InvestSMART Group Limited
ABN 62 111 772 359
ANNUAL
REPORT
2016
Empowering over 700,000 Australian investors
DIr eCt o rY
registered office
level 9
37 York Street
Sydney nSW 2000
directors
paul Clitheroe aM (Chairman)
ron Hodge (Managing Director)
share registry
Boardroom pty limited
level 12
225 George Street
Sydney nSW 2000
shareholder enquiries
telephone: +61 2 9290 9600
Michael Shepherd ao (lead Independent non-executive Director)
email: enquiries@boardroomlimited.com.au
company secretary
peter Friend
auditors
ernst & Young
200 George Street
Sydney nSW 2000
telephone: +61 2 9248 5555
Facsimile: +61 2 9248 5959
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investsmart group limited . annual report 2016
Co n t en t S
Director y
Chairman’s r epor t
Corporate Governance Statement
Directors’ r epor t
auditor’s Independence Declaration
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial p osition
Consolidated Statement of Changes in e quity
Consolidated Statement of Cash Flows
notes to the Consolidated Financial Statements
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4
6
12
21
22
23
24
25
26
49
Directors’ Declaration
50
52
Independent a uditor’s r epor t
additional Information
investsmart group limited . annual report 2016
3
CHaIrMa n ’S re p o r t
InvestSMart Group limited is pleased to announce its audited results for the year ended 30 June 2016 showing an increase in operating
profit from $131,204 in the year ended 30 June 2015, to $2,407,079.
the 2016 financial year was a period of business consolidation, cost restructuring and systems development. Improving services to members
was a core focus and sets the scene for organic growth in member engagement and revenue in the 2017 financial year.
on 4 april 2016, InvestSMart completed the acquisition of eureka report pty ltd using existing cash reserves. this is a very important
strategic acquisition which enables us to scale-up both member services and distribution and has doubled our registered members to over
700,000, increasing paying members by nearly 30% and increasing total revenue by approximately 28%.
It is pleasing to note that despite market deterioration during the 2016 financial year we were still able to post an overall modest growth of 2%
in our core revenue streams of commissions on funds under administration and subscriptions.
the following commentary provides a brief breakdown on significant line items within our audited accounts:
commissions
revenue resulting from funds under administration fell from $8,517,513 in 2015 to $ 7,907,634 for the year ended 30 June 2016, in line with
deteriorating market conditions reflected in a reduction in the all ordinaries Index of approximately 3%.
subscriptions
revenues from subscriptions continued to grow in the 2016 financial year from both organic growth and after taking into account the 3 months
of subscription revenue from the eureka report acquisition.
consulting fees and other income
Consulting and other income revenue dropped substantially from previous year as a result of business consolidation and discontinuation of
fund manager advertising contract and aWI Ventures. revenue from these sources decreased year on year by $1,056,131.
rebates paid
Commissions rebated to members as part of our cashback services reduced both in line with deteriorating market conditions and the final flow
through of reductions in our cashback scheme.
employee costs and other operating expenses
employee costs and other operating expenses reduced significantly as a result of business consolidation due to a reduced level of senior staff,
despite the inclusion of 3 months of eureka expenses.
Basic earnings per share was 0.16 cents, and diluted earnings per share was 0.14 cents per share, compared to (6.48) for the 2015 financial
year and (8.07) for the 2014 financial year for basic and diluted earnings.
the net profit of $175,160 for 2016 includes the non-cash deductions for amortisation of intangibles acquired in subsidiaries of $1,597,839
and the employee benefit expense of $562,877 relating to the long term Incentive plan, and a net corporate tax expense of $78,705. the tax
expense was net of a research and Development grant received of approximately $277,000.
performance in our key metrics for the year ended 30 June 2016 was as follows:
unique visitors
customers*
arpc ($)**
Q1 FY16
Q2 FY16
Q3 FY16
Q4 FY16
(to 30/9/15)
(to 31/12/15)
(to 31/3/16)
(to 30 6/16)
488,210
446,271
567,926
27,067
$449
27,595
$409
27,896
$386
807,713
38,543
$371
*Strong member growth and addition of Eureka Report resulted in large increases in customers in Q4 FY16
**Average annualised gross revenue per customer per annum (ARPC)
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investsmart group limited . annual report 2016
unique visitors to our websites continue to grow as we improve our member services across the board, integrate systems and improve search
engine marketing.
paying customers grew organically quarter on quarter for the year, with a marked increase in customer numbers in the fourth quarter due to
the eureka report acquisition. Further consolidation of eureka report systems, services and members into the larger group is ongoing and will
provide continued growth over the 2017 financial year.
average revenue per customer fell throughout the year in line with a lower subscription price for eureka subscribers.
engagement activity across our automated investment advice tools markedly increased over the months up to June 2016. Improved scalability,
systems and content services have started to demonstrate our ability to reach the mass market of australian retail investors. We expect this
enhanced engagement will convert into paying clients over time as our members continue to build trust in our products and services.
investsmart portfolio services
5,000
4,000
3,000
2,000
1,000
0
Registered Members
Portfolios Created
SMA PDS Downloads
Total Portfolios (RHS)
S e p 14
D ec 14
M ar 15
Jun 15
S e p 15
D ec 15
M ar 16
Jun 16
S e p 16
80,000
70,000
6,0000
50,000
40,000
30,000
InvestSMart differentiates itself from all other digital wealth advisers through proprietary software,which helps members construct better
weighted portfolios against their risk profiles. InvestSMart analyses over 8,000 managed funds, super and listed securities to show members
where they are underweight or overweight a particular asset class. Members are then able to invest in our low cost direct australian equity and
asset class specific exchange traded Fund portfolios to better diversify their overall investment portfolio.
It has been a very busy year for the InvestSMart team, but a real pleasure to be working on growing the business, not simply battling
with issues from the past. With solid and growing cash at bank, no debt and a very talented and highly motivated team, ably led by ron
Hodge, I am really excited about deepening our online conversations with the 700,000 people who use our services, tools and products and
accelerating the growth in customer numbers, revenue and in particular, funds under administration. It has been a remarkable turnaround and
the future is very bright for the company and all of its stakeholders.
the InvestSMart 2016 annual General Meeting will be held on 29 november 2016 at 10am at level 13, 60 Margaret Street, Sydney. I look
forward to reporting to shareholders on our progress at that meeting.
Yours sincerely
Paul Clitheroe AM
Chairman
investsmart group limited . annual report 2016
5
C o r p o r a t e G oVe r n a nCe S t a t eMe n t
Corporate governance includes the policies and practices by
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comply with the spirit, as well as the letter of the law and with
which InvestSMart Group limited (Company) and its controlled
the principles of the Code of Conduct;
entities (Group Entities) (collectively, Group) are effectively
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ensure compliance with the policies and procedures of
managed. those policies and practices prescribe:
our ethics;
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the Company, including the Board Charter, Delegations,
Securities trading and prevention of Insider trading policy,
Staff trading and Investment policy, Continuous Disclosure
the accountability of the Board for financial performance and
policy, Human resources policies and procedures and risk
growth; and
Management and Compliance policies.
•
the management of the risks which are encountered in
the Code of Conduct can be downloaded from the Company’s
running a company reliant upon the performance of financial
assets and investments.
In developing corporate governance policies and practices for the
Group, the Company takes into account the Constitution of the
Company (Constitution) and applicable legislation and standards,
including:
website at: www.investsmart.com.au/shareholder-centre/
governance.
Directors, senior executives and employees are required to make
all disclosures, keep all records and take all steps necessary
to enable the Company to comply with all relevant legislation,
common law obligations and Company policies, including the
• Corporations act 2001 (Corporations Act);
• australian Securities exchange listing rules (Listing Rules);
Code of Conduct.
• Corporate Governance principles and recommendations
2. responsiBilities and functions of the Board
with 2014 amendments, 3rd edition published by the aSX
and management
Corporate Governance Council (ASXCGC); and
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legislation governing australian Financial Services licences
and other licences held by members of the Group.
the Board functions in accordance with a Charter. under that
Charter, the role of the Board is to:
the information in this Statement is current as at 18 october 2016
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act as an interface between the Company and its
and has been approved by the Board.
shareholders;
1. code of conduct
the Code of Conduct prescribes that Directors, senior executives
and employees must:
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act honestly, in good faith and in the best interests of the
Company as a whole at all times;
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discharge their duty to use due care and diligence in fulfilling
the functions of their office and exercising the powers
attached to that office;
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always use the powers of their office for a proper purpose;
recognise that their primary responsibility is to the Company’s
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set the goals of the Company including short, medium and
longer term objectives;
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provide the overall strategic direction of the Company;
assess the optimal use of the Company’s capital; and
oversee the efficient management of the Company.
the Board is responsible for:
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consideration and approval of corporate strategy proposed by
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management and monitoring its implementation;
overseeing/monitoring financial performance;
approving financial and other reporting to shareholders,
employees and other stakeholders of the Company;
security holders as a whole but should, where appropriate,
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ensuring that the Company has appropriate human, financial
have regard to all stakeholders of the Company;
and physical resources to execute Company strategies;
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not make improper use of information acquired as a Director,
senior executive or employee;
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not allow personal interests, or the interests of any associated
person, to conflict with the interests of the Company;
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be independent in judgment and actions and to take all
reasonable steps to be satisfied as to all decisions taken by
or on behalf of the Company;
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not engage in conduct likely to bring discredit on the
Company;
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reviewing the Board and management succession planning;
appointing, removing and monitoring the performance of the
Managing Director and Key Management personnel;
appointing and removing the Company Secretary;
considering and monitoring risks;
reviewing the effectiveness of Company policies and
procedures regarding risk management;
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investsmart group limited . annual report 2016
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reviewing the effectiveness of the Company’s internal control
as at the date of this Statement, the Directors are:
and accounting systems;
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ensuring appropriate corporate governance structures are in
Chairman:
Mr paul Clitheroe aM
place including standards of ethical behaviour and a culture of
Managing Director:
Mr ron Hodge
corporate and social responsibility;
oversight of the Company’s continuous disclosure obligations;
reporting to shareholders and other stakeholders;
capital management.
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the Board Charter was reviewed in october 2016. It can be
downloaded from the Company’s website at: www.investsmart.
com.au/shareholder-centre/governance.
to assist the Board to carry out its responsibilities and functions,
certain powers have been delegated to management, including
the authority to undertake transactions and incur expenditure on
behalf of the Group, up to specified thresholds.
lead Independent
non-executive Director:
Mr Michael Shepherd ao
the Company does not comply with the aSXCGC Corporate
Governance principles and recommendations in relation to a
majority of the Board and the Chairman, being independent. Since
the latter part of 2014 there have been significant changes in
the composition of the Board. these changes have resulted in a
reduction of the number of independent non-executive Directors.
the Board believes that at this time in the development of the
Company and bearing in mind the short tenure of the Directors,
the current allocation of responsibilities among the Directors,
processes have been established to ensure that management
are most practical and effective for the Company and in the best
provides relevant information to the Board to enable the Board to
interests of shareholders.
make informed decisions and effectively discharge its duties. the
Board may also request additional information where necessary
and may seek independent advice should it wish to do so.
3. Board structure
the Board has assessed the mix of skills which best suit the
business conducted by the Company. the Board believes the
current mix of skills among Directors is appropriate for the Company
at this time, with the presence of core skills in financial services,
governance, marketing, digital distribution and product development.
the Constitution provides for a minimum of three Directors and a
In future the Board will consider expanding and deepening core
maximum of ten Directors.
skills through the expansion of the size of the Board.
the Company undertakes appropriate checks before appointing
the Company Secretary is accountable directly to the Board,
a person as a Director or putting forward a person as a
through the Chairman, on all matters to do with the proper
candidate for election as a Director. all material information in the
functioning of the Board.
possession of the Company, which is relevant to whether or not a
person should be elected or re-elected a Director, is provided to
4. terms of appointment of directors
shareholders prior to an election taking place.
the Company issues letters of appointment to Directors,
at the date of this Statement, the Board comprises the Chairman,
which include:
an independent non-executive Director and the Managing
Director. the Chairman held the role of executive Chairman from
31 March 2015 to 24 February 2016 and for this reason, is not
independent.
the Directors’ report included in this annual report provides the
details of the Directors in office during the year ended 30 June
2016, together with their experience, expertise and qualifications
and the number of Board meetings each attended during the year.
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term of appointment;
expectations regarding the Director’s involvement and time
commitment envisaged;
powers and duties of Directors;
circumstances in which the office of director will become
vacant;
remuneration and expenses;
requirements regarding interests (including the disclosure of
interests in securities) and independence;
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compliance with Company policies, including the Board
Charter, Code of Conduct and Securities trading policy;
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induction and training;
investsmart group limited . annual report 2016
7
C o r p o r a t e G oVe r n a nCe S t a t eMe n t
Co n tIn u eD
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•
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access to independent advice;
indemnification and insurance; and
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are entitled to obtain independent professional or other advice
at the cost of the Company, unless the Board determines
confidentiality and the right of access to Company information.
otherwise;
Directors appointed by the Board to fill a casual vacancy or as an
addition to existing Directors (other than a Managing Director) are
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are entitled to obtain such resources and information from
the Company including direct access to employees of and
advisers to the Company as they might require; and
appointed only to the conclusion of the general meeting following
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operate in accordance with a charter or terms of reference
their appointment and must stand for election at that general
established by the Board.
meeting. otherwise, Directors (other than any Managing Director)
retire at the later of the third anniversary of their appointment
6.1 audit, risK and compliance committee
or the conclusion of the third annual General Meeting after their
the Charter of the audit, risk and Compliance Committee can be
appointment and are available for re-election. Details of Directors,
downloaded from the Company’s website at: www.investsmart.
their experience, expertise and qualifications are set out in the
com.au/shareholder-centre/governance.
Directors’ report included in this annual report.
the appointment and removal of any Managing Director is a
matter for the Board as a whole.
5. directors’ interests and independence
the Board has in place processes to ensure that conflicts of
interest are managed appropriately throughout the Group.
Directors are required to immediately notify the Company of
interests or changes to interests as they arise. the Company
Secretary maintains a register of Directors’ interests. that register
is updated as interests or changes in interests are notified and it
is reviewed at the commencement of each regular Board meeting.
the Board undertakes the assessment of the independence of
Directors and makes a determination in respect of each Director
taking into account matters such as:
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specific disclosures made by the Director;
any association with a substantial shareholder of the
Company;
employment in any other capacity by the Group;
any related party dealings which are material under
accounting standards;
this Committee assists the Board to fulfil its corporate
governance and oversight responsibilities in relation to:
1. audit – the Committee reviews the integrity of the Group’s
financial reporting and oversees the independence of the
external auditor;
2. Compliance – the Committee reviews the integrity of the
Group’s compliance framework;
3. risk – the Committee assists the Board in fulfilling its risk
management responsibilities as defined by applicable law
and regulations, the Constitution and other applicable
standards.
the Committee consists of not less than two members appointed
by the Board. Where possible, a majority of members will be
independent non-executive Directors. the Board appoints the
Chairman of the Committee, who must be an independent non-
executive Director. preferably, the Chairman of the Board is not
also the Chairman of the Committee.
In determining membership of the Committee the Board seeks to
identify and appoint:
• members who can all read and understand financial
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association with a supplier, adviser, consultant to or customer
statements and are otherwise financially literate;
of the Group for the purposes of the aSXCGC Corporate
Governance principles and recommendations; and
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at least one member with financial expertise either as a
qualified accountant or other financial professional with
• whether the Director has been in their position for such a
experience in financial and accounting matters; and
period that their independence may have been compromised.
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at least one member who has an understanding of the
financial services industry.
6. committees of the Board
under the Constitution the Directors may delegate any of
their powers to a committee or committees. any committees
established by the Board:
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investsmart group limited . annual report 2016
the current Chairman of the Committee is Mr Michael Shepherd
annual report. the 2016 remuneration report distinguishes
ao and the other Committee member is Mr paul Clitheroe aM.
the structure of Directors’ remuneration from that of senior
Details of the number of meetings of the Committee held during
the year ended 30 June 2016 are set out in the Directors’ report
included in this annual report.
executives.
6.3 investment committee
6.2 nomination and remuneration committee
review and, if thought fit, approve investment portfolios for use in
the Company has established an Investment Committee to
the Charter of the nomination and remuneration Committee can
be downloaded from the Company’s website at: www.investsmart.
com.au/shareholder-centre/governance.
the Committee:
the suite of investment products offered by Group entities. the
Committee is also responsible for the ongoing monitoring and
review of investment portfolios.
Members of the Committee are drawn from the Board,
management and external advisers based on their relevant skills
1.
reviews and reports/make recommendations to the Board in
and experience. the current members are Mr alistair Davidson
relation to nomination matters;
2. develops and recommends to the Board strategies on gender
diversity for the Board, committees of the Board and all other
levels of the Company and Group entities.
(Chairman of the Committee), Mr paul Clitheroe, Mr ron Hodge,
Mr James Carlisle and Mr Jonathan ramsay (external adviser).
7. securities trading and prevention of insider
trading policy and staff trading and investment
3.
reviews and reports/make recommendations to the Board in
policy
relation to remuneration matters;
the Company has adopted a policy regarding trading in its
4.
reviews and brings to the attention of the Board matters
securities and the prevention of insider trading which applies to all
relating to:
•
remuneration structure including long term incentive
arrangements and participation;
Directors, employees and contractors and their associates. this
policy can be downloaded from the Company’s website at:
www.investsmart.com.au/shareholder-centre/governance.
•
•
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senior executive and key staff succession plans;
those covered by the policy must not trade, arrange for someone
recruitment, retention and termination strategies;
else to trade, or communicate information to someone they know,
the remuneration report of the Company; and
or ought reasonably to know, may use the information to trade (or
other matters identified from time to time by the Board.
procure another person to trade) Company securities when they
the Committee consists of not less than two members appointed
by the Board. Where possible, a majority of members will be
are in possession of price sensitive information relating to the
Group which is not generally available to the market.
independent non-executive Directors. the Board appoints the
Directors and employees are generally only permitted to trade in
Chairman of the Committee. preferably, the Chairman of the
Company securities in defined open periods and then, only if they
Board is not also the Chairman of the Committee.
the current Chairman of the Committee is Mr Michael Shepherd
ao and the other Committee member is Mr paul Clitheroe aM.
Details of the number of meetings of the Committee held during
the year ended 30 June 2016 are set out in the Directors’ report
included in this annual report.
Details about the Company’s remuneration policies and practices
are set out in the 2016 remuneration report included in this
are not in possession of price sensitive information relating to the
Group which is not generally available to the market and if they
have prior written approval to trade.
the Company has also adopted a separate policy dealing
with staff trading and investment. that policy deals with the
management of actual and perceived conflicts of interest arising
where in the ordinary cause of business Group entities promote,
analyse or report on securities.
investsmart group limited . annual report 2016
9
C o r p o r a t e G oVe r n a nCe S t a t eMe n t
Co n tIn u eD
8. continuous disclosure
•
the requirement to comply with corporate policies, including
the Board is very conscious of its disclosure obligations and has
Delegations, Securities trading and prevention of Insider
trading policy, Staff trading and Investment policy,
a Continuous Disclosure policy. It can be downloaded from the
Continuous Disclosure policy, Human resources policies and
Company’s website at: www.investsmart.com.au/shareholder-
procedures and risk Management and Compliance policies.;
centre/governance.
and
all Directors and the Company Secretary are responsible to
ensure that the Continuous Disclosure policy is adhered to. the
Chairman or the Managing Director deal with media contact and
any external communications.
•
circumstances of termination and entitlements on termination.
those contracts also set out the manner in which the performance
of the respective senior executive is evaluated. performance
evaluation of senior executives was undertaken in the reporting period.
9. independent professional advice
11. gender diversity
Directors may obtain independent professional advice at the
Company’s expense on matters arising in the course of their
Board and Committee duties, after obtaining the Chairman’s
In april 2016 the Company established a Diversity policy. It can
be downloaded from the Company’s website at: www.investsmart.
com.au/shareholder-centre/governance.
approval (or in the case of the Chairman, with prior approval of
the Company has policies and procedures in place in relation to
the Chairman of the audit, risk and Compliance Committee). the
employment opportunities for women. the Board believes these
Board requires that all Directors be provided with a copy of such
policies and procedures best suit the Company given its size and
advice and be notified if the Chairman’s approval is withheld.
stage of development.
10. performance assessment
the Company does not currently have any women on the Board
or within the Key Management personnel (as identified in the 2016
the performance assessment of individual Directors, Committees
annual report) however, 42% of the employees in the Group are
and the Board is included in the Board Charter. the process is
women. the Company will seek to maintain or increase this level
aimed at ensuring individual Directors, Committees and the Board
of women employees in the future and to reflect gender diversity
as a whole work efficiently and effectively. as part of that process:
within the Board and Key Management personnel.
•
the Board as a whole discusses and analyses its own
performance during the year including suggestions for change
12. directors’ induction and continuing education
or improvement;
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the Chairman meets with each non-executive Director
separately to discuss individually performance, including
development areas;
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a nominated Director leads the review of the Chairman.
all Directors receive an induction after joining the Board and have
access to continuing education to update and enhance their skills
and knowledge to enable them to continue to carry out their duties.
13. management of risK and internal control
Due to the size of the Board a formal performance evaluation of
frameWorK
Directors was not undertaken in the reporting period.
each senior executive in the Group is engaged under a written
contract which includes:
the Board is the ultimate sponsor of risk oversight within the
Group, but does so in a manner which reflects the transparent
nature of the Group’s systems. the Company pays significant
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10
the term of appointment;
attention to risk as a consequence of its activities, which involve
a description the position and associated duties and
dealing in financial assets.
responsibilities;
reporting;
remuneration, including superannuation;
the audit, risk and Compliance Committee fulfils an essential
role in the management of risk and the establishment, review
and monitoring of internal controls. In addition, through the
reporting of the Managing Director, the Board also monitors
investsmart group limited . annual report 2016
various measurements of absolute and relative risk. reviews of
the Chairman and the Managing Director are primarily responsible
the Company’s risk management framework were undertaken
for promoting effective communication with shareholders and
throughout the reporting period.
encouraging their participation at general meetings. the Board
Due to the relative small size of the Group and limited nature of its
business operations, the Company does not have an Internal audit
function. this matter is reviewed periodically by the audit risk
and Compliance Committee and that Committee makes relevant
recommendations to the Board to improve the effectiveness of the
reviews the activities aimed at achieving these outcomes. the
Company Secretary and the share registry are also available to
assist shareholders. Shareholders have the option to receive
communications from, and send communications to, the Company
and the share registry electronically.
Company’s risk management and internal control processes.
Current and archived announcements by the Company are
the Company has access to a series of internal and external
controls through the Managing Director, which govern the
available on the Company’s website at: www.investsmart.com.au/
shareholder-centre/announcements; or at: www.asx.com.au.
Company’s material business risks. these controls include, but
the Company provides a review of operations and financial
are not restricted to:
performance in this annual report, which includes the Company’s
financial report. results announcements to the australian
Securities exchange, analyst presentations and the full text of the
Chairman’s address at the Company’s annual General Meeting
are lodged with australian Securities exchange and available at on
the Company’s website at: www.investsmart.com.au/shareholder-
centre/announcements; or at: www.asx.com.au.
the external auditor attends the annual General Meeting of the
Company and is available to answer questions from shareholders
relevant to the audit of the Company.
•
external providers of accounting and related services to the
Company and Group entities; and
•
regular reporting by the Managing Director to the Board.
the Company’s exposure to economic, environmental and social
sustainability risks and management of those risks is disclosed in
this annual report.
the Board received a statement in writing from the Managing
Director and the Chief Finance officer that the declaration
provided in accordance with section 295a of the Corporations act
is founded on a sound system of risk management and internal
control and the system is operating effectively in all material
respects in relating to financial reporting risks.
14. engaging shareholders
the Board is committed to ensuring that the shareholders are
at all times provided with information sufficient to allow effective
monitoring of the Company’s performance, including:
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the annual report which is distributed to shareholders (at
•
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their election);
the Half Yearly report;
periodic reports and special reports when matters of material
interest arise;
•
the annual General Meeting and other meetings called to
obtain shareholder approval of any action as required; and
•
continuous and periodic disclosure.
investsmart group limited . annual report 2016
11
DIr eCt o rS’ re p o r t
the Directors present their report on InvestSMart Group limited (formerly australasian Wealth Investments limited) ( the Company) and its
subsidiaries (collectively the Group) for the financial year ended 30 June 2016.
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 61
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 66
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.
12
investsmart group limited . annual report 2016
John O’Connell
(Appointed 1 July 2014, resigned 31 August 2015)
Independent Non-Executive Director
Chairman of the Nomination and Remuneration Committee
B.D. SC (QLD), B.COM (QLD), Graduate Diploma in Applied Finance & Investments, SIA (now FINSIA)
age 52
John is Chief Investment officer, Banking and Financial Services for Macquarie Bank. John has been with Macquarie since 1998 and over
this time has held various senior management positions both in australia and the united States. John has a deep knowledge of investment
technology and global change as it applies to the financial services sector.
Peter Ronald Hodge
(Appointed 31 August 2015, appointed Managing Director 24 February 2016)
Managing Director
FFin
Age 46
ron Hodge was the founder of InvestSMart in 1999. He 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 is
also a director and shareholder in Webabout pty ltd, which provided web hosting services to one of the Group companies.
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.
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
Paul Clitheroe
Michael Shepherd
Peter Ronald Hodge
Ordinary Shares
5,000,000
400,000
4,166,666
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 (2,666,667) held by Mr paul Clitheroe, and all of the shares held by Mr ron Hodge, 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) as detailed below.
principal activities
the principal activities of the Company during the year was the provision of financial services under general advice to retail investors in
particular in the area of wealth management.
investsmart group limited . annual report 2016
13
DIr eCt o rS’ re p o r t
Co n tIn u eD
dividends
no dividend has been declared for the financial year ended 30 June 2016 (2015: 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 year to 30 June 2016.
the results for the prior year are based on consolidated accounting for the period from 1 January 2015 to 30 June 2015, and investment
accounting from the period from 1 July 2014 to 31 December 2014.
operating profit (loss) before income tax benefit
income tax benefit (expense)
operating profit (loss) for the year
2016
$
253,235
(78,075)
175,160
2015
$
(7,811,468)
625,904
(7,185,564)
the net tangible asset backing of the Company as at 30 June 2016 was $0.006 (2015: $0. 008) per share before tax. the operating loss in
the prior year was largely attributable to a write down in the valuation of the investment in van eyk research pty ltd of $7,490,036 at 31
December 2014, following the appointment of a liquidator to that company.
on 4 april 2016, the Group acquired eureka report pty ltd, a publisher of investment information, based in Melbourne. the financial results of
the Group include the revenues and costs from this business since that date up to 30 June 2016, which are detailed in note 3 of the financial
statements.
the group revenues for subscriptions and commissions for the prior year shown in the financial statements below only reflect revenues for the
period from 1 January 2015 to 30 June 2015, due to the change in investment policy in January 2015. unaudited revenues from subscriptions
and commissions for the period from 1 July 2014 to 30 June 2015 are shown below.
comparative consolidated financial information for the prior year
the table below shows the consolidated performance of the Group for the years to 30 June 2016 and 30 June 2015 respectively. this
information is audited for the period from 1 July 2015 to 30 June 2016 and unaudited for the period from 1 July 2014 to 30 June 2015, and
only shows earnings before tax and amortisation of goodwill and intangibles, and is presented to show the relative changes over the period.
statement of consolidated comprehensive income
Continuing operations
commission income
subscription income
consulting fees
other income
Total Income
Total operating expenses
Operating profit before income tax, amortisation and employee benefit expense
change in fair value of financial assets at fair value through profit and loss
Profit (loss) before income tax, amortisation and employee benefit expense
Year to
Year to
30 Jun 2016
30 Jun 2015
$
$
7,907,634
4,207,421
40,414
247,986
8,517,513
3,361,576
650,619
693,912
12,403,455
13,223,620
9,996,376
13,095,752
2,407,079
127,868
6,872
(7,490,036)
2,413,951
(7,362,168)
14
investsmart group limited . annual report 2016
the major changes to revenues were a fall in commission income over the year due to falls in the share market in australia, and a decline in
consulting fees from the mutual termination of the marketing contract with Forager Funds and the absence of revenues from aWI Ventures.
the increase in subscription income results from the inclusion of eureka report revenues from 4 april 2016 in the consolidated income.
operating expenses are significantly lower than 2015, through a reduction in employee costs and in the proportion of commission income
rebated to clients.
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 continue to pursue its objectives of increasing the number of subscribers to its services, including users of its free portfolio
management service, and the number of investors in its fund management products. the Group will introduce a mobile app and automate the
portfolio updates on the portfolio management service during the next 12 months. the Group also intends to pursue strategic partnerships
with specific product providers over the next 12 months. there is a risk of a material decline in Group revenues if there is a significant and
sustained equity market fall, however, the Group has plans to reduce as many variable costs as possible in that event.
significant changes in state of affairs
there were no 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 2016 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
ron hodge
John o’connell
michael shepherd
10
8
2
10
10
8
2
10
1
–
2
2
1
–
2
2
2
–
–
2
2
–
–
2
2
2
–
–
2
2
–
–
the number of Directors’ Meetings has been adjusted for each member to reflect the number of Meetings held during their tenure.
events suBsequent to Balance date
Since 30 June 2016, there have been no significant events up to the date of this report.
earnings per share
Basic earnings per share was 0.16 cents per share, and diluted earnings per share was 0.14 cents per share, (2015: (6.48) cents per share for
basic and diluted earnings).
investsmart group limited . annual report 2016
15
DIr eCt o rS’ re p o r t
Co n tIn u eD
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) 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 management is detailed below.
all Directors must have a deep understanding and commitment to good corporate governance. the primary role of the non- executive
Directors is to ensure adherence to good governance.
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.
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.
(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 vest in three equal tranches on 8 September 2016, 8 September 2017 and 8 September 2018 respectively.
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 2016 is detailed in the following table. there was only accrued long service leave for
the Managing Director at 30 June 2016.
Name of Director
Base fee
$
Superannuation
$
Accrued
Annual Leave $
LTIP
Expense $
Total
$
paul clitheroe
John o’connell (resigned 31 august 2015)
michael shepherd
90,000
7,500
–
peter ronald hodge (appointed 1 september 2015)
264,449
–
713
90,000
25,122
TOTAL
361,949
115,835
–
–
–
15,463
15,463
88,893
178,893
–
–
8,213
90,000
157,995
463,029
246,888
740,135
16
investsmart group limited . annual report 2016
the Directors’ remuneration for the year ended 30 June 2015 is detailed in the following table.
Name of Director
paul clitheroe
John o’connell
michael shepherd
andrew Barnes
(resigned 17 November 2014)
John reynolds
(resigned 17 February 2015)
Ben heap
(resigned 31 March 2015)
Base fee
$
Superannuation
$
Accrued
Annual Leave $
LTIP
Expense $
Share based
Expense $
Termination
Benefits $
Total
$
54,175
45,000
–
21,679
20,000
–
4,275
45,000
–
1,900
–
–
–
–
–
80,320
–
–
–
–
337,500
19,594
40,909
(94,941)
–
–
–
(3,848)
–
–
–
–
–
–
–
134,495
49,275
45,000
17,831
21,900
223,228
526,290
TOTAL
478,354
70,769
40,909
(14,621)
(3,848)
223,228
794,791
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 2016 is shown below.
Name of Key Management Personnel
Base
Remuneration $
Superannuation
$
Accrued
Annual Leave $
LTIP
Expense $
Total
$
nigel poole
alastair davidson
211,149
205,000
20,059
19,475
25,415
5,456
157,995
157,995
414,618
387,926
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 2015 is shown below.
Name of Key Management Personnel
Base
Remuneration $
Superannuation
$
Accrued
Annual Leave $
LTIP
Expense $
Total
$
ronald hodge
nigel poole
alastair davidson
239,055
205,385
209,500
29,018
19,512
9,500
10,273
20,212
10,256
7,268
7,268
7,268
285,614
252,377
236,524
investsmart group limited . annual report 2016
17
DIr eCt o rS’ re p o r t
Co n tIn u eD
shares held by Key management personnel and directors
for the year ended 30 June 2016
Ordinary Shares
Balance at
1 July 2015
Shares held on
appointment
Shares acquired /
(disposed)
Shares
vested
Balance at
30 June 2016
paul clitheroe (appointed 26 november 2014)
1,000,000
michael shepherd
alastair davidson
300,000
327,674
–
–
–
–
1,333,333
100,000
–
–
–
2,333,333
400,000
327,674
shareholdings relating to ltip
Executive
Balance at
1 July 2015
Tranches
Shares acquired /
(disposed)
per Tranche
Approval or
Issue date
Value at
issue date
Estimated
or actual
vesting date
Balance at
30 June
2016
paul clitheroe
4,000,000 tranche 1
1,333,333
26/11/2014
Executive Chairman
(appointed 26 November 2014)
ron hodge
4,166,666 tranche 1
tranche 2
tranche 3
tranche 2
tranche 3
1,333,333
1,333,334
1,388,888
17/06/2015
1,388,888
1,388,890
nigel poole
4,166,666 tranche 1
1,388,888
17/06/2015
alastair davidson
4,166,666 tranche 1
1,388,888
17/06/2015
tranche 2
tranche 3
1,388,888
1,388,890
tranche 2
tranche 3
1,388,888
1,388,890
0.0542
0.0663
0.0733
0.0767
0.0826
0.0878
0.0767
0.0826
0.0878
0.0767
0.0826
0.0878
30/5/2016
–
22/04/2017
1,333,333
22/07/2018
1,333,334
8/09/2016
4,166,666
8/09/2017
8/09/2018
8/09/2016
4,166,666
8/09/2017
8/09/2018
8/09/2016
4,166,666
8/09/2017
8/09/2018
the ltIp shares issued to paul Clitheroe will vest in three equal tranches on the later of the first, second and third anniversary of the grant
date, or the date the share price is at or above $0.33, $0.42 or $0.50 respectively for each tranche. the performance of the share price was
selected as the performance criteria in order to vest the ltIp shares as this closely aligns performance to shareholder returns. the share price
closed at $0.335 on 30 May 2016 and therefore the first tranche of ltIp shares have vested.
the 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.
shares held by Key management personnel and directors
for the year ended 30 June 2015
Ordinary Shares
Balance at Shares held on
appointment
1 July 2014
Shares acquired /
(disposed)
Shares
vested
Balance at
30 June 2015
andrew Barnes (resigned 17 November 2014)
paul clitheroe – Executive Chairman (appointed 26 November 2014)
alastair davidson – Chief Financial Officer
Ben heap (resigned 31 March 2015)
3,617,907
–
327,674
100,000
–
–
–
–
(3,541,240)
1,000,000
–
–
–
–
–
–
76,667
1,000,000
327,674
100,000
18
investsmart group limited . annual report 2016
shareholdings relating to ltip
Executive
Balance at
1 July 2014
Tranches
Shares acquired /
(disposed)
per Tranche
Approval or
Issue date
Value at
issue date
paul clitheroe
–
tranche 1
1,333,333
26/11/2014
Executive Chairman
(appointed 26 November 2014)
ron hodge
Chief Operating Officer
nigel poole
Chief Technology Officer
tranche 2
tranche 3
1,333,333
1,333,334
–
tranche 1
1,388,888
17/06/2015
tranche 2
tranche 3
1,388,888
1,388,890
–
tranche 1
1,388,888
17/06/2015
alastair davidson
Chief Financial Officer
–
tranche 2
tranche 3
tranche 1
tranche 2
tranche 3
1,388,888
1,388,890
1,388,888
17/06/2015
1,388,888
1,388,890
Ben heap
(resigned 31 March 2015)
Options issued to Directors
andrew Barnes
(resigned 17 November 2014)
10,569,384
tranche 1
(3,523,128)
3/12/2013
tranche 2
tranche 3
(3,523,128)
(3,523,128)
3,370,000
tranche 1
(1,685,000)
17/12/2013
tranche 2
(1,685,000)
17/12/2013
Estimated
or actual
vesting date
Balance at
30 June
2015
26/11/2015
4,000,000
22/04/2017
22/07/2018
17/06/2016
4,166,666
17/06/2017
17/06/2018
17/06/2016
4,166,666
17/06/2017
17/06/2018
17/06/2016
4,166,666
17/06/2017
17/06/2018
22/07/2021
–
25/02/2023
15/06/2024
–
–
–
–
0.0542
0.0663
0.0733
0.0767
0.0826
0.0878
0.0767
0.0826
0.0878
0.0767
0.0826
0.0878
0.1047
0.1253
0.1424
0.0887
0.0536
Key management personnel transactions concerning dividends and ordinary shares are on the same terms and conditions applicable to
ordinary members.
transactions with Key management personnel
Webabout pty ltd (an entity controlled by r. Hodge, n. poole and a. Davidson) provided web hosting services to a subsidiary of the Group
and received a total of $24,140 for the period (2015: $31,946), of which $nil was unpaid at 30 June 2016. In addition, Webabout received a
contract termination payment of $800,000 in 2015, of which $400,000 was paid in June 2015, and $400,000 was paid in June 2016.
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.
investsmart group limited . annual report 2016
19
DIr eCt o rS’ re p o r t
Co n tIn u eD
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 2016 has been received and can be found on page 21.
Signed in accordance with a resolution of the Directors.
Paul Clitheroe AM
Chairman
Dated 25 august 2016 at Sydney
20
investsmart group limited . annual report 2016
auD It o r ’S I nDe p e nDe nCe D eCl a r a tIo n
Ernst & Young
200 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
www.ey.com/au
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 2016, I declare to the best of my knowledge
and belief, there have been:
a)
no contraventions of the auditor independence requirements of the Corporations act 2001 in relation to the audit; and
b)
no contraventions of any applicable code of professional conduct in relation to the audit.
ernst & Young
Jonathan Pye
Partner
25 august 2016
investsmart group limited . annual report 2016
21
C o nSo lI Da t eD S t a t eMe n t oF
C oMp r eHe nS I Ve I nCoMe
dividend income
interest
commission income
subscription income
consulting fees
other
Total Income
change in fair value of financial assets at fair value through profit and loss
accounting and administrative costs
audit fees
employee costs
marketing and advertising
directors’ fees
employee benefit expense
travel and accommodation
legal and statutory expenses
rent
commission rebates
depreciation and amortisation
other expenses
market data costs
termination of Webabout contract
software and website costs
interest expense
Total expenses
Profit (loss) before income tax
income tax benefit/(expense)
Profit (loss) for the year
other comprehensive income, net of income tax
Total comprehensive income (loss) for the year
Basic per share (cents per share)
diluted earnings per share (cents per share)
Notes
4
4
5
17
6
18
8
22
22
2016
$
–
28,928
7,907,634
4,207,421
40,414
219,058
2015
$
1,350,000
69,738
4,292,850
1,875,595
650,618
176,795
12,403,455
8,415,596
6,872
(7,490,036)
(165,831)
(126,000)
(137,357)
(116,298)
(4,830,356)
(3,723,171)
(762,833)
(188,438)
(562,877)
(51,917)
(65,215)
(385,070)
(316,809)
(147,562)
(3,336)
(99,334)
(237,830)
(159,502)
(1,862,126)
(1,205,323)
(1,691,899)
(874,489)
(196,217)
–
(393,812)
(12)
(653,154)
(523,249)
(91,199)
(800,000)
(516,307)
(6,597)
(12,150,220)
(16,227,064)
253,235
(78,075)
(7,811,468)
625,904
175,160
(7,185,564)
–
–
175,160
(7,185,564)
0.16 cents
(6.48) cents
0.14 cents
(6.48) cents
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
22
investsmart group limited . annual report 2016
ConSolIDateD StateMent oF FInanCIal poSItIon
The above Consolidated Statement of Comprehensive Income for 2015 comprises investment accounted income for the period from
1 July 2014 to 31 December 2014 and consolidated income for the period from 1 January 2015 to 30 June 2015.
ASSETS
cash and cash equivalents
trade and other receivables
prepayments
rental deposit
financial assets at fair value through profit and loss
fixed assets, including software less accumulated depreciation
deferred tax asset
intangibles
goodwill
Total assets
LIABILITIES
other payables and provisions
trade payables
subscriptions received in advance
trail commissions to rebate
deferred tax liability
Total liabilities
Net assets
Equity
issued capital
employee Benefit reserve
retained losses
Total equity
Notes
2016
$
2015
$
7
9
10
8
12
11
14
13
8
15
6
16
4,986,827
3,292,828
622,379
169,760
56,264
785,899
163,284
93,290
1,638,448
1,711,576
264,340
613,248
265,679
765,596
8,988,770
9,447,700
23,610,664
21,595,696
40,950,700
38,121,548
1,786,751
82,964
4,437,135
1,339,828
2,697,185
1,347,544
439,211
1,889,715
1,741,968
2,834,310
10,343,863
8,252,748
30,606,837
29,868,800
58,522,440
58,522,440
665,002
102,125
(28,580,605)
(28,755,765)
30,606,837
29,868,800
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
investsmart group limited . annual report 2016
23
ConSolIDateD StateMent oF CHanGeS In equItY
Notes
Issued Capital
$
Retained losses
$
Employee Benefit Reserve
$
Total Equity
$
58,522,440
(21,570,201)
98,789
37,051,028
Balance as at 1 July 2014
comprehensive loss for the year
employee benefit share reserve
6
Balance as at 30 June 2015
Balance as at 1 July 2015
comprehensive income for the year
employee benefit share reserve
6
–
–
(7,185,564)
–
–
(7,185,564)
3,336
3,336
58,522,440
(28,755,765)
102,125
29,868,800
15
58,522,440
(28,755,765)
102,125
29,868,800
–
–
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
the above Consolidated Statement of Changes in equity should be read in conjunction with the accompanying notes.
24
investsmart group limited . annual report 2016
ConSolIDateD StateMent oF CaSH FloWS
Cash flows from operating activities
receipts from customers
interest received
dividends received
interest paid
gst paid
payments to suppliers and employees
Net cash used in operating activities
Cash flows from investing activities
purchase of fixed assets
purchase of investments and subsidiary
proceeds from sale of investments
rental deposit paid
loans to investee companies
Net cash (used in) investing activities
Cash flows from financing activities
Net cash inflow from financing activities
Net (decrease) / increase in cash and cash equivalents
cash and cash equivalents at beginning of the year
cash acquired through acquisitions
Cash and cash equivalents at the end of the year
Notes
2016
$
2015
$
13,791,852
7,576,780
28,928
–
(12)
(1,253,804)
(9,896,305)
69,738
2,100,000
(6,597)
(688,798)
(9,589,968)
21(a)
2,670,659
(538,845)
(149,023)
(3,182,478)
100,000
37,026
(59,168)
(500,796)
–
–
–
(816,253)
(3,194,475)
(1,376,217)
–
–
(523,816)
(1,915,062)
3,292,828
3,383,947
2,217,815
21(b)
4,986,827
1,823,943
3,292,828
On 4 April 2016, the Group acquired 100% of the issued shares of Eureka Report Pty Ltd and acquired the cash balance noted above.
The above Consolidated Statement of Cash flows should be read in conjunction with the accompanying notes.
investsmart group limited . annual report 2016
25
no t eS t o tHe C o nSo lI Da t eD FIn a nC Ia l
S t a t eMe n tS
1. REPORTINg ENTITY
InvestSMart Group limited (the “Company”) is domiciled in australia, 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 2016. the Group is
primarily involved in operating businesses delivering financial services to retail investors in australia, primarily in wealth management.
2. SuMMARY OF SIgNIFICANT ACCOuNTINg POLICIES
(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.
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 25th august 2016. 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 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 Revenue from Contracts with Customers replaces the existing revenue recognition standards aaSB 111 Construction Contracts,
aaSB 118 Revenue and related Interpretations (Interpretation 13 Customer Loyalty Programmes, Interpretation 15 Agreements for the
Construction of Real Estate, Interpretation 18 Transfers of Assets from Customers, Interpretation 131 Revenue—Barter Transactions
Involving Advertising Services and Interpretation 1042 Subscriber Acquisition Costs in the Telecommunications Industry). aaSB 15
incorporates the requirements of IFrS 15 Revenue from Contracts with Customers issued by the International accounting Standards Board
(IaSB)
26
investsmart group limited . annual report 2016
2. SuMMARY OF SIgNIFICANT ACCOuNTINg POLICIES (ContInueD)
aaSB 15 specifies the accounting treatment for revenue arising from contracts with customers (except for contracts within the scope of other
accounting standards such as leases or financial instruments). the core principle of aaSB 15 is that an entity recognises revenue to depict the
transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in
exchange for those goods or services. an entity recognises revenue in accordance with that core principle by applying the following steps:
(a) Step 1: Identify the contract(s) with a customer
(b) Step 2: Identify the performance obligations in the contract
(c) Step 3: Determine the transaction price
(d) Step 4: allocate the transaction price to the performance obligations in the contract
(e) Step 5: recognise revenue when (or as) the entity satisfies a performance obligation
the Group has a liability to service customers who have purchased subscriptions in advance and recognises revenue when that subscription
service has been delivered. an exposure draft has been issued by the aaSB with the effective date of 1 January 2018. Management are still
assessing the potential impact of implementation of this standard, however, they believe the impact will be minimal.
AASB 16 – Leases
aaSB 16 introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of
more than 12 months, unless the underlying asset is of low value. a lessee is required to recognise a right-of-use asset representing its right
to use the underlying leased asset and a lease liability representing its obligations to make lease payments.
assets and liabilities arising from a lease are initially measured on a present value basis. the measurement includes non-cancellable 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.
aaSB 16 contains disclosure requirements for lessees. lessees will need to apply judgement in deciding upon the information to disclose to
meet the objective of providing a basis for users of financial statements to assess the effect that leases have on the financial position, financial
performance and cash flows of the lessee.
aaSB 16 substantially carries forward the lessor accounting requirements in aaSB 117 leases. accordingly, a lessor continues to classify
its leases as operating leases or finance leases, and to account for those two types of leases differently. aaSB 16 also requires enhanced
disclosures to be provided by lessors that will improve information disclosed about a lessor’s risk exposure, particularly to residual value risk.
this Standard is applicable to annual reporting periods beginning on or after 1 January 2019 and management are still assessing the potential
impact on the financial statements of the implementation of this standard.
compliance With ifrs
the financial report complies with australian accounting Standards as issued by the australian accounting Standards Board, and International
Financial reporting Standards (IFrS) as issued by the International accounting Standards Board.
the preparation of the financial statements in conformity with IFrS requires the use of certain accounting estimates and judgments, which are
included below.
investsmart group limited . annual report 2016
27
no t eS t o tHe C o nSo lI Da t eD FIn a nC Ia l
S t a t eMe n tS Co n tIn u eD
2. SuMMARY OF SIgNIFICANT ACCOuNTINg POLICIES (ContInueD)
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 2016 and the results
of all subsidiaries for the period from 1 July 2015 to 30 June 2016, with the exception of eureka report pty ltd, whose results are included
from the date of acquisition, 4 april 2016.
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 to be
investments held for resale by the Directors. 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.
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.
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
28
investsmart group limited . annual report 2016
2. SuMMARY OF SIgNIFICANT ACCOuNTINg POLICIES (ContInueD)
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 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.
investsmart group limited . annual report 2016
29
no t eS t o tHe C o nSo lI Da t eD FIn a nC Ia l
S t a t eMe n tS Co n tIn u eD
2. SuMMARY OF SIgNIFICANT ACCOuNTINg POLICIES (ContInueD)
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 a 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.
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.
30
investsmart group limited . annual report 2016
2. SuMMARY OF SIgNIFICANT ACCOuNTINg POLICIES (ContInueD)
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 the 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.
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 expenses; rent expenses; commission rebates,
other expenses, market data costs, software and website costs.
investsmart group limited . annual report 2016
31
no t eS t o tHe C o nSo lI Da t eD FIn a nC Ia l
S t a t eMe n tS Co n tIn u eD
2. SuMMARY OF SIgNIFICANT ACCOuNTINg POLICIES (ContInueD)
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
2–3 years
network and production equipment
3–4 years
leasehold improvements
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.
Cash flows are presented in the Statement of Cash Flows on a gross basis, except the GSt component of investing and financing activities,
which are disclosed as operating cash flows.
earnings per share
Basic per share are calculated by dividing profit 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 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 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 have been used to estimate fair value of the assets acquired and liabilities assumed in the business combination. In particular, the
fair value of intangible assets has been calculated using management’s estimates of future cash flows from each entity’s identified intangible
assets for the period of their expected useful life.
32
investsmart group limited . annual report 2016
2. SuMMARY OF SIgNIFICANT ACCOuNTINg POLICIES (ContInueD)
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 five-year period, and
a long-term growth rate (net of inflation) is used for longer periods.
any impairment of goodwill is determined by assessing the recoverable amount of the CGu to which the goodwill relates. the Group has determined
that it has one CGu, and where the recoverable amount is less than the carrying value of goodwill, an irreversible impairment loss is recognised.
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.
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 $4,031,827 at 30 June 2016.
3. BuSINESS COMBINATIONS AND ACQuISITIONS
at 30 June 2016, the Company owned the following subsidiaries:
intelligent investor holdings pty ltd
investsmart financial services pty ltd
personal investment direct access pty ltd
Ziel two pty ltd
yourshare financial services pty ltd
yourshare plus pty ltd
aWi ventures pty ltd
eureka report pty ltd (acquired 4 april 2016)
30 June 2016
30 June 2015
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
–
assets acquired and liabilities assumed in acquisition of eureka report pty ltd
on 4 april 2016, InvestSMart Group ltd acquired 100% of the shares of eureka report pty ltd, and consolidated the operations of that
entity in the InvestSMart Group from that date.
the fair value of the identified assets acquired and the liabilities assumed at 4 april 2016 were:
Assets
cash and cash equivalents
prepayments
fixed assets, including software
Liabilities
trade payables
subscriptions received in advance
other accruals
Total Identifiable Net Tangible Assets
intangible assets identified on acquisition
goodwill arising on acquisition (note 11)
Acquisition consideration
$
2,217,815
127,023
16,476
2,361,314
102,857
1,981,200
77,717
2,161,774
199,540
1,138,910
1,824,028
3,162,478
investsmart group limited . annual report 2016
33
no t eS t o tHe C o nSo lI Da t eD FIn a nC Ia l
S t a t eMe n tS Co n tIn u eD
3. BuSINESS COMBINATIONS AND ACQuISITIONS (ContInueD)
the calculation of fair value of the identified assets and liabilities is provisional and may be amended in the 12 months following the acquisition date.
the intangible asset acquired through the acquisition of the eureka report pty ltd, includes the subscriber lists for newsletters, which assume
a conservative renewal rate and a finite life, and the historical content which also has a finite life.
the goodwill arising on the acquisition of eureka report can be attributed to the expected future synergy benefits and customer lists (where
not identified as an asset above) which are not separable. the goodwill arising on the acquisition is not deductible for tax purposes.
the table below shows the income and expenses before tax included in the consolidated results for eureka report pty ltd, since 4 april 2016:
Income
subscription income
other income
expenses
employee costs
rent
other expenses
net profit before tax
4. REVENuE FROM COMMISSIONS AND SuBSCRIPTIONS
commission income
subscription revenue
$
871,146
4,697
875,843
(484,546)
(66,581)
(182,719)
(733,846)
141,997
2016
$
7,907,634
4,207,421
2015
$
4,292,850
1,875,595
12,115,055
6,168,445
5. CHANgE IN FAIR VALuE OF FINANCIAL ASSETS AT FAIR VALuE THROugH PROFIT AND LOSS
unrealised loss on investment in van eyk group holdings pty ltd
net unrealised gain on investment in separately managed accounts
6. EMPLOYEE BENEFIT RESERVE
long term incentive plan (ltip)
company issued options
opening balance
expense
closing balance
2016
$
–
6,872
6,872
2016
$
562,877
–
562,877
102,125
562,877
665,002
2015
$
(7,490,036)
–
(7,490,036)
2015
$
7,184
(3,848)
3,336
98,789
3,336
102,125
34
investsmart group limited . annual report 2016
6. EMPLOYEE BENEFIT RESERVE (ContInueD)
the cost of the ltIp 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
trade receivables
2016
$
622,379
622,379
2015
$
785,899
785,899
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 benefit/(expense) recognised in the Statement of Comprehensive Income
the components of income tax expense:
current income tax (expense) benefit
r&d expenditure adjustments for prior years
other adjustments for prior years
deferred tax income relating to the origination and reversal of temporary differences
total income tax (expense) benefit
Deferred income tax related to items charged directly to equity
(b) Income tax expense
2016
$
2015
$
(587,024)
(129,716)
92,568
240,664
175,717
(78,075)
–
(9,976)
765,596
625,904
217,856
2,834,310
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 2016 and 2015 is as follows:
prima facie income tax benefit calculated at 30% (2015: 30%) on the operating profit
add/(less) tax effect of:
expenditure not deductible in current year
differences arising on consolidation
tax losses utilised from prior years
adjustments for prior years
recognition (de-recognition) of current year deferred tax benefit
income tax (expense) / benefit
(75,970)
2,343,440
(191,872)
–
–
(87,620)
405,000
344,342
189,767
(132,247)
–
(2,247,011)
(78,075)
625,904
investsmart group limited . annual report 2016
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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
deductible capital expenditure
tax losses carried forward
closing balance
movements in deferred tax assets
opening balance
Benefit (expense) in the income statement
deferred tax asset acquired
deferred tax liaBilities
the deferred tax liability balance comprises temporary differences recognised as follows:
future tax expense for intangibles acquired
prepayments not deductible if future years
closing balance
2016
$
267,138
303,459
42,651
613,248
765,596
(179,264)
26,916
2015
$
246,641
419,038
99,917
765,596
–
765,596
–
613,248
765,596
2,696,632
2,834,310
553
–
2,697,185
2,834,310
the deferred tax liability arising from amortisation of the intangible assets has been charged against the goodwill arising on consolidation.
movements in deferred tax liabilities
opening balance
Benefit (expense) in the income statement
Benefit (expense) to goodwill
closing balance at 30 June
9. FINANCIAL ASSETS HELD AT FAIR VALuE
aWi ventures investee companies
investments in separately managed accounts
financial assets at fair value through profit and loss
2016
$
2,834,310
(354,981)
2015
$
–
–
217,856
2,834,310
2,697,185
2,834,310
2016
$
2015
$
1,510,000
1,610,000
128,448
101,576
1,638,448
1,711,576
36
investsmart group limited . annual report 2016
10. FIxED ASSETS INCLuDINg SOFTwARE
Cost or valuation
opening balance 1 July 2015
additions
acquired in subsidiaries
disposals
Balance at 30 June 2016
Depreciation and Impairment
opening balance at 1 July 2015
depreciation charge for the period
disposals
Balance at 30 June 2016
net book value at 30 June 2015
net book value at 30 June 2016
11. gOODwILL
entity:
intelligent investor holdings pty ltd
investsmart financial services pty ltd
personal investment direct access pty ltd
yourshare financial services pty ltd
yourshare plus pty ltd
Ziel two pty ltd
eureka report pty ltd
deferred tax liability arising from amortisation of intangibles acquired
total goodwill
impairment charge
goodwill balance carried forward
Buildings
$
Plant and equipment
$
Software
$
24,248
–
–
–
117,750
149,680
16,746
(122,934)
211,790
–
–
–
24,248
161,242
211,790
506
854
–
1,360
23,742
22,888
21,643
40,370
(53,201)
8,812
96,107
152,430
2016
$
7,629,593
2,854,976
538,087
68,705
54,063
–
122,768
142,785
89,022
2015
$
7,629,593
2,854,976
538,087
6,896,290
6,896,290
471,038
371,402
1,824,028
471,038
371,402
–
3,025,250
2,834,310
23,610,664
21,595,696
–
–
23,610,664
21,595,696
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 2016. the Group considered the relationship between its market capitalisation and its
book value, among other factors, when reviewing for indicators of impairment. as at 30 June 2016, the market capitalisation of the Group was
higher than the book value of its equity, supporting the decision not to impair goodwill or impair the assets of the operating segment.
the Group has determined it has one cash generating unit (CGU). the recoverable amount of the CGu, as at 30 June 2016, 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 projected increased demand for products and services. the pre-tax
discount rate applied to cash flow projections is 15% and cash flows beyond the five-year period are extrapolated using a 2.5% 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 2.5%. It was concluded
investsmart group limited . annual report 2016
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11. gOODwILL (ContInueD)
that the carrying value less costs of disposal did not exceed the value in use. as a result of this analysis, management has not recognised an
impairment charge against goodwill.
the calculation of value in use for the cash generating unit is most sensitive to the following assumptions:
•
The future growth in the share market
• Discount rates
•
Expected growth in wages and employee costs
• Growth rates used to extrapolate cash flows beyond the forecast period
Growth in share market – Growth in the share market is based on the long term averages for growth in the all ordinaries accumulation
index. a large proportion of the CGu’s revenue is based on trailing commissions or investment management fees which are highly correlated
with the movements in the australian share market. a decrease of 2.50% in the all ordinaries accumulation Index would result in an
impairment in the cash generating unit.
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. a rise in the pre-tax discount rate of 1.25% (i.e. +0.5%) would result in an impairment of $422,380 (2015: $1,574,607).
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%.
If wage costs increases are greater than the forecast price inflation and the Group is unable to pass on or absorb these increases through
efficiency improvements, then the Group will have an impairment.
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 effect of new
entrants may have an adverse impact on the forecasts, and reduce the estimated long-term growth rate of 2.5%. a long-term growth rate of 1
% would result in impairment in the carrying value of goodwill of $168,113 (2015: $66,869).
12. INTANgIBLES
Intangibles acquired at 1 January 2015
Fund distribution contracts
Content Subscriber lists
acquired
amortisation
intangible balance at 30 June 2015
acquired at 4 april 2016 in eureka report
amortisation
intangible balance at 30 June 2016
$
8,774,000
(438,700)
8,335,300
$
–
–
–
$
1,236,000
(123,600)
1,112,400
–
412,724
726,185
(877,400)
(412,724)
(307,715)
7,457,900
–
1,530,870
Fund distribution agreements 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 has been fully amortised at 30 June 2016.
38
investsmart group limited . annual report 2016
13. TRADE PAYABLES
trade payables
trade payables are non-interest bearing and unsecured and are payable within 3 months.
14. OTHER PAYABLES
annual leave provision
long service leave provision
payg and superannuation payables
gst payable
other payables
tax payable
Webabout payable
other payables are non-interest bearing and unsecured.
15. ISSuED CAPITAL
ordinary shares
2016
$
82,964
82,964
2016
$
248,808
52,938
142,039
416,670
596,690
329,606
2015
$
439,211
439,211
2015
$
137,340
29,858
233,428
250,917
296,001
–
–
400,000
1,786,751
1,347,544
2016
$
2015
$
58,522,440
58,522,440
at 30 June 2016, 110,885,360 ordinary shares were on issue (2015: 110,885,360). an additional 16,500,000 were issued, as part of the
ltIp detailed in note 6, but of which 15,166,667 remain unvested at 30 June 2016. the 1,333,333 vested shares have a non-recourse loan
outstanding.
(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 2016 and 30 June 2015.
investsmart group limited . annual report 2016
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16. RETAINED LOSSES
opening balance
profit (loss) attributable to members of the group
closing balance
17. AuDITORS REMuNERATION
auditing and reviewing the financial reports of the group:
ernst and young – audit fees
2016
$
2015
$
(28,755,765)
(21,570,201)
175,160
(7,185,564)
(28,580,605)
(28,755,765)
2016
$
126,000
126,000
2015
$
133,900
133,900
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:
paul Clitheroe (until 24 February 2016 – resigned as executive Chair)
ron Hodge
nigel poole
alastair Davidson
(b) Key management personnel remuneration
remuneration paid to key management personnel by the Group and related parties 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
Termination
benefit
Total
2016
2015
680,598
1,325,827
64,656
90,123
46,334
3,336
473,985
102,125
–
223,228
1,265,573
1,642,514
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 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.
40
investsmart group limited . annual report 2016
18. RELATED PARTY INFORMATION (ContInueD)
on 17 June 2015 (the grant date), 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 share 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.
(c) Shareholdings of key management personnel and their related entities
For the year ended 30 June 2016
Ordinary Shares
paul clitheroe (appointed 26 November 2015, appointed
non-executive Chairman 24 February 2016)
ron hodge (appointed COO 1 April 2015)
alastair davidson
nigel poole
For the year ended 30 June 2015
Ordinary Shares
andrew Barnes (resigned 17 November 2015)
paul clitheroe (appointed 26 November 2015)
ron hodge
alastair davidson
nigel poole
Balance at
1 July 2015
Shares held
on appointment
Shares acquired /
(disposed)
Balance at
30 June 2016
5,000,000
4,166,666
4,494,340
4,166,666
Balance at
1 July 2014
6,987,907
–
–
327,674
–
–
–
–
–
–
–
5,000,000
4,166,666
4,494,340
4,166,666
Shares held
on appointment
Shares acquired /
(disposed)
Balance at
30 June 2015
–
–
–
–
(6,911,240)
76,667
5,000,000
5,000,000
4,166,666
4,166,666
4,166,666
4,494,340
4,166,666
4,166,666
(10,569,384)
100,000
Ben heap (resigned 31 March 2015)
10,669,384
(d) Transactions with related parties
transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties
unless otherwise stated. related party transactions in the reporting period with key management personnel were:
Webabout pty ltd (an entity controlled by r. Hodge, n. poole and a. Davidson) provided web hosting services to the Group and received a
total of $24,140 for the period (2015: $31,946), of which $nil was unpaid at 30 June 2016 (2015: $5,486). In addition, Webabout received a
contract termination payment of $800,000, of which $400,000 was paid at 30 June 2015 and the balance paid at 30 June 2016 as disclosed
in previous financial statements.
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 and payable.
aaSB 7 Financial Instruments: Disclosures identify three types of risk associated with financial instruments (i.e. the Group’s investments,
receivables and payables)
investsmart group limited . annual report 2016
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20. FINANCIAL RISK MANAgEMENT (ContInueD)
(i) Credit risk
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 2016.
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.
On-demand
Less than 3 months
3 to 12 months
1 to 5 years
At 30 June 2016
other payables
subscriptions received in advance
trail commissions due to customers
trade and other payables
total financial liabilities
At 30 June 2015
other payables
trail commissions due to customers
subscriptions received in advance
trade and other payables
total financial liabilities
(iii) Market risk
$
-
–
–
–
–
–
–
–
–
$
$
1,485,005
1,109,284
334,957
82,964
248,808
2,805,703
1,004,871
–
$
52,938
522,148
–
–
Total
$
1,786,751
4,437,135
1,339,828
82,964
3,012,210
4,059,382
575,086
7,646,678
780,345
237,501
–
439,211
537,340
1,504,467
1,889,715
–
29,858
–
–
–
1,347,543
1,741,968
1,889,715
439,211
1,457,057
3,931,522
29,858
5,418,437
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 $81,922 and $163,845 respectively (2015: $85,579 and $171,158 respectively).
42
investsmart group limited . annual report 2016
20. FINANCIAL RISK MANAgEMENT (ContInueD)
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 $37,401 (2015: $24,696).
a decrease of 75 basis points would have an equal but opposite effect.
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
Floating interest
Non-interest
interest rate (% pa)
rate $
bearing $
Total
$
Financial assets
cash assets
trade and other receivables
prepayments
rental deposit
financial assets at fair value through profit or loss
Financial liabilities
other payables
trail commissions due to customers
subscriptions received in advance
trade and other payables
1.25
4,986,827
–
4,986,827
–
–
–
–
622,379
169,759
56,624
622,379
169,759
56,624
1,638,448
1,638,448
4,986,827
2,487,210
7,474,037
–
–
–
–
–
1,786,751
1,786,751
1,339,828
1,339,828
4,437,135
4,437,135
82,964
82,964
7,646,678
7,646,678
Net financial assets/(liabilities)
4,986,827
(5,159,468)
(172,641)
investsmart group limited . annual report 2016
43
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20. FINANCIAL RISK MANAgEMENT (ContInueD)
as at 30 June 2015, 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
Floating interest
Non-interest
interest rate (% pa)
rate $
bearing $
Total
$
Financial assets
cash assets
trade and other receivables
prepayments
rental deposit
financial assets at fair value through profit or loss
Financial liabilities
other payables
trail commissions due to customers
subscriptions received in advance
trade and other payables
Net financial assets
fair value hierarchy
1.50
3,292,828
–
3,292,828
–
–
1.50
93,290
785,899
163,284
–
785,899
163,284
93,290
–
1,711,576
1,711,576
3,386,118
2,660,759
6,046,877
–
–
–
–
–
1,347,543
1,347,543
1,741,968
1,741,968
1,889,715
1,889,715
439,211
439,211
5,418,437
5,418,437
3,386,118
(2,757,678)
628,440
aaSB 13 requires the Group to classify fair value measurements using a fair value hierarchy that reflects the subjectivity of the inputs used in
making the measurements. the fair value hierarchy has the following levels:
•
•
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 – Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is,
as prices) or indirectly (that is, derived from prices).
•
Level 3 – Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).
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.
44
investsmart group limited . annual report 2016
20. FINANCIAL RISK MANAgEMENT (ContInueD)
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:
At 30 June 2016
Financial assets
financial assets held at fair value through profit or loss
Total
At 30 June 2015
Financial assets
financial assets held at fair value through profit or loss
Total
Level 1
$
Level 2
$
Level 3
$
Total
$
–
–
–
–
128,448
1,510,000
1,638,448
128,448
1,510,000
1,638,448
101,576
1,610,000
1,711,576
101,576
1,610,000
1,711,576
During the reporting period ending 30 June 2016 there was 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.
Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer
quotations or alternative pricing sources supported by observable inputs are classified within level 2.
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 as at 1 July 2015
unlisted equities disposed during the period
impairment charge on unlisted equities
Balance as at 30 June 2016
1,610,000
(100,000)
–
1,510,000
Investments classified within level 3 have significant unobservable inputs, as they are infrequently traded. unlisted equities are classified within
level 3.
description of significant unoBservaBle inputs to valuation of level 3 assets
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
director’s valuation
last issue price of new
n/a
an issue of new equity, or trade
investee
companies
equity, last traded price
of equity
in existing equity, at a higher or lower may
have significant effect on fair value
aWI Ventures ltd has invested into 11 start-up companies in the financial technology sector. these companies have little or no revenue and
therefore cannot be valued using DCF. the fair value of the investee companies has been assessed as the price the value 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 Directors’ 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.
investsmart group limited . annual report 2016
45
no t eS t o tHe C o nSo lI Da t eD FIn a nC Ia l
S t a t eMe n tS Co n tIn u eD
21. STATEMENT OF CASH FLOwS
(a) Reconciliation of net profit from ordinary activities after income tax to net cash provided by operating activities
operating profit (loss)
non-cash items in operating profit (loss)
unrealised change in fair value of financial assets through profit or loss
employee benefit expense
depreciation and amortisation
non–cash transactions with subsidiaries
decrease (increase) in deferred tax asset
loss on disposal of fixed asset
Write off of sundry expense
change in goodwill through income statement
change in operating assets and liabilities:
decrease in trade and other receivables
(increase) in prepayments
increase / (decrease) in trade and other payables
less net trade payables and receivables acquired in eureka report
net cash inflow/(outflow) from operating activities
(b) Reconciliation of cash
2016
$
2015
$
175,160
(7,185,564)
(6,872)
562,877
1,691,899
–
152,348
72,778
–
(190,941)
7,490,036
3,336
653,153
636,434
(765,596)
43,883
145
–
163,520
(6,475)
787,792
(106,680)
2,091,116
(2,095,784)
(2,034,751)
–
2,670,659
(538,845)
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:
cash at bank
2016
$
2015
$
4,986,827
3,292,828
4,986,827
3,292,828
the Group acquired $2,217,815 of cash at bank through the acquisition of eureka report pty ltd on 4 april 2016.
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. EARNINgS PER SHARE
Basic earnings per share (cents per share)
diluted earnings per share (cents per share)
2016
cents
0.16
0.14
2015
cents
(6.48)
(6.48)
as the Group was in a loss position in 2015, 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.
46
investsmart group limited . annual report 2016
22. EARNINgS PER SHARE (ContInueD)
earnings as per statement of consolidated income
Weighted average number of ordinary shares outstanding during the year used in calculating
basic earnings per share
175,160
(7,185,564)
110,885,360
110,885,360
Weighted average number of ordinary shares outstanding during the year used in calculating
127,385,360
122,964,569
diluted earnings per share if all ltip shares vest and non-recourse loans are repaid
23. FRANKINg ACCOuNT
opening balance of franking account
2016
$
2015
$
1,805,971
1,723,473
adjustments for tax payment and tax payable/refundable in respect of the prior year’s profits
81,308
82,498
adjusted franking account balance
1,887,279
1,805,971
24. PARENT ENTITY INFORMATION
Statement of Financial Position
Assets
current assets
investments
total assets
Liabilities
current liabilities
total liabilities
net assets
Equity
contributed equity
employee benefit reserve
retained earnings
Total Equity
Statement of Profit or Loss and other Comprehensive Income
net loss for the year after income tax expense
Total Comprehensive loss for the year
2016
$
2015
$
229,242
572,185
26,302,568
28,745,879
26,531,810
29,318,064
191,167
191,167
592,907
592,907
26,340,643
28,725,157
58,522,441
58,522,441
665,002
102,125
(32,846,800)
(29,899,409)
26,340,643
28,725,157
2,947,391
8,329,207
2,947,391
8,329,207
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 2016, InvestSMart Group limited had commitments for an office lease at level 9, 37 York Street, Sydney, and level 4, 356
Collins St, Melbourne, for $1,365,571 (2015: $55,155).
investsmart group limited . annual report 2016
47
no t eS t o tHe C o nSo lI Da t eD FIn a nC Ia l
S t a t eMe n tS Co n tIn u eD
25. EVENTS OCCuRRINg AFTER REPORTINg DATE
Since 30 June 2016, there have been no significant events up to the date of these financial statements.
26. CONTINgENT LIABILITIES AND COMMITMENTS
Within one year
after one year but less than five years
total
2016
$
395,003
1,042,909
1,437,912
2015
$
307,739
84,341
392,080
at 30 June 2016, the Group had commitments of $1,437,912 (2015: $392,080) for leased premises. the Group has leases over its offices at
level 9, 37 York St, Sydney nSW 2000, until 30 april December 2019, level 4, 356 Collins St, Melbourne until 1 June 2021, level 2, 122 pitt
St until 30 September 2016, 36 east esplanade, Manly until 30 September 2016, and Gibraltar Square, Bowral until 28 February 2017.
there are no other contingent liabilities or commitments at 30 June 2016.
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
48
investsmart group limited . annual report 2016
DIr eCt o rS’ DeCl a r a tIo n
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:
(i)
giving a true and fair view of the financial position of the Company as at 30 June 2016 and of its performance for the year ended
on that date.
(ii)
complying with australian accounting Standards, International Financial reporting Standards (IFrS) as 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.
2. this declaration has been made after receiving the declarations required to be made to the Directors in accordance with section 295a of
the Corporations act 2001 for the financial year ended 30 June 2016.
on behalf of the Board
Paul Clitheroe AM
Chairman
Dated 25 august 2016 at Sydney
investsmart group limited . annual report 2016
49
I nDe p e nDe n t auD It o r ’S re p o r t
Ernst & Young
200 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
www.ey.com/au
INDEPENDENT AuDITOR’S REPORT TO THE MEMBERS OF INVESTSMART gROuP LIMITED
Report on the financial report
We have audited the accompanying financial report of InvestSMart Group limited (the “Company”), which comprises the consolidated
statement of financial position as at 30 June 2016, the consolidated statement of comprehensive income, the consolidated statement of
changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting
policies and other explanatory information, and the directors’ declaration of the consolidated entity comprising the Company and the entities it
controlled at the year’s end or from time to time during the financial year.
Directors’ responsibility 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 controls as the directors determine are necessary to
enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In note 2a, the directors
also state, in accordance with accounting Standard aaSB 101 Presentation of Financial Statements, that the financial statements comply
with International Financial Reporting Standards.
Auditor’s responsibility
our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with australian
auditing Standards. those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and
perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement.
an audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. the procedures
selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial report, whether
due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the Company’s preparation and
fair presentation of the financial report 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 Company’s internal controls. an audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation
of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Independence
In conducting our audit we have complied with the independence requirements of the Corporations act 2001. We have given to the directors
of the Company a written auditor’s Independence Declaration, a copy of which is included in the directors’ report.
50
investsmart group limited . annual report 2016
Ernst & Young
200 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
www.ey.com/au
Opinion
In our opinion:
a. the financial report of InvestSMart Group limited is in accordance with the Corporations act 2001, including:
i giving a true and fair view of the Company’s financial position as at 30 June 2016 and of its performance for the year ended on that date; and
ii complying with australian accounting Standards and the Corporations regulations 2001; and
b. the financial report also complies with International Financial Reporting Standards as disclosed in note 2a.
Report on the remuneration report
We have audited the remuneration report included in pages 16 to 19 of the directors’ report for the year ended 30 June 2016. 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.
Opinion
In our opinion, the remuneration report of InvestSMart Group limited for the year ended 30 June 2016, complies with section 300a of the
Corporations Act 2001.
ernst & Young
Jonathan Pye
Partner, Sydney
25 august 2016
investsmart group limited . annual report 2016
51
a D D ItIo n a l I nFo rMa tIo n
additional information required by the australian Securities exchange listing rules is set out below.
the security holder information set out below was current as at 9 october 2016.
distriBution of shareholders
there were 127,385,358 fully paid ordinary shares held by 1,265 shareholders, all of which were quoted on the australian Securities
exchange. there are no restricted shares on issue. there are no unquoted shares on issue.
Category (size of holding)
Number of shareholders
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
354
265
200
319
127
Shares
62,214
1,119,969
1,733,567
11,598,187
112,869,421
the number of shareholders holding less than a marketable parcel of fully paid ordinary shares is 318.
1,265
127,385,358
Percentage
0.05
0.88
1.36
9.10
88.61
100.00
top 20 shareholders
Holder Name
rBc investor services australia nominees pty ltd
Bnp paribas nominees pty ltd
robin anne owles & ron peter hodge
James noort
onmell pty ltd
Jp morgan nominees australia limited
mr paul hugh clitheroe
cameron richard pty ltd
rBc investor services australia nominees pty limited
ronnscam pty ltd
sm & rW Brown pty ltd
patcaieli pty ltd
pendex pty ltd
vadina pty limited
JJc sf (2012) pty ltd
stuart andrew pty ltd
leyland private asset management pty ltd
myall resources pty ltd
farnworth house pty ltd
linwierik super pty ltd
Total
Number of Shares
Percentage
19,009,046
14.92
5,151,534
4,166,666
4,166,666
4,063,183
4,016,970
4,000,000
3,922,030
3,760,765
3,166,666
3,000,000
2,747,747
2,301,991
1,940,000
1,672,000
1,600,000
1,500,000
1,400,000
1,190,475
1,122,501
4.04
3.27
3.27
3.19
3.15
3.14
3.08
2.95
2.49
2.36
2.16
1.81
1.52
1.31
1.26
1.18
1.10
0.94
0.88
73,898,240
58.03
52
investsmart group limited . annual report 2016
voting rights
at a general meeting, shareholders are entitled to one vote for each share held. on a show of hands, every shareholder present in person or
by proxy shall have one vote and upon a poll, every shareholder so present shall have one vote for every share held.
suBstantial shareholders
the Company has been notified of three shareholders who hold relevant interests of in excess of 5% of the Company’s ordinary shares:
Name
leyland private asset management pty ltd
perpetual limited
discovery asset management pty ltd
peter and helen Jones
Date of Interest
No of shares held1
Percentage2
18 June 2015
25 august 2016
1 may 2014
11 July 2016
22,531,407
18,539,432
7,521,739
6,487,232
17.69
14.55
6.19
5.09
1 as disclosed in the last notice lodged with the australian Securities exchange by the substantial shareholder.
2 the percentage set out in the notice lodged with the australian Securities exchange is based on the total issued capital of the Company at
the date of the interest.
stocK exchange listing
quotation has been granted for all the ordinary shares of the Company on all Member exchanges of the australian Securities exchange.
investsmart group limited . annual report 2016
53
InvestSMart Group limited
po Box 744
queen Victoria Building
nSW 1230, australia
phone: 1300 880 160
email: support@investsmart.com.au
www.investsmart.com.au