INVESTSMART GROUP LIMITED — Interim / Quarterly Report 2017

Feb 14, 2017

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15 February 2017

Attention: Company Announcements ASX Limited

By E-Lodgement

RESULTS FOR ANNOUNCEMENT TO THE MARKET

Appendix 4D - Half-year report for period ended 31 December 2016

Name of Entity	InvestSMART Group Limited
ABN	62 111 772 359
Period Ended	31 December 2016
Previous Corresponding Reporting Period	31 December 2015

This page and the following 18 pages comprise the half-year information provided to ASX Limited pursuant to Listing Rule 4.2A.3. This information should be read in conjunction with the financial report for the half-year ended 31 December 2016.

	31 December 2016 ($’000)	31 December 2015 ($’000)	Increase over previous corresponding period
Revenues from ordinary activities	7,275	5,932	22.6%
Profit from ordinary activities	483	210	130%
Net profit attributable to members	483	210	130%

Dividend

It is not proposed to pay a dividend.

Net tangible assets per share

	31 December 2016 (cents)	31 December 2015 (cents)
Net tangible assets per share	1.12	1.84

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InvestSMART Group Limited ABN 62 111 772 359

Report for the half-year ended 31 December 2016

InvestSMART Group Limited ABN 62 111 772 359 Contents

Contents	Page
Directors' Report	3
Auditor’s Independence Declaration	4
Consolidated Statement of Comprehensive Income	5
Consolidated Statement of Financial Position	6
Consolidated Statement of Changes in Equity	7
Consolidated Statement of Cash Flows	8
Notes to the Consolidated Financial Statements	9
Directors' Declaration	16
Independent Auditor’s Review	17

2

InvestSMART Group Limited ABN 62 111 772 359 Directors’ Report for the half-year ended 31 December 2016

Directors’ Report

The Directors of InvestSMART Group Limited ( Company ) present their report on the consolidated entity comprised of the Company and the entities it controlled at the end of, or during, the half-year ended 31 December 2016 ( Group ).

Directors

The Directors of the Company during the whole of the half-year, and up to the date of this report, are:

Paul Clitheroe AM (Chairman) Michael Shepherd AO Ron Hodge (Managing Director)

Review and Results of Operations

The Group continues to provide financial services under general advice to retail investors in particular in the area of wealth management. It is a leading provider of general financial advice to retail clients and self-managed superfunds providing high quality, share research and portfolio management tools and investment opportunities, to private investors.

The Group experienced an increase in both revenue and profits during the half-year compared with the same period in the previous financial year. Revenue for the half-year was $7,324,716 (2015: $5,931,600). This was largely an increase in subscription revenue following the strategic acquisition of Eureka Report Pty Limited in April 2016. Group profit before income tax also increased in the half-year to $708,377 (2015: $279,322).

The Group will continue to pursue its objectives of increasing the number of subscribers to its services, including users of its free portfolio management service, and the number of investors in its fund management products. The Group also intends to pursue strategic partnerships with specific product providers over the next 12 months. There is a risk of a material decline in Group revenues if there is a significant and sustained equity market fall, however, the Group has plans to reduce as many variable costs as possible in that event.

Employee Share Ownership Plan

The Company lent $1,804,200 to the Managing Director and employees of the Group to acquire 5,820,000 ordinary shares on 28 December 2016 ( Grant Date ) as part of the Employee Share Ownership Plan ( ESOP ), which was approved by shareholders at the Annual General Meeting on 29 November 2016. The shares were issued on the Grant Date.

These shares have not vested and therefore have not been included in share capital. The shares will vest in three equal tranches on the first, second and third anniversaries of the Grant Date. The Company estimates the fair value of this director/employee share benefit is $329,716 at the Grant Date.

Matters subsequent to the end of the half-year

No matter or circumstances have arisen since 31 December 2016 that have significantly affected, or may significantly affect:

(a) the Group’s operations in future financial years, or

(b) the results of those operations in future financial years, or

(c) the Group’s state of affairs in future financial years.

Auditor’s Independence Declaration

The auditor’s independence declaration required under section 307C of the Corporations Act 2001 is included on page [number] of the half-year report.

This report is made in accordance with a resolution of the Directors.

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Paul Clitheroe AM Chairman

Sydney 15 February 2017

3

Ernst & Young 200 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001

Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 www.ey.com/au

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Auditor’s Independence Declaration to the Directors of InvestSMART Group Limited

As lead auditor for the review of InvestSMART Group Limited for the half-year ended 31 December 2016, I declare to the best of my knowledge and belief, there have been:

• a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the review ; and

• b) no contraventions of any applicable code of professional conduct in relation to the review.

This declaration is in respect of InvestSMART Group Limited and the entities it controlled during the financial period.

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Ernst & Young

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Damien Jones Partner Sydney 15 February 2017

A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation

InvestSMART Group Limited ABN 62 111 772 359 Consolidated Statement of Comprehensive Income for the half-year ended 31 December 2016

Consolidated Statement of Comprehensive Income for the half-year ended 31 December

		2016	2015
	Notes	$	$
Continuing operations
Commission income		3,787,245	4,124,892
Subscription income Interest income from financial assets Gain in fair value of financial assets Other income Total Income		3,452,986 18,960 8,008 7,517 7,274,716	1,642,582 9,368 3,530 151,228 5,931,600
Commission rebates		1,015,489	995,259
Accounting and administrative costs		25,700	112,870
Audit fees		68,670	55,620
Directors’ fees		91,615	103,785
Employee costs		2,894,215	2,254,614
Employee benefit expense	5	82,298	308,336
IT expense		340,272	302,654
Travel and accommodation		53,883	9,977
Rent		211,190	173,841
Legal, insurance and statutory expenses		162,232	81,131
Marketing expense		434,311	363,080
Other expenses		446,395	280,623
Depreciation		56,739	48,188
Amortisation of intangibles		683,330	562,300
Total operating expenses		6,566,339	5,652,278
Profit before income tax		708,377	279,322
Income tax expense	6	225,736	69,255
Profit for the half-year		482,641	210,067
Other comprehensive income, net of income tax		-	-
Total comprehensive profit for the half-year		482,641	210,067
Earnings per share
Basic earnings per share [cents]	10	0.64	0.19
Diluted earnings per share [cents]	10	0.53	0.16

This Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes on pages 9 to 15

5

InvestSMART Group Limited ABN 62 111 772 359 Consolidated Statement of Financial Position

Consolidated Statement of Financial Position

Notes ASSETS Cash and cash equivalents Trade and other receivables Prepayments Rental deposit Financial assets at fair value through profit and loss 7 Fixed assets, including software less accumulated depreciation Deferred tax asset Goodwill Intangibles Total Assets LIABILITIES Trade payables Other payables Subscriptions received in advance Trail commissions to rebate Deferred tax liability Total liabilities Net assets Equity Issued capital Employee benefit reserve 5 Retained earnings Total equity	As at 31 December 2016 $ 4,836,718 662,358 183,956 35,125 1,521,206 292,115 506,130 23,610,664 8,305,740 39,954,012 125,636 1,629,544 3,388,974 1,145,725 2,492,358 8,782,237 31,171,775 58,522,440 747,300 (28,097,965) 31,171,775	As at 30 June 2016 $ 4,986,827 622,379 169,760 56,264 1,638,448 264,340 613,248 23,610,664 8,988,770 40,950,700 82,964 1,786,751 4,437,135 1,339,828 2,697,185 10,343,863 30,606,837 58,522,440 665,002 (28,580,605) 30,606,837

This Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes on pages 9 to 15.

6

InvestSMART Group Limited ABN 62 111 772 359 Consolidated Statement of Changes in Equity

Consolidated Statement of Changes in Equity

Balance as at 1 July 2015 Comprehensive loss for the year Employee benefit reserve Balance as at 31 December 2015 Balance as at 1 July 2016 Comprehensive profit for the year Employee benefit reserve Balance as at 31 December 2016	Issued Capital Retained earnings Employee Benefit Reserve Total Equity $ $ $ $ 58,522,440 (28,755,765) 102,125 29,868,800 - 210,067 - 210,067 - - 308,336 308,336
	58,522,440 (28,545,698) 410,461 30,387,203
	58,522,440 (28,580,606) 665,002 30,606,836 - 482,641 - 482,641 - - 82,298 82,298
	58,522,440 (28,097,965) 747,300 31,171,775

This Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes on pages 9 to 15.

7

InvestSMART Group Limited ABN 62 111 772 359 Consolidated Statement of Cash Flows

Consolidated Statement of Cash Flows for the half-year ended 31 December

Notes Cash flows from operating activities Operating income received Interest received Other income received Payments to suppliers and employees Income Tax Paid Net cash (used in) provided by operating activities Cash flows from investing activities Purchase of fixed assets Rental deposit refund (paid) Sale (purchase) of investments Net cash provided by/ (used in) investing activities Cash flows from financing activities Net cash (outflow)/inflow from financing activities Net (decrease) increase in cash and cash equivalents Cash and cash equivalents at beginning of the period Cash and cash equivalents at the end of the period	2016 $ 5,957,987 18,960 15,670 (5,786,622) (417,284) (211,289) (85,209) 21,139 125,250 61,180 - (150,109) 4,986,827 4,836,718	2015 $ 5,551,332 9,368 151,228 (5,441,095) -
		270,833 (5,499) (7,314) (20,000)
		(32,813) - 238,020 3,292,828 3,530,848

This Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes on pages 9 to 15.

8

InvestSMART Group Limited ABN 62 111 772 359 Notes to Consolidated Financial Statements for the half-year ended 31 December 2016

Notes to the Consolidated Financial Statements for the half-year ended 31 December 2016

1. Reporting Entity

InvestSMART Group Limited ( Company ) is a for profit company limited by shares incorporated in Victoria, Australia. The shares of the Company are listed on the Australian Securities Exchange.

The Group is comprised of the Company and the entities it controlled at the end of, or during, the half-year ended 31 December 2016 (each a Group Entity ). The Group is domiciled in Australia and is primarily involved in delivering financial services to retail investors, primarily in wealth management.

2. Summary of significant accounting policies

Statement of compliance

The half-year financial report is a general purpose financial report prepared in accordance with the Corporations Act 2001 and AASB 134 ‘Interim Financial Reporting’. Compliance with AASB 134 ensures compliance with International Financial Reporting Standard IAS 34 ‘Interim Financial Reporting’. The half-year report does not include notes of the type normally included in an annual financial report and should be read in conjunction with the annual financial report of the Group for the year ended 30 June 2016.

Basis of preparation

The half-year financial report has been prepared on the basis of historical cost, except for the revaluation of certain noncurrent assets and financial instruments. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, unless otherwise stated.

The accounting policies and methods of computation adopted in the preparation of the half-year financial report are consistent with those adopted and disclosed in the annual financial report of the Group for the year ended 30 June 2016. These accounting policies are consistent with Australian Accounting Standards and with International Financial Reporting Standards.

The financial statements were approved by the Directors on 15 February 2017.

Changes in accounting policies, accounting standards and interpretations

The accounting policies adopted in the preparation of the half-year financial report are consistent with those followed in the preparation of the annual financial report of the Group for the year ended 30 June 2016.

Intercompany transactions and balances

Intercompany transactions, balances and unrealised gains on transactions between Group Entities are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of Subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Where there is a change in ownership interest, there will be an adjustment between the carrying amounts of the controlling and non-controlling interests to reflect their relative interests in the Subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognised in a separate reserve within equity attributable to owners of the Company.

When the Company acquires control through a change in investment policy, the entity is remeasured to its fair value with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, jointly controlled entity or financial asset. Any amounts above net tangible assets are held as goodwill or intangibles at that point.

If the ownership interest in a jointly-controlled entity or an associate is reduced but joint control or significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss where appropriate.

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InvestSMART Group Limited ABN 62 111 772 359 Notes to Consolidated Financial Statements for the half-year ended 31 December 2016

Notes to the Consolidated Financial Statements for the half-year ended 31 December 2016 (continued)

2. Summary of significant accounting policies (continued)

Intercompany transactions and balances (continued)

When the Group ceases to have control, joint control or significant influence, any retained interest in the entity is remeasured to its fair value with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, jointly controlled entity or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.

If the ownership interest in a jointly-controlled entity or an associate is reduced but joint control or significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss where appropriate.

Earnings per share

Basic and diluted earnings per share are calculated by dividing profit attributable to members of the Company by the weighted average number of ordinary shares outstanding during the period, adjusted for any outstanding options over unissued shares, including the Long Term Incentive Plan and Employee Share Ownership Plan shares.

New and amended standards and interpretations

Australian Accounting Standards and Interpretations have recently been issued or amended, but are not yet effective, which have not been adopted by the Group in the presentation of this financial report.

1. AASB 15 - Revenue from Contracts with Customers

AASB 15 Revenue from Contracts with Customers replaces the existing revenue recognition standards AASB 111 Construction Contracts, AASB 118 Revenu e and related Interpretations (Interpretation 13 Customer Loyalty Programmes , Interpretation 15 Agreements for the Construction of Real Estate, Interpretation 18 Transfers of Assets from Customers , Interpretation 131 Revenue—Barter Transactions Involving Advertising Services and Interpretation 1042 Subscriber Acquisition Costs in the Telecommunications Industry ). AASB 15 incorporates the requirements of IFRS 15 Revenue from Contracts with Customers issued by the International Accounting Standards Board.

AASB 15 specifies the accounting treatment for revenue arising from contracts with customers (except for contracts within the scope of other accounting standards such as leases or financial instruments). The core principle of AASB 15 is that an entity recognises 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 those goods or services. An entity recognises revenue in accordance with that core principle by applying the following steps:

• (a) Step 1: Identify the contract(s) with a customer

• (b) Step 2: Identify the performance obligations in the contract

• (c) Step 3: Determine the transaction price

• (d) Step 4: Allocate the transaction price to the performance obligations in the contract

• (e) Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation.

The Group has a liability to service customers who have purchased subscriptions in advance and recognises revenue when that subscription service has been delivered. The Group is assessing the potential impact of implementation of this standard, however, initial assessment indicates that the impact will be minimal.

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InvestSMART Group Limited ABN 62 111 772 359 Notes to Consolidated Financial Statements for the half-year ended 31 December 2016

Notes to the Consolidated Financial Statements for the half-year ended 31 December 2016 (continued)

2. Summary of significant accounting policies (continued)

New and amended standards and interpretations (continued)

1. AASB 16 - Leases

AASB 16 introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognise a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligations to make lease payments.

Assets and liabilities arising from a lease are initially measured on a present value basis. The measurement includes noncancellable lease payments (including inflation-linked payments), and includes payments to be made in optional periods if the lessee is reasonably certain to exercise an option to extend the lease, or not to exercise an option to terminate the lease.

AASB 16 contains disclosure requirements for lessees. Lessees will need to apply judgement in deciding upon the information to disclose to meet the objective of providing a basis for users of financial statements to assess the effect that leases have on the financial position, financial performance and cash flows of the lessee.

AASB 16 substantially carries forward the lessor accounting requirements in AASB 117 Leases. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently. AASB 16 also requires enhanced disclosures to be provided by lessors that will improve information disclosed about a lessor’s risk exposure, particularly to residual value risk.

This standard is applicable to annual reporting periods beginning on or after 1 January 2019. The Group is assessing the potential impact of the implementation of this standard.

3. Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectation of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances. Estimates of future cash flows have been used to estimate fair value of the assets acquired and liabilities assumed in the business combination. In particular, the fair value of intangible assets has been calculated using management’s estimates of future cash flows from the identified intangible assets of each Group entity for the period of their expected useful life.

The residual goodwill arising from a business combination is tested for impairment at each balance date and when circumstances indicate that the carrying value may be impaired. The Group bases its assumptions used to test the impairment of goodwill on detailed budgets and forecasts which are prepared for the Group’s cash generating unit ( CGU ). These budgets generally cover a five year period, and a long-term growth rate (net of inflation) is used for longer periods.

Any impairment of goodwill is determined by assessing the recoverable amount of the CGU to which the goodwill relates. The Group has determined that it has one CGU, and where the recoverable amount is less than the carrying value of goodwill, an irreversible impairment loss is recognised.

The Group has not recognised deferred tax assets relating to carried forward capital gain tax losses on the basis that it does not expect to derive sufficient future capital gains to utilise the current losses within a 3 to 5 year time period. It has not recognised deferred tax assets relating to carry forward tax losses, due to the complexities arising from utilising losses acquired in Subsidiaries.

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InvestSMART Group Limited ABN 62 111 772 359 Notes to Consolidated Financial Statements for the half-year ended 31 December 2016

Notes to the Consolidated Financial Statements for the half-year ended 31 December 2016 (continued)

4. Segment Information

The Group is currently organised into one business segment. The Group is engaged solely in financial services conducted in Australia, deriving revenue primarily from commission income and subscription income from its activities.

5. Employee Benefit expense Employee Share Ownership Scheme (ESOP) Long Term Incentive Plan (LTIP)		For the half-year ended 31 December 2016 2015 $ $ 548 - 81,750 308,336 82,298 308,336	For the half-year ended 31 December 2016 2015 $ $ 548 - 81,750 308,336 82,298 308,336
		2016 $ 548 81,750 82,298
			308,336

The cost of the ESOP and LTIP shares have been estimated using Monte-Carlo simulation and the Black-Scholes methodology and amortised to their loan maturity dates.

6. Income tax Income tax expense recognised in the Statement of Comprehensive Income The components of income tax expense: Current income tax expense Deferred tax income relating to the origination and reversal of temporary differences Total income tax expense 7. Financial Assets held at Fair Value AWI Ventures Pty Ltd investee companies Investments in Separately Managed Accounts Financial assets at fair value through profit and loss		For the half-year ended 31 December 2016 2015 $ $ 323,445 165,912 (97,709) (95,917) 225,736 69,995 31 December 30 June 2016 2016 $ $ 1,385,000 1,510,000 136,206 128,448 1,521,206 1,638,448	For the half-year ended 31 December 2016 2015 $ $ 323,445 165,912 (97,709) (95,917) 225,736 69,995 31 December 30 June 2016 2016 $ $ 1,385,000 1,510,000 136,206 128,448 1,521,206 1,638,448
		2016 $ 323,445 (97,709) 225,736 31 December 2016 $ 1,385,000 136,206 1,521,206
			69,995 30 June 2016 $ 1,510,000 128,448
			1,638,448

The Separately Managed Accounts are issued by Praemium Australia Limited as the responsible entity and managed by InvestSMART Financial Services Pty Ltd.

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InvestSMART Group Limited ABN 62 111 772 359 Notes to Consolidated Financial Statements for the half-year ended 31 December 2016

Notes to the Consolidated Financial Statements for the half-year ended 31 December 2016 (continued)

8. Fair Value Hierarchy

AASB 13 requires the Group to classify fair value measurements using a fair value hierarchy that reflects the subjectivity of the inputs used in making the measurements. The fair value hierarchy has the following levels:

• Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2 - Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).

• Level 3 - Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).

There were no transfers between level 1 and level 2 during the year. Transfers between levels of the fair value hierarchy are deemed to occur only when changes in circumstances are identified to indicate a change in observable/unobservable inputs.

The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability.

The determination of what constitutes ‘observable’ requires significant judgement by the Directors. The Directors consider observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.

There has been no change in the Level 2 and Level 3 valuation techniques used for this report form previous reports. The table below sets out the Company’s financial assets (by class) measured at fair value according to the fair value hierarchy at 31 December 2016:

At 31 December 2016 Financial assets Financial assets held at fair value Total At 30 June 2016 Financial assets Financial assets held at fair value Total	Level 1 $ - - - -	Level 2 $ 136,206 136,206 128,448 128,448	Level 3 $ 1,385,000 1,385,000 1,510,000 1,510,000	Total $ 1,521,206
				1,521,206
				1,638,448
				1,638,448

Investments classified within level 3 have significant unobservable inputs, as they are infrequently traded. Unlisted equities are classified within level 3.

Investments classified within level 2 have inputs based on quoted and unquoted prices. The level 2 investments held by the Group relate to investments in Separately Managed Accounts issued by Praemium Australia Limited. The accounts hold primarily listed securities which are valued at the last closing price on the Australian Securities Exchange.

Description of significant unobservable inputs to valuation of Level 3 assets

Through AWI Ventures Pty Ltd, the Group has investments in 10 start-up companies in the financial technology sector. These companies have little or no revenue and therefore cannot be valued using Discounted Cash Flow. The fair value of the investee companies has been assessed as the price at which each investee company raised a material amount of new capital, or historic cost if they have not raised a material amount of new capital, adjusted for the Director’s view of the likely success of the business model and a liquidity discount based on the likelihood of a liquidity event in the next 3 years.

The table below shows the assumptions used by management in assessing fair value of its investments in unlisted equities. As there are no reasonably possible assumptions, therefore no sensitivity quantification has been disclosed.

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InvestSMART Group Limited ABN 62 111 772 359 Notes to Consolidated Financial Statements for the half-year ended 31 December 2016

Notes to the Consolidated Financial Statements for the half-year ended 31 December 2016 (continued)

	Valuation technique	Significant unobservable inputs	Range (weighted average)	Sensitivity to fair value
InvestSMART Group investee companies	Director’s valuation	Last issue price of new equity, last traded price of equity	N/A	An issue of new equity, or trade in existing equity, at a higher or lower price may have significant effect on fair value

The following table shows a reconciliation of the movement in the fair value of financial instruments within Level 3 between the beginning and the end of the reporting period. The carrying value of all financial assets and liabilities approximate their fair value.

Balance as at 1 July 2016 Disposal of investments Adjustment to fair value on unlisted equities Balance as at 31 December 2016	1,510,000 (75,000) (50,000)
	1,385,000

9. Issued capital

On 28 December 2016, the Company issued 5,820,000 shares under the ESOP to the Managing Director and other employees of the Group, which will vest over the next 3 years. Under the ESOP, the director or employee can repay the loan by forfeiting the shares issued under the plan. The shares will only vest certain time periods and may be forfeited prior to the loan repayment date, and have therefore not been included in the issued share capital total

A portion of the Long Term Incentive Plan shares issued to Ron Hodge, Nigel Poole and Alastair Davidson issued on 8 September 2015, vested on 8 September 2016.

Under the LTIP, the director or employee can repay the loan by forfeiting the shares issued under the plan. The shares will only vest when the Company’s share price reaches certain hurdles or after certain time periods and may be forfeited prior to the loan repayment date, and have therefore not been included in the issued share capital total.

10. Earnings per share asic earnings per share From continuing operations attributable to ordinary shareholders Diluted earnings per share From continuing operations attributable to ordinary shareholders Weighted average number of shares Weighted average number of shares used to calculate basic earnings per share Weighted average number of shares used to calculate diluted earnings per share	As	at
	31 December 2016 cents 0.64 0.53 110,885,360 133,205,362	31 December 2015 cents 0.19 0.16 110,885,360 127,385,358

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InvestSMART Group Limited ABN 62 111 772 359 Notes to Consolidated Financial Statements for the half-year ended 31 December 2016

Notes to the Consolidated Financial Statements for the half-year ended 31 December 2016 (continued)

11. Events occurring after reporting date

No matters or circumstances have occurred after the period end that have significantly affected, or may affect, the operations of the Group, the results of those operations or the state of affairs of the Group in subsequent periods.

12. Related Party Transactions

Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. Related party transactions in the reporting period with key management personnel were:

The agreement with Webabout Pty Ltd (an entity controlled by R. Hodge, N. Poole and A. Davidson) providing web hosting services to the Group was terminated on 30 June 2016. No related party payments were made in the half year ended 31 December 2016 (2015: $10,973).

13. Contingent liabilities and commitments

At 31 December 2016, the Group had commitments of $1,294,398 (2015: $198,653) for leased premises. The Company has a lease over offices at Level 9, 37 York St, Sydney, until April 2020 and Eureka Report Pty Ltd has a lease over offices at Level 4, 356 Collins St, Melbourne, until June 2021.

The Group had leases over offices at Level 2, 122 Pitt St, Sydney NSW, which expired on 1 September 2016, and the Esplanade, Manly, NSW, which expired on 30 September 2016. The lease at Gibraltar Square, Bowral, NSW, which was due to expire on 28 February 2017, was terminated in December 2016.

There are no other material changes to commitments or contingent liabilities since those reported in the annual financial report of the Group for the period ended 30 June 2016.

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InvestSMART Group Limited ABN 62 111 772 359 Directors’ Declaration for the half-year ended 31 December 2016

Directors' Declaration

In the opinion of the Directors:

• (a) the Consolidated Financial Statements and notes of InvestSMART Group Limited for the half year ended 31 December, 2016 are in accordance with the Corporations Act 2001 , including:

• (i) complying with AASB 134 Interim Financial Reporting, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and

• (ii) giving a true and fair view of the consolidated entity's financial position as at 31 December 2016 and of its performance for the half-year ended on that date, and

• (b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the Directors.

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Paul Clitheroe AM Chairman

Sydney 15 February 2017

16

Ernst & Young Tel: +61 2 9248 5555 200 George Street Fax: +61 2 9248 5959 Sydney NSW 2000 Australia ey.com/au GPO Box 2646 Sydney NSW 2001

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To the members of InvestSMART Group Limited

Report on the Half-Year Financial Report

We have reviewed the accompanying half-year financial report of InvestSMART Group Limited, including its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 31 December 2016, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the half-year ended on that date, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration, of the consolidated entity comprising the Group and the entities it controlled at the half-year end or from time to time during the half-year.

Directors’ Responsibility for the Half-Year Financial Report

The directors of the Group are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal controls as the directors determine are necessary to enable the preparation of the half-year financial report that is free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity , in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity’s financial position as at 31 December 2016 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 . As the auditor of InvestSMART Group Limited and the entities it controlled during the half-year, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001 . We have given to the directors of the Group a written Auditor’s Independence Declaration, a copy of which is included in the Directors’ Report.

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Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of InvestSMART Group Limited is not in accordance with the Corporations Act 2001 , including:

• a) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2016 and of its performance for the half-year ended on that date; and

• b) complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 .

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Ernst & Young

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Damien Jones Partner Sydney 15 February 2017

A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation