Ironbark Capital Limited
ABN 89 008 108 227
Annual Report
For the year ended 30 June 2020
Ironbark Capital Limited
ABN 89 008 108 227
Annual Report
For the year ended 30 June 2020
Contents
Corporate Directory
Review of Operations and Activities
Corporate Governance Statement
Investment Manager Report
Portfolio Shareholdings at 30 June 2020
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
37
38
43
Ironbark Capital Limited
ABN 89 008 108 227
Corporate Directory
Directors
Michael J Cole AM 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
Suite 607
180 Ocean Street
Edgecliff NSW 2027
Telephone: (02) 8917 0399
Boardroom Pty Limited
GPO Box 3993
Sydney NSW 2001
Shareholder enquiries telephone:
(within Australia) 1300 737 760
(outside Australia) +61 2 9290 9600
Kaplan Funds Management Pty Limited
Suite 607
180 Ocean Street
Edgecliff NSW 2027
Telephone: (02) 8917 0300
Kaplan Funds Management Pty Ltd
Suite 607, 180 Ocean Street
Edgecliff NSW 2027
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 2020
Review of Operations and Activities
The second half of the 2020 year saw markets both global and domestic increasingly affected by the
COVID-19 pandemic, resulting in extreme volatility. On the domestic front, February saw the market at
an all time high, followed by a sharp fall of around 36% on 23 March 2020, as consumer confidence
plummeted and the uncertainty surrounding the virus took hold, forcing the government to respond to
the deteriorating economic conditions.
Companies responded by deferring or reducing their dividends and this will continue in the near term as
companies dissect the impact of these extreme conditions on their business. By June, the market had
bounced back somewhat in response to government stimulus which was positive for banks and
companies whose offerings contributed to the new 'norm' of living in a pandemic.
Investment Performance
The Ironbark Capital Limited (“Ironbark”) portfolio returned negative 4.38% for the year inclusive of
franking credits, underperforming the benchmark (one year swap interest rate plus 6%) of 6.62% on
volatility that was 70% of the market. The ASX 300 Accumulation returned approximately negative 6.4%
including franking. The turnaround in the market is reflected in the performance of the portfolio for the
June quarter which returned a positive 11.24% compared to the benchmark of 1.46%, reflecting the
strong rebound particularly in the hybrid market and banking sector.
The Ironbark performance continues to reflect the Investment Manager’s absolute return focus and
income emphasis which includes the writing of call options. Call options written contributed around
$490k to income. NTA before provision for tax on unrealised losses was $0.492, compared to $0.545 in
the previous period. The NTA is after a 2.2 cents per share fully franked dividend paid in the period.
Results for the Full Year
The loss after tax of $2.61 million, was down on the $5.60 million profit of the prior year reflecting the
performance of some of the large cap stock holdings in the current environment, with unrealised losses
contributing $4.5 million to the result. Revenue from the trading portfolio was $2.76 million, down
around 30% on the prior year as a result of the deferral or reduction in company dividends and due to
the one-off special dividends in FY19 which were not repeated in the current financial year. Losses of
$1.87 million were realised.
Expenses were contained, resulting in an MER of 0.9%.
Dividends
The primary focus of Ironbark has been the payment of fully franked dividends as corporate profits
create the opportunity to do so. In 2020, fully franked dividends of 2.2 cents per share were paid to
shareholders.
The corporate tax rate will fall to 26% for the 2020-21 tax year as per the Government's timetable for
lowering of the corporate tax rate for smaller companies. Future dividends will be franked at the 26% tax
rate.
Ironbark Corporate Outlook
The Directors of Ironbark have a current policy to provide liquidity to shareholders every three years via
a buy-back facility. This policy was introduced to assist the narrowing of the NTA discount by providing
the certainty of a periodic exit at approximately NTA. A resolution for the buy-back will be put to
shareholders at the forthcoming Annual General Meeting. The buy-back is anticipated around the
middle of the calendar 2021 year. Further information is provided in the Explanatory Notes to the Notice
of Meeting.
2
Ironbark Capital Limited
ABN 89 008 108 227
Review of Operations and Activities
For the year ended 30 June 2020
Volatility will continue as the economic outlook remains uncertain while the virus remains. Going
forward, a key contributor to Ironbark's ability to pay fully franked dividends will be the franked
dividends from the underlying investments, whose companies have been impacted by the current
economic conditions.
However, over the longer term, an absolute return and fully franked dividend focused investment
portfolio continues to be a relevant offering 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 AM
Chairman
3
Ironbark Capital Limited
ABN 89 008 108 227
Corporate Governance Statement
For the year ended 30 June 2020
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 (4th edition) published by the ASX Corporate
Governance Council.
The 2020 Corporate Governance Statement is dated as at 30 June 2020 and reflects the corporate
governance practices in place throughout the 2020 financial year. The 2020 Corporate Governance
statement was approved by the Board on 24 August 2020.
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 2020
Investment Manager Report –financial year to 30 June 2020
The manager’s focus is to deliver consistent returns and a high fully franked dividend yield from the
portfolio. IBC’s performance benchmark is the 1-year swap rate plus 6% per annum.
Performance measurement includes franking credits and option premium income. Franking credits are
a significant source of return from IBC’s hybrid investments and for shareholders. Option premium
income is generated from buy & write activity and varies with market conditions. Over the financial
year, realised option premium income was approximately $490,000 (0.8% of the portfolio). The
calculation of the portfolio’s current running yield of 5.6% excludes option income because realised
option premiums are highly variable from year to year.
IBC recorded a portfolio return of -4.38% over the financial year underperforming its benchmark
return of 6.62%. Since inception, over 17.5 years including two crisis periods (GFC & Covid-19), the
portfolio achieved a return of 8.6%pa with risk measured in terms of volatility approximately 57% of
equity market risk.
n
r
u
t
e
r
%
15
10
5
0
-5
-10
-15
IBC Performance
since inception to 30 June 2020
9.8
8.6
7.7
8.5
8.2
6.8
7.9
6.4
7.7
5.1
5.6
7.6
7.5
6.4
7.4
5.0
4.6
7.2
1.5
6.6
3.1
17.5yrs
%pa
10yrs
%pa
9yrs
%pa
7yrs
%pa
6yrs
%pa
5yrs
%pa
4yrs
%pa
3yrs
%pa
2yrs
%pa
1 yr
%pa
-4.4
-7.6
-6.8
-10.5
6Mth
IBC portfolio+franking
BENCHMARK (1 yr swap+6%pa)
ASX300 Acc (excl franking)
IBC’s focus on income generation and capital preservation from a balanced portfolio structure has
delivered superior risk adjusted returns compared to the equities market. The portfolio demonstrated
defensive qualities and performed substantially better than the equities market over the last 6 months,
1 & 2 year periods. However, the absolute return benchmark was unachievable this year because of
the severity of the Covid-19 market sell-off.
IBC Portfolio Volatility vs ASX Index Volatility
12 month rolling period (risk measurement)
30%
25%
20%
15%
10%
5%
0%
2
0
-
c
e
D
3
0
-
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J
4
0
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4
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6
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7
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7
0
-
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A
8
0
-
t
c
O
9
0
-
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a
M
8
0
-
r
a
M
IBC Volatility
9
0
-
c
e
D
0
1
-
l
u
J
1
1
-
b
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F
5
1
1
-
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3
1
-
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J
2
1
-
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A
2
1
-
v
o
N
5
1
-
r
a
M
ASX Index Volatility
4
1
-
g
u
A
4
1
-
n
a
J
5
1
-
t
c
O
6
1
-
y
a
M
6
1
-
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e
D
7
1
-
l
u
J
8
1
-
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e
F
8
1
-
p
e
S
9
1
-
r
p
A
9
1
-
v
o
N
0
2
-
n
u
J
Ironbark Capital Limited
ABN 89 008 108 227
Investment Manager Report
Year ended 30 June 2020
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 5.6% inclusive of franking credits but
excluding option premium income.
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 28 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 mostly floating rate securities with
little duration risk.
Approximately 39% of the portfolio was held in hybrids and corporate bonds and 19% in buy & writes
in Banks, Telstra, Coles, Ramsay Health Care and BHP. The balance was represented by: 22.3% in
property trusts, 1.9% in mid-cap and small companies, 3.6% in utilities and 13.9% held in cash &
option delta.
Asset allocation reflects a cautious stance.
IRONBARK CAPITAL ASSET ALLOCATION - 30 June 2020
9.0%
1.9%
1.0%
9.4%
13.9%
39%
31.6%
2.2%
5.0%
3.6%
22.3%
Bank Notes & Hybrids 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
portfolio running yield 5.6%
(includes franking credits but excludes option premium income)
Portfolio Performance-financial year to 30 June 2020
The portfolio recorded a return of -4.38% for the financial year. The 2H period to June was negatively
impacted by the Covid19 market sell-off. Portfolio losses for the 2H were -6.83% compared to the
ASX300 Accumulation Index fall of -10.55% in the 2H.
6
Ironbark Capital Limited
ABN 89 008 108 227
Investment Manager Report
Year ended 30 June 2020
Hybrids representing around 40% of the portfolio gained 1.3% over the year and proved defensive.
Apart from a brief liquidity induced sell off in March, hybrids regained their March losses by June and
the major banks continued to preference hybrid distributions over bank dividends. Average major
bank hybrid margins peaked at 8.5% in March and finished the quarter at 3.3%. APRA provided capital
relief to the banking sector and bank capital raisings were a credit positive for bank hybrids. The RBA
cut rates to 0.25% and introduced quantitative easing causing increased appetite for higher yield
credit.
Utilities suffered losses as the regulator reset lower the allowable regulated returns for the industry.
The portfolio increased its utilities exposure in the June quarter attracted to the sector’s high security
cashflow and high dividend yield.
The portfolio held a large position in REITS with exposure mainly to industrial, healthcare, non-
discretionary retail, and long leased assets to high grade tenants. These investments proved defensive
with stable cashflows and experienced losses of -4.5% compared to the broader REIT Index that fell -
21.3%. The property trust sector was impacted by the mandatory code of conduct between landlords
and tenants introduced by the government. An investment in Australian Unity Healthcare (unlisted)
was introduced for added diversification and secure and growing cashflows from the health care
industry.
Buy & writes suffered from bank exposure of around 9%. Banks felt the brunt of the Covid-19 crisis
sell off (WBC -34%, ANZ -31% , NAB-28%, CBA-11%) with option premium only providing partial
protection. Better performance by BHP, Telstra, Coles, and Ramsay Health Care mitigated banking
losses. The manager took advantage of the spike in market volatility caused by the Covid-19 sell off to
increase buy & write holdings by 4% outside of the major banks. New buy & write return parameters
lifted significantly because of higher volatility.
IRONBARK CAPITAL Jun 2020
12 months - performance & sector contribution
Benchmark (1yr swap+6%)
PORTFOLIO TOTAL
hybrids & corp bonds
buy & writes & equities
utilities
property trusts
cash
-4.38%
-3.87%
0.49%
0.06%
0.01%
-1.05%
6.62%
-7%
-5%
-3%
-1%
1%
3%
5%
7%
9%
IRONBARK CAPITAL Jun 2020
12 months- comparative sector returns
hybrids & corp bonds
buy & writes & equities
utilities
property trusts
-21.3%
cash
-7.6%
-10.3%
-1.9%
-3.8%
-4.5%
1.4%
1.3%
0.7%
0.8%
*ASX300 Accum Index
ASX Index Returns
Fund Sector Returns
-30%
-20%
-10%
0%
10%
KAPLAN FUNDS MANAGEMENT
7
Ironbark Capital Limited
ABN 89 008 108 227
Portfolio Shareholdings as at 30 June 2020
Market
Value*
$'000
% of
portfolio
%
exposure**
ASX Code
Security
ANZ
CBA
NAB
WBC
Banks
ANZ Banking Group Limited
Commonwealth Bank of Australia Limited
National Australia Bank Limited
Westpac Banking Corporation Limited
AMPPA
ANZPG
BOQPE
BENPG
CBAPD/PG/PI
IAGPD
MAC05
MBLPC
MQGPB/PC/PD
NABPD/PE/PF
NABHA
NAB1249
QUBHA
RHCPA
SUNPF/PG
WBCPG
Hybrids & Corporate Bonds
AMP Limited - Capital Notes
ANZ Banking Group Limited - Capital Notes
Bank of Queensland Limited - Capital Notes
Bendigo & Adelaide Bank Limited - Convertible Preference Shares
Commonwealth Bank of Australia Limited - Capital Notes
Insurance Australia Group Limited - Capital Notes
Macquarie Bank Limited - Subordinated Notes (Unlisted)
Macquarie Bank Limited - Capital Notes
Macquarie Group Limited - Capital Notes
National Australia Bank Limited - Capital Notes
National Australia Bank Limited - Income Securities
National Australia Bank Limited - Capital Notes (Unlisted)
Qube Holdings Limited - Subordinated Notes
Ramsay Healthcare Limited - Perpetual Preference Securities
Suncorp Group Limited - Capital Notes
Westpac Banking Corporation Limited - Capital Notes
COL
RHC
TLS
BHP
AOF
AUHW
CIP
COF
CLW
GOZ
LLC
PWG
SCP
WPR
SDF
SKI
Large Industrial
Coles Group Limited
Ramsay Health Care Limited
Telstra Corporation Limited
Materials & Energy
BHP Billiton Limited
Property
Australian Unity Office Fund
Australian Unity Healthcare Wholesale Fund (Unlisted)
Centuria Industrial REIT
Centuria Office REIT
Charter Hall Long WALE REIT
Growthpoint Properties Australia
Lend Lease Group
Primewest Group
SCA Property Group
Waypoint REIT
Small Industrial
Steadfast Group Limited
Utilities & Infrastructure
Spark Infrastructure Group
Cash
*Includes market value of options written against holdings
**Includes option delta written against holdings
8
1,910
3,187
1,609
2,810
9,516
301
726
1,901
765
2,468
2,071
506
626
2,103
3,536
986
494
1,317
581
2,611
1,944
22,936
465
265
333
1,063
8,089
8,089
42
1,976
380
860
4,526
402
151
307
207
4,427
13,278
1,126
1,126
2,138
2,138
645
3.2
5.4
2.7
4.8
16.1
0.5
1.2
3.2
1.3
4.2
3.5
0.9
1.1
3.6
6.0
1.7
0.8
2.2
1.0
4.4
3.3
38.9
0.8
0.5
0.6
1.9
13.8
13.8
0.1
3.4
0.6
1.5
7.7
0.7
0.3
0.5
0.4
7.5
22.7
1.9
1.9
3.6
3.6
1.1
2.0
3.6
1.4
2.3
9.3
0.5
1.2
3.2
1.3
4.2
3.5
0.9
1.1
3.6
6.0
1.7
0.8
2.2
1.0
4.4
3.3
38.9
0.4
0.2
0.4
1.0
9.0
9.0
0.1
3.4
0.6
1.5
7.7
0.7
0.1
0.5
0.4
7.5
22.5
1.9
1.9
3.6
3.6
13.8
58,791
100.0
100.0
Ironbark Capital Limited
ABN 89 008 108 227
Directors’ Report
Year ended 30 June 2020
Directors’ Report
Your Directors present their report on the Company for the year ended 30 June 2020.
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 AM
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
2020
Ordinary shares -
Final
Ordinary shares –
Interim
2019
Ordinary shares -
Special
Ordinary shares –
Final
Ordinary shares –
Interim
16/06/2020
1.0cps
$1,232
26/06/2020
100
20/02/2020
1.2cps
$1,478
12/03/2020
100
17/06/2019
1.45cps
$1,786
26/06/19
100
19/03/2019
1.8cps
$2,217
2/04/2019
100
31/08/2018
0.85cps
$1,167
18/09/2018
100
Review of Operations
The loss from ordinary activities after income tax amounted to $2,614,000 (2019: Profit $5,604,000).
The net tangible asset backing before tax for each ordinary share as at 30 June 2020 amounted to
$0.492 per share (2019: $0.545 per share). The NTA was after payment of 2.2 cents per share fully
franked dividends.
Earnings per share
2020
Basic and diluted earnings per share (cents per share) (2.12)
2019
4.33
9
Ironbark Capital Limited
ABN 89 008 108 227
Directors’ Report
Year ended 30 June 2020
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
Until a suitable treatment is found, the COVID-19 pandemic will continue to impact various ASX listed
companies, their market value and their dividends or distributions. This will continue to have a
derivative effect on the Company which may impact dividend income and the value of its investments.
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
As stated in the Chairman's Review of Operations & Activities and in the preceding paragraph, the
Company will be impacted in the 2021 financial year as companies in various sectors re-assess their
approach to the payment of dividends and their share values fluctuate with the uncertainty.
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 in the current economic climate.
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 AM 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.
Former directorships
Chairman, IMB Limited.
Interests in shares
2,152,971 shares
Ross J Finley B Comm (NSW)
Experience and expertise
Investment manager and stockbroker
Other current directorships
Director, WAM Leaders Limited
Director, Century Australia Investments Limited
Interests in shares
700,000 shares
10
Ironbark Capital Limited
ABN 89 008 108 227
Directors’ Report
Year ended 30 June 2020
Ian J Hunter BA LLB (Syd), MBA (MGSM) Audit Committee Chairman
Experience and expertise
Banking and finance
Other directorships
Director, Platinum Asia Investments Limited
Interests in shares
1,663,631 shares
The particulars of directors’ interests in shares of the Company are as at the date of this report.
Company Secretary
The Company Secretary is Ms Jill Brewster. She has been Company Secretary for a number of
companies 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.
Meetings of directors
The numbers of meetings of the Company’s Board of Directors and Audit Committee held during the
year ended 30 June 2019, and the numbers of meetings attended by each Director were:
Board meetings
Audit Committee
Michael J Cole
Ross J Finley
Ian J Hunter
A
4
4
4
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
4
4
4
A
2
2
2
B
2
2
2
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 2020
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.
2020
Name
MJ Cole
RJ Finley
IJ Hunter
2019
Name
MJ Cole
RJ Finley
IJ Hunter
Cash salary
and fees
$
Superannuation
$
Total
$
22,000
22,000
22,000
66,000
-
-
-
-
Superannuation
$
Total
$
-
-
-
-
22,000
22,000
22,000
66,000
22,000
22,000
22,000
66,000
Cash salary
and fees
$
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 from Ironbark Capital Limited. 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:
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.
12
Ironbark Capital Limited
ABN 89 008 108 227
Directors’ Report
Year ended 30 June 2020
2020
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
1,300,000
500,000
1,575,000
3,375,000
852,971
200,000
88,631
1,141,602
2,152,971
700,000
1,663,631
4,516,602
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 2020 (2019: $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 AM
Director
Sydney
26 August 2020
13
Ironbark Capital Limited
ABN 89 008 108 227
Statement of Profit or Loss and
Other Comprehensive Income
For the year ended 30 June 2020
Notes
6
6
19 (b)
19 (b)
19 (a)
17
2020
$'000
2019
$'000
2,758
(6,443)
(3,685)
(265)
30
(18)
(41)
(28)
(30)
(13)
(18)
-
(66)
(46)
(37)
(18)
(29)
(579)
4,015
3,954
7,969
(281)
(763)
(32)
(45)
(37)
(34)
(12)
(17)
(11)
(66)
(47)
(36)
(18)
(28)
(1,427)
Investment income from trading portfolio
Revenue
Net (losses)/gains on trading portfolio
Total investment income from trading portfolio
Expenses
Management fees
Performance 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
(Loss)/profit before income tax
(4,264)
6,542
Income tax benefit/(expense)
7
1,650
(938)
Net (loss)/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
22
(2,614)
-
(2,614)
Cents
(2.12)
5,604
-
5,604
Cents
4.33
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 2020
Notes
2020
$'000
2019
$'000
8
9
10
12
13
14
15
645
296
58,146
3
59,090
2,501
2,501
309
505
66,225
3
67,042
1,202
1,202
61,591
68,244
71
71
5
5
76
1,048
1,048
357
357
1,405
61,515
66,839
67,374
376
(6,235)
67,374
961
(1,496)
61,515
66,839
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Trading portfolio
Other assets
Total current assets
Non- current assets
Deferred tax assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
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 2020
Issued
capital
$'000
Profit
reserve
$'000
Accumulated
losses
$'000
Total
equity
$'000
Notes
Balance at 1 July 2019
67,374
961
(1,496)
66,839
Loss for the year
Transfer to profit reserve
Total comprehensive income for the
year
Transactions with owners in their
capacity as owners:
Dividends paid
16
-
-
-
-
-
(2,614)
(2,614)
2,125
(2,125)
-
2,125
(4,739)
(2,614)
(2,710)
-
(2,710)
Balance at 30 June 2020
67,374
376
(6,235)
61,515
Balance at 1 July 2018
Profit for the year
Transfer to profit reserve
Total comprehensive income for the
year
Transactions with owners in their
capacity as owners:
Dividends paid
16
74,644
527
(1,496)
73,675
-
5,604
5,604
5,604
(5,604)
-
5,604
(5,170)
-
-
-
5,604
(5,170)
(7,270)
-
-
-
-
Buy-back of shares
15(c),(d)
(7,270)
-
Balance at 30 June 2019
67,374
961
(1,496)
66,839
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 2020
Cash flows from operating activities
Interest received
Net proceeds/(purchases) of trading portfolio
Dividends and trust distributions received
Other income received
Management fees paid
Performance fees paid
Other expenses paid
Net cash inflow/(outflow) from operating activities
Cash flows from financing activities
Dividends paid to shareholders
Payments for shares bought back
Net cash (outflow)/inflow from financing activities
Notes
19(c)
21
16(a)
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
8
2020
$'000
124
1,516
2,740
-
(267)
(786)
(281)
2019
$'000
280
9,000
3,771
43
(283)
-
(376)
3,046
12,435
(2,710)
-
(2,710)
(5,170)
(7,270)
(12,440)
336
309
645
(5)
314
309
Non cash: Distribution reinvestment
43
-
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 2020
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 Suite 607, 180 Ocean Street, Edgecliff NSW 2027. The
financial statements of Ironbark Capital Limited are for the year ended 30 June 2020. 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 26 August 2020.
(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
Several amendments and interpretations apply for the first time in 2020, but do not have an impact on the
Financial Statements of the Company:
AASB 2019-3: Interest Rate Benchmark Reform
The amendments provide a number of reliefs, which apply to all hedging relationships that are directly
affected by interest rate benchmark reform. A hedging relationship is affected if the reform gives rise to
uncertainties about the timing and or amount of benchmark-based cash flows of the hedged item or the
hedging instrument. These amendments had no impact on the financial statements of the Company as it
does not have any interest rate hedge relationships.
AASB 2018-7: Definition of Material
This Standard amends AASB 101 Presentation of Financial Statements and AAS 108 Accounting Policies,
Changes in Accounting Estimates and Errors to align the definition of ‘material’ across the standards and to
clarify certain aspects of the definition. The amendments clarify that materiality will depend on the nature or
magnitude of information. An entity will need to assess whether the information, either individually or in
combination with other information, is material in the context of the financial statements. A misstatement of
information is material if it could reasonably be expected to influence decisions made by the primary users.
These amendments had no impact on the financial statements of, nor is there expected to be any future
impact to the Company.
(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.
19
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2020
2. Significant accounting policies (continued)
(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.
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 above.
(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.
20
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2020
2. Significant accounting policies (continued)
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax
assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax
assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends
either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax is recognised in profit or loss in the Statement of Profit or Loss and Other
Comprehensive Income, except to the extent that it relates to items recognised in other comprehensive
income or directly in equity. In this case, the tax is also recognised in other comprehensive income or
directly in equity, respectively.
(d)
Cash and cash equivalents
For the purpose of presentation in the Statement of Cash Flows, cash and cash equivalents includes cash
on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with
original maturities of three months or less that are readily convertible to known amounts of cash and which
are subject to an insignificant risk of changes in value.
(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.
21
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2020
2. Significant accounting policies (continued)
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.
(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.
22
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2020
2. Significant accounting policies (continued)
(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.
(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, including AASB 17 (Insurance Contracts) have been
published that are not mandatory for 30 June 2020 reporting periods and have not yet been adopted in the
financial statements. None of these are expected to have a material impact on the financial statements.
23
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2020
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
Property & Infrastructure Trusts
Materials
Subordinated notes
Corporate floating rate notes
Small Industrials
Telecommunications services
Utilities
Healthcare & biotechnology
Consumer staples
Corporate fixed rate bonds
Cash
Total
Securities representing over 5 percent of the trading portfolio at 30 June 2020 were:
BHP Billiton Limited
Charter Hall Long Wale REIT
Commonwealth Bank of Australia Limited
Waypoint REIT
2020
(%)
16.2
26.2
13.8
2.2
36.8
1.9
0.6
-
0.4
0.8
-
1.1
2019
(%)
56.3
16.9
13.5
-
6.9
1.6
1.3
1.3
0.9
-
0.8
0.5
100.0
100.0
2020
(%)
13.8
7.7
5.4
7.5
34.4
The Company is also not directly exposed to currency risk as all its investments are quoted in Australian
dollars.
24
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2020
3.
Financial risk management (continued)
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 27.5 percent (2019: 27.5 percent):
Index
Change in variable by +5%/-5% (2019: +5%/-5%)
Change in variable by +10%/-10% (2019: +10%/-10%)
This illustration does not take into account covered call option positions
(ii)
Cash flow and fair value interest rate risk
Impact on post-tax profit
2020
2019
$'000
$'000
$'000
$'000
2,108
4,216
(2,108)
(4,216)
2,401
4,801
(2,401)
(4,801)
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 2020
Financial Assets
Cash and cash equivalents
Trade and other receivables
Trading portfolio
Other assets
Financial liabilities
Trade and other payables
Net exposure
30 June 2019
Financial Assets
Cash and cash equivalents
Trade and other receivables
Trading portfolio
Other assets
Financial liabilities
Trade and other payables
Floating
interest rate
$'000
Fixed
interest rate
$'000
Non-interest
bearing
$'000
645
-
22,936
-
23,581
-
-
23,581
-
-
-
-
-
-
-
Total
$'000
645
296
58,146
3
59,090
-
296
35,210
3
35,509
(71)
(71)
(71)
(71)
35,438
59,019
Floating
interest rate
$'000
Fixed
interest rate
$'000
Non-interest
bearing
$'000
309
-
2,869
-
3,178
-
-
-
-
-
-
-
-
-
505
63,356
3
63,864
(1,048)
(1,048)
Total
$'000
309
505
66,225
3
67,042
(1,048)
(1,048)
Net exposure
3,178
-
62,816
65,994
25
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2020
3. Financial risk management (continued)
The weighted average interest rate of the Company's cash and cash equivalents at 30 June 2020 is
0.3% pa (2019: 0.9% pa).
Sensitivity
At 30 June 2020, 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 $128,220 higher/
$128,220 lower (2019: changes of 75 bps/75 bps: $17,281 higher/$17,281 lower).
(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 2020.
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 2020
Non-derivatives
Trade and other payables
Total non-derivatives
Less than 1
month
$'000
More than 1
month
$'000
71
71
-
-
26
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2020
Less than 1
month
$'000
More than 1
month
$'000
1,048
1,048
-
-
3. Financial risk management (continued)
At 30 June 2019
Non-derivatives
Trade and other payables
Total non-derivatives
(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 2020 and 30 June 2019:
30 June 2020
Financial assets
Trading portfolio
Total
30 June 2019
Financial assets
Trading portfolio
Total
Level 1
$'000
55,170
55,170
Level 1
$'000
63,807
63,807
Level 2
$'000
Level 3
$'000
2,976
2,976
Level 2
$'000
2,418
2,418
-
-
Level 3
$'000
-
-
Total
$'000
58,146
58,146
Total
$'000
66,225
66,225
27
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2020
3. Financial risk management (continued)
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
quoted market prices may reflect the economic impact of the COVID-19 pandemic on a listed company.
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.
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 (losses)/gains on trading portfolio
2020
$'000
1,864
119
775
-
2,758
(1,870)
(4,573)
(6,443)
(3,685)
2019
$'000
2,970
272
730
43
4,015
679
3,275
3,954
7,969
28
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2020
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
2020
$'000
(493)
(1,157)
(1,650)
2019
$'000
(103)
1,041
938
(1,650)
938
(b) Numerical reconciliation of income tax expense/(benefit) to prima facie tax payable
Profit from continuing operations before income tax (benefit)/expense
Tax at the Australian rate of 27.5% (2019: 27.5%)
Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
Franking credits on dividends received
Imputation gross up on dividend income
Timing differences
Realised taxable investment gain/(loss)
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
2020
$'000
(4,264)
(1,173)
(798)
219
160
(540)
514
(32)
(1,650)
2019
$'000
6,542
1,799
(1,327)
365
224
82
(187)
(18)
938
2020
$'000
645
2019
$'000
309
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 National Australia Bank Limited which is rated AA- (2019: AA-) by
Standard & Poor's.
29
9. Trade and other receivables
Dividends and distributions receivable
Interest receivable
GST Receivable
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2020
2020
$'000
280
13
3
296
2019
$'000
424
18
63
505
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.
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
Property and infrastructure trusts
Floating rate notes - listed
Subordinated notes- listed
Property trusts - unlisted
Floating rate notes - unlisted
Subordinated notes- unlisted
Fixed rate bonds - unlisted
2020
$'000
2019
$'000
19,794
13,440
21,134
802
1,976
494
506
-
58,146
48,967
12,097
2,743
-
-
1,876
-
542
66,225
The value of the trading portfolio includes the market value of options written against holdings (note 11).
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.
30
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2020
11. Derivative financial instruments (continued)
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.
At year end, the notional principal amounts of derivatives held by the Company were as follows:
Notional
principal
amounts
2020
$'000
Notional
principal
amounts
2019
$'000
(1,422)
(3,082)
2020
$'000
797
1,653
51
2,501
1,202
352
947
2,501
2019
$'000
-
1,150
52
1,202
1,791
(707)
118
1,202
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:
- (from)/to deferred tax liabilities
- to profit or loss
31
13. Trade and other payables
Management fees payable
Performance fee payable
Unsettled purchases
Other payables
14. Deferred tax liabilities
The balance comprises temporary differences attributable to:
Accrued income
Unrealised gains on investments
Movements:
Opening balance
Charged/credited
- to profit or loss
- (to)/from deferred tax assets
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2020
Notes
19(c)
19(c)
2020
$'000
22
-
-
49
71
2019
$'000
24
819
162
43
1,048
2020
$'000
2019
$'000
5
-
5
357
-
(352)
5
5
352
357
7
(357)
707
357
15. Issued capital
(a)
Issued capital
30 June
2020
Shares
30 June
2019
Shares
2020
$'000
2019
$'000
Ordinary shares - fully paid
123,166,545
123,166,545
67,374
67,374
(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 2019
Balance at 30 June 2020
Number of
shares
123,166,545
-
123,166,545
$'000
67,374
-
67,374
32
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2020
15. Issued capital (continued)
(d)
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.
(e)
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.
16. Dividends
(a)
Ordinary Shares recognised as paid
Special dividend
Final dividend
Interim dividends
(b)
Dividend franking account
Opening balance of franking account
Franking credits on dividends received
Franking credits on ordinary dividends paid
Closing balance of franking account
Franking credits on dividends received after year end
33
2020
$'000
-
1,232
1,478
2,710
2020
$'000
237
798
(1,028)
7
15
15
22
2019
$'000
1,786
2,217
1,167
5,170
2019
$'000
871
1,327
(1,961)
237
84
84
321
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2020
16. Dividends (continued)
(c)
Dividend rate
Record
Date
Dividend
Rate
Total Amount
$’000
Date of
Payment
% Franked
2020
Ordinary shares -
Final
16/06/2020
1.0cps
$1,232
26/06/2020
100
Ordinary shares –
Interim
20/02/2020
1.2cps
$1,478
12/03/2020
100
2019
Ordinary shares -
Special
Ordinary shares –
Final
Ordinary shares –
Interim
17/06/2019
1.45cps
$1,786
26/06/19
100
19/03/2019
1.8cps
$2,217
2/04/2019
100
31/08/2018
0.85cps
$1,167
18/09/2018
100
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
18. Contingencies
30 June
2020
$'000
30 June
2019
$'000
37
36
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 2020 (2019: nil).
34
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2020
2020
$'000
66
2019
$'000
66
19. Related party transactions
(a) Key management personnel
Short-term benefits
(b) Transactions with other related parties
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.
Under the terms of the Management Agreement, a performance fee is payable when the performance of
the Company exceeds the 1 year swap rate plus 6%.
The following transactions occurred with related parties (exclusive of RITC):
Management fees paid or payable
Performance fee payable
2020
$'000
265
-
2019
$'000
281
763
The performance fee accrual as at 30 June 2019 was adjusted following an external review of the
calculation of the performance fee. A reversal of $30,000 (net of RITC) was posted in the current year prior
to payment.
(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
Performance fees payable
30 June
2020
$'000
30 June
2019
$'000
22
-
22
24
819
843
The performance fee payment of $786,000 reflects the $33,000 adjustment inclusive of GST.
(d) Terms and conditions
Transactions between related parties are on normal commercial terms and conditions no more favourable
than those available to other parties unless otherwise stated.
35
Ironbark Capital Limited
ABN 89 008 108 227
Notes to the Financial Statements
For the year ended 30 June 2020
20. Events occurring after the reporting period
The impact of the COVID-19 virus will continue to be reflected in the market prices and income of the
underlying investments.
Other than noted in this report, the Directors are not aware of any matter or circumstance that 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
(Loss)/profit for the year
Unrealised losses/(gains) on trading portfolio
Realised losses/(gains) on trading portfolio
Distribution reinvestment
Change in operating assets and liabilities
Decrease in trade and other receivables
(Decrease)/Increase in trade and other payables
(Decrease)/Increase in tax
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
(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
2020
$'000
(2,614)
4,574
1,870
(43)
209
(816)
(1,650)
1,516
3,046
2019
$'000
5,604
(3,275)
(679)
-
722
986
938
8,139
12,435
2020
Cents
2019
Cents
(2.12)
(2.12)
4.33
4.33
2020
Cents
2019
Cents
(2.12)
(2.12)
4.33
4.33
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
2020
Number
2019
Number
Weighted average number of ordinary shares used as the denominator in
calculating basic and diluted earnings per share
123,166,545
129,289,938
36
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 36 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 2020 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 AM
Director
Sydney
26 August 2020
37
Ironbark Capital Limited
ABN 89 008 108 227
Shareholder Information
Shareholder Information
Stock Exchange Listing
Ironbark has 123,166,545 fully paid ordinary shares on issue held by 1,698 security holders. These
are listed on the Australian Securities Exchange under ASX code: IBC.
Transaction Summary
The Company conducted 493 security transactions during the financial year. Brokerage paid during
the year net of RITC claimable was $17,991.
Voting rights
The Constitution provides for votes to be cast for fully paid ordinary shares as follows:
i.
ii.
on a show of hands, every member present in person, by proxy, by attorney or corporate
representative has 1 vote; and
on a poll, every member present in person, by proxy, by attorney or corporate representative
has 1 vote for each share held by the member.
Distribution of security holdings
As at 11 September 2020 there were 1,698 shareholders of fully paid ordinary shares in Ironbark
Capital Limited. These holders were distributed as follows:
No. of
Shareholders
274
346
215
741
122
1,698
Holdings Range
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001 and over
Totals
Shares
97,592
997,638
1,624,411
24,846,715
95,600,189
123,166,545
%
0.08
0.81
1.32
20.17
77.62
100.00
There were 283 shareholders holding less than a marketable parcel of 1,136 ordinary shares/$500,
based on a share price of $0.44.
Investment Management Agreement
The Investment Management Agreement with Kaplan Funds Management Pty Limited, the
Investment Manager, provides for an annual Management Fee of 0.40% p.a. based on the portfolio
value at the end of each month, which is charged monthly.
At the end of each financial year, the Company will determine whether a performance fee is payable,
based on a rate of 15% of the outperformance of the benchmark 1 year swap rate plus 6%, adjusted
for the value of franking credits received (after adjustment for the Management Fee and the
applicable GST). The high water mark is reset every 3 years.
43
Ironbark Capital Limited
ABN 89 008 108 227
Shareholder Information
Largest twenty shareholders
The largest 20 shareholders of the Company’s shares as at 11 September 2020 are listed below:
Ordinary Shares
Holder Name
KAPLAN PARTNERS PTY LIMITED
NATIONAL NOMINEES LIMITED
AUSTRALIAN EXECUTOR TRUSTEES LIMITED
MRS GLENDA CLAIRE ORGILL
ABTOURK (SYD NO 415) PTY LTD
LIANGROVE MEDIA PTY LIMITED
HPIC PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
SUPENTIAN PTY LIMITED
BOND STREET CUSTODIANS LIMITED
LIANGROVE GROUP PTY LTD
AGO PTY LTD
BOND STREET CUSTODIANS LIMITED
BOND STREET CUSTODIANS LIMITED
MR JOHN KENNETH CAMERON POTTS & MRS MARGARET
HAMILTON POTTS
BOND STREET CUSTODIANS LIMITED
BOND STREET CUSTODIANS LIMITED
DANEJON PTY LIMITED
WENTRADING PTY LTD
MISS SAMANTHA ORGILL
Number Held
41,838,109
10,201,944
2,415,039
2,374,441
2,152,971
1,943,456
1,697,625
1,683,469
1,663,631
1,389,077
1,166,081
1,122,242
806,127
712,982
618,750
616,331
601,912
600,000
584,293
577,253
%
33.97%
8.28%
1.96%
1.93%
1.75%
1.58%
1.38%
1.37%
1.35%
1.13%
0.95%
0.91%
0.65%
0.58%
0.50%
0.50%
0.49%
0.49%
0.47%
0.47%
74,765,733
60.70%
Total Securities as per Register
123,166,545
Substantial shareholders
As at 11 September 2020 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
28 Dec 2018
Number Held
46,445,116
%
37.71%
Ordinary Shares
On-market buy-back
There is no current on-market buy-back of shares.
44