INVESTSMART GROUP LIMITED — Regulatory Filings 2017

Aug 23, 2017

Appendix 4E (ASX Listing Rule 4.3A) PRELIMINARY FINAL REPORT Year ended 30 June 2017

(previous corresponding period: 30 June 2016)

INVESTSMART GROUP LIMITED AND ITS CONTROLLED ENTITIES

ABN 62 111 772 359

RESULTS FOR ANNOUNCEMENT TO THE MARKET

This Appendix 4E should be read in conjunction with InvestSMART Group Limited Audited Consolidated Financial Report and Directors' Report for the year ended 30 June 2017 lodged with the Australian Securities Exchange on 23 August 2017.

Australian with accordance Results in Accounting Standards	Current period \$'000	Previous corresponding period \$'000	Movement \$'000	Movement %
Revenue from ordinary activities	14,218	12,410	1,808	14.6
Profit (Loss) from ordinary activities after tax for the period attributable to members	(22, 548)	175	(22, 723)	(12,985)
Profit (Loss) for the period attributable to members	(22, 548)	175	(22, 723)	(12, 985)

DIVIDEND INFORMATION

It is not proposed to pay a final dividend for the year ended 30 June 2017. No interim dividend was paid for the half-year ended 31 December 2017.

NET TANGIBLE ASSET BACKING PER ORDINARY SHARE

	Current period	Previous corresponding period
Net tangible asset backing per ordinary share	2.3 cents	0.6 cents

SUPPLEMENTARY COMMENTS

The decrease in net profit after tax was largely a result of a non-cash impairment charge of \$23.6million booked against the carrying value of goodwill. Additional Appendix 4E disclosures and other significant information may be found in InvestSMART Group Limited Audited Consolidated Financial Report and Directors' Report for the year ended 30 June 2017 lodged with this document.

INDEPENDENT AUDITOR'S REPORT

The Consolidated Financial Report for InvestSMART Group Limited for the year ended 30 June 2017 has been audited by the Company's independent external auditor, Ernst & Young. A copy of the independent external auditor's report may be found at pages 37 to 41 of the Audited Consolidated Financial Report and Directors' Report.

InvestSMART Group Limited ABN 62 111 772 359

Audited Consolidated Financial Report and Directors' Report

for the year ended 30 June 2017

InvestSMART Group Limited ABN 62 111 772 359 Contents 30 June 2017

Contents Page $\mathbf{3}$ Directors' Report $11$ Auditor's Independence Declaration Consolidated Statement of Comprehensive Income $12$ Consolidated Statement of Financial Position 13 Consolidated Statement of Changes in Equity 14 Consolidated Statement of Cash Flows 15 Notes to the Consolidated Financial Statements 16 36 Directors' Declaration Independent Audit Report to the Members 37

Directors' Report

The Directors present their report on InvestSMART Group Limited (the Company) and its subsidiaries (collectively the Group) for the financial year ended 30 June 2017.

Directors

The names and details of the Directors of the Company who held office during the year and at the date of this report (unless otherwise specified) are:

Paul Clitheroe AM (Appointed Non-Executive Chairman 26 November 2014, appointed Executive Chairman 31 March 2015, reappointed Non-Executive Chairman 24 February 2016) Chairman

Bachelor of Arts (UNSW), SNF Fin, CFP Age 62

Paul Clitheroe is a founding director of leading financial planning firm ipac, and has been involved in the investment industry since he graduated from the University of New South Wales in the late 1970s. From 1993 to 2002 Mr Clitheroe hosted the popular Channel 9 program Money. Since 1999 he has been the chairman and chief commentator of Money magazine. He writes personal finance columns for metropolitan, suburban and regional newspapers across Australia and presents Talking Money on radio nationally. Mr Clitheroe has been a media commentator and conference speaker for more than 30 years, and is regarded as one of Australia's leading experts in the field of personal investment strategies and advice.

Mr Clitheroe is Chairman of Monash Absolute Investment Company Ltd and a Director of Wealth Defender Equities Ltd, both ASX-listed investment companies. He is also Chairman of the Australian Government Financial Literacy Board, Chairman of Financial Literacy Australia, Chairman of the youth anti-drink driving body, RADD, and a member of the Sydney University Medical School Advisory Board. In 2012, Macquarie University appointed Mr Clitheroe as Chair of Financial Literacy. He is a Professor with the School of Business and Economics.

Michael Shepherd AO (Appointed 1 March 2014)

Lead Independent Non-Executive Director Chairman of the Audit Risk and Compliance Committee Chairman of the Nomination and Remuneration Committee Age 67

Michael Shepherd has had a successful career in financial services over more than 40 years. He was a director of ASX Limited and group between 1988 and 2007, including a term as Vice-Chairman between 1993 and 2007. Mr Shepherd was also Chairman of the ASX Derivatives Board and Chairman of the ASX Market Rules Committee.

Mr Shepherd is currently Chairman of HFA Holdings Limited (a listed investment management company) and a member of the Member Responsible Entity Compliance Committee of UBS Global Asset Management (Australia) Limited. He is also a Senior Fellow and Life Member, Financial Services Institute of Australasia, after being a director of that body between 2001 and 2009, including 2 years as National President.

Peter Ronald Hodge (Appointed 1 September 2015, appointed Managing Director 24 February 2016) Managing Director

FFin

Age 47

Ron Hodge was the founder of InvestSMART in 1999. Ron Hodge later sold this business to Fairfax Media in October 2007 where he continued as General Manager. He has worked in financial services for over 25 years, including at UBS in Singapore and Bell Commodities in Sydney. Ron holds a Masters degree in Computer Science, Bachelor Degrees in Commerce and Economics, a Graduate Diploma in Applied Finance and Investments and is a Graduate of the Australian Institute of Company Directors.

Company Secretary

Peter Friend is a qualified solicitor, and was appointed Company Secretary on 10 February 2014 and held office throughout the financial year. Peter Friend resigned on 19 July 2017 and was replaced by Grant Winberg.

Interests in the Securities of the Company

The relevant interests of each Director in the securities of the Company shown in the Register of Directors' Shareholdings as at the date of this report are:

Director	Ordinary Shares
Paul Clitheroe	5,000,000
Michael Shepherd Peter Ronald Hodge	400,000 4,766,666

Directors are not required under the Company's constitution to hold any Shares, Options or any other Securities in the Company. A portion of the shares held by Mr Paul Clitheroe (2,666,667), and Mr Ron Hodge (3,177,778), are subject to vesting conditions.

Interests in Contracts or Proposed Contracts with the Company

None of the Directors have an interest in, or proposed interests in, contracts with the Company, other than the loans to Mr Paul Clitheroe and Mr Ron Hodge as part of the Long Term Incentive Plan (LTIP) and Employee Share Ownership Plan (ESOP) as detailed below.

Principal Activities

The principal activities of the Company during the year was the provision of financial services and products under general advice to retail investors in particular in the area of wealth management, personal insurance and funds management.

Dividends

No dividend has been declared for the financial year ended 30 June 2017 (2016: nil).

Review of operations

Financial results for the year

The results below show the audited operating profit for the year, and are based on consolidated accounting for the years to 30 June 2017 and 30 June 2016 respectively.

	2017	2016
Operating (loss) profit before income tax	(22, 257, 343)	253,235
Income tax expense	(291, 017)	(78,075)
Operating (loss) profit for the year	(22, 548, 360)	175,160

The net tangible asset backing of the Company as at 30 June 2017 was \$0.0269 (2016: \$0.006) per share before tax. The operating loss is attributable to a write down in the valuation of the goodwill assets of the Group of \$23,610,664 at 30 June 2017. This was as a result of the Group's change in focus from growing subscription revenue to growing funds management revenues.

Comparative Consolidated Financial Information for the prior year

The table below shows the consolidated performance of the Group for the years to 30 June 2017 and 30 June 2016 respectively. This information only shows earnings before tax, write off and amortisation of goodwill and intangibles, and is presented to show the relative changes in operating income over the period.

Statement of Consolidated Comprehensive Income

	Year to 30 June	Year to 30 June
	2017	2016
Continuing operations
Commission income	7,348,059	7,907,634
Subscription income	6,584,654	4.207,421
Other income	43,895	288,400
Change in fair value of financial assets at fair value through profit and loss	241,297	6,872
Total Income	14,217,905	12,410,327
Total operating expenses	11,073,396	9,996,376
Profit before income tax, amortisation and employee benefit expense	3.144.509	2,413,951

The major changes to revenues from 2016 were a fall in commission income over the year due to clients moving to noncommission paying products such as MySuper, and an increase in subscription revenue due largely to the acquisition of Eureka Report in April 2016. The subscription income results for 2016 includes Eureka Report revenues from 4 April 2016. Operating expenses are higher than 2016, due to the inclusion of employee costs related to the Eureka Report.

The Group has substantial realised and unrealised capital tax losses that have not been recognised in the financial statements as the Directors believe there are negligible opportunities to utilise those losses in the medium term. The Group is exposed to potential changes in financial services regulation that may diminish its ability to collect commissions in the future.

Business strategies and prospects

The Group will increase its focus on increasing the number of users of its free portfolio management service, and the number of investors in its fund management products, while maintaining current subscription numbers. The Group has recently been granted authorisation under one if its AFSLs ("Australian Financial Services License") to issue its own managed investment schemes and expects to issue and market several investment products in the next 12 months. These initiatives will result in an estimated \$1.8 million increase in operating costs in the financial year to 30 June 2018. 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 contingency 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.

Significant Changes in State of Affairs

As announced on 30 June 2017 the Group incurred a Goodwill write down of \$23,610,664 after testing for impairment under the applicable AASB standard. The Group disclosed a change in focus from growing subscription revenue to growing fund management revenues.

There were no other significant changes in the Group affairs during the period.

Meetings of Directors

The number of Directors' Meetings (including Meetings of Committees of Directors) and number of Meetings attended by each of the Directors of the Company during the 2017 financial year were:

	Directors' Meetings			Meetings of Audit, Risk and Compliance Committee		Meetings of Nomination and Remuneration Committee		Meetings of Investment Committee
	Meetings eligible to attend	Meetings attended	Meetings eligible to attend	Meetings attended	Meetings eligible to attend	Meetings attended	Meetings eligible to attend	Meetings attended
Paul Clitheroe	8		4	4
Ron Hodge	8	8	4	4
Michael Shepherd	8	8	4	4

Events Subsequent to Balance Date

Since 30 June 2017, there have been no significant events up to the date of this report.

Earnings (loss) per share

Basic (loss) per share was (20.33) cents per share, and diluted (loss) per share was (20.33) cents per share, (2016: 0.16 cents per share for basic and 0.14 cents for diluted earnings). Potential ordinary shares shall be treated as dilutive when their conversion to ordinary shares would decrease earnings per share or increase loss per share from continuing operations.

Remuneration Report (Audited)

The Group's policy is to offer a sufficient level of remuneration to attract employees and Directors who are financially literate and knowledgeable of financial services and investment management best practice.

As the Company has a Long Term Incentive Plan (LTIP) and Employee Share Ownership Plan (ESOP) in place which is an equity-settled share based payment to employees and Directors, the Company has effectively linked performance with compensation in relation to the performance of the Company's share price. The value of any benefits given to Directors or senior management is detailed below.

All Directors must have a commitment to good corporate governance. The primary role of the Non- Executive Directors is the protection and enhancement of sustainable shareholder value through:

• $(a)$ ensuring the control and accountability framework is in place so that all significant issues relating to the operation and performance of the Company and its subsidiary entities are brought to the attention of the Board;
• $(b)$ monitoring governance policies, practices and systems to ensure they are effective and appropriate:
• monitoring risk policies, practices and systems to ensure they are effective and appropriate. $(c)$

Subject to the sum determined by the Company in general meeting, the Directors agree the remuneration each Director (other than any Managing Director or Director who is a salaried officer) receives. No option or bonus plans are in place for Directors (other than the Managing Director).

Under ASX Listing Rules, the maximum fees payable to Directors may not be increased without prior approval from the Company at a general meeting. Directors will seek approval from time to time as deemed appropriate.

The Directors will be entitled to receive the following benefits:

• (a) the maximum total remuneration of the Directors of the Company (excluding the Managing Director) has been set at \$400,000 per annum to be divided amongst them in such proportions as they agree. Directors are not required to allocate the entire amount.
• (b) Mr Paul Clitheroe is eligible to participate in the LTIP and received 4,000,000 shares at 25 cents per share and a corresponding limited recourse loan on 26 November 2014, as approved by shareholders. 1.333.333 of these shares vested on 30 May 2016, when the share price reached \$0.33 per share. The second tranche vests when the share price reaches \$0.42 per share after 26 November 2016. The final tranche vests when the share price reaches \$0.50 per share after 26 November 2017. There is no time limit for the share price to reach the vesting price.

(c) Mr Ronald Hodge, as Managing Director, is eligible to participate in the LTIP and received 4,166,666 shares at 25 cents per share and a corresponding limited recourse loan on 8 September 2015, as approved by shareholders. Mr Hodge's shares have no performance conditions and the first tranche of 1,388,888 vested on 8 September 2016. The remaining shares vest in equal tranches on 8 September 2017 and 8 September 2018 respectively. As Managing Director Mr Hodge is eligible to participate in the ESOP and received 400,000 shares at 31 cents per share and a corresponding limited recourse loan on 28 December 2016, as approved by shareholders. The shares will vest in three equal tranches on the first, second and third anniversaries of the Grant Date.

Additional information on the remuneration of executive directors and key management personnel is given in Note 18 of the Financial Statements.

The Directors' remuneration for the year ended 30 June 2017 is detailed in the following table. There was no accrued long service leave for the Managing Director at 30 June 2017.

Name of Director	Base fee	Super- annuation	Accrued Annual Leave	LTIP & ESOP expense	Total
Paul Clitheroe	88,048	1.952	$\sim$	1,576	91,576
Michael Shepherd	34.246	57,369			91,615
Ron Hodge	264,252	30,518	(6, 237)	122,874	411,407
TOTAL	386,546	89,839	(6, 237)	124,450	594,598

The Directors' remuneration for the year ended 30 June 2016 is detailed in the following table.

Name of Director	Base fee	Super- annuation	Accrued Annual Leave	LTIP expense	Total
Paul Clitheroe	90,000			88,893	178,893
John O'Connell (resigned 31 August 2015)	7,500	713			8.213
Michael Shepherd		90,000			90,000
Ron Hodge (appointed 1 September 2015)	264,449	25,122	15,463	157,995	463,029
TOTAL	361,949	115,835	15,463	246,888	740,135

No Director of the Company has received or become entitled to receive a benefit, other than a remuneration benefit as disclosed in the notes to the financial statements, by reason of a contract made by the Company or a related entity with the Director or with a firm of which they are a member, or with a Company in which they have a substantial interest.

Key Management Personnel

The remuneration of the key management personnel who were not Directors for the year to 30 June 2017 is shown below.

Name of Key Management Personnel	Base Remuneration	Super- annuation	Accrued Annual Leave	LTIP & ESOP Expense	Total
Nigel Poole	214.940	20,419	3.159	121.715	360.233
Alastair Davidson	192.518	30,608	374	121.715	345.215

Key management personnel are on standard Group employment contracts, with the exception of termination which requires 3 months' notice, if without cause.

The remuneration of the key management personnel who were not Directors for the year to 30 June 2016 is shown below.

Name of Key Management Personnel	Base Remuneration	Super- annuation	Accrued Annual Leave	LTIP Expense	Total
Nigel Poole	211.149	20.059	25,415	157,995	414.618
Alastair Davidson	205.000	19.475	5.456	157,995	387.926

Shares held by Key Management Personnel and Directors

For the year ended 30 June 2017

Balance at 1 July 2016	Shares acquired / (disposed)	Shares vested	Balance at 30 June 2017
			2.333.333
			400,000
$\blacksquare$	200,000		1,588,888
۰			1,388,888
327,624	۰	1,388,888	1,716,512
	2,333,333 400,000		1,388,888 1,388,888

Shareholdings relating to LTIP

Executive	Balance at 1 July 2016	Tranches	Shares acquired/ Approval or (disposed) per Tranche	Issue date	Value at issue date	Estimated or actual vesting date	Balance at 30 June 2017
Paul Clitheroe - Non-		Tranche 1	1,333,333	26/11/2014	0.0542	30/5/2016	۰
Executive Chairman	2,666,667	Tranche 2	1,333,333	26/11/2014	0.0663	25/11/2018	1.333.333
		Tranche 3	1,333,334	26/11/2014	0.0733	26/08/2020	1.333.334
Ron Hodge		Tranche 1	1,388,888	17/06/2015	0.0767	8/09/2016
	4,166,666	Tranche 2	1,388,888	17/06/2015	0.0826	8/09/2017	1,388,888
		Tranche 3	1,388,890	17/06/2015	0.0878	8/09/2018	1,388,390
Nigel Poole		Tranche 1	1,388,888	17/06/2015	0.0767	8/09/2016	٠
	4,166,666	Tranche 2	1,388,888	17/06/2015	0.0826	8/09/2017	1,388,888
		Tranche 3	1.388.890	17/06/2015	0.0878	8/09/2018	1,388,890
Alastair Davidson		Tranche 1	1,388,888	17/06/2015	0.0767	8/09/2016	u
	4,166,666	Tranche 2	1,388,888	17/06/2015	0.0826	8/09/2017	1,388,888
		Tranche 3	1,388,890	17/06/2015	0.0878	8/09/2018	1.388.390

The remaining LTIP shares issued to Paul Clitheroe will vest in two equal tranches on the later of the second and third anniversary of the grant date, or the date the share price is at or above \$0.42 or \$0.50 respectively for each tranche. The performance of the share price was selected as the performance criteria as this closely aligns the rewards for performance to shareholder returns.

The remaining LTIP shares issued to Ron Hodge, Nigel Poole and Alastair Davidson vest at \$0.25 per share on the dates noted above and have no performance conditions in order to vest. These LTIP shares were issued in relation to the termination of a management contract with one of the Group subsidiaries, and the Directors believed this compensation best aligned the executives to the interests of shareholders.

Shareholdings relating to ESOP

	Balance at	Tranches	Shares acquired/ Approval or		Value at	Estimated or Balance at
Executive	1 July 2016		(disposed) per Tranche	Issue date		issue date actual vesting date	30 June 2017
Ron Hodge	$\overline{\phantom{a}}$	Tranche 1	133,333	28/12/2016	0.0499	28/12/2017	133,333
		Tranche 2	133,333	28/12/2016	0.0569	28/12/2018	133,333
		Tranche 3	133,334	28/12/2016	0.0631	28/12/2019	133,334
Nigel Poole		Tranche 1	100,000	28/12/2016	0.0499	28/12/2017	100,000
	÷.	Tranche 2	100,000	28/12/2016	0.0569	28/12/2018	100,000
		Tranche 3	100,000	28/12/2016	0.0631	28/12/2019	100,000
Alastair Davidson	$\omega$	Tranche 1	100,000	28/12/2016	0.0499	28/12/2017	100,000
		Tranche 2	100,000	28/12/2016	0.0569	28/12/2018	100,000
		Tranche 3	100,000	28/12/2016	0.0631	28/12/2019	100,000

The shares issued to the Managing Director and key management personnel as part of the ESOP on 28 December 2016 are dependent on the relevant employee not resigning, or being dismissed for cause, before each tranche vests.

Shares held by Key Management Personnel and Directors

For the year ended 30 June 2016

Ordinary Shares	Balance at July 2015	Shares acquired / (disposed)	Shares vested	Balance at 30 June 2016
Paul Clitheroe - Non-Executive Chairman	000.000	$\overline{\phantom{0}}$	1.333.333	2,333,333
Michael Shepherd - Non-executive director	300.000	100,000	a.	400,000
Alastair Davidson – Chief Financial Officer	327.674	۰	$\overline{\phantom{0}}$	327,624

Shareholdings relating to LTIP

Executive	Balance at 1 July 2015	Tranches	Shares acquired/ (disposed) per Tranche	Approval or	Value at	Estimated or Issue date issue date actual vesting date	Balance at 30 June 2016
Paul Clitheroe - Non-executive Chairman	4,000,000	Tranche 1	1,333,333	26/11/2014	0.0542	30/05/2016
		Tranche 2	1,333,333	26/11/2014	0.0663	22/04/2017	1,333,333
		Tranche 3	1,333,334	26/11/2014	0.0733	22/07/2018	1,333,333
Ron Hodge - Chief Operating Officer	4,166,666	Tranche 1	1,388,888	17/06/2015	0.0767	8/09/2016	4,166,666
		Tranche 2	1,388,888	17/06/2015	0.0826	8/09/2017
		Tranche 3	1.388.890	17/06/2015	0.0878	8/09/2018
Nigel Poole - Chief Technology	4,166,666	Tranche 1	1,388,888	17/06/2015	0.0767	8/09/2016	4,166,666
Officer		Tranche 2	1,388,888	17/06/2015	0.0826	8/09/2017
		Tranche 3	1,388,890	17/06/2015	0.0878	8/09/2018
Alastair Davidson - Chief		Tranche 1	1,388,888	17/06/2015	0.0767	8/09/2016	4,166,666
Financial Officer	4,166,666	Tranche 2	1,388,888	17/06/2015	0.0826	8/09/2017
		Tranche 3	1,388,890	17/06/2015	0.0878	8/09/2018

Key management personnel transactions concerning dividends and ordinary shares are on the same terms and conditions applicable to ordinary members.

This concludes the Remuneration Report which has been audited.

Insurance of Directors

During the financial year, the Company has given indemnity and paid insurance premiums to insure Directors and officers of subsidiaries against liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in the capacity of Directors or officers of the Company or subsidiaries, other than conduct involving a wilful breach of duty in relation to the Company or subsidiaries. During the year, premiums were paid in respect of the key management personnel liability and legal expenses insurance contract. Details of the nature of the liabilities covered and the amount of premiums paid have not been disclosed as disclosure is prohibited under the terms of the contract.

Indemnification of auditors

To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as part of the terms of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No payment has been made to indemnify Ernst & Young during or since the end of the financial year.

Proceedings on behalf of the Group

There are no legal or other proceedings being made on behalf of the Group or against the Group as at the date of this report.

Non-Audit Services

No non-audit services have been provided by the Auditor or by another person on the Auditor's behalf during the year. This statement has been made in accordance with advice provided by the Company's audit committee and has been endorsed by a resolution of that committee.

Auditor's Independence Declaration

The auditor's independence declaration for the year ended 30 June 2017 has been received and can be found on page 11.

Signed in accordance with a resolution of the Directors.

Paul Clitheroe Chairman Dated this 23rd day of August 2017 at Sydney

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 ey.com/au

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

As lead auditor for the audit of InvestSMART Group Limited for the financial year ended 30 June 2017, 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 audit; and
• b) no contraventions of any applicable code of professional conduct in relation to the audit.

Emost 8

Ernst & Young

Damien Jones Partner 23 August 2017

InvestSMART Group Limited ABN 62 111 772 359
ABN 62 111 772 359
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2017

Consolidated Statement of Comprehensive Income

		2017	2016
	Notes	\$	\$
Commission income	4	7,348,059	7,907,634
Subscription income	4	6,584,654	4,207,421
Consulting fees			40,414
Dividend income		3,166
Interest income		34,997	28,928
Other income		5,732	219,058
Net gain/loss on financial instruments at fair value through profit and loss	5	241,297	6,872
Total Income		14,217,905	12,410,327
Accounting and administrative costs		(187, 305)	(165, 831)
Audit fees	17	(133, 560)	(126,000)
Commission rebates		(1,983,032)	(1,862,126)
Directors' fees		(181, 616)	(188, 438)
Employee costs		(5,747,665)	(4,830,356)
Interest expense			(12)
Legal and statutory expenses		(92, 180)	(65, 215)
Market data costs		(190, 223)	(196, 217)
Marketing and advertising expense		(832, 202)	(762, 833)
Other expenses		(640,864)	(874, 489)
Rent		(367,968)	(385,070)
Software and website costs		(512, 509)	(393, 812)
Travel and accommodation		(89,909)	(51, 917)
Depreciation and amortisation		(1,481,023)	(1,691,899)
Employee benefit expense	6	(424, 528)	(562, 877)
Goodwill impairment		(23, 610, 664)
Total expenses		(36, 475, 248)	(12, 157, 092)
(Loss)/Profit before income tax		(22, 257, 343)	253,235
Income tax expense	8a	(291, 017)	(78, 075)
Loss for the year		(22, 548, 360)	175,160
Other comprehensive income, net of income tax
Total comprehensive (loss)/profit for the year		(22, 548, 360)	175,160
Basic (loss)/earnings per share (cents per share)	22	(20.33)	0.16
Diluted (loss)/earnings per share (cents per share)	22	(20.33)	0.14

The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.

InvestSMART Group Limited ABN 62 111 772 359
Consolidated Statement of Financial Position As at 30 June 2017

b.

Consolidated Statement of Financial Position

		2017	2016
	Notes	S
ASSETS
Cash and cash equivalents		4,935,046	4,986,827
Trade and other receivables	7	602,697	622,379
Prepayments		250,516	169,760
Rental deposit		21,372	56,264
Financial assets at fair value through profit and loss	9	2,053,481	1,638,448
Fixed assets, including software less accumulated depreciation	10	294,478	264,340
Deferred tax asset	8c	455,311	613,248
Intangibles	12	7,622,110	8,988,770
Goodwill	11		23,610,664
Total assets		16,235,011	40,950,700
LIABILITIES
Trade payables	13	29,189	82,964
Other payables	14	1,971,734	1,786,751
Subscriptions received in advance		2,422,358	4,437,135
Trail commissions to rebate		1.209.392	1,339,828
Deferred tax liability	8c	2,119,333	2,697,185
Total liabilities		7,752,006	10,343,863
Net assets		8,483,005	30,606,837
Equity
Issued capital	15	58,522,440	58,522,440
Employee Benefit reserve	6	1,089,530	665,002
Retained losses	16	(51, 128, 965)	(28, 580, 605)
Total equity		8,483,005	30,606,837

The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.

InvestSMART Group Limited INVESTSIMART Group Enfined
ABN 62 111 772 359
Consolidated Statement of Changes in Equity
For the year ended 30 June 2017

Consolidated Statement of Changes in Equity

	Notes	Issued Capital s	Retained losses S	Employee Benefit Reserve	Total Equity
Balance as at 1 July 2015	15	58,522,440	(28, 755, 765)	102,125	29,868,800
Comprehensive income for the year Employee benefit share reserve	6		175,160	562,877	175,160 562,877
Balance as at 30 June 2016		58,522,440	(28, 580, 605)	665,002	30,606,837
Comprehensive loss for the year Employee benefit share reserve	6		(22, 548, 360)	424,528	(22, 548, 360) 424.528
Balance as at 30 June 2017		58,522,440	(51, 128, 965)	1,089,530	8,483,005

The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.

InvestSMART Group Limited
ABN 62 111 772 359
Consolidated Statement of Cash Flows For the year ended 30 June 2017

Consolidated Statement of Cash Flows

	Notes	2017 s	2016 s
Cash flows from operating activities Receipts from customers		13,958,126	12,538,048
Payments to suppliers and employees		(13, 488, 084)	(9,863,762)
Interest received		34,997	28,928
Interest paid			(12)
Income tax paid		(276, 643)	(32, 543)
Net cash from operating activities	21(a)	228,396	2,670,659
Cash flows from investing activities
Proceeds from sale of investments		210,180	100,000
Purchase of investments and subsidiary		(383, 913)	(3, 182, 478)
Net Purchase of fixed assets		(144, 501)	(149, 023)
Dividends received		3,166
Rental deposit		34,891	37,026
Net cash (used in) investing activities		(280, 177)	(3, 194, 475)
Cash flows from financing activities
Net cash inflow from financing activities
Net decrease in cash and cash equivalents		(51, 781)	(523, 816)
Cash and cash equivalents at beginning of the year		4,986,827	3,292,828
Cash acquired through acquisitions			2,217,815
Cash and cash equivalents at the end of the year	21(b)	4,935,046	4,986,827

The above Consolidated Statement of Cash flows should be read in conjunction with the accompanying notes.

Notes to the Consolidated Financial Statements

Reporting Entity 1.

InvestSMART Group Limited (the "Company") is domiciled in Australia and is the parent entity of the group which includes the entities listed in Note 3 (the "Group") and is a for profit company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange. The consolidated financial statements of the Group are presented for the year ended 30 June 2017. The Group is primarily involved in operating businesses delivering financial services to retail investors in Australia, primarily in wealth and funds management.

Summary of significant accounting policies $2.$

(a) Basis of Preparation

This general purpose financial report has been prepared in accordance with Australian Accounting Standards, including Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board (AASB) and the Corporations Act 2001.

Australian Accounting Standards set out accounting policies that the AASB has concluded would result in a financial report containing relevant and reliable information about transactions, events and conditions to which they apply. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board.

The financial report has been prepared on an accruals basis, and is based on historical cost, with the exception of the valuation of financial assets as described below.

The financial statements were authorised for issue by the Directors on 23 August 2017. The directors and shareholders have the power to amend these financial statements after issue.

The following significant accounting policies have been adopted in the preparation and presentation of the financial report. The accounting policies have been consistently applied, unless otherwise stated.

Adoption of New and Revised Accounting Standards

The Group has adopted all of the new and revised standards and interpretations issued by the Australian Accounting Standards Board that are relevant to its operations and effective for the current reporting period. The adoption of these new and revised standards and interpretations did not have a material impact on the financial statements of the Group.

New standards and interpretations not yet adopted

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.

AASB 15 - Revenue from Contracts with Customers

AASB 15 is applicable to annual reporting periods beginning on or after 1 January 2018.

Under the standard an entity recognises revenue by applying the following steps:

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

Step 2: Identify the performance obligations in the contract

Step 3: Determine the transaction price

Step 4: Allocate the transaction price to the performance obligations in the contract

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

Summary of significant accounting policies (continued) $2.$

The Group has a liability to service customers who have purchased subscriptions in advance and recognises revenue when that subscription service has been delivered. Commission income is derived from trailing commissions on funds management and insurance products under a contract to distribute products to the InvestSMART client base. Revenue is recognised as the performance obligation is satisfied. Management is continuing its assessment of applying the new standard on the Group's financial statements, however, it is not expected that it will result in a material impact.

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-ofuse 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 also 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.

This Standard is applicable to annual reporting periods beginning on or after 1 January 2019. The Group is not considering early adopting AASB 16. An initial assessment has been performed based on leases that exist in the current reporting period. Based on this assessment it is anticipated that there will be a material impact to the statement of financial position and equity as the Group is expected to recognise a "right-of-use" asset and corresponding liability for operating leases. A schedule of current operating lease commitments is disclosed in Note 26. The Group will recognise the cumulative effect of initially applying the standard as an adjustment to the opening balance of retained earnings.

Current versus non-current classification

The Group presents assets and liabilities in the statement of financial position based on liquidity and not on a current versus non-current classification.

Investments at Fair Value

The Group's investments are all measured at fair value through profit or loss in accordance with AASB 13: Fair Value Measurement. The fair values of the Group's listed investments are determined from the amount quoted on the primary exchange of the country of domicile. If a listed investment is measured at fair value and has a bid price and an ask price, fair value is based on a price within the bid-ask spread that is most representative of fair value and allows the use of mid-market pricing or other pricing conventions that are used by market participants as a practical expedient for fair value measurement within a bid-ask spread. The fair value of the Group's unlisted investments is determined primarily using the price at which any recent transaction in the security may have been effected, adjusted for the Directors' view as to the likely success of the business model and discounted for the likelihood of a liquidity event occurring in the next 3 years. Changes in the fair value of investments are recognised in the Statement of Comprehensive Income. Transaction costs directly attributable to the acquisition of the investments are expensed in the Statement of Comprehensive Income as incurred.

Principles of Consolidation

The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of the Group as at 30 June 2017 and the results of all subsidiaries for the period from 1 July 2016 to 30 June 2017, with the exception of Intelligent Investor Small Caps Fund, whose results are included from the date of establishment. 1 February 2017. Control is achieved when the Company is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary.

Subsidiaries are all entities (including special purpose entities) over which the Company has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights and excludes those subsidiaries determined by the Directors to be investments held for resale. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group, or when they are established.

Summary of significant accounting policies (continued) $2.$

Intercompany transactions and balances

Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated on consolidation. 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 the owners of the Company.

When a 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.

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.

Business combinations and Goodwill

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the fair value consideration transferred, measured at acquisition date and the amount of any non-controlling interests in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquiree's identifiable net assets. Acquisition-related costs are expensed as incurred and included in administrative expenses. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms. economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests, and any previous interest held, over the net identifiable assets acquired and liabilities assumed.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group's Cash-Generating Units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. The Group has determined that it operates as one Cash Generating Unit for the purposes of testing goodwill impairment.

Intangible Assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Internally generated intangibles, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in the consolidated statement of comprehensive income in the period in which the expenditure is incurred.

The useful lives of intangible assets are assessed as either finite or indefinite. Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future

2. Summary of significant accounting policies (continued)

economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates and adjusted on a prospective basis. The amortisation expense on intangible assets with finite lives is recognised in the statement of profit or loss as the expense category that is consistent with the function of the intangible assets. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit or loss when the asset is derecognised.

Impairment of financial assets

The Group assesses at each reporting date whether a financial asset or group of financial assets classified as loans and receivables is impaired. Evidence of impairment may include indications that the debtor or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred) discounted using the asset's original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the consolidated statement of comprehensive income as 'impairment expense'.

Impaired debt together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Group. If, in a subsequent period, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced. If a previous write-off is later recovered, the recovery is credited to the 'impairment expense'.

Interest revenue on an impaired financial asset is recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.

Investment Income

Net changes in fair value of investments

Realised and unrealised gains and losses on investments measured at fair value through profit or loss are recognised in the Statement of Comprehensive Income.

Share-based Payments to Employees and Directors

Employees (including executive directors) of the Group may receive remuneration in the form of share-based payments, where employees render services as consideration for equity instruments (equity-settled transactions).

The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an appropriate valuation model. The cost is recognised, together with a corresponding increase in other capital reserves in equity, over the period in which the performance and/or service conditions are fulfilled in the employee benefits reserve.

The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group's best estimate of the number of equity instruments that will ultimately vest. This cost is reversed in the event that an employee forfeits any share-based payment, when leaving the Group or other circumstances.

The expense in the consolidated statement of comprehensive income for a period represents the movement in cumulative expense recognised as at the beginning and end of that period and is recognised in employee benefits expense.

Income Tax

The Group has formed a tax consolidated group and has executed tax-sharing agreements with each controlled entity. The head entity and the controlled entities in the tax consolidated group continue to account for their own current and deferred tax amounts. The Group has applied the Group allocation approach in determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax consolidated group.

In addition to its own current and deferred tax amounts, the Group also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group. The income tax expense (revenue) for the year comprises current income tax expense and deferred tax expense or benefit.

Summary of significant accounting policies (continued) $2.$

Current income tax expense charged to profit or loss is the tax payable on taxable income. Current tax liabilities are measured at the amounts expected to be paid to the relevant taxation authority.

Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses. Current and deferred income tax expense is charged or credited outside profit or loss when the tax relates to items that are recognised outside profit and loss. No deferred income tax is recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.

Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled and their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability.

Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised only to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where: (a) a legally enforceable right of set-off exists; (b) the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective assets and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled.

Revenue Recognition

Revenue is recognised to the extent that it is probable that economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when the payment is received. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty, and is generally recognised on an accruals basis.

Subscription revenue

Subscription revenue is generally received in advance, and is recognised to the extent that the service has been delivered.

Commission revenue

Commission revenue from managed funds and life insurance products are recognised and measured as the fair value of the consideration received or receivable to the extent that it is probable that economic benefits will flow to the Group and the revenue can be reliably measured.

Dividend income

Dividends and distributions are recognised on the applicable ex-dividend date.

Interest income

Interest Income is recognised as it accrues.

Other income

Other income is recognised to the extent that it is probable that the economic benefits will flow to the Group and when the revenue can be reliably measured.

Cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits held at call with bank, other short term highly liquid investments with original maturities of three months or less, and bank overdrafts.

For the purposes of the Statement of Cash Flows, cash includes deposits held at call with financial institutions net of bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities on the Statement of Financial Position.

Long service and Annual leave provisions

The Group does not expect its long service leave or annual leave benefits to be settled wholly within 12 months of each reporting date. The Group recognises a liability for long service leave and annual leave measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method.

$2.$ Summary of significant accounting policies (continued)

Expenses

The Group records all expenses on an accruals basis. This includes: accounting, audit, legal and administrative fees, management fees, employee costs, marketing and advertising costs, director's fees, travel and accommodation expense, rent expenses, commission rebates, other expenses, market data costs, software and website costs.

Property, Plant and Equipment

All property, plant and equipment is carried at historical cost less accumulated depreciation and accumulated impairment losses, if any. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, when it is probable that the future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.

Depreciation on assets is calculated using the straight-line method to allocate their cost, net of residual value, over the estimated useful lives as follows:

Computer and office equipment Network and production equipment Leasehold improvements

2-3 years 3-4 years Initial term of lease (approximately 4 years)

Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the Statement of Financial Position are shown inclusive of GST.

Earnings/loss per share

Basic per share are calculated by dividing profit/(loss) attributable to members of the Company by the weighted average number of ordinary shares outstanding during the year, adjusted for any bonus element, and are shown to one decimal place. Diluted earnings/(loss) per share is calculated by dividing profit attributable to members of the Company by the total number of ordinary shares that would be outstanding if all the LTIP and ESOP shares had vested.

Share 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.

Functional and presentation currency

The functional and presentation currency of the Group is Australian dollars.

Comparatives

Where necessary, comparative information has been reclassified to be consistent with the current reporting period.

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 were used to estimate fair value of the assets acquired and liabilities assumed in the business combination. In particular, the fair value of intangible assets was calculated using management's estimates of future cash flows from each entity's identified intangible assets for the period of their expected useful life. The residual goodwill arising from a business combination is tested for impairment at each balance date (30 June) 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 fiveyear 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.

Level 3 investments in financial assets are based on Director's estimates of the fair value of those investments, where reliable third party sources of valuation are not available.

Summary of significant accounting policies (continued) $2.$

The Group has not recognised deferred tax assets relating to carried forward realised capital 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. The potential deferred tax asset that could be realised is \$5,166,415 at 30 June 2017.

Business Combinations and Acquisitions 3.

At 30 June 2017, the Company controlled the following subsidiaries:

	30-Jun-17	30-Jun-16
Intelligent Investor Holdings Pty Ltd	100%	100%
InvestSMART Financial Services Pty Ltd	100%	100%
InvestSMART Funds Management Ltd (previously Personal Investment Direct Access
Pty Ltd)	100%	100%
Ziel Two Pty Ltd	100%	100%
Yourshare Financial Services Pty Ltd	100%	100%
InvestSmart Insurance Pty Ltd (previously Yourshare Plus Pty Ltd)	100%	100%
AWI Ventures Pty Ltd	100%	100%
Eureka Report Pty Ltd	100%	100%
InvestSMART Australian Small Caps Fund	100%	$\overline{\phantom{m}}$

On 1 February 2017 the InvestSMART Australian Small Caps Fund, a unit trust, was established by payment of \$350,000. InvestSMART Funds Management Limited held 100% of all outstanding units in the fund from establishment date to year end and consolidated the operations of the fund. The table below shows the income and expenses before tax for the fund:

	\$
Income
Dividend income	3,166
Realised gain on financial assets	18,968
Unrealised gain on financial assets	22,501
	44,635
Expenses
Management and performance fees	4,457
Other expenses	999
	5,456
Net profit	39,179

4. Revenue from commissions and subscriptions	2017	2016
Commission income	7,348,059	7,907,634
Subscription revenue	6,584,654	4,207,421
	13,932,713	12,115,055
5. Change in fair value of financial assets at fair value through profit and
loss	2017	2016
blat sealized gain an incontractor	GO 218

----
Net realised gain on investments	69,218	-
Net unrealised gain on investments	172,079	6.872
	241,297	6.872

Notes to the Consolidated Financial Statements For the year ended 30 June 2017	ABN 62 111 772 359
2016 2017 6. Employee benefit reserve
562,877 1,022,025 Long Term Incentive Plan (LTIP)
67.505 Employee Share Ownership Scheme (ESOP)
562,877 1,089,530
102,125 665,002 Opening balance
562,877 424.528 Expense
665,002 1,089,530 Closing balance

The cost of the LTIP & ESOP shares and Company issued options have been estimated using the Monte-Carlo simulation or the Black-Scholes methodology and amortised over the applicable vesting period. A summary of the terms of the LTIP shares issued are included in the Directors' Report.

7. Trade and other receivables	2017	2016
Trade receivables	602,697	622.379

Receivables are non-interest bearing and unsecured, and will be received within 3 months. The credit risk exposure of the Group in relation to receivables is the carrying amount.

8. Income Tax

(a) Income tax (expense) recognised in the Statement of Comprehensive Income

	2017	2016
The components of income tax expense:
Current income tax expense	787,655	587,024
R&D expenditure adjustments for prior years		(92, 568)
Other adjustments for prior years	(73,968)	(240,664)
Deferred tax income relating to the origination and reversal of temporary differences	(271, 145)	(175, 717)
Change in tax rate	(151, 525)
Total income tax (expense) benefit	291,017	78,075
Deferred income tax related to items charged directly to equity		217,856

(b) Income tax expense

A reconciliation of income tax expense applicable to accounting profit before income tax at the statutory income tax rate to income tax expense at the entity's effective income tax rate for the years ended 30 June 2017 and 2016 is as follows:

Prima facie income tax expense/(benefit) calculated at 30% (2016: 30%) on the
operating (loss)/profit	(6,673,891)	75,970
Add/(Less) tax effect of:
Expenditure not deductible in current year	134.231	191,872
Impairment of goodwill	7,083,199
Change in tax rate	(151,525)
Adjustments for prior years	(100,997)	(189,767)
Income tax (expense)/benefit	291.017	78,075

2017

2016

8. Income Tax (continued)

(c) Deferred tax assets and liabilities

Deferred tax assets

The deferred tax asset balance comprises temporary differences recognised as follows:

Accruals and provisions not deductible in this period	236,875	267,138
Deductible capital expenditure	181,866	303,459
Revenue tax losses carried forward	36,570	42,651
Closing balance	455,311	613,248
Movements in deferred tax assets
Opening balance	613.248	765,596
Expense in the income statement	(157, 937)	(179, 264)
Deferred tax asset acquired		26,916
	455,311	613,248

Deferred tax liabilities

The deferred tax liability balance comprises temporary differences recognised as follows:
Future tax expense for intangibles acquired	2,096,080	2.696,632
Prepayments not deductible in future years		553
Unrealised gain on investments	23.253
Closing balance	2.119.333	2,697,185
Movements in deferred tax liabilities
Opening balance	2,697,185	2,834,310
Expense in the income statement	(577.852)	(354.981)
Benefit to goodwill		217,856
	2.119.333	2,697,185

The Group expects to be classified as a small business for tax purposes. As a result a reduced tax rate of 27.5% will apply for reporting periods after 30 June 2017 (previously 30%).

9. Financial assets held at fair value	2017	2016
		S
AWI Ventures investee companies	1.573.000	1,510,000
Investments in Separately Managed Accounts	182.124	128,448
Investments in Equity Securities	298,357
Financial assets at fair value through profit and loss	2.053,481	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.

10. Fixed assets including software	Plant and equipment	Software	Total
			s
Cost
Opening balance 1 July 2016	185,490	211,790	397,280
Additions	145,897		145,897
Disposals	(394)		(394)
Balance at 30 June 2017	330,993	211,790	542,783
Depreciation
Opening balance 1 July 2016	10,172	122,768	132,940
Depreciation charge for the period	79,509	35,856	115,365
Disposals
Balance at 30 June 2017	89,681	158,624	248,305
Net book value at 30 June 2016	175,318	89,022	264,340
Net book value at 30 June 2017	241,312	53,166	294,478
11. Goodwill		2017	2016
Opening net carrying amount		23,610,664	21,595,696
Additions			2,014,968
Impairment		(23, 610, 664)
Closing net carrying amount			23,610,664

Goodwill is tested for impairment at each balance date using a discounted cash flow model on the net cash flows from the business. The Group performed its annual impairment test at 30 June 2017. The Group considers the relationship between its market capitalisation and its book value, among other factors, when reviewing for indicators of impairment. As at 30 June 2017, the market capitalisation of the Group was below the book value of its equity, indicating a potential impairment of goodwill. In addition, the group made a strategic decision to focus on growing funds management products which will result in a decline in budgeted commissions and subscriptions revenue.

The Group has determined it has one cash generating unit (CGU). The recoverable amount of the CGU, as at 30 June 2017, has been determined based on a value in use calculation using cash flow projections from financial budgets approved by senior management covering a five-year period. The projected cash flows have been updated to reflect a decline in commissions and subscriptions revenue and do not incorporate future cash inflows expected to arise from future enhancements to funds management products. The pre-tax discount rate applied to cash flow projections is 13.3% and cash flows beyond the five-year period are extrapolated using a 2.1% growth rate that is the same as the long-term average growth rate for the financial services sector, and a long term inflation rate of 2.1%. It was concluded that the carrying value less costs of disposal did not exceed the value in use. As a result of this analysis, management has recognised an impairment charge of \$23,610,664 in the current year against goodwill with a carrying amount of \$23,610,664 as at 30 June 2017.

The calculation of value in use for the cash generating unit is most sensitive to the following assumptions:

• Future revenue growth $\bullet$
• Discount rates ä
• Expected growth in wages and employee costs $\bullet$
• Growth rates used to extrapolate cash flows beyond the forecast period

Future revenue growth - Future revenue growth is based on past experience (average declines in product revenue for the four years preceding the end of the budget period). A large proportion of the CGU's revenue is based on trailing commissions which are highly correlated with the movements in the Australian share market. Commission income has been affected by legislative changes which are not adjusted for in future cash flow projections. A change in focus from growing subscription revenue to growing fund management revenues was taken into account when determining future revenue growth. Future cash flow projections exclude estimated future cash inflows expected to arise from future restructurings or from improving or enhancing the CGU's performance.

11. Goodwill (continued)

Discount rates - Discount rates represent the current market assessment of the risks specific to the CGU, taking into consideration the time value of money and the risks incorporated in the cash flow estimates. The discount rate calculation is based on the specific circumstances of the Group and its operating segments and is derived from its weighted average cost of capital (WACC). The WACC takes into account both debt and equity. The cost of equity is derived from the expected return on investment by the Group's investors. The cost of debt is based on the expected cost of interest-bearing borrowings the Group may be obliged to service. The beta factors are evaluated annually based on publicly available market data. Adjustments to the discount rate are made to factor in the specific amount and timing of the future tax flows in order to reflect a pre-tax discount rate.

Wage and Employee cost inflation - Management has considered the possibility of greater than forecast increases in employee costs. This may occur if inflation causes higher than forecast wage increases in the future. Forecast price inflation lies within a range of 1.5 to 2.5%.

Growth rate estimates - Rates are based on long term expected growth rates for the Australian economy. Management recognises that the speed of technological change and the possibility of new entrants can have a significant impact on growth rate assumptions.

The Group considers no other assets to be impaired.

12. Intangibles	Fund distribution contracts	Content	Subscriber lists
Opening balance 1 July 2015	8,335,300		1,112,400
Acquired at 4 April 2016 in Eureka Report		412,724	726,185
Amortisation	(877, 400)	(412, 724)	(307, 715)
Balance at 30 June 2016	7,457,900		1,530,870
Amortisation	(877, 400)		(489, 260)
Balance at 30 June 2017	6,580,500		1,041,610

Fund distribution contracts were acquired as intangible assets under a business combination as at 1 January 2015. Whilst they have no expiry date, it is expected that customers on which the distribution fees are earned will leave over 10 years. Subscriber lists in Intelligent Investor are assumed to have a 5-year life, based on the Group's historical experience, and therefore the intangible asset arising from those lists are amortised on a straight line basis. Subscriber lists in Eureka Report are assumed to have a 3-year life and are amortised on a straight line over that period. Original content acquired in Eureka Report at 4 April 2016 was fully amortised at 30 June 2016.

13. Trade payables	2017	2016
Trade payables	29,189	82,964

Trade payables are non-interest bearing and unsecured and are payable within 3 months.

14. Other payables	2017	2016
Annual leave provision	208,396	248,808
Long service leave provision	65.623	52.938
PAYG and superannuation payables	136,255	142.039
GST payable	252,686	416,670
Other payables	542.615	596,690
Tax payable	766,159	329,606
	1.971.734	1.786.751

15. Issued capital	2017	2016
Ordinary shares	58,522,440	58,522,440

At 30 June 2017, 110,885,360 ordinary shares were on issue (2016: 110,885,360). An additional 16,500,000 were issued, as part of the LTIP detailed in Note 6, of which 9,666,665 remain unvested at 30 June 2017. The vested shares have a non-recourse loan outstanding.

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 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.

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 vest over 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) Terms and conditions

The Company has ordinary shares on issue. Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at shareholder meetings.

(b) Capital Management

The Group's policy is to maintain a strong capital base so as to maintain investor and market confidence. To achieve this the Directors monitor the monthly performance of the operating entities, the Group's management expenses, and share price movements. The Group is not subject to any externally imposed capital requirements. Capital relates to equity attributable to investors.

The primary objective of the Group's capital management is to ensure that it maintains healthy capital ratios to support its business and maximise shareholder value. The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions. To maintain or adjust the capital structure, the Company may adjust any dividend payment to investors, capital returns or issue new shares. No changes were made in the objectives, policies or processes for managing capital during the years ended 30 June 2017 and 30 June 2016.

16. Retained losses	2017	2016
Opening balance	(28, 580, 605)	(28, 755, 765)
(Loss)/Profit attributable to members of the group	(22, 548, 360)	175,160
Closing balance	(51, 128, 965)	(28, 580, 605)
17. Auditors remuneration	2017	2016
$\mathcal{L}(\mathcal{C})$		s
Auditing and reviewing the financial reports of the Group:
Ernst & Young - audit fees	133,560	126,000

18. Related party information

(a) Key management personnel

The names of the persons who were key management personnel of the Group during the financial year were:

Ron Hodge Nigel Poole Alastair Davidson

18. Related party information (continued)

(b) Key management personnel remuneration

Remuneration paid to key management personnel by the Group in connection with the management of affairs of the group were:

	Short-term Employee Benefit Cash Salary & Fees	Employment Benefit Superannuation	Accrued Annual Leave	Employee share benefit	Total
2017	671,710	81,545	(2,704)	366,304	1.116.855
2016	680.598	64,656	46,334	473.985	1.265.573

The Directors' remuneration excludes insurance premiums paid and payable by the Group in respect of Directors' liability insurance. Apart from the details disclosed in this note, no key management personnel have entered into a material contract with the Group during the financial year.

The Directors of the InvestSMART Group Limited are responsible for determining and reviewing compensation arrangements for the Managing Director and key management personnel. The Directors also assess the appropriateness of the nature and amount of emoluments of each Director on a periodic basis by reference to workload and market conditions.

The overall objective is to ensure maximum stakeholder benefit from the retention of a high quality board whilst constraining costs. The Directors' remuneration has been included in the remuneration report section of the Directors Report.

On 26 November 2014 (the grant date), the Company lent \$1,000,000 to the Executive Chairman, Mr Paul Clitheroe, to acquire 4,000,000 shares, as part of the Long Term Incentive Plan, subject to vesting terms, as approved by shareholders at the Annual General Meeting in November 2014. The first tranche of these shares have vested, though the associated non-recourse loan has not been repaid, and therefore has not been included in share capital. The remaining tranches have not vested and therefore have not been included in share capital. The Company estimated the fair value of this director/employee share benefit was \$258,400 at the grant date.

On 17 June 2015 the Company agreed to lend \$3,125,000 in total to three key management personnel to acquire 12,499,968 shares, as part of the Long Term Incentive Plan, subject to vesting terms, as approved by shareholders at the Extraordinary General Meeting in June 2015. These shares were issued on 8 September 2015, and have not vested or had the associated non-recourse loan repaid, and therefore have not been included in share capital. The Company estimated the fair value of this director/employee share benefit was \$1,029,293 at the grant date.

On 28 December 2016 as part of the Employee Share Ownership Plan (ESOP) the Company lent \$1,804,200 to the Managing Director and employees of the Group to acquire 5,820,000 ordinary shares as 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.

18. Related party information (continued)

(c) Shareholdings of key management personnel and their related entities

For the year ended 30 June 2017

Ordinary Shares	Balance at 1 July 2016	Shares held on appointment	Shares acquired / (disposed)	Balance at 30 June 2017
Ron Hodge	4,166,666		600,000	4,766,666
Alastair Davidson	4,494,340	$\overline{\phantom{a}}$	300,000	4.794.340
Nigel Poole	4.166,666	$\overline{\phantom{a}}$	300,000	4,466,666
For the year ended 30 June 2016
	Balance at 1 July 2015	Shares held on appointment	Shares acquired / (disposed)	Balance at 30 June 2016
Ordinary Shares
Ron Hodge	4,166,666			4,166,666
Alastair Davidson	4,494,340		÷	4,494,340
Nigel Poole	4.166,666			4,166,666
Paul Clitheroe (appointed 26 November 2015, appointed non- executive Chairman 24 February
2016)	5,000,000			5,000,000

19. Segment information

The Group has only one reportable segment. The Group is engaged solely in general advice retail financial services conducted in Australia, deriving revenue from commissions and subscriptions.

20. Financial risk management

The Group's financial instruments consist mainly of deposits with banks, accounts receivable, accounts payable and investments in listed and unlisted equities classified as financial assets at fair value through profit and loss.

AASB 7 Financial Instruments: Disclosures identify three types of risk associated with financial instruments (i.e. the Group's investments, receivables and payables)

Credit risk $(i)$

The standard (AASB 7) 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 other material amounts of collateral held as security at 30 June 2017.

Credit risk is managed as shown in Note 7 and with respect to receivables, and Note 20 for cash and cash equivalents. None of these assets are over-due or considered to be impaired.

(ii) Liquidity risk

The standard (AASB 7) defines this as the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. Senior management monitors the Group's cash-flow requirements daily taking into account upcoming dividends, tax payments and investment activity.

The Group's inward cash-flows depend upon the level of trail commission and subscription revenue received. If these decrease by a material amount, the Group will amend its outward cash-flows accordingly. As the Group's major cash outflows are the cost of employees and rebates of trail commissions, the level of both of these is managed by the Board and senior management.

The tangible assets of the Group are largely in the form of unlisted securities which may be difficult to liquidate in a timely fashion, and short-term receivables.

The table below analyses the Group'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 below are contractual undiscounted cash flows.

20. Financial risk management (continued)

	On-	Less than 3 months	3 to 12 months	$1$ to 5 years	Total
	demand
At 30 June 2017	s
Other payables		1,612,234	293,877	65,623	1,971,734
Trail commissions due to customers		371.347	838,044		1.209,391
Subscriptions received in advance		147,396	1,983,794	291,168	2,422,358
Trade and other payables		29,189			29,189
Total financial liabilities		2.160,166	3.115.715	356,791	5,632,672
At 30 June 2016
Other payables	-	1.485,005	248,808	52.938	1,786,751
Trail commissions due to customers	۰	334,957	1,004,871		1,339,828
Subscriptions received in advance	$\overline{\phantom{0}}$	1.109.284	2,805,703	522,148	4,437,135
Trade and other payables		82,964			82,964
Total financial liabilities		3.012.210	4.059,382	575,086	7.646.678

(iii) Market risk

The standard (AASB 7) 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. A general fall in market prices of 5 per cent and 10 per cent, if spread equally over all investments would lead to a reduction in the Group's equity and increase the reported loss by \$102,674 and \$205,348 respectively (2016: \$81,922 and \$163,845 respectively).

The Group is also not directly exposed to currency risk as all its operations are conducted in Australian dollars. The Group is engaged in activities conducted solely in Australia.

Derivative financial instruments

A derivative is a financial 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. The Group does not currently use or hold derivative instruments.

Interest rate risk

The Group's cash balances and term deposits 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.

Sensitivity analysis - interest rate risk

An increase of 75 basis points in interest rates over the reporting period would have increased the Group's profit by \$35,902 (2016: \$37,401). A decrease of 75 basis points would have an equal but opposite effect.

20. Financial risk management (continued)

As at 30 June 2017, the Group's exposure to interest rate risk and the effective weighted average interest rate for each class
of financial asset and financial liability is set out in the table below:

	Weighted average interest rate	Floating interest rate	Non- interest bearing	Total
Financial assets	(%pa)		S	s
Cash assets	0.8	4,465,970	469,076	4,935,046
Trade and other receivables			602,697	602,697
Prepayments			250,516	250,516
Rental deposit			21,372	21,372
Financial assets at fair value through profit and loss			2.053,481	2,053,481
		4,465,970	3,397,142	7,863,112
Financial liabilities
Other payables			1,971,734	1,971,734
Trail commissions due to customers			1.209.391	1,209,391
Subscriptions received in advance			2.422.358	2,422,358
Trade and other payables			29,189	29,189
			5,632,672	5,632,672
Net financial assets/(liabilities)		4,465,970	(2, 235, 530)	2,230,440

As at 30 June 2016, the Group's exposure to interest rate risk and the effective weighted average interest rate for each class of financial asset and financial liability is set out in the table below:

	Weighted average interest rate	Floating interest rate	Non- interest bearing	Total
	(%	S		S
Financial assets
Cash assets	1.25	4,986,827		4,986,827
Trade and other receivables			622,379	622,379
Prepayments			169,759	169,759
Rental deposit			56,624	56,624
Financial assets at fair value through profit or loss			1.638.448	1,638,448
		4,986,827	2.487.210	7.474,037
Financial liabilities
Other payables			1,786,751	1,786,751
Trail commissions due to customers			1,339,828	1,339,828
Subscriptions received in advance			4,437,135	4,437,135
Trade and other payables			82,964	82,964
			7,646,678	7,646,678
Net financial assets/(liabilities)		4,986,827	(5.159, 468)	(172.641)

20. Financial risk management (continued)

Fair value hierarchy

AASB 13 requires the Group to classify fair value measurements using a fair value hierarchy that reflects the subiectivity 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).

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 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 Group's financial assets and liabilities (by class) measured at fair value according to the fair value hierarchy at 30 June 2017:

	Level 1	Level 2	Level 3	Total
At 30 June 2017
Financial assets
Financial assets held at fair value through profit or loss	298,357	182.124	1,573,000	2.053.481
At 30 June 2016
Financial assets
Financial assets held at fair value through profit or loss		128,448	1,510,000	1,638,448

During the reporting period ending 30 June 2017 there were no transfers between Level 1 and Level 2 fair value measurements.

Financial instruments whose values are based on quoted market prices in active markets, and therefore classified within level 1. include active listed equities, certain unlisted unit trusts and exchange traded derivatives.

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.

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

ă)

20. Financial risk management (continued)

The table below shows the assumptions used by management in assessing fair value of its investments in unlisted equities:

	Valuation technique	Significant unobservable inputs	Range (weighted average)	Sensitivity to fair value
AWI Ventures investee companies	Director's valuation	Last issue price & date of new equity, last traded price of equity, Capital structure, Directors' qualitative assessment of investee business model success	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 categorised within level 3 between the beginning and the end of the reporting period:

Balance at 1 July 2016	1.510.000
Unlisted equities disposed during the period	(125.250)
Gain through profit and loss	188,250
Balance at 30 June 2017	1.573.000

The credit risk exposure of the Group in relation to cash is the carrying amount and any accrued unpaid interest. Cash investments are held with a number of banks all of which are rated AA- by Standard and Poor's.

21. Statement of Cash Flows

(a) Reconciliation of net profit from ordinary activities after income tax to net
cash provided by operating activities	2017	2016
		s
Operating (loss)/profit	(22, 548, 360)	175,160
Adjustments to reconcile profit after tax to net cash flows:
Unrealised change in fair value of financial assets through profit or loss	(241, 298)	(6, 872)
Employee benefit expense	424,528	562,877
Depreciation and amortisation	1,481,023	1,691,899
Non-cash transactions with subsidiaries
Decrease in deferred tax asset	157,937	152,348
Decrease in deferred tax liability	(577, 852)
Loss on disposal of fixed asset		72,778
Dividend income	(3, 166)
Change in goodwill through income statement	23,610,664	(190,941)
Change in operating assets and liabilities:
Decrease in trade and other receivables	19,682	163,520
(Increase) in prepayments	(80, 757)	(6, 475)
(Decrease)/increase in trade and other payables	(2,014,005)	2,091,116
Less net trade payables and receivables acquired in Eureka Report		(2,034,751)
Net cash from operating activities	228,396	2,670,659

(b) Reconciliation of cash

Cash at the end of the financial year as shown in the Statement of Cash Flows is reconciled to the related items in the statement of financial position as follows:

	2017	2016
		¢
Cash at bank	4,935,046	4,986,827

21. Statement of Cash Flows (continued)

The credit risk exposure of the group in relation to cash is the carrying amount and any accrued unpaid interest. Cash investments are held with a number of banks all of which are rated AA- by Standard and Poor's.

22. Loss/Earnings per share	2017	2016
	cents	cents
Basic (loss)/earnings per share (cents per share) Diluted (loss)/earnings per share (cents per share)	(20.33)	0.16
	(20.33)	0.14

As the Group was in a loss position in 2017, share based incentive plans did not affect the diluted earnings per share calculation as potential ordinary shares shall be treated as dilutive when, and only when, their conversion to ordinary shares would decrease earnings per share or increase loss per share from continuing operations.

(Loss)/earnings as per Statement of Consolidated Income		(22, 548, 360)	175,160
Weighted average number of ordinary shares outstanding during the year used in calculating basic earnings per share		110,885,630	110,885,360
Weighted average number of ordinary shares outstanding during the year used in calculating diluted earnings per share if all LTIP & ESOP shares vest and non- recourse loans are repaid		132,820,362	127,385,360
23. Franking account		2017	2016
		\$
Opening balance of franking account		1,887,279	1,805,971
Adjustments for tax payment and tax payable/refundable in respect of the prior year's
profits		323,596	81,308
Adjusted franking account balance		2,210,875	1,887,279
		Restated	As reported
24. Parent Entity Information	2017	2016	2016
	\$	\$	s
Statement of Financial Position Assets
Current assets	128,260	229,242	229,242
Investments	5,474,546	26,302,568	26,302,568
Total Assets	5,602,806	26,531,810	26,531,810
Liabilities
Current Liabilities	653,824	476,432	191,167
Total Liabilities	653,824	476,432	191,167
Net Assets	4,948,982	26,055,378	26,340,643
Equity
Contributed Equity	58,522,441	58,522,441	58,522,441
Employee benefit reserve	1,085,245	665.002	665,002
Retained earnings	(54, 658, 704)	(33, 132, 065)	(32, 846, 800)
Total Equity	4,948,982	26,055,378	26,340,643
Statement of Profit or Loss and other Comprehensive Income
Net loss for the year after income tax expense	21,526,639	2,662,126	2,947,391
Total Comprehensive loss for the year	21,526,639	2,662,126	2,947,391

24. Parent Entity Information (continued)

The accounting policies of the parent entity, InvestSMART Group Limited, used in determining the financial information shown above, are the same as those applied in the Group's consolidated financial statements, as detailed in Note 2.

At 30 June 2017, InvestSMART Group Limited had commitments for an office lease at Level 9, 37 York Street, Sydney, and Level 4, 356 Collins St, Melbourne, for \$963,789 (2016: \$1,365,571).

Comparative figures have been restated for an adjustment not reflected in the Parent Entity information in the 2016 Group Financial Report. As a result the Parent Entity Current Liabilities and Total Comprehensive Income for the year were overstated by \$285,265. The error relates only to the Parent Entity disclosure and the Group financial statements are not affected.

25. Events occurring after reporting date

Since 30 June 2017 there have been no significant events up to the date of these financial statements.

26. Contingent liabilities and commitments	2017	2016
Within one year	313.374	395,003
After one year but less than five years	650,415	1.042.909
Total	963.789	1.437.912

At 30 June 2017, the Group had commitments of \$963,789 (2016: \$1,437,912) for leased premises. The Group has leases over its offices at Level 9, 37 York St, Sydney NSW 2000, until 31 March 2020 and Level 4, 356 Collins St, Melbourne until 1 June 2021. There are no other contingent liabilities or commitments at 30 June 2017.

27. Company details

The registered office and principal place of business of the Company and subsidiaries is: Level 9, 37 York Street Sydney NSW 2000

Directors' declaration

In accordance with a resolution of the Directors of InvestSMART Group Limited, I state that:

• $1.$ In the opinion of the Directors:
• (a) The financial statements, notes and the additional disclosures included in the Director's Report designated as audited, of the Company are in accordance with the Corporations Act 2001, including:
  • giving a true and fair view of the financial position of the Company as at 30 June 2017 and of its performance for $(i)$ the year ended on that date.
  • complying with Australian Accounting Standards, International Financial Reporting Standards (IFRS) as $(ii)$ disclosed in Note 2(a) and Corporations Regulations 2001.
• (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 has been made after receiving the declarations required to be made to the Directors in accordance with $2.$ section 295A of the Corporations Act 2001 for the financial year ended 30 June 2017.

On behalf of the Board

Paul Clitheroe Chairman Dated this 23rd day of August 2017 at Sydney

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 ey.com/au

Independent Auditor's Report to the Members of InvestSMART Group Limited

Report on the Audit of the Financial Report

Opinion

We have audited the financial report of InvestSMART Group Limited (the Company) and its subsidiaries (collectively the Group), which comprises the consolidated statement of financial position as at 30 June 2017, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes to the financial statements, including a summary of significant accounting policies, and the directors' declaration.

In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:

• giving a true and fair view of the consolidated financial position of the Group as at 30 June 2017 $a)$ and of its consolidated financial performance for the year ended on that date; and
• complying with Australian Accounting Standards and the Corporations Regulations 2001. $b)$

Basis for Opinion

We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board's APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.

We have fulfilled the responsibilities described in the Auditor's Responsibilities for the Audit of the Financial Report section of our report, including in relation to these matters, Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report.

Valuation of Goodwill

Financial report reference: Note 11

Why significant

Goodwill was recognised as a result of the Group's historical acquisitions, representing the excess of purchase consideration over the fair value of assets acquired.

In line with the requirements of Australian Accounting Standard - AASB136 Impairment of Assets, the Group performs an impairment assessment at least annually. The Group prepares a discounted cash flow impairment model to determine its recoverable amount (determined by Value in Use). This model is dependent upon certain assumptions which include:

• Future cash flows;
• Discount rates; and
• $\triangleright$ Terminal growth rates

This was a key audit matter due to the quantum of goodwill impairment expense recognised in the Consolidated Statement of Comprehensive Income (30 June 2017: \$23.6 million) and the degree of judgment associated with the impairment assessment and related assumptions therein.

How our audit addressed the key audit matter

In obtaining sufficient audit evidence we:

• Assessed the methodology applied by the Group with reference to the requirements of AASB136 Impairment of Assets.
• Assessed the cash generating units determined by the Group in performing the impairment assessment.
• Assessed the appropriateness of estimated cash flows and long term growth rates of commissions and subscriptions income through analysis of the Group's board approved forecasts.
• Compared historical cash flow forecasts to actual k. results.
• Checked the mathematical accuracy of the k. discounted cash flow model.
• Involved our valuations specialists to assist by $\blacksquare$ considering the valuation methodology adopted including the calculations and logic of the impairment model, assessing the discount rate used in the model, cross checking implied multiples to those of comparable companies and performing a sensitivity analysis to consider the sensitivity of headroom to certain assumptions.

Valuation of Unlisted Investments

Financial report reference: Note 9

Why significant

Unlisted investments of \$1.57 million are held by the Group at balance date. The investments are classified within Level 3 of the Fair Value Hierarchy. They represent minority holdings in start-up companies in the financial technology sector. The investments comprise unlisted shares and there are no observable, reliable market values. The nature of these entities and the sector in which they operate means that they are inherently difficult to value.

How our audit addressed the key audit matter

We performed an assessment of the valuation analysis prepared by management and agreed inputs to observable external support as appropriate. We assessed discounts applied and compared them to available market information for reasonableness.

Management considered the following when determining fair value:

• Recent share issues of the investee companies.
• The application of an appropriate liquidity ¥ discount.
• The impact of any differences in the terms of recent share issues with the terms of the shares held by the Group.
• ► Proposals from external parties to acquire the Group's interest in the investments held.

These matters were assessed by the audit team as part of our procedures. Additionally, we considered the adequacy of the disclosures relating to the investments within the financial report.

Information Other than the Financial Report and Auditor's Report

The directors are responsible for the other information. The other information comprises the information included in the Company's 2017 Annual Report, but does not include the financial report and our auditor's report thereon.

Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Directors for the Financial Report

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

In preparing the financial report, the directors are responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

Auditor's Responsibilities for the Audit of the Financial Report

Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a quarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report.

As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.
• Conclude on the appropriateness of the directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial report, including the $\bullet$ disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.

We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated to the directors, we determine those matters that were of most significance in the audit of the financial report of the current year and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

5

Report on the Audit of the Remuneration Report

Opinion on the Remuneration Report

We have audited the Remuneration Report included in pages 6 to 9 of the directors' report for the year ended 30 June 2017.

In our opinion, the Remuneration Report of InvestSMART Limited for the year ended 30 June 2017, complies with section 300A of the Corporations Act 2001.

Responsibilities

The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Emot 85

Ernst & Young

Damien Jones Partner Sydney 23rd August 2017