520
6,715
7,991
-
65,226
2016
$'000
50,322
781
8,447
769
60,319
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 buy 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.
31
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2017
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
12. Deferred tax assets
The balance comprises temporary differences attributable to:
Net unrealised losses of investments
Tax losses
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
32
Notional
principal
amounts
2017
$'000
Notional
principal
amounts
2016
$'000
(506)
(1,021)
2017
$'000
1,353
342
27
1,722
2,568
-
(846)
1,722
2017
$'000
26
88
114
2016
$'000
2,535
-
33
2,568
1,081
-
1,487
2,568
2016
$'000
24
83
107
2017
$'000
2016
$'000
7
7
17
(10)
-
7
17
17
10
7
-
17
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2017
15. Issued capital
(a)
Issued capital
30 June
2017
Shares
30 June
2016
Shares
2017
$'000
2016
$'000
Ordinary shares - fully paid
137,258,651
125,820,582
74,663
69,537
(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 2016
1:8 entitlement offer
Less: transaction costs (net of tax)
Balance at 30 June 2017
(d)
Non-renounceable Entitlement Offer
Number of
shares
125,820,582
11,438,069
-
137,258,651
$'000
69,537
5,147
(21)
74,663
On 27 March 2017, the Company invited its eligible shareholders to subscribe to a non-renounceable offer
of 1 share for every 8 fully paid ordinary shares held at an issue price of $0.45 per share. 11,438,069
ordinary shares were issued on 1 May 2017. The issue had a 73% take-up of the Entitlement Offer of
shares by eligible shareholders. The Offer was not underwritten and there was no associated shortfall offer.
(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.
33
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2017
16. Dividends
(a)
Ordinary Shares recognised as paid
Final dividend
Interim dividend
2017
$'000
1,321
2,454
3,775
In respect of the financial year ended 30 June 2017, 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
2017
$'000
1,112
1,103
207
(1,618)
804
(102)
160
58
862
2016
$'000
566
944
1,510
2016
$'000
612
1,129
18
(647)
1,112
114
165
279
1,391
(c)
Dividend rate
Record
Date
Dividend
Rate
Total Amount
$’000
Date of
Payment
% Franked
2017
Ordinary shares -
Final
28/02/2017
1.05cps
$1,321
20/03/2017
100
Ordinary shares –
Interim
15/12/2016
Ordinary shares –
Interim
17/08/2016
1.0cps
$1,258
16/01/2017
100
0.95cps
$1,196
31/08/2016
100
2016
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
34
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2017
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
18. Contingencies
30 June
2017
$'000
30 June
2016
$'000
35
-
35
33
7
40
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 2017 (2016: 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
2017
$'000
66
2017
$'000
279
2016
$'000
66
2016
$'000
278
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 2017 (2016: nil).
35
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2017
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
30 June
2017
$'000
30 June
2016
$'000
26
24
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 0.75 cents per
share payable 20 September 2017 out of the Profit Reserve as at 31 July 2017. Based on current
legislation, this dividend will be franked at the 27.5% tax rate.
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
Profit for the year
Unrealised (gains)/losses on trading portfolio
Realised losses/(gains) on trading portfolio
Change in operating assets and liabilities
Decrease in trade and other receivables
Increase/(Decrease) in trade and other payables
Increase/(Decrease) in tax liabilities
(Increase)/Decrease in trading portfolio
Net cash inflow 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
36
2017
$'000
4,556
(3,449)
840
63
7
629
(2,299)
347
2016
$'000
381
4,882
(1,478)
15
(6)
(999)
10,550
13,345
2017
Cents
2016
Cents
3.55
3.55
0.29
0.29
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
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2017
2017
Cents
2016
Cents
3.55
3.55
0.29
0.29
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
2017
Number
2016
Number
128,420,924
129,523,274
37
Ironbark Capital Limited
ABN 89 008 108 227
Directors’ Declaration
In the Directors' opinion:
(a)
the financial statements and notes set out on pages 15 to 37 are in accordance with the
Corporations Act 2001, including:
(i)
(ii)
complying with Australian Accounting Standards, the Corporations Regulations 2001 and
other mandatory professional reporting requirements, and
giving a true and fair view of the entity's financial position as at 30 June 2017 and of its
performance for the year ended on that date, and
(b)
(c)
there are reasonable grounds to believe that the Company will be able to pay its debts as and
when they become due and payable.
Note 2(a) confirms that the financial statements also comply with International Financial Reporting
Standards as issued by the International Accounting Standards Board.
The Directors have been given a declaration by Jill Brewster on behalf of Kaplan Funds Management Pty
Limited, as a person who performs the Chief Executive functions of the Company, required by section 295A
of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Board of Directors.
Michael J Cole
Director
Sydney
24 August 2017
38
Ironbark Capital Limited
ABN 89 008 108 227
Shareholder Information
A.
Distribution of shareholdings
As at 31 August 2017 there were 1,910 shareholders of ordinary shares in Ironbark Capital Limited.
These holders were distributed as follows:
Holdings Ranges
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001 and over
Totals
No. of
Shareholders
268
373
241
886
142
1,910
Shares
91,962
1,087,027
1,802,108
29,855,742
104,421,812
137,258,651
There were 245 holders of less than a marketable parcel of 980 ordinary shares, based on a share
price of $0.51.
B.
Largest 20 shareholders
The largest 20 shareholders of the Company’s shares as at 31 August 2017 are listed below:
Ordinary Shares
Holder Name
KAPLAN PARTNERS PTY LIMITED
NATIONAL NOMINEES LIMITED
IOOF INVESTMENT MANAGEMENT LIMITED
ABTOURK (SYD NO 415) PTY LTD
LIANGROVE MEDIA PTY LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
HPIC PTY LTD
MRS GLENDA CLAIRE ORGILL
SUPENTIAN PTY LIMITED
BOND STREET CUSTODIANS LIMITED
AGO PTY LTD
LIANGROVE GROUP PTY LTD
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LTD
GRANTULLY INVESTMENTS PTY LIMITED
BOND STREET CUSTODIANS LIMITED
MR ANTHONY GEOFFREY HARTNELL
BOND STREET CUSTODIANS LIMITED
BOND STREET CUSTODIANS LIMITED
BOND STREET CUSTODIANS LIMITED
NORBERT INVESTMENTS PTY LTD
Number Held
43,838,109
7,683,033
3,905,967
3,000,000
1,943,456
1,803,216
1,697,625
1,630,000
1,575,000
1,289,077
1,240,433
1,166,081
1,141,380
1,092,801
806,127
735,285
721,884
712,982
664,086
623,438
%
31.94%
5.60%
2.85%
2.19%
1.42%
1.31%
1.24%
1.19%
1.15%
0.94%
0.90%
0.85%
0.83%
0.80%
0.59%
0.54%
0.53%
0.52%
0.48%
0.45%
77,269,980
56.30%
44
Ironbark Capital Limited
ABN 89 008 108 227
Shareholder Information
C.
Substantial shareholders
As at 31 August 2017 the following substantial holder notices had been received by Ironbark Capital
in respect of shareholders and their associates:
Holder Name
KAPLAN PARTNERS PTY LIMITED
Notice Date
2 May 2017
Number Held
47,725,466
%
34.77%
Ordinary Shares
D.
Transaction Summary
The Company conducted 448 security transactions during the financial year. Brokerage paid during
the year net of RITC claimable was $27,719.
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.
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
H.
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