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1 Prospectus For the offer of million shares in iselect Limited at $1.85 per share iselect Limited (ACN ) Financial Adviser to the Company and Joint Lead Manager Joint Lead Manager

2 Contents Important notices 1 Chairman s letter 3 1. Investment overview 7 2. Industry overview Company overview Financial Information Risks Key people, interests and benefits Details of the Offer Investigating Accountant s Report Additional information 119 Appendix 1 Significant accounting policies 131 Appendix 2 Glossary 139 Corporate directory 144

3 iselect Limited Important notices Offer The Offer contained in this Prospectus is an invitation for you to apply for fully paid ordinary shares in iselect Limited ( iselect or Company ) ( Shares ). This Prospectus is issued by iselect and iselect SaleCo Pty Ltd ( SaleCo ). This Prospectus is not issued by ninemsn Pty Limited. Lodgement and Listing This Prospectus is dated 31 May 2013 and was lodged with ASIC on that date. Neither ASIC nor the ASX takes any responsibility for the contents of this Prospectus or the merits of the investment to which this Prospectus relates. Within seven days after the date of this Prospectus, the Company will apply to the ASX for listing of the Company and quotation of the Shares on the ASX ( Listing ). No securities will be issued on the basis of this Prospectus later than 13 months after the date of this Prospectus. Note to Applicants The information contained in this Prospectus is not financial product advice and does not take into account the investment objectives, financial situation or particular needs of any prospective investor. It is important that you read this Prospectus carefully and in full before deciding whether to invest in the Company. In particular, in considering the prospects of the Company, you should consider the risk factors that could affect the financial performance of the Company. You should carefully consider these factors in light of your investment objectives, financial situation and particular needs (including financial and taxation issues) and seek professional advice from your accountant, financial advisor, stockbroker, lawyer or other professional advisor before deciding whether to invest. Some of the risk factors that should be considered by prospective investors are set out in Section 5. There may be risk factors in addition to these that should be considered. You should also consider the assumptions underlying the Forecast Financial Information set out in Section 4 and the risk factors that could affect the Company s business, financial condition and results of operations. No person named in this Prospectus, nor any other person, guarantees the performance of the Company, the repayment of capital by the Company or the payment of a return on the Shares. No person is authorised to give any information or make any representation in connection with the Offer which is not contained in this Prospectus. Any information or representation not so contained may not be relied on as having been authorised by the Company, or SaleCo Directors. Exposure Period The Corporations Act prohibits the Company from processing applications to subscribe for Shares under this Prospectus ( Applications ) in the seven day period after the date of lodgement of this Prospectus. This period may be extended by ASIC by up to a further seven days. This period is an Exposure Period to enable this Prospectus to be examined by market participants prior to the raising of funds. The examination may result in the identification of deficiencies in this Prospectus, in which case any Application may need to be dealt with in accordance with Section 724 of the Corporations Act. Applications received during the Exposure Period will not be processed until after the expiry of that period. No preference will be conferred on Applications received during the Exposure Period. After the Exposure Period, this Prospectus will be made available to Australian residents, without the Application Forms, at the Company s offer website, Photographs and diagrams Photographs and diagrams used in this Prospectus that do not have descriptions are for illustration only and should not be interpreted to mean that any person shown in them endorses this Prospectus or its contents or that the assets shown in them are owned by iselect. Diagrams used in this Prospectus are illustrative only and may not be drawn to scale. Disclaimer and forward-looking statements No person is authorised to give any information or make any representation in connection with the Offer which is not contained in this Prospectus. Any information or representation not so contained may not be relied on as having been authorised by the Company, SaleCo or any other person in connection with the Offer. This Prospectus contains forward-looking statements. The Forecast Financial Information is an example of forward-looking statements. These statements are based on an assessment of present economic and operating conditions, and on a number of assumptions regarding future events and actions that, at the date of this Prospectus, are expected to take place (including the key assumptions set out in Section 4.6.5). Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties, assumptions and other important factors, many of which are beyond the control of the Company, the Directors and management. Forward-looking statements should therefore be read in conjunction with, and are qualified by reference to, Sections 4 and 5, and other information in this Prospectus. The Company cannot and does not give any assurance that the results, performance or achievements expressed or implied by the forward-looking statements contained in this Prospectus will actually occur and investors are cautioned not to place undue reliance on these forward looking statements. The Company has no intention of updating or revising forward-looking statements, or publishing prospective Financial Information in the future, regardless of whether new information, future events or any other factors affect the information contained in this Prospectus, except where required by law. This Prospectus, including the industry overview in Section 2, uses market data, industry forecasts and projections. iselect has obtained significant portions of this information from market research prepared by third parties. There is no assurance that any of the forecasts contained in the reports, surveys and research of such third parties that are referred to in this Prospectus will be achieved. iselect has not independently verified this information. Estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed in the risk factors set out in Section 5. As set out in Section , it is expected that the Shares will be quoted on the ASX initially on a deferred settlement basis. iselect disclaims all liability, whether in negligence or otherwise, to persons who trade Shares before receiving their holding statements. Nielsen information reflects estimates of market conditions based on samples, and is prepared primarily as a marketing research tool for consumer packaged goods manufacturers and others in the consumer goods industry. This information should not be viewed as a basis for investments and references to Nielsen should not be considered as Nielsen s opinion as to the value of any security or the advisability of investing in the Company. Hitwise information and references to Hitwise should not be used as the sole basis for any business or investment decision. Hitwise does not make any representation or recommendation regarding the Company, this Prospectus or any Offer. Statements of past performance This Prospectus includes information regarding the past performance of the Company. Investors should be aware that past performance should not be relied upon as being indicative of future performance. Obtaining a copy of this Prospectus A hard copy of the Prospectus is available free of charge to any Broker Firm Offer Applicant or applicant under the Employee Priority Offer by calling from 8.30 am to 5.00 pm (Melbourne time) Monday to Friday. This Prospectus is available in electronic form via The Offer constituted by this Prospectus in electronic form is available only to persons receiving this Prospectus in electronic form within Australia. It is not available to persons in other jurisdictions (including in the United States). Persons having received a copy of this Prospectus in its electronic form may, during the Offer period, obtain a hard copy of the Prospectus by telephoning Applications for Shares may only be made on the Application Form attached to or accompanying this Prospectus or in its paper copy form which may be downloaded in its entirety from together with the electronic form of this Prospectus. The Corporations Act prohibits any person from passing on to another person the Application Form unless it is attached to or accompanies a hard copy of this Prospectus or the complete and unaltered electronic version of this Prospectus.

4 2 Financial year periods All references to FY10, FY11, FY12 and FY13F appearing in this Prospectus are to the financial years ended or ending 30 June 2010, 30 June 2011, 30 June 2012 or 30 June 2013, respectively, unless otherwise indicated. All references to 1H FY13 and 1H FY14F appearing in this Prospectus are to the half financial years ended or ending 31 December 2012 and 31 December 2013, respectively, unless otherwise indicated. All references to CY13F appearing in this Prospectus are to the calendar year ending 31 December All financial amounts contained in this Prospectus are expressed in Australian currency, unless otherwise stated. Any discrepancies between totals and sums of components in figures and tables contained in this Prospectus are due to rounding. Section 4 sets out in detail the Financial Information referred to in this Prospectus. The basis of preparation of the Financial Information is set out in Section 4. Historical Financial Information has been prepared and presented in accordance with the recognition and measurement principles prescribed by the Australian Accounting Standards (as adopted by the Australian Accounting Standards Board (AASB)). The Historical Financial Information also complies with the Australian equivalents to the International Financial Reporting Standards. This Prospectus also includes Forecast Financial Information based on the best estimate assumptions of the Directors. The basis of preparation and presentation of the Forecast Financial Information, to the extent applicable, is consistent with the basis of preparation and presentation for the Historical Financial Information. The Forecast Financial Information presented in this Prospectus is unaudited. The Historical Financial Information and the Forecast Financial Information in this Prospectus should be read in conjunction with, and are qualified by reference to, the information contained in Sections 4 and 5. Glossary Defined terms and abbreviations used in this Prospectus have the meanings defined in the Glossary. Selling restrictions This Prospectus does not constitute an offer or invitation in any place in which, or to any person to whom, it would not be lawful to make such an offer or invitation. No action has been taken to register or qualify the Shares or the Offer, or to otherwise permit a public offering of Shares, in any jurisdiction outside Australia. The distribution of this Prospectus outside Australia may be restricted by law and persons who come into possession of this Prospectus outside Australia should seek advice on and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of applicable securities laws. In particular, the Shares to be offered and sold under the Offer have not been, and will not be, registered under the U.S. Securities Act and may not be offered or sold in the United States unless the Shares have been registered under the U.S. Securities Act, or an exemption from the registration requirements of the U.S. Securities Act and applicable U.S. state securities laws is available. The Shares may only be offered and sold outside the United States in offshore transactions (as defined in Rule 902(h) of the Regulation S under the U.S. Securities Act) in compliance with Regulation S under the U.S. Securities Act or in the United States to Eligible U.S. Fund Managers in transactions exempt from, or not subject to, the registration requirements of the U.S. Securities Act. See Section 7.7 for more detail on selling restrictions that apply to the offer and sale of Shares in jurisdictions outside of Australia. Privacy By filling out the Application Form to apply for Shares, you are providing personal information to iselect and SaleCo through the Company s service provider, Computershare Investor Services Pty Limited ( Share Registry ), which is contracted by the Company to manage Applications. The Company, SaleCo and the Share Registry on their behalf, may collect, hold and use that personal information in order to process your Application, service your needs as a Shareholder, provide facilities and services that you request and administer the Company. If you do not provide the information requested in the Application Form, the Company, SaleCo and the Share Registry may not be able to process or accept your Application. Your personal information may also be provided to the Company s and SaleCo s members, agents and service providers on the basis that they deal with such information in accordance with the Company s privacy policy. The members, agents and service providers of the Company and SaleCo may be located outside Australia where your personal information may not receive the same level of protection as that afforded under Australian law. The types of agents and service providers that may be provided with your personal information and the circumstances in which your personal information may be shared are: The Share Registry for ongoing administration of the Shareholder register; Printers and other companies for the purpose of preparation and distribution of statements and for handling mail; Market research companies for the purpose of analysing the Shareholder base and for product development and planning; and Legal and accounting firms, auditors, contractors, consultants and other advisors for the purpose of administering, and advising on, the Shares and for associated actions. You may request access to your personal information held by (or on behalf of) the Company and SaleCo. You may be required to pay a reasonable charge to the Share Registry in order to access your personal information. You can request access to your personal information by writing to or telephoning the Share Registry as follows: Telephone: (international) (within Australia) Address: Computershare Investor Services Pty Limited GPO Box 2975 Melbourne VIC 3001 Australia. Report on Directors Forecast and Financial Services Guide The provider of the independent review is required to provide Australian retail clients with a Financial Services Guide in relation to the review under the Corporations Act. The Financial Services Guide is provided in Section 8. Company website Any references to documents included on the Company s website are provided for convenience only, and none of the documents or other information on the website is incorporated by reference. Questions If you have any questions about how to apply for Shares, please call your Broker. For any other questions about the Offer, please contact the iselect Offer Information Line on (within Australia) or (outside Australia) between 8.30 am and 5.00 pm (Melbourne time), Monday to Friday.

5 iselect Limited Chairman s letter 31 May 2013 Dear investor, On behalf of the Board of Directors, I am delighted to present you with the opportunity to become a shareholder in iselect, a leading Australian online-driven comparison service. 1 iselect s mission is to help consumers make complex purchase decisions with confidence by connecting them with the right product and in doing so, delivering an exceptional customer experience. iselect has built Australia s destination of choice for the comparison and purchase of private health insurance, life and car insurance, broadband, home loans, personal finance and energy products. Since I co-founded iselect, we have grown from one business unit in FY00 to eight in FY12. Between FY10 and FY12 annual sales lead volume (excluding our Money business unit, which was acquired in FY12) increased by 93.9%. In addition, our sales conversion ratio 2 has increased from 3.6% in FY10 to 5.7% in FY12 (excluding Money). This represents an increase in our sales lead conversion ratio of 58% over that period. In FY12, iselect generated 2.9 million sales leads 3 (excluding sales leads and associated sales from the Money business unit) and completed more than 169,000 sales transactions (excluding Money). These impressive results can be attributed to the management team s sustained focus on growth, performance and efficiency. This focus led to iselect recording $111.9 million of consolidated revenue and $24.1 million of EBITDA in FY12, representing a compound annual growth rate in EBITDA of 61% from FY10. Based on this strong historical performance, we believe the Company is well positioned to capitalise on the continued growth in Australian online comparison and achieve its forecast EBITDA of $30.0 million in CY13F. To sustain these results we will continue to invest in our brand and technology platform as these will be key drivers of our ongoing growth. Furthermore, we will continue our successful diversification into new product categories outside of private health insurance, both organically and via acquisition. Today, we are embarking on an exciting new journey to provide iselect with flexibility to realise its future growth potential and to raise capital which will strengthen the balance sheet and enable us to repay debt. By listing on the ASX, we are also creating liquidity in iselect s shares, which will allow existing and new shareholders to trade in shares on the open market. An investment in iselect is subject to risks. These include: exposure to changes in government policy (particularly regarding the private health insurance market); increased competition; the risk of lower than expected cash receipts from trail commissions; adverse decisions taken by Product Providers or deterioration of relationships with Product Providers; the risk of not attracting sufficient traffic to iselect s websites; exposure to changes in accounting standards, which may in particular affect how iselect recognises trail commission revenue; and a strong bias to earnings being generated in the second half of the financial year. Detailed information about these and other risks is set out in Section 5 of this Prospectus, which I encourage you to read carefully. If any of these risks eventuate, it may adversely impact iselect s financial performance, position and prospects, and, potentially, the value of your investment. The Directors are confident that iselect s business, in conjunction with the growth profile of the industry and the expertise of the Board and management team, provides a strong platform for growth. I look forward to you joining me as a shareholder of iselect. Best wishes, Damien Waller Executive Chairman and Co-Founder 1 Based on visits to iselect s websites (refer to Figure for details) and brand awareness. 2 Sales conversion ratio is calculated as the number of net sales divided by the number of sales leads (net of terminations and Sales Direct to Fund). Refer to Table 4.10 for further detail. 3 Key operating metrics for the Money business unit are generally reported separately to iselect s other business units, as different reporting definitions are used. Further information on the Company s key operating metrics is included in Section 4.6.

6 4 This Prospectus provides the opportunity to participate in the initial public offering of Shares in iselect, a leading Australian online-driven comparison service 4 that compares insurance, household utilities and financial products. The Offer Number of New Shares offered by iselect under this Prospectus million Number of Existing Shares offered for sale by SaleCo under this Prospectus million Total number of Shares offered under this Prospectus million Number of Shares offered under the Institutional Offer and Broker Firm Offer million Number of Shares to be issued under the Employee Priority Offer (1) 1.08 million Number of Shares to be held by Existing Shareholders at Completion of the Offer (2)(3) million Number of Shares to be held by new Shareholders at Completion of the Offer million Total number of Shares on issue at Completion of the Offer (3) million Offer Price (4) $1.85 per Share Market capitalisation at the Offer Price (5) $479.3 million (1) See Section 7.4 for further details of the Employee Priority Offer. (2) Of which 37,266,130 Shares will be subject to voluntary escrow arrangements until the date on which iselect s full year accounts for FY13F are released to the ASX by iselect. After this date and until the date on which iselect s half year accounts for the period ending on 31 December 2013 are released to the ASX, 36,416,130 Shares will be subject to voluntary escrow arrangements. See Section 7.6 for further details of these voluntary escrow arrangements. (3) Excludes: (a) any Shares acquired by Existing Shareholders under the Offer; and (b) approximately 8.88 million LTIP Shares. LTIP Shares will not be quoted on ASX until satisfaction of all conditions to vesting and repayment of the applicable LTI Loan. LTIP Shares vest and holders will be entitled to exercise their rights as ordinary Shareholders only if certain total shareholder return ( TSR ) performance hurdles and continuing employment criteria are satisfied by holders, and their LTI Loan repaid in full. Vesting of the LTIP Shares granted under the LTI Plan will occur in three tranches, ending on 30 June 2015, as detailed further in Section Until vested, LTIP Shares cannot be voted. Any LTIP Shares remaining unvested following the final testing date will be forfeited and surrendered by holders in full satisfaction of the LTI Loan. (4) Shares may not trade at the Offer Price post Listing. (5) Market capitalisation at the Offer Price is defined as the Offer Price multiplied by the total number of Shares at completion of the Offer (excluding LTIP Shares). Important dates (1) Broker Firm Offer and Employee Priority Offer open Broker Firm Offer and Employee Priority Offer close 9.00 am (Melbourne time) Tuesday, 11 June pm (Melbourne time) Monday, 17 June 2013 Issue of Shares (Completion of the Offer) Monday, 24 June 2013 Expected commencement of trading on the ASX (on a deferred settlement basis) Monday, 24 June 2013 Expected despatch of holding statements Thursday, 27 June 2013 Shares expected to begin trading on a normal settlement basis Friday, 28 June 2013 (1) These dates are indicative only and may change. iselect and SaleCo, in consultation with the Joint Lead Managers, reserve the right to amend any and all of the above dates without notice (including, subject to the ASX Listing Rules and the Corporations Act, to close the Offer early, to extend the Closing Date, to accept late Applications or to cancel the Offer before Settlement). If the Offer is cancelled before the allocation of Shares, then all Application Monies will be refunded in full (without interest) as soon as practicable in accordance with the requirements of the Corporations Act. Investors are encouraged to submit their Applications as soon as possible after the Offer opens. 4 Based on visits to iselect s websites (refer to Figure for details) and brand awareness.

7 Financial Information and investment metrics (1) Historical results (2) Forecast results (3) iselect Limited (A$000s) FY10 FY11 FY12 FY13F CY13F Financial Information Revenue 43,491 72, , , ,482 EBITDA 9,257 17,369 24,082 26,028 30,024 EBIT 7,829 14,184 20,028 21,134 25,021 NPAT 5,780 10,657 12,929 14,523 18,901 Earnings per Share (cents) (4) Investment metrics Enterprise value (5) /CY13F EBITDA (times) 13.1x Offer Price/CY13F NPAT per Share (6) (times) 25.4x (1) See Section 4 for full details of the Financial Information. The Financial Information presented in these tables is intended as a summary only and should be read in conjunction with the more detailed discussion of the Historical and Forecast Results disclosed in Section 4, as well as the risk factors set out in Sections 5. (2) See Section 4.3 for full details of the Historical Results. (3) The Forecast Results are based on assumptions and accounting policies set out in Section and Appendix 1, respectively and are subject to the risks set out in Section 5. There is no guarantee that the forecast financial results will be achieved. (4) Represents forecast NPAT divided by the total number of Shares to be on issue following Completion of the Offer (excluding approximately 8.88 million LTIP Shares), being million Shares. (5) Enterprise value at the Offer Price is defined as market capitalisation at the Offer Price of $479.3 million (excluding approximately 8.88 million LTIP Shares), less pro forma net cash of $86.4 million as at 31 December 2012, adjusted to reflect the impact of the Offer, as set out in Section 4.8. (6) This ratio is commonly referred to as a price earnings or PE ratio. A PE ratio is a ratio of a company s share price and its earnings per share. How to invest Applications for Shares can only be made by completing and lodging the Application Form attached to this Prospectus. Instructions on how to apply for Shares are set out in Section 7.2 of this Prospectus and on the back of the Application Form.

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9 Investment overview 1

10 8 1. Investment overview 1.1 Introduction and overview of iselect s business Topic Summary For more information What is iselect? iselect is a leading Australian online-driven comparison service. 5 Its service provides comparison of both price and product features for a range of: Private health insurance and car insurance products; and Household utilities and financial products, including life insurance, broadband, home loans, personal financial and energy products. Section 3.1 What are the strengths of iselect s business model? iselect has developed a successful business model that rests upon four inter-linked pillars that provide a strong foundation for the Company as it looks to grow its existing business and enter new underlying product markets. The strengths of this model lie in: Brand development and marketing iselect has achieved strong brand awareness in online comparison, investing in excess of $110 million in strategic marketing and brand development, resulting in iselect being the most recognised online-driven comparison service in Australia. Sales lead generation iselect is Australia s most visited online comparison service, with approximately 7.8 million total visits to iselect s websites for the year 31 March Sales lead conversion iselect s ability to generate lead volumes is uniquely complemented by its strength in converting those sales leads into successful sales. Between FY10 and FY12, iselect increased its consolidated sales lead conversion ratio by 58% (excluding Money, which was acquired in FY12). Product Provider relationships iselect presents value to its Product Providers by delivering a large and growing volume of consumers whose needs are matched to the products of the Provider. Due to the success-only nature of iselect s fee arrangements with most of its Product Providers, iselect represents a cost-effective customer acquisition channel. Section 3.3 How does iselect generate its revenue? What are iselect s key strengths? iselect s revenue is primarily derived from fees paid by Product Providers each time a consumer purchases a Provider s product from iselect. The fee arrangements vary by Product Provider, but will generally take the form of an upfront fee, which is a fee paid to iselect when a consumer purchases a product, and/or a trail commission, which is an ongoing fee that may be paid to iselect for a pre-determined period over a consumer s tenure with the Product Provider. iselect also generates a small amount of revenue from other activities, including online Click-throughs, display advertising and the provision of web applications, e.g. mortgage repayment calculators, to third parties. A leader in online-driven comparison A leading Australian online-driven comparison service with approximately 7.8 million total visits to its websites for the year ended 31 March An established and highly recognisable brand iselect has the highest top-of-mind (unaided) awareness 6 of any Australian online comparison service. 7 High levels of consumer awareness of the iselect brand are supported by strong marketing creative content. Over $110 million invested in strategic marketing and brand development since inception in Section 3.6 Section Section Based on visits to iselect s websites (refer to Figure for details) and brand awareness. 6 Top-of-mind (unaided) awareness (also known as front-of-mind awareness) is a measure of how readily a brand name or concept comes to respondents minds, without prompting. 7 Among a sample of Online Australians over 18 years of age who use the internet, as surveyed by Nielsen Australia as part of its Understanding the Australian Market for Online Comparison Services Consumer Research Survey in March 2013, ( Nielsen Australia March 2013 Research ).

11 iselect Limited Topic Summary Well positioned to benefit from the consumer trend towards online transacting Australian consumers are increasingly researching and purchasing products online. For more information Section Of Online Australians recently surveyed as part of the Nielsen Australia March 2013 Research, 46% said they were more likely to use an online comparison service now than in the last 12 months, and 67% stated they are likely to purchase through an online comparison service in the next 12 months. iselect is well positioned to benefit from these trends, with an established brand presence and online comparison and purchasing platform. Scalable business model underpinned by a unique and sophisticated technology platform Established platform that is amenable to the rollout of new businesses. Section Unique proprietary comparison and recommendation algorithm that enables iselect to effectively connect consumers with products appropriate to their needs and improve sales lead conversion ratios. Strong track record of executing its strategy and achieving growth Since its inception in 2000, iselect has brought online product comparison in the private health insurance market into the mainstream and has grown to become a leading Australian online-driven comparison service. Section iselect generated 2.9 million sales leads in FY12 and completed 169,000 sales transactions (excluding sales leads and associated sales from the Money business unit), over the same period. 8 Lead growth, together with the 58% growth in iselect s consolidated sales lead conversion ratio between FY10 and FY12 (excluding Money, which was acquired in FY12), has driven strong revenue and EBITDA growth. In FY12, iselect generated $111.9 million of consolidated revenue and delivered $24.1 million of EBITDA, representing compound annual growth rates of 60% and 61%, respectively, between FY10 and FY12. iselect s proven comparison model in Health has now been successfully applied and expanded to new product markets through organic growth and acquisition. Exposed to the attractive underlying dynamics of the Australian private health insurance market Established presence in online comparison in private health insurance iselect sold approximately 100,000 new policies in FY12, which iselect estimates represented between 15% and 20% of the total number of private health insurance policies sold in Australia during FY12. Section Demographic trends (e.g. Australia s ageing population) and an Australian regulatory environment that supports private health insurance underpin an attractive growth outlook. High quality management team and Board of Directors iselect s Board and management possess significant breadth and depth of industry experience. Section iselect s team has delivered strong revenue growth and product innovation for over a decade. 8 Key operating metrics for the Money business unit are generally reported separately to iselect s other business units, as different reporting definitions are used. Further information on the Company s key operating metrics is included in Section 4.6.

12 10 Investment overview Topic What are the key risks for iselect? Summary Exposure to potential changes in government policy, particularly regarding the private health insurance market In FY12, iselect derived 81% of its revenue from its Health business unit, which is the largest of the Company s businesses. The Australian private health insurance market is regulated. While the Australian private health insurance regulatory environment supports participation in private health insurance, amendments to existing regulation or Federal Government policy, such as the removal of or changes to the Federal Government Private Health Insurance Rebate ( Rebate ), could adversely affect the future demand for private health insurance. This could impact iselect s sales volumes. Each of iselect s other underlying product markets is also subject to varying degrees of government regulation and is susceptible to changes in consumer demand or compliance requirements in the event of regulatory change, which could impact iselect s sales volumes or increase the costs of compliance. Changes to government regulation could adversely impact iselect s ability to earn revenue from its current operating model. For more information Section iselect may face significant competition iselect experiences high levels of competition for the sale of products in each of its underlying product markets, including from other comparison service providers. iselect may also face competition from new entrants into the comparison sector. Increased competition could result in a reduction of iselect s ability to generate revenue, and in turn, its profitability. This could adversely impact iselect s market share and subsequently, its attractiveness to Product Providers. Future cash receipts from trail commissions may be lower than expected Trail commissions (being the ongoing fees related to the private health insurance, life insurance, car insurance and home loans consumers that iselect has referred to Product Providers and who remain with the relevant Product Provider for a pre-determined period following the initial product purchase) have historically made up the largest proportion of iselect s revenue. Trail commission income is initially recognised at fair value and at amortised cost on an ongoing basis, based on the present value of expected future cash flows, using various financial and actuarial assumptions. The assumptions and model for valuing the trail commission receivable are subject to ongoing review by actuaries (including quarterly review within the Health business unit and bi-annually within the Life business unit). However, if actual experience diverges from assumptions or if key assumptions underpinning the valuations change, including around pricing inflation and customer attrition assumptions, this could materially affect the value of the trail commission receivable, which would impact iselect s profitability, cash flows and balance sheet. If iselect is required to impair the value of the trail commission receivable recognised on its balance sheet, this could result in a significant loss. In turn, the impact of industry changes that are inconsistent with assumptions can affect iselect s profitability and resultant cash flows. Section Section 5.1.3

13 iselect Limited Topic Summary iselect is impacted by adverse decisions taken by Product Providers iselect earns the majority of its revenue (FY12: 81%) from the sale of private health insurance policies. In turn, iselect derives a majority of its private health insurance revenue from several key Product Providers. In FY12, it derived 89% of its private health insurance revenue from the intermediation of products from its top five Product Providers. Other business units also rely on key Product Provider relationships to ensure adequacy of supply. For more information Section The loss or impairment of any of these Product Provider relationships, including as a result of key Product Providers not making products available (due to various reasons, including a lack of sufficient capital or funds to enable them to do so), could adversely impact iselect s business, financial condition and results from operations, including iselect s ability to meet its financial forecasts. In order to diversify the range of Product Providers using the iselect service, the Company aims to increase the number and type of Product Providers who distribute their products through its service. There is no guarantee that the Company will be able to influence product providers to use the iselect service, which may result in a reduction in the expected growth in sales of products in each business unit. iselect relies upon attracting and retaining personnel iselect s success and growth rely to a large extent on the performance and expertise of staff. Section Loss of staff, or a failure to attract effective replacements, could have a material adverse impact on iselect s ability to effectively service consumers, and affect the delivery of its growth strategy. iselect may be unable to attract sufficient traffic to its websites The attractiveness of iselect to Product Providers is driven in part by iselect s ability to attract large volumes of consumers to its websites. Section If volumes decline (due to, for example, any adverse changes to the algorithms and terms of service of search engines which affected the ranking of iselect s websites, ineffective marketing, competitor action or other reasons), it could have a material impact on iselect s ability to receive fees from Product Providers. iselect s relationship with current and potential Product Providers may be affected by iselect s support of new market entrants iselect may from time to time assist new Product Providers with their entrance into existing product markets, with the aim of catering to consumer demand for non-existent products and product features. For example, iselect has provided a secured facility to health.com.au ( NIA ) to enable NIA to defer the time of payment of upfront fees owed by NIA to iselect. Section Whilst involvement with new entrants who provide innovative products may help increase the competitiveness of iselect s businesses, existing or potential Product Providers may become less inclined to use iselect as a distribution channel if they perceive that this may indirectly result in an increase in competition in the underlying product market or cause them to doubt iselect s comparison service. iselect is exposed to changes in Accounting Standards Australian Accounting Standards are set by the Australian Accounting Standards Board ( AASB ) and are outside the control of either iselect or its Directors. AASB is due to introduce new or updated Accounting Standards during the period from 2014 to 2018, which may affect future measurement and recognition of key income statement and balance sheet items, including revenue and receivables. Section 5.1.8

14 12 Investment overview Topic Summary Changes to Accounting Standards issued by the AASB or changes to the commonly held views on the application of those standards could materially adversely affect the financial performance and position reported in iselect s financial statements. There is currently no specific guidance in Accounting Standards about the recognition and measurement of trail commission revenue and there is a risk that if the AASB issues specific amendments or interpretation guidance relating to trail commission revenue, the Company may need to change the way in which it accounts for trail commission revenue, potentially affecting the initial and subsequent recognition of trail commission revenue, which may adversely impact key income statement and balance sheet items of the Company. For more information What is iselect s mission, vision and strategy? How does iselect expect to fund its operations? The timing of iselect s earnings is currently biased strongly towards the second half of the financial year iselect currently earns the majority of its revenue from its Health business unit (FY12: 81%), and is therefore exposed to the seasonal fluctuation in sales of private health insurance policies that is prevalent in that market. Due to seasonal factors specific to the health insurance industry, iselect generates peak volumes of private health insurance leads during the final quarter of the financial year, with peak demand typically occurring in the month of June (and in particular, in the second half of June). Given the materiality of financial performance in June to iselect s annual financial result, there is a risk that iselect may not become aware of any material divergence in its financial position and performance from its earlier expectations or published forecasts or guidance (if any) and so may not be in a position to update the market until late in the month of June (or even only after the end of June) in any given financial year. iselect s mission is to help consumers make complex purchase decisions with confidence, by connecting them with the right product and in doing so, delivering an exceptional customer experience. iselect s vision is to build the home of comparison for consumers and to be the distribution channel of choice for Product Providers. To achieve its mission and realise its vision, iselect s strategy focuses on: Continued investment in the iselect brand to drive greater consumer awareness and sales lead volumes, supporting expansion of iselect s cross-sell programme; Building out the iselect consumer offering by launching new business units and transitioning all business units to an end to end (E2E) model; Continued investment in iselect s unique technology and people to ensure consumers are provided with the best possible iselect experience; Building greater and deeper relationships with Product Providers and continued expansion of the Product Provider panel; Continued assessment of strategic acquisition opportunities; and Continued assessment of international expansion opportunities. iselect will raise net cash proceeds from the Offer of approximately $88.1 million. Post Offer, iselect will also have access to cash flow from operations, as well as access to a term debt revolving facility with CBA of $35 million. The Term Debt Revolving Facility was drawn to $25 million (as at 19 April 2013). iselect is currently in compliance with its financial covenants and expects to remain in compliance with them following completion of the Offer. Section Sections Section 4.4.1

15 iselect Limited Overview of the Offer Topic Summary For more information Why is the Offer being conducted? What is SaleCo? The purpose of the Offer is to: Provide funding flexibility to support future growth, including by acquisition; Raise capital to strengthen the Company s balance sheet and pay down debt; and Create liquidity in iselect Shares by listing on the ASX which will allow existing and new shareholders to sell their shares or buy further shares on market. SaleCo is a special purpose vehicle, established to sell Shares acquired from ninemsn who is to sell all of its existing investment in iselect and ITV Consulting, which is to sell 350,000 of its Existing Shares. SaleCo is not owned by or related to ninemsn or ITV Consulting. SaleCo will acquire 62,001,590 Existing Shares from ninemsn and 350,000 Existing Shares from ITV Consulting. The price payable by SaleCo to ninemsn for its Existing Shares will be the ninemsn Sale Price. The price payable by SaleCo to ITV Consulting for those Existing Shares will be the Other Sale Price. These Shares will be transferred to successful Applicants under this Prospectus by SaleCo. Section Section 7.1 What is the Offer size? Offer Price $1.85 per Share Total number of New Shares offered million Total number of Existing Shares offered million Total Shares offered million Total cash proceeds to iselect from the Offer $100 million Total cash proceeds to SaleCo from the Offer $115.4 million Total cash proceeds from the Offer $215.4 million Section 7.1 What are the key investment metrics? Market capitalisation at the Offer Price 9 $479.3 million Pro forma net debt/(cash) 10 $(86.4) million Enterprise value at the Offer Price 11 $392.9 million Enterprise value 12 /CY13F EBITDA (times) 13.1x Offer Price/CY13F NPAT per Share 13 (times) 25.4x Section Calculated by multiplying the Offer Price by the number of Shares on issue on Completion of the Offer (excluding approximately 8.88 million LTIP Shares). LTIP Shares will not be quoted on ASX until satisfaction of all conditions to vesting and repayment of the applicable LTI Loan. LTIP Shares vest and holders will be entitled to exercise their rights as ordinary Shareholders only if certain total shareholder return ( TSR ) performance hurdles and continuing employment criteria are satisfied by holders, and their LTI Loan repaid in full. Vesting of the LTIP Shares granted under the LTI Plan will occur in three tranches, ending on 30 June 2015, as detailed further in Section Until vested, LTIP Shares cannot be voted. Any LTIP Shares remaining unvested following the final testing date will be forfeited and surrendered by holders in full satisfaction of the LTI Loan. Shares may not trade at the Offer Price post Listing. 10 Pro forma net cash of $86.4 million as at 31 December 2012, adjusted to reflect the impact of the Offer, as set out in Section Calculated by subtracting pro forma net cash from indicative market capitalisation. 12 Enterprise value at Offer Price is defined as market capitalisation at the Offer Price of $479.3 million less pro forma net cash of $86.4 million, as at 31 December 2012, adjusted to reflect the impact of the Offer, as set out in Section This ratio is commonly referred to as a price earnings or PE ratio. A PE ratio is a ratio of a company s share price and its earnings per share.

16 14 Investment overview Topic What is iselect s historical and forecast financial performance? 14 Summary Historical Results 15 Forecast Results 16 (A$000s) FY10 FY11 FY12 FY13F CY13F For more information Section 4.3 Revenue 43,491 72, , , ,482 EBITDA 9,257 17,369 24,082 26,028 30,024 EBIT 7,829 14,184 20,028 21,134 25,021 NPAT 5,780 10,657 12,929 14,523 18,901 Earnings per Share (cents) What is the Offer? Who are the issuers of the Prospectus? What is the proposed use of funds raised pursuant to the Offer? Will the Shares be listed? How is the Offer structured? Is the Offer underwritten? The Offer is an initial public offering of million Shares that will in part be issued by iselect and in part sold by SaleCo. The Shares being offered will represent approximately 44.9% of Shares on issue on Completion of the Offer (excluding approximately 8.88 million LTIP Shares). iselect (ACN ), a company incorporated in Victoria, Australia and iselect SaleCo Pty Ltd (ACN ), a company incorporated in Victoria, Australia. The funds received pursuant to the Offer will be used as follows: $100.0 million will be paid to iselect, of which $11.9 million will be used to fund the issue of New Shares; and $113.5 million will be paid to ninemsn and $0.64 million will be paid to ITV Consulting (each of whom sold Shares to SaleCo), net of $1.2 million of fees payable in connection with the sale of those Shares. iselect will apply to the ASX for the Company s admission to the official list of the ASX and quotation of Shares on the ASX (which is expected to be under the code ISU within seven days of the date of this Prospectus). LTIP Shares will not be quoted on ASX until satisfaction of all conditions to vesting and repayment of the loan made by iselect to the participant to fund their subscription of the LTIP Shares (see Section for more details). Completion of the Offer is conditional on the ASX approving this application. If approval is not given within three months after such application is made (or any longer period permitted by law), the Offer will be withdrawn and all Application Monies received will be refunded without interest as soon as practicable in accordance with the requirements of the Corporations Act. The Offer comprises: The Broker Firm Offer; The Institutional Offer; and The Employee Priority Offer. The Offer is fully underwritten by Credit Suisse and Baillieu Holst, the Joint Lead Managers. Section 7.1 Section 7.1 Section Section Section Section See Section 4 for full details of the Financial Information. The Financial Information presented in this table is intended as a summary only and should be read in conjunction with the more detailed discussions of the Historical and Forecast Results disclosed in Section 4, as well as the risk factors, set out in Section See Section 4 for full details of the Historical Results. 16 The Forecast Results are based on assumptions and accounting policies set out in Section 4 and Appendix 1, respectively and are subject to the risks set out in Section 5. There is no guarantee that the forecast financial results will be achieved. 17 Represents NPAT divided by the total number of Shares to be on issue following Completion of the Offer, being million Shares (excluding approximately 8.88 million LTIP Shares).

17 iselect Limited Topic What is the allocation policy? Summary The allocation of Shares between the Broker Firm Offer and the Institutional Offer was determined by the JLMs in consultation with iselect. The JLMs, in consultation with iselect, had absolute discretion regarding the basis of allocation of Shares among Institutional Investors. For Broker Firm Offer Applicants, Brokers will decide as to how they allocate Shares that they are allocated among their retail clients. For Applicants in the Employee Priority Offer, iselect and the JLMs have absolute discretion regarding the allocation of Shares and may reject an Application, or allocate fewer Shares than applied for, in their absolute discretion, subject to the guaranteed minimum allocation of Shares described in Section 7.4. For more information Sections Is there any brokerage, commission or stamp duty payable by Applicants? What are the tax implications of investing in the Shares? No brokerage, commission or stamp duty is payable by Applicants on an acquisition of Shares under the Offer. The tax consequences of any investment in the Shares will depend upon an investor s particular circumstances. Applicants should obtain their own tax advice prior to deciding whether to invest. Section 9.8 When will I receive confirmation that my Application has been successful? When will dividends on the Shares be paid? What is the minimum Application size under the Employee Priority Offer? How can I apply? Can the Offer be withdrawn? Where can I find out more information about this Prospectus or the Offer? It is expected that initial holding statements will be despatched by standard post on or around 27 June There will be no FY13 or FY14 dividend paid. The Company has a number of growth strategies it is pursuing, and does not anticipate paying a dividend in the forecast period. Following the forecast period, dividends will be payable at the Board s discretion having regard to the growth opportunities available to the Company at that time. The minimum Application size for investors in the Employee Priority Offer is $500 worth of Shares and thereafter in multiples of $100. Broker Firm Offer Applicants should contact their Broker regarding the minimum Application size. You may apply for Shares by completing a valid Application Form attached to or accompanying this Prospectus. To the extent permitted by law, an Application by an Applicant under the Offer is irrevocable. iselect and SaleCo reserve the right not to proceed with the Offer at any time before the issue of Shares to successful Applicants. If the Offer does not proceed, Application Monies will be refunded. No interest will be paid on any Application Monies refunded as a result of the withdrawal of the Offer. Call the iselect Offer Information Line on (within Australia) or (outside Australia) from 8.30 am until 5.00 pm (Melbourne time) Monday to Friday. If you are unclear in relation to any matter or are uncertain as to whether iselect is a suitable investment for you, you should seek professional guidance from your accountant, financial advisor, stockbroker, lawyer or other professional advisor before deciding whether to invest. Section Section 4.9 Section 7.4 Sections Section 7.8

18 16 Investment overview 1.3 Key information on the experience and background of the Directors and Management Directors Experience For more information Who is in control of iselect and what is their expertise? Damien Waller (Executive Chairman) Damien is an Australian online entrepreneur and is the Executive Chairman and co-founder of iselect. Section 6.1 Under Damien s leadership, the Company has grown to become a leading Australian online driven comparison service. Prior to founding iselect, Damien was recruited by JBWere & Son via its elite graduate program. Damien is currently a director of Nimble Money Pty Ltd and other related Nimble entities. Greg Camm (Non-Executive Director and Deputy Chairman) Greg joined the iselect Board in August 2012 and has nearly 40 years experience in the financial services industry in Australia and New Zealand. Greg spent 16 years in various senior roles at Australia and New Zealand Banking Group Limited, including Managing Director of the Australian Retail Banking Division of ANZ, following which he served as Managing Director of AMP Financial Services (New Zealand). He then served as CEO of Superpartners Pty Ltd for five years. Greg serves on the boards of mecu Ltd (trading as bankmecu) and Bottlecyclers Pty Ltd and is a trustee of the Australian Cancer Research Foundation. Matt McCann (Chief Executive Officer) Matt joined iselect in 2008 as Corporate Development Director and in January 2012 was promoted to the role of Chief Executive Officer, joining the iselect Board in February Matt has over 17 years of strategy, mergers and acquisitions, corporate finance, legal and business management experience and prior to joining iselect, spent a decade in the U.K., developing and running start-up technology and media businesses. During this time, he was Business Affairs Director and Company Secretary for Shazam Entertainment.

19 iselect Limited Directors Experience For more information Leslie Webb (Non-Executive Director) Pat O Sullivan (Non-Executive Director) Shaun Bonètt (Non-Executive Director) Leslie joined the iselect Board in February 2001 and since 1986 has practised as a barrister. Leslie has consulted extensively to both listed and unlisted public companies regarding corporate and financial planning, intellectual property, corporate governance and strategic planning. Previously, Leslie served as a director of Gradipore Ltd, non-executive Chairman of Stem Cell Sciences (Australia) and a non-executive director of Stem Cell Sciences PLC. Leslie is currently a non-executive director of Generic Health Pty Ltd and is non-executive Chairman of Nimble Money Pty Ltd. Pat joined the iselect Board in September Pat brings over 30 years of international commercial and business management experience to the iselect Board. From 2007 to 2012, Pat was Chief Financial Officer of Nine Entertainment Co. and Chief Operating Officer of its predecessor, Publishing and Broadcasting Ltd (PBL). Before joining PBL, Pat was Chief Financial Officer of SingTel Optus Pty Ltd, a position he held for over five years and before that, he held a number of senior positions at Goodman Fielder, Burns, Philp & Company, and PwC. Pat is also a non-executive director of carsales.com Limited and Little Company of Mary Health Care Ltd. Shaun joined the iselect Board in May Shaun is an accomplished entrepreneur, having founded the property development and investment firm Precision Group. Shaun is a director and Chairman of Litigation Lending Services Ltd. Shaun is also a founding member and trustee of the Heartfelt Foundation, an Australian charitable trust. Section 6.1

20 18 Investment overview Management Experience For more information Matt McCann (Chief Executive Officer) Refer above. Section 6.2 David Chalmers (Chief Financial Officer and Company Secretary) Jo Thomas (Operations Director) Scott Wilson (Commercial Director) Elise Morris (Human Resources Director) Roger McBride (Marketing Director) Chris Billing (Chief Innovation Officer) David has over 15 years experience across the finance and professional services sectors. Prior to joining iselect in 2012, David held a variety of senior financial and executive roles with DuluxGroup and Macquarie Capital. Jo has over 10 years sales and operations experience across several industries. Prior to joining iselect in 2008, Jo led the sales division of Aegis Pty Ltd, servicing blue-chip clients such as Telstra, Citibank, Metlife, Vodafone, Westpac and TRUenergy. Scott has over 20 years of sales and key account management experience across a range of industries including consumer goods and entertainment. Prior to joining iselect in 2013, Scott was the Sales Director (Australia & New Zealand) for 20 th Century Fox Home Entertainment and also held senior national sales roles at PZ Cussons and SPC Ardmona. Prior to joining iselect in February 2012, Elise held human resources roles of increasing responsibility for over a decade within several Australian companies including Seek Limited and Pacific Brands. During her career, Elise has also held senior management positions within the U.K.-based confectionery manufacturer Cadbury, and its parent company Kraft Foods. Roger has over 25 years marketing experience across numerous industries. Prior to joining iselect in 2004 as Marketing Manager, Roger held positions at Sensis, Thomson Reuters and Ford Motor Company. Chris has over 18 years experience in corporate strategy, product management and marketing. Prior to joining iselect in 2009, Chris held a variety of senior positions at REA Group, Uecomm Pty Ltd, and Sensis.

21 iselect Limited Significant interests of key people Who are the Existing Shareholders and what will be their interest at the Completion of the Offer? Existing Shareholder 18 Existing Shares Shares sold under the Offer Shares held at close of the Offer ninemsn 62,001,590 62,001,590 nil Section Damien Waller 31,377,660 1 nil 31,377,660 1 Spectrum Equity 19,765,290 nil 19,765,290 Other Existing Shareholders 91,866, ,000 91,516, Excludes 1,351,350 LTIP Shares granted to Damien Waller on 24 May Excludes: (a) any Shares acquired by Existing Shareholders under the Offer; and (b) 7,532,320 LTIP Shares granted to other employees. ninemsn, Damien Waller and Spectrum Equity and the Other Existing Shareholders are the current owners of iselect. ninemsn has irrevocably offered to sell all of its Existing Shares to SaleCo subject to Completion of the Offer. ninemsn will receive the ninemsn Sale Price for the Existing Shares that it sells to SaleCo. All of the Existing Shares held at Listing by Damien Waller, Matt McCann, Greg Camm, Shaun Bonètt and Leslie Webb and their respective controlled entities, (the Escrowed Shares and Escrowed Shareholders) will be subject to voluntary escrow arrangements until the date on which iselect s full year accounts for FY13F are released to the ASX by iselect. After this date, 850,000 Shares owned by ITV Consulting (controlled by Leslie Webb) will be released from the voluntary escrow arrangements, and the remaining Escrowed Shares (i.e. 36,416,130 Shares) will continue to be subject to voluntary escrow arrangements, until the date on which iselect s half year accounts for the period ending 31 December 2013 are released to the ASX by iselect. These escrow arrangements are discussed further in Section 7.6. Subject to certain exceptions, the Escrowed Shareholders may not dispose of their Escrowed Shares whilst those Escrowed Shares are subject to voluntary escrow arrangements. ITV Consulting s current intention in relation to the 850,000 Shares that will be released from escrow upon announcement of iselect s FY13F results is that it will sell a portion of those Shares during the escrow period applicable to the remaining Escrow Shares. 18 This includes interests held, or that may be acquired through, associated entities.

22 20 Investment overview What significant benefits are payable to Directors and other persons connected with the Issuer or the Offer and what significant interests do they hold? Directors Shares held on Listing Options on Listing Damien Waller 31,377,660 1 nil Matt McCann 235,230 2 nil Section 6.3 Greg Camm 60,000 nil Pat O Sullivan nil nil Leslie Webb 2,050, ,000 4 Shaun Bonètt 300,000 nil 1 Excludes 1,351,350 LTIP Shares granted to Damien Waller on 24 May Excludes 1,891,890 LTIP Shares granted to Matt McCann on 24 May ITV Consulting has agreed to sell 350,000 of these Shares to SaleCo. See Section At an exercise price of $2.365 per option. The above disclosure of Leslie Webb s Shareholding excludes 3,750,000 Shares which as at the date of this Prospectus are held by a superannuation fund of which Leslie Webb is a member, and in which he has an indirect interest. These Shares are not subject to any escrow arrangements. That fund may sell all or a portion of these Shares during the Escrow Period. Directors and management are entitled to remuneration and fees on commercial terms. In addition, each Director (except for Pat O Sullivan) is entitled to a discretionary cash bonus in the event of a successful Offer and Listing. Discretionary bonuses may also become payable to other members of management and other personnel. Matt McCann s bonus may be up to $150,000; Damien Waller s may be up to $50,000 and the bonuses payable to the eligible non-executive directors are $20,000 each. Advisors and other service providers are entitled to fees for services.

23 21 Industry overview 2

24 22 2. Industry overview 2.1 In what sector does iselect operate? iselect operates in the online product comparison sector, and compares private health insurance, life insurance, car insurance, broadband, home loans, personal finance and energy products. iselect maintains two brands, iselect ( and InfoChoice ( 2.2 What is online product comparison? What is an online comparison service? Online product comparison services seek to simplify the purchase of typical household products where complexity in product features and/or pricing would otherwise make product analysis and purchasing difficult and time-consuming for consumers. They appeal to consumers by enabling them to compare product pricing and features of multiple products from a number of providers in a single location, resulting in a more efficient and informed purchasing decision at no additional cost. Online product comparison services aim to refer new consumers to product providers that offer products through the service. Comparison services generate consumer interest in their website or call centre using a combination of online (e.g. search engine) and offline (e.g. television and radio) advertising. Online comparison services earn fees for sales leads referred or products sold through their comparison platform, depending on the specific business model they operate (refer to Section 2.3) What range of comparison services are offered? iselect participates in the online comparison sector offering services across a range of product categories including private health insurance, life insurance, car insurance, broadband, home loans, personal finance and energy. These underlying product markets possess several common characteristics that can make like-for-like product comparison difficult and time-consuming, including: Complexity of product features. For example, hospital, general (extras) and combined private health insurance policies each contain varying levels of inclusions, benefit caps, and restrictions, which can be difficult to directly compare with one another; and/or Complexity of product pricing structures. For example, while retail energy products have underlying product features that are uniform, they have complex and differing pricing structures that can make like-for-like comparison difficult for consumers. Figure 2.1.1: Overview of iselect s brands Free product comparison and advice service to consumers for private health insurance, life insurance, car insurance, home loans, energy and broadband products Free comparison service to consumers for personal financial products, including savings and investment products, credit cards, home loans and personal loans

25 iselect Limited What are the different models of online product comparison? Competitors in the online product comparison sector generally operate either an end-to-end ( E2E ) or lead generation business model. A description of each of the comparison models is included below. Figure 2.3.1: Comparison of service models Lead Generation E2E E2E Service to product provider Comparison provider uses their platform to generate: Click-throughs to product provider s own website from display (banner) advertising on its website; and/or Leads, either through encouraging the consumer to contact the product provider directly (online or by phone), or by collecting the consumer s details for the product provider to contact them directly (Lead Referrals) Comparison provider uses their platform to generate leads and complete product sales on behalf of product providers Specific offering Display Advertising Lead Referral Full Service Revenue model Fee per thousand page impressions Fee per lead Fee per call Fee per sale of product iselect indicative revenue 1 $80 2 per thousand page impressions $3 $200 per lead or call $30 $3,000 per sale Predominant iselect business unit model Broadband Money Money Health Life Car Home Loans Energy Investment required Low Lead generator operates with a simple website that links to product provider s website or simply has product provider s contact details Significant Comparison provider must invest in technology to support: Online transacting; and Integration to product providers back-office systems for sale processing Investment in call centre capacity and capability to provide personalised advice and improve sales results (1) iselect indicative revenue provides an indication of the average fee per impression, lead or sale derived through operation of each business model. Where a range is provided, this is intended to provide an indication of the average fee per lead or sale in lower value categories (e.g. Broadband) compared with higher value categories (e.g. Home Loans) operating under the same business model. (2) This figure of $80 per thousand page impressions is charged for run of site banners and stated in our pricing rate card. In most cases, display advertising is sold on a category sponsorship basis where the price is based on market demand and page impressions. Pricing can range from $3,000 to $25,000 per month. iselect currently operates an E2E comparison model across the majority of its businesses. iselect currently operates a lead generation model within its Broadband and Money business units; however, management is currently working to develop an E2E capability in these business units over time.

26 24 Industry overview 2.4 What is the competitive landscape in the online comparison sector? The Australian online product comparison sector is fragmented, with a large number of small-scale participants offering comparison services across a range of underlying product markets. Industry fragmentation is the result of significant barriers to the achievement of increased scale and profitability, most notably, the substantial financial investment required to develop the marketing capability to attract large volumes of consumers to a comparison service, and the systems and manpower required to process large volumes of sales on behalf of Product Providers. Figure 2.4.1: Competitive landscape and iselect s position Basis of competition Detail iselect position Brand strength Ability to process large sales volumes Relationships with a broad panel of product providers Ability to provide tailored purchase advice A strong brand across multiple underlying product markets is required to build scale This drives the ability of comparison sector participants to attract large volumes of sales leads to their comparison platforms Developing an effective and well-recognised brand generally requires significant investment in marketing and brand development over a sustained period of time Development of an effective, scalable platform with the ability to process large sales volumes is required to establish a large scale E2E comparison service Requires significant investment in the development of comparison algorithms, the online comparison platform, back-office applications, call centre capabilities and systems integration with product providers Large-scale comparison services require relationships with a range of product providers for the comparison model to attract large volumes of consumers Development of those relationships requires a substantial investment of time, and the demonstrated capability to deliver sustained sales volumes to product providers over time The ability to provide tailored purchase advice through a team of consultants facilitates strong lead to sales conversion compared with operating a website alone Building a large-scale team of experienced consultants requires investment in personnel, product training and the associated telephony equipment to operate a large-scale consumer advice centre Highest level of consumer brand awareness in the Australian online comparison sector (refer to Section 3.3) A leading Australian online-driven comparison service 19 Demonstrated ability to process large sales volumes across multiple businesses A range of over 120 Product Providers across multiple underlying product markets (refer to Section 3.4) iselect has a large offline comparison team, with more than 220 advisors within its Consumer Advice Team iselect is a leading online-driven comparison service in Australia as measured by website visits, as presented in Figure and by brand awareness, as determined by the Nielsen Australia March 2013 Research as outlined in Section Based on visits to iselect s websites (refer to Figure for details) and brand awareness.

27 iselect Limited Figure 2.4.2: Australian online comparison services website visits (as a percentage of visits to iselect Group websites for the year ended 31 March 2013) 100% 100% 43% 90% Website visits (as a proportion of iselect website visits) 80% 70% 60% 50% 40% 30% 20% 57% 42% 35% 28% 28% 28% 23% 20% 19% 18% 15% 10% 12% 11% 10% 10% 8% 7% 6% 5% 5% 5% 0 iselect Group YouCompare Group WhistleOut Aussie Home Loans RateCity Finder Group Mozo Canstar Group Captain Compare / Compare the Market Choosi Compare Broadband Rate Detective Switchwise CreditCard.com.au Mortgage Choice EnergyWatch Go Switch.com.au Money Buddy One Big Switch Electricity Wizard echoice iselect.com.au InfoChoice.com.au Note: Percentages calculated based on web visit data sourced from Hitwise, April 2013, which measures total visits to each website. Online comparison services shown are not intended to be exhaustive and include both category-specific services and multi-category services in categories which iselect operates that predominantly earn income from the providers of products that they compare, and exclude services that aggregate or white label the comparison offerings of external providers. YouCompare Group represents the total visits of and Finder Group represents the total visits of and Canstar Group represents the total visits of and and visits to Captain Compare and Compare the Market have been aggregated as they are both related entitles of A&G Insurance Services Pty Ltd. 2.5 What factors influence the growth of the Australian online comparison sector? Research conducted by Nielsen in 2013 (as described in Section 2.7.3) found that Online Australians expect their use of online comparison services (such as iselect) to increase in the future compared to present levels of usage. The Australian online comparison sector is influenced by a range of factors including: Trends in internet usage, which drives the extent to which online comparison is accessible to consumers (these are explained in Section 2.6); Online commerce trends, which reflect the willingness of the Australian consumer to research and purchase products online (these are explained in Section 2.7); and The supply and demand dynamics of the underlying markets for the products that are compared and purchased through an online comparison service (these are explained in Section 2.8). Further information relating to each of these drivers is included in this Section.

28 26 Industry overview 2.6 What are the key trends in internet usage by Australians? How many Australians are online? Internet usage in Australia is widespread, with the uptake of internet use approaching saturation point. In January 2013, Nielsen Online Ratings found that an estimated 15.5 million (70%) of Australians aged over 2 years and 14.8 million (82%) of Australians aged over 16 years can be classified as active online users (i.e. had used the internet in the last month) How much time are Australians spending online? Nielsen estimates that the internet is the most popular form of media (based on average weekly time spent in 2012), with Australians spending an average of 23 hours and 18 minutes per week online 21 (an increase of 5 hours and 42 minutes per week versus ). Australians continue to spend more time online than any other media and have done so since 2007, when online consumption surpassed TV consumption for the first time. 23 Figure : Average weekly time spent online by Australians Figure : Average weekly hours for different media activities, 2012 Time in hours and minutes hours 42 minutes 23 hours 18 minutes hours 36 minutes CY09 weekly average CY12 weekly average Internet Broadcast TV Time-shifted TV Radio Internet via tablet Internet via mobile Newspaper Source: Nielsen, Australian Connected Consumers Report, February 2013, p.80. Source: Nielsen, Australian Connected Consumers Report, February 2013, p Nielsen, Australian Connected Consumers Report, February 2013, p Nielsen, Australian Connected Consumers Report, February 2013, p.77 and p Nielsen, Australian Connected Consumers Report, February 2013, p Nielsen, Australian Connected Consumers Report, February 2013, p.134.

29 iselect Limited What are the key trends in the Australian online industry? How much are Australians purchasing online? Continued growth in the comfort and sophistication of consumers towards online shopping as well as technology changes (e.g. greater penetration of smartphones and tablet PCs) has resulted in a shift in the way many Australians engage with retailers and service providers. Australian online shopping expenditure demonstrated strong growth in 2011, reaching $13.9 billion. This represented a year on year growth rate of approximately 16%, considerably higher than the comparable year-on-year growth in traditional retail sales of approximately 2% Are Australians expecting to increase the amount they purchase online? PricewaterhouseCoopers (PwC) and Frost & Sullivan forecast that over the 12 months ending 31 July 2013, almost 90% of Australians who use the internet to purchase products and services online expect to maintain or increase their online expenditure. 27 PwC and Frost & Sullivan also expects Australian online shopping expenditure to grow from $16.0 billion in 2012 to $18.4 billion by 2013, representing a growth rate of 15.0%. 28 iselect considers that the expectation of ongoing growth in online shopping by Australians reflects an increasing level of confidence in the use of the internet to make purchases. Online shopping expenditure in Australia represented 5.6% of the $249 billion in total retail sales in 2011, and was forecast to have reached 6.3% of total retail sales in This level of online shopping penetration is lower than in the more mature online markets like the U.S. and U.K. (with 2012 forecast penetration of 7.3% and 10.7%), respectively. 26 Figure : Online shopping expenditure as percentage of total retail sales in CY12F Figure : Australian online shopping expenditure forecast 10.7% 7.0% 5.9% 6.3% 7.3% 4.6% % % % New Zealand Australia U.S. U.K. CY09A CY10A CY11A CY12F CY13F Total online expenditure (A$ billions) Online expenditure share of total retail sales (%) Source: Note: PwC / Frost & Sullivan: Australian and New Zealand online shopping market and digital insights (July 2012, Infographic supplement, p.1). Based on calendar year end. Online shopping defined as online purchasing of physical merchandise such as clothes, books, and electronic items. The data excludes online purchasing of services such as travel and accommodation, event ticketing, financial services products and media downloads as these categories are not included in the retail sales statistics. Purchases of items from online auction sites (such as ebay) are also excluded, but purchases of fixed-price items from sites such as ebay are included in the analysis. 24 ABS Retail Trade Australia statistics, , February ABS Retail Trade Australia statistics, February 2013 and PwC / Frost & Sullivan, Australian and New Zealand online shopping market and digital insights, July 2012, p PwC / Frost & Sullivan, Australian and New Zealand online shopping market and digital insights, July 2012, p PwC / Frost & Sullivan, Australian and New Zealand online shopping market and digital insights, July 2012, p PwC / Frost & Sullivan, Australian and New Zealand online shopping market and digital insights, July 2012, p.29. According to the report, a number of factors were considered in the analysis undertaken, including the entry of more online retailers, and product and service expansion by current online retailers. The report identified other factors that may also have an impact on the forecasts, including: improvements in product imagery, demographic shifts and the increasing level of comfort of consumers towards the online shopping process. The analysis also had regard to primary and secondary research with industry participants, industry experts, end users, regulatory organizations, the financial and investment community, and other related sources as well as utilising the authors in-house forecast and benchmarking models.

30 28 Industry overview Are Australians using online comparison services and why? In order to gain a greater understanding of consumer preferences, iselect commissioned independent research house Nielsen Australia to undertake market research regarding the Australian online comparison sector ( Nielsen Australia March 2013 Research ). The key objectives of the research undertaken were to: Understand the difference in behaviour for research and comparison of products and services online versus offline; Identify the key drivers for choosing online shopping over offline shopping; Identify the drivers of a consumer using online comparison services; Measure the awareness and level of engagement with Australian online comparison services; and Quantify the benefits of using online comparison services to the consumer in terms of time, money and effort savings and ultimately obtaining a product better aligned to their needs. Nielsen conducted this research between 18 February and 25 February 2013, which involved a random sample of individuals and which resulted in receipt of 2,012 completed online surveys. Data was weighted on gender, age and location to reflect a nationally representative demographic composition of the Australian population aged over 18 based on the latest ABS population figures. Nielsen then extrapolated those figures into results that are outlined in this Section. Nielsen considers the survey results are broadly representative of the behaviour of Online Australians. The Nielsen Australia March 2013 Research suggests that the use of online resources, including online comparison services, to research, compare, and purchase products is widespread. Nearly every Online Australian who was surveyed by Nielsen has researched or compared products or services online, and over 70% of Online Australians who were surveyed by Nielsen have used online comparison services at least once. Figure : Online Australians that have researched, compared or purchased products/services online or have used an online comparison service Have researched/compared a product/service online 98% YES 2% NO Have purchased a product/service online 97% YES 3% NO Have used online comparison services 71% YES 29% NO Source: Nielsen Australia March 2013 Research. Obtaining lower prices, saving time, and enabling easier comparison to result in better-informed purchasing decisions were identified by surveyed participants as the key reasons for using online comparison services.

31 iselect Limited Figure : Reasons for using online comparison services Lower price 79% Easier comparison Better-informed purchasing decision Save time Simpler comparison Easier to find information Compare products with different features on pricing, which would make comparison confusing Save effort Simpler to find information 68% 66% 65% 62% 58% 58% 54% 53% Consumer reviews 40% Personalise/tailor the product or service Expert advice 27% 30% Source: Nielsen Australia March 2013 Research. Online comparison services are perceived as beneficial by respondents who had used those services, compared to shopping around either online or offline. Respondents that have recently used an online comparison service indicated that online comparison services have saved them time, money and effort and helped them find a product that better suited their needs compared with shopping around, either online or through traditional offline methods, such as bricks and mortar branches or retail stores. Figure : Perceived benefits of using online comparison services by respondents who have previously used an online comparison service to research, compare or purchase products Saved money Saved time Saved effort Product better suited needs Compared to shopping around ONLINE Compared to shopping around OFFLINE 86% saved money 96% saved time 94% saved effort 85% found a product that better suited their needs 92% saved money 97% saved time 96% saved effort 92% found a product that better suited their needs Source: Nielsen Australia March 2013 Research.

32 30 Industry overview Figure : Likelihood of using online comparison services in the next 12 months 27% Likelihood to research/compare I won t 3% 10% 28% 32% 87% 7% 26% 36% 20% 11% Likelihood to purchase 67% The benefit to consumers of using online comparison services is expected to drive growth in usage. The Nielsen Australia March 2013 Research determined that: While 53% of Online Australians surveyed by Nielsen have made use of an online comparison service in the last 12 months, 87% of Online Australians surveyed by Nielsen are likely to use an online comparison service in the next 12 months, reflecting increasing acceptance of online comparison services; and While 24% of Online Australians surveyed by Nielsen have purchased financial/insurance and utilities products from an online comparison service in the last 12 months, 67% are likely to purchase from an online comparison service in the next 12 months, illustrating the likelihood of growth for the industry Where do Australians go online to compare and purchase products? According to the Nielsen Australia March 2013 Research, among Australian online comparison services, iselect has the highest top-of-mind (unaided) awareness, with 17% of respondents mentioning iselect without prompting, when they were asked to name an online comparison service. iselect also has the highest Prompted Awareness, with 72% of respondents acknowledging awareness of iselect when presented with a competitive set of 17 Australian online comparison services. This high level of awareness of iselect is reflected when examining usage of the same competitive set of online comparison services, with 34% of Online Australians surveyed by Nielsen having previously used iselect. Unlikely Somewhat likely Very likely Likely 100% certain Source: Nielsen Australia March 2013 Research.

33 iselect Limited Figure : Usage of online comparison services (As a % of total respondents) iselect.com.au 4.8% 29.4% 34% Choosi.com.au 19% Energywatch.com.au 13% GoSwitch.com.au YouCompare.com.au 9% 9% Infochoice.com.au Canstar.com.au Mozo.com.au Ratecity.com.au Creditcardfinder.com.au Comparethemarket.com.au Switchwise.com.au Other Captaincompare.com.au Helpmechoose.com.au Lifebroker.com.au Whistleout.com.au XLife.com.au 7% 6% 5% 5% 4% 4% 3% 2% 2% 2% 1% 1% 0% I regularly use this website I use this website occasionally Source: Nielsen Australia March 2013 Research, page Why do product providers utilise online product comparison channels? Traditionally, product providers techniques for acquiring customers have consisted of one or more of the following activities: Paying for mass-market advertising (e.g. television, radio and outdoor display advertising); Paying for search engine marketing (e.g. investing in paid search engine advertising ( SEM ), and website optimisation to optimise position in organic web search results ( SEO )); Conducting direct marketing (e.g. direct s / letters to potential consumers); Employment of dedicated in-house sales teams; Appointment of traditional third party brokers; Establishing and maintaining a bricks and mortar retail presence through a store or branch network; Acquisition of the consumers of another product provider through mergers and acquisitions; or Funding product discounts and corporate offers. Many of these activities require significant upfront investment by the product provider, both in marketing activities in order to generate consumer interest in their products, and in the development of the processes required to convert consumer interest into completed sales. This can involve substantial risk for the product provider if the customer acquisition technique does not deliver the desired number of sales.

34 32 Industry overview Online comparison services can provide an attractive alternative to traditional consumer acquisition methods for a number of reasons: Product providers are able to use the brand marketing of the online comparison services to promote their product. Online comparison services provide product providers with a position in an online shopfront which is being visited by a group of consumers who are already expressing an interest in researching pricing and features of products that the product provider offers. Online comparison services generally operate on a success basis, meaning the channel can represent an attractive alternative to traditional marketing and sales from a risk/return perspective. E2E providers will generally only charge the product provider a fee upon a successful conversion, meaning that the product provider knows that they will generate revenue from the new consumer at the time they incur the fee. Lead generators will generally only charge the Product Provider for a lead, which means the risk and cost of marketing has been passed through to the comparison service, but the cost and risk of converting that lead into a sale remains with the product provider. Finally, product providers also benefit from an E2E comparison service provider s ability to offer insights into consumer behaviour drawn from data analytics that may be carried out by the online comparison service provider to assist in developing and refining products that cater to consumer preferences. 2.8 What are the underlying product markets that iselect operates in? iselect provides its comparison service across seven main product markets: Private health insurance; Life insurance; Car insurance; Broadband; Home loans; Money (including credit cards, personal loans, car loans and deposit accounts); and Energy (including gas and electricity). These markets are particularly attractive for comparison given, among other things: The relatively low or non-existent financial disincentives which would otherwise prevent consumers switching between product providers; The recurring nature of the cost of these products with respect to consumers household budgets (and the resultant financial benefit of reducing a recurring expense); The features within some markets that make like-for-like product comparison inherently difficult or time-consuming; or In some of these markets, government incentives and surcharges exist that may influence consumers to take up a particular product, such as those in the private health insurance industry. Health is iselect s largest business unit representing approximately 81% of FY12 revenue. 2.9 What are the key characteristics of the private health insurance market? Market overview The Australian private health insurance market is characterised by strong participation rates as a proportion of the overall population. Participation rates are supported by Federal Government regulation that seeks to ease the burden of healthcare funding placed on the public sector (which is expected to increase as the Australian population ages), by ensuring private sector participation in the funding of healthcare. To achieve this, the applicable regulation provides incentives for certain individuals to hold a private health insurance policy. The majority of Australians now hold some level of private health insurance cover, which may include private hospital cover, general treatment (extras) cover or both (combined cover). Private hospital cover provides insurance against some or all of the costs of being treated in a public or private hospital. General treatment cover provides insurance against some or all of the costs of treatment by certain ancillary health service providers (e.g. dentists, physiotherapists, optometrists, etc.) depending on the type of cover selected. As at 30 June 2012, there were approximately 5.1 million policies including some form of private hospital cover, which covered approximately 10.6 million individuals (or 47% of the population). Including general only policies, the total number of policies outstanding was 5.9 million. Figure 2.9.1: Total policies outstanding (hospital and general cover) and participation rate (% of population) 29 PHI policies in Australia Source: (000s) 8,000 50% 6,000 4,000 2, % 45% 43% 40% 38% 35% PHI policies in Australia ( general treatment cover) PHI policies in Australia ( hospital cover and combined cover) % of Australians covered by private healthcare PHIAC Annual Reports to ; Annual Industry Whole Fund Policies; Annual Industry Hospital Treatment Policies; Also, ABS series 3101 Australian Population Historical June 2012: Estimated Resident Population, Australia. % of Australians covered by private healthcare 29 Refers to policies that include hospital cover i.e. this figure excludes policies that are general treatment only to avoid double counting.

35 iselect Limited Figure 2.9.2: Premium revenues (hospital and general cover) Premium revenue $ million 18,000 12% 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2, % 8% 6% 4% 2% 0% Growth in premium revenue Private health insurance is an approximately $10 billion funding source for national healthcare expenditure Expenditure on healthcare services in Australia was estimated to be $130 billion in FY11, having grown at a CAGR of 8.3% since FY Australia s population is ageing, which is expected to result in the number of people aged 65 and above increasing by approximately 40% between FY10 and FY This is expected to place additional pressure on national healthcare expenditure in the coming years. These growing costs are being incurred by private health insurers, and have driven private health insurance premium increases at more than double the inflation rate since Figure 2.9.3: Proportion of the Australian population aged % As a % of Australians Premium revenue ($ million) Growth in premium revenue 20% Source: PHIAC Annual Reports to ; Annual Industry Whole Fund Policies; Annual Industry Hospital Treatment Policies; Annual HIB Industry Premium Revenue. There are 34 registered insurers in the Australian private health insurance market. The market is relatively concentrated, with the five largest insurers (Medibank Private (including subsidiary AHM), BUPA, HCF, HBF and NIB) accounting for approximately 83% of the market (in terms of total members). Three of the top five insurers participate in iselect s service: HCF, NIB and AHM, which is a subsidiary of the Government owned and largest private health insurer, Medibank Private. The private health insurance industry is regulated by the Private Health Insurance Administration Council ( PHIAC ), an independent statutory authority that governs the industry under policies set down by the Federal Government Department of Health and Ageing. There was no significant online-driven intermediary presence in the Australian private health insurance market prior to the entry of iselect in Over the past 13 years, iselect has built a significant presence in the market. In FY12, consumers purchased approximately 100,000 policies through iselect, representing an estimated 15% to 20% market share of new policy sales (i.e. new to system policies and policyholders transferring between funds). iselect is generally remunerated based on a percentage of the dollar value of a policy (a fee). Accordingly, the key revenue drivers for iselect s Health business unit are policy sales volume and the premium of policies sold. 15% 10% 5% 0% Source: and over Federal Government Intergenerational Report Australia to 2050: future challenges January 2010, p.117, Table A2 Demographic projections. Figure 2.9.4: Total Australian nominal healthcare spend Total health expenditure ($ billion) Source: The Australian Institute of Health and Welfare, Health Expenditure Australia Table 2.7, p.16). 30 The Australian Institute of Health and Welfare, Health Expenditure Australia , p Australian Government Intergenerational Report Australia to 2050: future challenges, January 2010, p.10.

36 34 Industry overview Figure 2.9.5: Share of FY11 nominal healthcare spend by source of funding Figure 2.9.6: Premium increases versus inflation 18.3% INDIVIDUALS 7.6% PRIVATE HEALTH INSURERS 5.0% OTHER 69.1% GOVERNMENT 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Average premium increase/contribution rate increase CPI Source: Source: Figure 2.9.5: The Australian Institute of Health and Welfare, Health Expenditure Australia , p.23, Table 3.2. Government category includes both the Australian Government and the state and territory governments. Figure 2.9.6: Sources for premium increase versus inflation for each year are (i) 2003 from PHIAC Annual report Operations of the Registered Health Benefits Organisations, p.16, (ii) 2004 from Federal Government, PHIAC media release, Health Fund Contribution Rate Increase 2004, 27 February 2004, p.1, (iii) 2005 from PHIAC Annual Report Operations of the Private Health Insurers, p.33, Table 2. (iv) 2006 to 2010 data from PHIAC Annual report Operations of the Private Health Insurers, p.21, Table 2 Average weighted premium increase on 1 April, (v) 2011 from Australian Government, PHIAC media release, Private Health Insurance Premiums Kept to a Minimum, 25 February 2011, p.1. (vi) 2012 from Australian Government, PHIAC media release, 2012 Private Health Insurance Premium Round, 28 February 2012, p.1, (vii) CPI from Australian Bureau of Statistics Consumer Price index, category All Price Australia. The Federal Government supports and regulates the private health insurance industry because it is a material funding source for national healthcare There are various Acts and Rules dealing with private health insurance. The primary piece of legislation is the Private Health Insurance Act The legislation is supported by Rules which can be made by PHIAC or the Minister for Health and Ageing. The product offering and activities of private health insurers are tightly regulated to ensure broad participation, adequate coverage, reasonable pricing and portability of hospital cover between products and funds. The Federal Government seeks to maintain broad participation across different groups of the Australian population, irrespective of their perceived level of risk from a private health insurance perspective. This is achieved through the application of a community rating for private health insurance. This means that private health insurers are prevented from discriminating between people on the basis of their health or for any other reason (except for the Lifetime Health Cover Loading). To support this principle, a risk equalisation scheme averages out the cost of hospital treatment of high risk groups between private health insurers across the industry. The nature of the private health insurance product offering is also regulated. The applicable legislation limits the types of treatment that private health insurers are able to offer as part of their product offering to members, and caps the maximum time that private health insurers are able to make members wait until they can claim benefits for hospital treatment. The regulation is supportive of facilitating members switching between private health insurance policies (or between funds). Private health insurance policies generally include waiting periods, which are pre-defined periods after the purchase of a policy during which benefits will not be paid. Under the Private Health Insurance Act, portability rules mean that members who change products (or funds) do not need to re-serve waiting periods in relation to their hospital cover, before hospital benefits can be paid, if their payments are up to date, provided they are moving to hospital cover with an equivalent or lower level of benefits and conditions. The Federal Government also assesses and approves private health insurance premium increases proposed by insurers on an annual basis. Private health insurance premium increases are generally announced in February/March and are effective from 1 April in a given year. The Federal Government supports private health insurance membership To encourage private health insurance fund membership (and to penalise non-membership), the Federal Government has implemented a number of initiatives, including: Lifetime Health Cover Loading: requires a person to take out private health insurance before 1 July following their 31st birthday in order to avoid an additional loading (premium) when they take out appropriate hospital cover later in life. Some Australians are exempt from this loading; The Medicare Levy Surcharge ( MLS ): a surcharge of 0.0% 1.5% of taxable income that may be levied on individuals and families who do not have appropriate private hospital cover and who earn above certain income thresholds; and

37 iselect Limited The Federal Government Private Health Insurance Rebate (the Rebate): a 0% 40% rebate on private healthcare premiums is available to eligible individuals and families within certain income thresholds to stimulate private health insurance participation rates What was the impact of 2012 private health insurance regulatory changes on the private health insurance market? Changes to the Medicare Levy Surcharge and Federal Government Rebate on 1 July 2012 On 1 July 2012, the Federal Government made changes to the MLS and Rebate regimes to introduce income (or means ) testing of MLS penalties and Rebate entitlements. Prior to 1 July 2012, most Australians with private health insurance received a 30% income tax rebate to help cover the cost of their premiums. The Rebate and the MLS are now income tested against three income tier thresholds. Higher income earners will generally now receive a percentage points lower private health insurance Rebate (or no Rebate), or, if they do not have the appropriate level of private hospital cover, the MLS they normally incur may increase. A summary of the new Rebate and MLS rates are included in the tables below. Figure : Impact of changes to the MLS and the private health insurance rebate Income Singles $84,000 or less Families* $168,000 or less No change Tier 1 Tier 2 Tier 3 $84,001 $97,000 $168,001 $194,000 $97,001 $130,000 $194,001 $260,000 $130,001+ $260,000+ * The family income threshold is increased by $1,500 for each Medicare levy surcharge dependent child after the first child. Private health insurance rebate Age No change Tier 1 Tier 2 Tier 3 Under 65 30% 20% 10% 0% % 25% 15% 0% % 30% 20% 0% Medicare Levy Surcharge Age No change Tier 1 Tier 2 Tier 3 All ages 0.0% 1.0% 1.25% 1.5% iselect estimates that the change to the Rebate affected approximately one million policies across the three income tiers (approximately 20% of all policies) when they were introduced on 1 July 2012, effectively increasing the cost of private health insurance cover for those affected. Some members affected by the Rebate changes had the option to prepay their policy premiums for up to 30 months to lock in the Rebate for the prepayment period (discussed in further detail below). Changes to the Rebate for members who did not prepay their premiums came into effect on 1 July The onus was on those members to notify their insurer of their estimated income tier for the purpose of administering the Rebate. Members who did not notify their insurer of their estimated income tier would typically continue to receive the 30% Rebate and may incur a private health insurance liability which would be assessed through their FY13 tax return. Policy prepayment in Q4 FY12 In May and June 2012, private health insurers actively promoted the option for members affected by the Rebate changes to prepay their premium. 32 Members that prepaid their premium ( Prepaid PHI Consumers ) would receive the 30% Rebate with respect to their prepayment, effectively delaying the impact of the regulatory change on the price of their private health cover for the period of prepayment. Prepaid PHI Consumers lose the benefit of avoiding the Rebate changes if they make changes to their cover over the period for which they have prepaid. Therefore, this group is locked in to their existing policies for the prepayment period if they want to continue to enjoy the benefits of prepayment. Bring forward of sales into FY12 iselect believes that the combination of the regulatory changes introduced, the resulting media attention on the private health insurance sector, and the prepayment of private health insurance premiums resulted in a bring forward of demand for policies to FY12 that would, in normal circumstances, have occurred in FY13. iselect believes that this led to a temporary reduction in demand during 1H FY13 (particularly given that Prepaid PHI Consumers were effectively locked in to their existing policies if they wanted to continue to enjoy the benefits of prepayment). iselect believes the reduction in demand in 1H FY13 is temporary, and will unwind over 4Q FY13F and 1H FY14F. In forming this opinion, iselect has considered, among other factors, a report prepared by Deloitte Actuaries & Consultants Limited ( Deloitte ) who iselect engaged to undertake a review of the private health insurance market in Australia, including a total market sales volume forecast for the period from 1 April 2012 to 31 December 2013, having regard to the current regulatory changes. Deloitte estimates that over 250,000 policies were prepaid in 4Q FY Most of these policies are believed to have been prepaid for months (with the bulk expiring within 12 months). A proportion of the holders of these policies are expected to seek to alter their current arrangements as the prepayment periods expire over 1H FY14F, supporting a return of demand for new policies in this period. Deloitte also recognised in its market forecast that there are potential sales from policies affected by the Rebate changes that did not prepay. If these policyholders did not advise their insurer of their Rebate tier and have been claiming the 30% Rebate for the 32 Prepayment period offered varied by insurer. 33 Deloitte Effect of Regulatory Changes on Private Health Insurance Sales Volumes report commissioned by iselect, 5 April 2013.

38 36 Industry overview duration of FY13, these policyholders may incur a private health insurance liability, which would be assessed as part of their FY13 tax return. iselect expects that a proportion of these policyholders will also seek to reconsider their private health insurance cover, generating further incremental switch sales in the private health insurance market in 1H FY14F. Longer-term implications of regulatory changes The changes to the Rebate effectively increase the cost of private health insurance cover for those affected by the changes. The associated changes to the MLS increased the tax penalty for higher income earners who do not have private hospital cover. iselect expects that the changes will increase the incentive for those affected to review their private health insurance coverage (and potentially seek an alternative policy) on a more regular basis, with comparison service providers well positioned to benefit from changes. The expected impact of these changes on iselect s financial performance is discussed further in Section 4 Financial Information. Foreshadowed regulatory changes to private health insurance (as at April 2013) Through the Federal Government s mid-year economic and fiscal outlook ( MYEFO ), it was announced that from 1 July 2013 the Federal Government Private Health Insurance Rebate would no longer be paid on any lifetime health cover loading applied to the cost of a private health insurance policy for lifetime health cover. The related Bill, Private Health Insurance Amendment (Lifetime Health Cover Loading Other Measures) Bill 2012, is however, yet to be passed by the Parliament of Australia. Also announced through the Federal Government s MYEFO was the decision to change the calculation of the Federal Government s contribution to private health insurance. From 1 April 2014, the Federal Government intends to calculate its contribution by using commercial premiums as at 1 April 2013 and then index it annually by the lesser of either the Consumer Price Index (CPI) or the actual increase in commercial premiums What are the key characteristics of iselect s other underlying product markets? In recent years, iselect has expanded into new underlying product markets outside of its established private heath insurance comparison service. The underlying product markets that iselect has chosen to enter share common characteristics that make them attractive for online product comparison, namely industries where complexity of product features or complexity of product pricing mechanisms make like-for-like product comparison challenging, financial disincentives to product switching are relatively low, or the underlying products form a key component of a typical household s budget. Australian life insurance market overview The life insurance industry in Australia represented over $11 billion in annual premiums in force, of which $3 billion represents premiums paid under new policies written during FY The value of premiums paid under new policies written in a particular year has experienced substantial growth over recent years, increasing at a CAGR of 12% between FY07 and FY12, compared to a 9% CAGR for total annual premiums paid over the same period. This reflects strong growth in the value of new policies written during the period, providing an attractive opportunity for online-driven comparison services such as iselect, as increasing volumes of business have been written through online channels. The market is comprised of 28 APRA-registered life insurance companies. However, market share is relatively concentrated, with the top five life insurance companies representing more than 55% of the market by annual premiums paid. 35 Distribution is important in the life insurance industry, with life insurance products in the Australian marketplace typically being products which need to be sold, rather than products that are actively sought out by consumers. Traditionally, life insurance products have been distributed through financial advisors. However, in recent years, other channels have evolved, including the sale of life insurance through superannuation, directly from insurers themselves (the Direct channel), through companies, unions or other associations to their own members (Group Risk), and through online-driven comparison services, such as iselect. iselect offers a range of life insurance products, including term life insurance (i.e. traditional life insurance products that provide a lump sum payment to a policyholder s family upon his or her death), income protection insurance, funeral cover, total permanent disablement ( TPD ) insurance, trauma insurance and key man insurance. Many working Australians have some basic level of death and TPD cover as a feature of their superannuation fund. Such cover can be inadequate to meet their individual needs, as the type and level of cover available can be limited. Many consumers are not aware of the level of insurance they have through their superannuation, and may not be aware of any coverage shortfalls. iselect considers that this underpins the importance of consumers receiving appropriate advice in connection with the life insurance comparison and purchase process. To the extent that working Australians have life insurance, the average level of cover is generally low, particularly with respect to TPD and income protection cover. This provides life insurers with the opportunity to increase insurance volumes, and reduce underinsurance. Although this has already occurred to some extent (as average life insurance cover levels have increased), Rice Warner Actuaries expect this trend to continue. 36 E2E comparison services (such as iselect) predominantly operate in the Advisor Non-Superannuation segment 37 of the retail life insurance market (which excludes policies sold on a wholesale basis, for example, policies sold on a group basis through a superannuation fund or an employer group). 34 Plan for Life Actuaries and Researchers, Life Insurance Statistics, June 2012, All Life in-force Annual Premium and All Life New Premiums.. 35 Plan for Life Actuaries and Researchers, Life Insurance Statistics, Total In Force Annual Premiums, June Rice Warner Actuaries, Risk Insurance Market Projections 2012, p.4, p.17, p.30 and p.31.

39 iselect Limited Rice Warner Actuaries estimates that the retail life insurance market has grown substantially in recent years, with retail market annual life insurance premium income growing from $1.2 billion in 1997 to $7.6 billion in 2012, representing a nominal CAGR of 13% (or 10% in real terms). 38 Rice Warner Actuaries expects the rate of market growth in the short-term to remain high, partially due to price increases, however, the average growth rate in the medium term is expected to be lower than over the previous 15 years as underinsurance is progressively addressed and other market opportunities become increasingly limited (reflecting greater market penetration of life insurance). 39 Accordingly, Rice Warner Actuaries projects that the retail market annual life insurance premium income will grow to $10.8 billion in 2016, reflecting a nominal CAGR of 9.1% from The growth in the Advisor Non-Superannuation Segment is projected to be in line with the broader retail life insurance market, at a nominal CAGR of 9.1% between 2012 and A summary of Rice Warner Actuaries retail life insurance market projection is included in Figure Online comparison services are a growing area of the life insurance market in Australia according to Rice Warner Actuaries, with increasing volumes of policies written via online comparison services over the last two years. 42 Furthermore, as more emphasis is placed on the need for personal insurance (due to ongoing underinsurance), Rice Warner Actuaries considers that more may look online to research and purchase life insurance policies. 43 Figure : The Australian life insurance industry is expected to experience significant growth The above projection is based on a detailed analysis of the retail life insurance market as at 30 June 2012 prepared by Rice Warner Actuaries. The analysis includes a detailed market segmentation profile based on a large number of factors, including product segments (e.g. trauma, TPD, income protection, etc.), distribution channels (e.g. through superannuation and/or by financial advisers) and the age and gender of policyholders. The information used by Rice Warner to create this profile has been collated from a number of sources, including the industry regulator (APRA), publicly available company and market information, and from survey responses submitted by industry participants to research houses. Rice Warner Actuaries has then applied projection assumptions to the estimated 2012 premium income of each market segment to calculate the expected growth in annual premium income in each of these segments from 2012 to Rice Warner Actuaries has assumed that growth in the retail life insurance market will be attributed to four key sources: underlying growth in per capita life insurance sales, increases in sums insured due to earnings increases (assumed to be 4% per annum in all years), increases or reductions in premium rates charged by insurers, and growth or contraction in the market due to demographic trends. The assumed growth rates applied by Rice Warner Actuaries vary by type of product and by year. To the extent these vary from the base assumptions adopted, the experienced growth rate in the retail life insurance market could vary considerably to the projections set out in Figure Nominal annual premium income A$ in billions Total retail Advisor non-superannuation Source: Rice Warner Actuaries, Risk Insurance Market Projections Report 2012 p.88, p.93 and p.99. Note: Total retail is defined as the sum of the advisor within superannuation, advisor non-superannuation and direct life insurance markets. 37 This segment comprises insurance sold through advisors outside of superannuation plans. 38 Rice Warner Actuaries, Risk Insurance Market Projections 2012, p Rice Warner Actuaries, Risk Insurance Market Projections 2012, p.17 and p Rice Warner Actuaries, Risk Insurance Market Projections 2012, p.88, p.93 and p Rice Warner Actuaries, Risk Insurance Market Projections 2012, p Rice Warner Actuaries, Direct Life Insurance 2012, p Rice Warner Actuaries, Direct Life Insurance 2012, p.138.

40 38 Industry overview Australian car insurance market overview Domestic motor vehicle policies accounted for approximately $7 billion of gross earned premium in FY12, having grown by approximately 4% between FY11 and FY ABS data indicates that the number of passenger vehicles in Australia has increased from 11.5 million in 2007 to 12.7 million in 2012, representing an average annual growth rate of 2.2%. Moreover, in recent years, the number of Australians automatically renewing their car insurance policies with their existing provider has fallen, with more consumers now shopping around. Comparison services allow consumers to shop around to identify a product they may wish to purchase, rather than simply renewing their existing policy. Figure : Australian vehicle insurance policy renewal actions: 2008 versus 2012 (% of policies) 100% 80% 87.8% 83.7% 60% 40% 20% 7.4% 10.7% 4.8% 5.6% 12.2% 16.3% 0% Renewed (same company without approaching others) Renewed (same company after approaching others) Changed from previous company Total shopped around 12 months to Sep months to Sep-12 Source: Roy Morgan Single Source (Australia), Article No. 1863, 8 November 2012, p.1. In addition, Roy Morgan estimates that although the telephone remains the most frequently used channel to obtain vehicle insurance (accounting for 44.4% of purchases), purchasing online more than doubled (from 6.6% of purchases in September 2009 to 13.7% in September 2012). 45 An increase in the penetration of the online distribution channel in vehicle insurance represents a potential growth avenue for iselect. Australian money market overview Via its Money business unit, iselect offers comparison services for a range of financial products. These products can broadly be classified into two main categories: Credit products credit cards, home loans, personal loans and car loans; and Deposit products savings accounts and term deposits. Australians generally have at least one financial product (e.g. a savings account, credit card, or a home loan). Reserve Bank of Australia (RBA) data indicates that there are approximately 15 million credit card accounts in Australia, having grown at a CAGR of approximately 4% between FY02 and FY12, 46 while the number of everyday accounts is approximately 35 million, also having increased by a CAGR of approximately 4% over the same period. 47 In relation to term deposits, APRA data indicates that the total outstanding balance of Australian term deposits has grown from approximately $338 billion in FY07 to approximately $795 billion in FY12, representing a CAGR of approximately 19% APRA, Quarterly General Insurance Performance Statistics, September 2012 (issued 29 November 2012), Table 10, Domestic motor vehicle gross earned premium ($m). 45 Roy Morgan Single Source (Australia), Article No. 1863, 8 November 2012, p.1.

41 iselect Limited Figure : Number of Australian credit card and debit card accounts (Millions) FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 Number of credit card accounts Number of debit card accounts Source: RBA Statistical Tables C1 (Credit and Charge Card Statistics) and Statistical Table C5 (Debit Card Statistics), number of accounts as at June Drivers of demand for these products include population growth, average disposable income levels, interest rates and consumer sentiment (which are driven by various economic factors). There are a variety of products (with differing features) available to consumers within the credit and deposit categories, and these are issued by a range of product providers. This can render the task of comparing and choosing the right products potentially complex and time-consuming. A comparison service simplifies this process and helps consumers find the product that is best suited to their needs. The Federal Government is seeking to increase consumers ability to switch banks, in order to promote competition. As of 1 July 2012, the responsibility for transferring direct-entry (direct credit and direct debit payments) arrangements between financial providers passed from the consumer to the relevant financial institution, pursuant to certain technological requirements banks are now required to put in place. These changes may lead to an increase in the frequency with which Australians switch their credit and deposit products, which would be a positive trend for comparison service providers. Australian home loans market overview Following the global financial crisis, and the consolidation of the Australian banking industry, home loan market share is mostly concentrated with the four major Australian banks. However, the intermediary market for home loan origination is well established, with the proportion of new loans initiated through mortgage brokers approaching 45%. Although mortgage brokers are likely to continue to play a prominent role in the market, the substantial variety of products and features available mean that the home loans market is particularly suited to an online comparison service, whereby consumers are able to educate themselves in their own time before making such a large financial commitment. The home loans market within Australia reflects the volume and value of home loans, and includes loans taken out by both owner occupiers and investors for construction of new dwellings, purchase of new or existing dwellings and refinancing of existing loans. 46 Defined as credit card and charge card accounts, where each account is counted only once even if accessible by multiple cards. RBA, Statistical Table C1 (Credit and Charge Card Statistics), number of accounts as at June Defined as deposit accounts / facilities that can be accessed by a debit card. RBA, Statistical Table C5 (Debit Card Statistics), number of accounts as at June APRA, Quarterly Bank Performance Statistics, Table 2 and Quarterly CUBS Performance Statistics, Table 2, as at June 2012.

42 40 Industry overview Figure : Value of Australian outstanding home loans (owner occupied and investor) 1200 (A$bn) ,107 1, FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 Source: RBA Statistics Table D5 (Bank Lending Classified by Sector). From FY02 to FY12, the value of housing related finance in Australia expanded substantially, reflecting a CAGR of 13.2%. The volume of housing loan approvals each year, for both new purchases and refinancings, represents the addressable market for brokers and online comparison services. Although the value of loans is important for an online comparison service, another key consideration is the number of loans granted each year, as the relevance of an online comparison service is greatest when a consumer is considering obtaining a new loan or refinancing an existing one. Figure : Value and volume of home loan approvals $500 $450 $400 $350 $300 $250 $200 $150 $100 $50 $0 (A$bn) 733 ( 000s) FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 Value of all other owner occupied and investment home loan approvals (Left Hand Side) Value of refinancing approvals of owner occupied and investment home loans (Left Hand Side) Number of owner occupied home loan approvals (Right Hand Side) Source: ABS Housing Finance Australia, Table 1 and Table 11. From FY02 to FY12, the number of new loans per year granted to owner occupiers 49 has fluctuated significantly. In FY12, almost 542,000 new loans were granted to owner occupiers, which, although a substantially lower volume than the FY02 to FY12 average (628,000), nonetheless represented a 6.5% increase over FY11. Aside from housing market conditions, the home loans market is affected by various drivers, including interest rates, unemployment and consumer sentiment, as well as general population growth. In an effort to promote competition, the Federal Government banned exit fees on all new home loans with effect from 1 July 2011, thereby reducing the cost to consumers when undertaking to refinance a loan, in turn increasing the ease of switching loans. 49 Data for the number of investment home loans is not available.

43 iselect Limited Broadband The Australian internet service provider industry comprises businesses which provide internet access to consumers via fixed line and wireless broadband to businesses, households and governments. Four major Internet Service Providers (ISPs) account for approximately 60% of total market share in the internet service provider industry according to IBISWorld data. 50 The market is characterised by complexity, with the use of a variety of definitions and terms, such as cap, unlimited and flag fall. The market is also characterised by short-term (e.g. 12 to 24 month) service contracts which may assist consumers to review their product options at regular intervals. The number of internet subscribers in Australia has increased significantly over the last five years, growing at a CAGR of 13.6% from FY08 to FY12. It should be noted that due to broadband having both domestic and commercial applications, it is possible for a consumer to purchase broadband in multiple capacities (e.g. as a domestic consumer and on behalf of their workplace). A key growth driver for the market in coming years will be the roll out of the National Broadband Network ( NBN ), the first national Australian high speed broadband network, which aims to provide high speed broadband to 93% of Australian homes, schools and businesses, subject to government policy. The NBN is likely to provide an opportunity for Australian online comparison services that target Australian broadband users. This is expected to provide greater retail competition and more choice for consumers. Figure : Internet subscriber growth over time (millions) FY08 FY09 FY10 FY11 FY12 Total internet subscribers Australian population Source: ABS Internet Activity Australia, June 2012 (Table 1) and ABS Australian Demographic Statistics, (Table 1). Population Change, Summary Australia (2000) (Data 1). 50 IBISWorld, J7124, Internet Service Providers in Australia, October 2012, p.27.

44 42 Industry overview Australian energy market overview The retail energy market in Australia comprises energy retailers who buy electricity and gas in wholesale markets for resale to consumers. The Australian electricity market is mature and the volume of consumers is likely to grow at a modest rate. This is likely to be driven by population growth, and growth in the number of distinct households. Similar to broadband, the energy market is characterised by relatively short-term (e.g. two to three year) service contracts, which allow consumers to review their product options at regular intervals. Price increases have been experienced in both the retail electricity and gas markets over the last five years in Australian capital cities. Residential electricity prices rose nationally by 91% in the five years to , and residential gas prices rose by 62% over the same period. Rising network costs were the main driver of these outcomes, however the introduction of carbon pricing led to one-off price rises in retail electricity bills of 5% 13% in Increasing energy prices and the short-term nature of the service contract terms make the Australian energy market attractive for online comparison. AEMO data indicates that in FY12, there was an average of approximately 142,000 small consumer electricity accounts transferred between retailers per month, and an average of approximately 56,000 gas accounts transferred during the same period. 52 Figure : FY12 monthly completed retail consumer account transfers 160 (000s) JUL 11 AUG 11 SEP 11 OCT 11 NOV 11 DEC 11 JAN 12 FEB 12 MAR 12 APR 12 MAY 12 JUN 12 Electricity small consumer transfers Gas consumer transfers Source: Australian Energy Market Operator (AEMO) NEM Monthly Retail Transfer Statistics and AEMO Gas Retail Markets Monthly Statistics. Note: For the electricity market, consumers are classified as small or large based on consumption. Domestic premises and most small businesses are classified as small. Gas consumer transfers include all consumers; Australian Energy Market Operator, National Electricity Market Monthly Retail Transfer Statistics, July 2011 June 2012 (includes NSW, Qld, SA and Vic) and Gas Retail Markets Monthly Statistics, July 2011 June 2012 (includes Vic, Qld, SA, NSW and ACT). The opportunity for online-driven comparison services within this market is also expected to benefit from the recent shift away from door to door marketing by energy retailers. Previously, this marketing channel comprised a significant distribution channel for Product Providers within the energy market (with approximately 55% of industry sales derived from this channel in 2011). Recently, two major energy retailers have ceased using door to door sales as a customer acquisition strategy. 51 Australian Energy Regulator, State of the Energy Market 2012, p For the electricity market consumers are classified as small or large based on consumption. Domestic premises and most small businesses are classified as small. Gas consumer transfers include all consumers.

45 43 Company overview 3

46 44 3. Company overview 3.1 What is iselect? Overview iselect is a leading Australian online-driven comparison service 53 that compares insurance, household utilities and personal finance products. iselect provides consumers with the convenience of online comparison and the benefit of telephone-based advice and sales. iselect has two key brands, iselect ( and InfoChoice ( and a highly trained and experienced team of more than 220 Australian-based telephone advisors. Furthermore, iselect has developed specialised technology that, together with its Consumer Advice Team, helps to deliver a tailored consumer experience. iselect offers consumers a free analysis of their product needs followed by a comprehensive review of products from iselect s Product Provider panel. This enables consumers to avoid spending their time visiting multiple suppliers and comparing non-standardised products and also enhances their ability to find a product better suited to their needs, at a given price point. iselect s consumers have the flexibility of completing the purchase of their selected product directly through an iselect website, or, having initially consulted an iselect website, by subsequently interacting with iselect s Consumer Advice Team by phone, where they can obtain additional information and complete their purchase. Through its Follow-up Channel, iselect also engages with potential purchasers that have expressed an interest in, but not yet purchased, a product available through iselect. By providing consumers with the two comparison and advice methods outlined above, consumers can purchase products without needing to contact the relevant Product Provider themselves (an E2E offering set out in Section 2.3). While consumers benefit from making better informed purchase decisions in a timely way, Product Providers also benefit, as iselect offers them a cost-effective means of acquiring customers compared to traditional means. iselect offers Product Providers access to a large and growing number of informed consumers that are searching for the most appropriate product for their needs. iselect provides a cost-effective, and success-only source of new customers, who have the benefit of iselect s online comparison services to help them make a more confident purchasing decision Operational achievements Over its 13-year history, iselect has recorded several significant operational achievements: iselect s proven comparison model in private health insurance has been applied and expanded into six other business units: Life Insurance, Car Insurance, Broadband, Home Loans, Money and Energy. The Group generated 2.9 million sales leads and completed 169,000 individual product sales in FY12 (excluding sales leads and associated sales from the Money business unit). 54 Lead growth, together with the 58% growth between FY10 and FY12 in iselect s consolidated sales lead conversion ratio (excluding Money, which was acquired in FY12), has driven strong revenue and EBITDA growth. iselect generated $111.9 million of consolidated revenue in FY12, delivering $24.1 million of EBITDA, representing compound annual growth rates of 60% and of 61% respectively between FY10 and FY12. iselect now has more than 120 individual Product Providers across its seven business units and two brands; iselect and InfoChoice. The Group now employs more than 420 people. iselect s headquarters and its Consumer Advice Team are based 30 minutes south of Melbourne s CBD in Cheltenham, Victoria. 3.2 How has iselect invested in and developed its business over time? Figure iselect company history 2000 iselect launched by Damien Waller and another co-founder 2004 iselect records its first profit 2005 Television and radio advertising commences 2006 ninemsn acquires a 35% shareholding in iselect Popular Puffin Muffins television and radio advertising campaign launched 2007 iselect launches Life business unit 2009 iselect launches Car business unit 2011 Spectrum acquires substantial shareholding in iselect Health business unit records over 66,000 sales in FY11 iselect launches its Home Loans and Broadband business units iselect completes the acquisition of InfoChoice iselect launches Mr iselect marketing campaign iselect moves into a new campus in Cheltenham, Victoria 2012 iselect s Health business unit records over 100,000 sales in FY12 iselect launches its Energy business unit iselect was established in 2000 after its co-founder Damien Waller identified an opportunity to offer consumers a way to compare a number of complex, non-standardised products in one simple online location. Over the last 13 years, as an increasing number of consumers have demonstrated a willingness to research and purchase products online, iselect has further developed its business to take advantage of this fundamental shift in consumer behaviour. 53 Based on visits to iselect s websites (refer to Figure for details) and brand awareness. 54 Key operating metrics for the Money business unit are generally reported separately to iselect s other business units, as different reporting definitions are used. Further information on the Company s key operating metrics is included in Section 4.6.

47 iselect Limited Since inception, iselect has invested in excess of $110 million in strategic marketing and brand development, and as a result is now the most recognised online comparison brand in the Australian market. This strong brand awareness has enabled the business to attract both prospective and repeat consumers, as well as a panel of more than 120 Product Providers. Over time, iselect has invested in an innovative and scalable platform, incorporating unique proprietary comparison and recommendation algorithms, which enable iselect to effectively connect consumers with products appropriate to their needs. This platform has been central to the success of the business, and has enabled iselect to complete sales on behalf of Product Providers, and to provide consumers a full service E2E comparison and purchase solution. The platform has been developed to optimise the conversion of sales leads into purchases, through its use of proprietary comparison algorithms and consumer data analysis, known as the iconnect platform and Big Data, as set out in Section iselect recognised that its consumers wanted quality purchase advice in addition to the ability to compare products online. As a result, iselect invested in its Consumer Advice Team, an initiative that has enhanced iselect s attractiveness to both consumers and Product Providers, and improved the Company s sales lead conversion capabilities. From its foundations in private health insurance comparison, iselect diversified into life insurance in 2007, followed by car insurance in Since that time iselect has successfully expanded into household utilities and financial products. Management believes opportunities exist for the Company to apply its proven business model in new underlying product markets. Today, iselect is a leading Australian online-driven comparison service and compares insurance, household utilities and financial products. iselect employs over 420 staff, sells a selection of products from its panel of Product Providers, within its various business units and attracted approximately 7.8 million total visits to its websites for the year ended 31 March What are the strengths of iselect s business model? iselect considers that it has developed a successful business model that provides strong foundations for the Company as it looks to grow its existing business and enter new underlying product markets. iselect s business model is comprised of four key pillars that are linked: brand, lead generation, conversion and Product Providers. The model operates as follows: 1) Investment in brand builds brand recognition, which supports iselect s lead generation capabilities i.e. the ability for iselect to attract consumers to its website and callers to its Consumer Advice Team; 2) leads are required for iselect to provide product advice and comparison services to consumers and convert these sales leads into sales; 3) As iselect s conversion ratios improve, this enables the Company to deliver greater volumes of sales to its Product Providers. This assists in building relationships with a diverse range of providers across a range of product markets and may also drive increased profitability. 4) As iselect develops relationships with a greater number of Product Providers, consumers can compare a greater number of products through iselect s comparison platform. This can improve the consumer experience for iselect s consumers, helping to build brand equity, completing the cycle. Figure 3.3.1: Overview of iselect s four pillars of success Brand Product Providers Lead generation Conversion (a) A well established brand iselect has achieved strong brand awareness in online product comparison. Since its inception in 2000, the Company has invested in excess of $110 million in strategic marketing and brand development, resulting in iselect being the most recognised online comparison service in Australia. The Nielsen Australia March 2013 Research showed that iselect has the highest Unprompted Awareness as well as the highest Aided Awareness among surveyed Australians aged 18+, with 17% of respondents naming iselect spontaneously when asked to name an online comparison service, and 72% of respondents acknowledging awareness of iselect when provided with a list of 17 Australian comparison service providers.

48 46 Company overview Figure 3.3.2: Unprompted Awareness Figure 3.3.3: Aided Awareness (% of survey respondents) (% of survey respondents) iselect.com.au 17% iselect.com.au 72% Choosi.com.au 9% Choosi.com.au 63% Choice.com.au 8% Energywatch.com.au 38% ebay.com.au 4% GoSwitch.com.au 28% Getprice.com.au 4% YouCompare.com.au 23% Google.com.au 3% InfoChoice.com.au 19% MyShopping.com.au 3% Canstar.com.au 19% Webjet.com.au 2% Comparethemarket.com.au 16% Shopbot.com.au 1% Mozo.com.au 11% Other 29% Other 42% Unsure/None 46% None of the above 12% Source: Nielsen Australia March 2013 Research. iselect s marketing strategy utilises both online and offline (television, radio, outdoor, and print) marketing channels to drive brand awareness which is designed to increase lead volumes. Online marketing is focused on search 0engine 10 optimisation 20 (SEO) 30 and 40 search 50 engine marketing (SEM) (which are forms of internet marketing that involve the promotion of a website by increasing the visibility, prominence or popularity of that website in search engine results, through ongoing optimisation of the website s content, or payment to search engine providers, or a combination of both). The Company s brand is continually enhanced by sustained high profile marketing activity, and the Company s ongoing drive to provide an outstanding consumer experience. Although past events do not guarantee future results, historically, first movers and market leaders in the online industry that successfully delivered a consumer-focused business model in the Australian online space have been able to maintain and build their pre-eminent market positions. Prominent examples include Seek Limited (founded in 1997), REA Group (1995), and Carsales.com.au (1996). These market leaders continue to hold leading positions in their respective markets Figure 3.3.4: Online first movers and market leaders have enjoyed long term success in the Australian market (% share of website visits) Employment 71% Seek.com.au 29% Other Property 65% Realestate.com.au 35% Other Car 52% Carsales.com.au 48% Other Source: Hitwise. This has been measured as a percentage of total visits in each of the Employment, Property and Car categories as defined below, for the 12 months ending 31 December For the Employment category, Others include and For the Car category, Others include and For the Property category, Others include and

49 iselect Limited iselect s current marketing strategy is focused on taking advantage of the Company s strong brand positioning in private health insurance to assist in growing the Company s business in other product markets. iselect s marketing and brand investment seeks to maximise the volume of consumers who interact with iselect, via either iselect s websites, or the Consumer Advice Team, or both. Further details regarding the services iselect provides to consumers are set out in Section 3.5. By combining a strong brand with optimal comparison services, iselect aims to create the maximum number of sales leads possible, and to convert those sales leads into sales by delivering a positive consumer experience. (b) Strong lead generation capabilities iselect s strong lead generation capabilities are evidenced by the approximately 7.8 million visits to its websites over the year to 31 March According to data sourced from Hitwise, iselect is one of Australia s most visited online comparison services, based on data over the same period. iselect s strong brand awareness among consumers assists in generating significant traffic to its website, as consumers wishing to undertake product comparison are more likely to visit a comparison service they are familiar with (which is likely to be driven by mass-market advertising, whether offline or online advertising). This is demonstrated in the traffic to iselect s private health insurance websites for the 12 months to 31 December 2012, of which only 26% was derived from paid search engine advertisements, with the remainder derived from consumers seeking out iselect s website via their own web searching or through iselect s use of search engine optimisation. iselect s ability to attract high enquiry (or sales lead) volumes contributes to the attractiveness of the iselect platform to the Company s Product Providers, as Product Providers recognise the opportunity to access a large volume of potential product purchasers provided to them. (c) Strong conversion capability iselect s ability to generate lead volumes is complemented by its ability to convert a growing proportion of sales leads to successful sales. iselect converts consumer enquiries into sales directly through its website and through its Consumer Advice Team. The Consumer Advice Team is comprised of two sub-channels: the Inbound channel that receives direct inbound telephone enquiries from consumers and the Follow-up Channel, which is comprised of a telephone sales team that contacts consumers that have previously left their details to be contacted about the products offered on iselect s service. The Consumer Advice Team is comprised of experienced product advisors that provide tailored product purchase advice relating to the products on iselect s service. These advisors receive ongoing specialist product training and development to ensure they are up to date with the product features and benefits of products on iselect s service. Conversion is assisted by iselect s set of business processes and predictive algorithms that enable iselect to target and contact the best quality sales leads, and connect them with the best available iselect consultant based on that consumer s requirements who is therefore best able to convert them to a completed sale through the provision of an excellent customer experience. Further details in relation to these processes are set out in Section 3.5. iselect s websites and Consumer Advice Team enable it to use each sales channel independently and together to enhance the user experience and maximise iselect s sales conversion ratio. Within iselect s Health and General business units, the overall conversion ratio has increased from 3.8% in FY10 to 6.7% in FY12. (d) Attractive customer acquisition source for Product Providers iselect seeks to deliver value to its Product Providers by providing them with a large and growing volume of consumers whose needs are matched to the products of the Product Provider. This customer acquisition channel is cost-effective (due to the predominantly success-only nature of iselect s fee arrangements with Product Providers, as detailed further in Sections 2.3 and 3.6.). iselect also delivers value to Product Providers by providing brand exposure to consumers who search for products with the intention of making a future purchase. Additionally, iselect s position in the market provides it with unique consumer insights which are drawn into meaningful product feedback via the use of intelligent data analytics. This assists Product Providers to develop and refine products that cater to consumer preferences. iselect s ability to integrate its technology platform with those of selected Product Providers streamlines the process for customer details to be delivered to Product Providers. For the Product Providers, the Company s platform represents an attractive and cost-effective, largely fixed price, and predominantly success-only customer acquisition source, as explained in Sections 2.3 and 3.6.

50 48 Company overview 3.4 What underlying product markets does iselect provide comparison services for? Figure 3.4.1: iselect s underlying product markets Business unit iselect brands Business unit launched Business unit description FY12 Revenue (A$m) Products Selected Product Provider brands Health FY00 Launched in 2000 and representing approximately 81% of FY12 revenue, Health is the largest and most successful business unit within iselect Allows consumers to search for, compare and purchase private health insurance products 90.9 Hospital Extras Combined Overseas Visitor Cover AHM Australian Unity Frank HCF Health.com.au Health Partners LaTrobe NIB Teachers Health Fund Transport Health Teachers Union Health Health has become a significant consumer channel in Australia for the purchase of private health insurance Launched in 2007, Life is the second largest business, accounting for approximately 7% of FY12 revenue 7.8 Term Life Income Protection Funeral AIA AMP Macquarie Life FY07 The Product Provider brands on iselect s approved product list are among the biggest and most well-recognised in the industry Total Permanent Disablement (TPD) Trauma Key Man TAL Zurich Car FY09 Launched in 2009, General accounted for approximately 6% of FY12 revenue iselect was the first company to establish an E2E Australian car insurance comparison service 7.1 Comprehensive Car AI Insurance Budget Direct Carsure Cashback 1st For Women Heels n Wheels Kudos Retirease Silver Fox Virgin Money ozicare ibuyeco Represents several car insurance brands Broadband FY11 Launched in 2011, Broadband accounted for approximately 1% of FY12 revenue Offers intermediation and online product comparison for broadband and broadband bundles with home phones 0.6 Broadband, ADSL Cable, Mobile Broadband Broadband & Home Phone Bundles ClubTelco Eftel Engin iprimus Optus Southern Cross Telco Vodafone Home Loans FY11 Launched in 2011, Home Loans accounted for approximately 1% of FY12 revenue Established using the Australian Finance Group Limited ( AFG ) product platform, an independent Australian mortgage broking group AFG provides iselect with a range of services, including product comparison from one of Australia s largest range of mortgage products and electronic loan lodgement capabilities 1.4 Home Loans Adelaide Bank AFG Home Loans AMP ANZ Bank of Melbourne Bankwest Citibank Circle Commonwealth Bank Heritage Homeside ING Direct Keystart LaTrobe Financial Liberty Financial Macquarie ME Bank MKM Capital NAB Pepper The Rock St. George Westpac Suncorp Bank Wide Bay

51 iselect Limited Business unit iselect brands Business unit launched Business unit description FY12 Revenue (A$m) Products Selected Product Provider brands Money FY12 Launched through the acquisition of InfoChoice in November 2011, Money accounted for approximately 3% of FY12 revenue Money products are sold through the InfoChoice website, which provides detailed product comparison data for home loans, savings and term deposits, personal loans, credit cards, transaction accounts, business banking products, investment products and insurance from over 120 Australian financial institutions 3.4 Credit Cards (1) Personal Loans (1) Car Loans (1) Investment Products Savings Accounts and Term Deposits Home Loans (1) American Express AMP ANZ Aussie Homeloans bankmecu Bank of Melbourne Bank of Queensland Bankwest CUA HomeStar HSBC IMB Banking ING Direct Macquarie Bank ME Bank NAB Newcastle Permanent RaboDirect RAMS St. George Suncorp Bank UBank Westpac InfoChoice also provides software development services for banking calculators, key fact sheet generators and dynamic rate tables for bank websites. It also provides subscription access to its interest rate and product data for banking products Citibank iselect launched Energy in 2012, which accounted for approximately 1% of FY12 revenue Electricity Gas Electricity and Gas ActewAGL AGL Alinta Energy EnergyAustralia Momentum Energy Origin Power Direct Red Energy FY12 Energy currently allows consumers to search for and compare energy products, including gas only, electricity only and electricity and gas bundles Australian Power & Gas (1) Selected brands only. 55 Energy was launched in March 2012.

52 50 Company overview Figure 3.5.1: Overview of a completed iselect E2E sale Website Customer Consumer Advice Centre Follow-up Channel Needs analysis Customer needs and priorities are understood (online and offline) Product matching Products database is searched to find a range of suitable products Recommendation Compare products in context of needs analysis to arrive at recommendation New product Stay on existing product Completed sale iconnect Intelligent customer and consultant matching 3.5 How does iselect service consumers? iselect has invested in and refined its platform over the last 13 years with a focus on optimising sales leads and the lead conversion ratio. The platform is also protected by two patents owned by iselect. The iselect platform comprises the combination of iselect s websites, its comparison and matching algorithms, and its Consumer Advice Team. Each of these is explained further in this Section 3.5. The platform has been deployed into new underlying product markets over the last four years iselect s websites The iselect group of websites is an enterprise web platform (being a set of computing systems) that is able to be adapted to suit additional underlying product markets. Additional business units can be added, or additional Product Providers can be added to existing business units. Consumers using the website are able to complete a purchase on the website without seeking assistance from the Consumer Advice Team. As a sales channel in its own right, the website accounted for 24% of all completed transactions in FY12. The iselect website is designed to work on the growing volume of traffic from tablet devices. During the past 12 months iselect has experienced a doubling of traffic to the health insurance section of its website that originates from mobile devices (excluding tablets). iselect operates a mobile optimised site for users on smart phones. As part of iselect s growth strategy, further adaptation of existing technologies to embrace mobile usage will complement the user s online experience. In addition, the website is also the starting point for the majority of sales through the Consumer Advice Team (including the Follow up Channel). Demonstrating the importance and effectiveness of iselect s websites, of all private health insurance consumers who purchase through iselect, 85% utilised the iselect website in the past 12 months The iselect Consumer Advice Team iselect s online sales channel is complemented by its Melbournebased Consumer Advice Team of more than 220 telephone advisors, who provide a complete consumer interaction function for managing organisation-wide sales and consumer support. The Consumer Advice Team is comprised of an Inbound Team, handling inbound consumer telephone enquiries and sales, and a Follow-up Team, that contacts consumers who have provided their details through the iselect websites. The individuals forming part of the Consumer Advice Team use both in-house and selected third party consumer relationship management computing applications (where available), while interacting with consumers regarding product comparison and, potentially, purchase. These consumer relationship management applications together with the telephony systems, provide real time consumer call reporting. The Consumer Advice Team receives ongoing sales and specialist product training to enable iselect to offer consumers a richer, more tailored experience iconnect When a consumer is connected with iselect s Consumer Advice Team, they are individually matched with a specialist advisor depending on the data provided by the consumer through the iselect website, including their purchasing motivation and product feature requirements. In order to provide consumers with a better user experience and maximise sales conversion, iselect has developed processes to optimise information capture and routing to ensure that each consumer is matched with the optimal sales advisor based on an advisor s demonstrated expertise in providing the solution likely to best suit the consumer s requirements. This blend of technology with people is known as the iconnect platform and is the result of significant investment in the underlying technology platform and proprietary data-mining

53 iselect Limited capabilities (whereby iselect is able to collect and analyse data regarding consumer behaviour and preferences, across the iselect websites and interaction with the Consumer Advice Team). The iconnect platform aims to provide consumers with a rich user experience, connecting them with an advisor who is most likely to understand their needs, while also, from the Company s perspective, enhancing sales conversion and boosting advisor productivity. iselect collects the vast volumes of data generated when each consumer accesses its platform, and aggregates and analyses that data in order to gain insights that allow it to build improved consumer experiences for future consumers ( Big Data ) Patented comparison and web capture algorithms Over its 13 year history, iselect has invested in innovation and sought to protect its intellectual property through Australian and New Zealand patent applications. Specifically, innovation has focused on two categories of proprietary algorithms that provide the Company a significant competitive advantage: Decision Support System (DSS); and iconnect. DSS is the algorithm that powers the recommendation engine that assesses consumer needs and compares them to a database of analysed product features to determine a set of products that form each consumer s recommendation which are displayed when a consumer visits and uses and DSS is protected by two patents. iconnect is a set of business processes and predictive algorithms that enable iselect to capture, target and contact the best quality sales leads, and connect them with the best available iselect consultant who is able to convert them into a completed sale. Two patent applications for iconnect were lodged in End-to-end integration with Product Providers As explained in Section 2.3, iselect operates an E2E model across the majority of its businesses. iselect s sales systems connect directly to selected Product Providers back-office systems via secure gateways, enabling real-time sales completion and eliminating the need for the consumer to provide details and payment to iselect as well as to the Product Provider Compliance iselect has systems and processes in place to record and listen to calls into the Consumer Advice Team. iselect s monitoring and supervisory team listen to a sample of each consultant s calls each month to monitor for compliance with applicable regulations. The cornerstone of iselect s service is its ability to match the right consumer with the right product, and as such its recommendation engine is not influenced by Product Provider fee arrangements. iselect seeks to quarantine information about the fees it receives from Product Providers from its Consumer Advice Team. iselect s commercial arrangements with Product Providers do not directly influence the remuneration provided to the Consumer Advice Team for the products that they sell. However, in the Company s financial services and credit regulated business units, the Consumer Advice Team has access to general or specific fee information (as appropriate to the advice provided) so that iselect can comply with its disclosure obligations for those products. All of these measures are designed to help safeguard the impartiality of the recommendation that iselect provides to consumers. 3.6 How does iselect generate revenue? iselect s E2E business units derive the majority of their revenue from fees paid by its Product Providers for each successful sale of their products made through iselect. This commission-based revenue can be broadly categorised into one of two categories, namely upfront fees and trail commissions. Revenue arrangements may comprise of either a single or hybrid fee structure. The majority of remaining sales revenue earned is generated from Click-through revenue, advertising and subscription fees, primarily through the Money business unit. Figure 3.6.1: Composition of revenue arrangements for iselect s E2E business units for FY13F Business unit Trail commission only Number of Product Providers Hybrid Upfront fee only Health Insurance Car Insurance Life Insurance Home Loans Energy Note: 1 Home loans are sold through Australian Financial Group Limited ( AFG ), an independent Australian mortgage broking group that represents 27 Product Providers (including AFG) Upfront fees Upfront fees are upfront introduction fees earned upon a consumer purchasing a Product Provider s product referred by iselect such as in Health, Life or Car Insurance or a consumer purchasing a Home Loan, Money, Broadband or Energy product through iselect. The upfront fee is defined as a percentage of referred product price/premium or fixed fee per sale. Upfront fees are discussed further in Section Trail commissions Trail commissions are ongoing fees received from certain suppliers within iselect s Health, Life, Car and Home Loans business units that relate to consumers referred to these Product Providers by iselect ( Referred Consumers ). Of iselect s over 120 Product Providers, iselect is entitled to receive trail commission payments for selling the products of 38 of these Product Providers. Trail commissions are payable by Product Providers over an agreed term, provided that the Referred Consumer either continues to renew their insurance policy (in Health, Life and Car) or does not terminate their home loan (in Home Loans) with the relevant Product Provider. The terms over which trail commissions are payable vary among Product Providers and range from 12 months to product life. iselect is entitled to receive trail commissions without having to perform further services.

54 52 Company overview Upon initial recognition, expected future trail commission revenue and expected future trail commission receivable are recognised at fair value, being the present value of expected future trail revenue receivables, discounted to their present value using discounted cash flow valuation techniques. Due to the difference in the underlying product characteristics and Product Provider circumstances, the discount rates applied in the most recent valuation of the trail commission receivable range from 8.0% to 12.0%. This method of revenue recognition requires the Company to make certain estimates and assumptions based on industry data and historical experience. iselect engages actuaries to assist in reviewing the accuracy and assumptions utilised in this approach. Subsequent to initial recognition, expected future trail commission revenue and receivables are recognised at amortised cost. Amortised cost requires the carrying amount to be adjusted to reflect actual and revised estimated cash flows by recomputing the present value of estimated future cash flows at each reporting date based on the original interest and discount rates used at the time of initial recognition. Deloitte has performed an expert valuation of the Company s trail commission receivable at 31 December Other revenue iselect also earns revenue for contracted services, including Click through and display advertising (based on the volume of customer referrals provided and number of page impressions respectively), and subscription revenue (recognised systematically over the term of the respective agreements). 3.7 What arrangements does iselect have with its Product Providers? Agreements with Product Providers Prior to a Product Provider joining the iselect platform, each Product Provider is reviewed by iselect for its suitability to the iselect platform based on a wide range of criteria including, but not limited to, potential consumer interest in the Product Provider s product. Once a Product Provider is approved for the iselect platform, iselect and the Product Provider generally enter into contractual arrangements, which are usually non-exclusive. Details of fee arrangements are set out in Section 3.6. While these contractual arrangements are generally capable of being terminated by either party on relatively short notice without cause, iselect has strong business relationships with its Product Providers, some of whom receive a large proportion of their sales from consumers purchasing products through iselect Arrangements with health.com.au iselect has entered into a distribution agreement and provided a secured facility to NIA Limited ( NIA ) to defer NIA s obligations to pay fees owed to iselect for a period of time. NIA launched health.com.au in April This was the first major new private health insurance fund in Australia for over 20 years. health.com.au is well suited to iselect because it has an onlinefocused marketing strategy and a suite of products that have been designed to appeal to underserviced consumer segments within online comparison. NIA has appointed iselect as a distributor of health.com.au s private health insurance products. iselect is entitled to receive a fee for each completed sale of a private health insurance product, as with its existing fund relationships. iselect agreed to provide a secured facility to NIA to enable NIA to defer the time of payment of upfront fees that it owes to iselect for referred sales during the period of the facility, expiring in 24 months on 31 July 2014 (with the ability to extend for a further 12 months). This arrangement was initially designed to provide a deferred payment facility akin to existing trail commission arrangements, but ultimately was structured as a secured debt facility. As at 31 December 2012, $9.2 million was outstanding under this facility, with the total facility capped at $75 million. iselect is able to and is actively considering syndication of this facility. Further details of the distribution arrangement and a summary of the key terms of the facility are available in Section What is iselect s approach to its people and culture? As at 1 April 2013, iselect employed over 420 staff. iselect aims to achieve its business results with its human resources strategy that focuses on fostering engaged and contributing employees who are influential and strive to provide value and meaning to customers, Product Providers, shareholders and iselect s community. iselect s Consumer Advice Team is remunerated via a short and medium-term remuneration structure, comprising base salary and a tiered commission structure, aimed at encouraging ongoing contribution and performance within the Company s largest consumer-facing function. During its move to a new campus in Cheltenham, Victoria in 2011, iselect took the opportunity to develop a work environment that was tailored to the needs of its growing workforce. Collaborative meeting spaces, a spin room, sleep pod and massage chairs feature within the office. Additional employee benefits including access to on-site health providers, recharge days and an in-house café are provided to encourage engaged and contributing employees. 3.9 What licences does iselect require? In order to provide certain products offered through its websites, iselect is required to hold certain licences. Members of iselect are required to hold a non-deposit taking Australian Financial Services Licence ( AFSL ) in respect of certain products. The AFSLs authorise iselect to carry on a financial services business to provide financial product advice in relation to certain classes of financial products and to deal in certain classes of financial products. The AFSLs granted cover the product markets of life, car and money. Specific details of the AFSLs held by iselect are as follows: iselect General (AFSL ); iselect Life (AFSL ); and InfoChoice (AFSL ). InfoChoice Pty Ltd also has an Australian Credit Licence ( ACL ) pursuant to the National Consumer Credit Protection Act The ACL relates to the money product market, in particular credit cards and personal loans. The ACL allows iselect to engage in

55 iselect Limited certain credit activities other than as a credit provider, including providing a credit service under a credit contract or lessor under a consumer lease, performing obligations and exercising rights of a credit provider, mortgagee or lessor in relation to a credit contract, mortgage or consumer lease, in each case, under which InfoChoice is not a credit provider; and performing obligations and exercising rights of a beneficiary in relation to a guarantee which guarantees obligations under a credit contract under which InfoChoice is not a credit provider What are iselect s key strengths? iselect is well positioned to benefit from being a leading Australian online-driven comparison service iselect was founded in 2000, and has since grown to become a leading Australian online-driven comparison service. 56 iselect s strong lead generation capabilities are evidenced by the approximately 7.8 million total visits to its websites for the year ended 31 March iselect s position as a leading Australian online-driven comparison service and its strong brand provide the Company with access to a large volume of consumers, and the ability to offer them advice and access to products provided by some of Australia s leading brands. The Company will seek to build market share, as iselect attracts and assists more consumers (which is underpinned by ongoing brand investment, which generates visits to iselect s websites), and generates greater sales for Product Providers. iselect believes that its business model provides a strong platform for growth in its existing businesses as well as in new underlying product markets that iselect may choose to enter in the future iselect has an established and highly recognisable brand Since its launch in 2000, iselect has invested in excess of $110 million in strategic marketing and brand development, which has been a key driver behind iselect s high levels of consumer brand awareness across multiple underlying product markets. According to the Nielsen Australia March 2013 Research, iselect has the highest top-of-mind (unaided) awareness (17% of respondents named iselect when asked to name any online comparison service) as well as the highest Aided Awareness (72% of respondents acknowledged awareness of iselect when provided with a list of 17 Australian online comparison service providers) among surveyed Australians aged iselect is well positioned to benefit from the consumer trend towards online transacting iselect stands to benefit from the increasing adoption of the internet and growing use of online resources (including online comparison services) as a tool for consumers to extend their buying power and to more efficiently find more appropriate products at lower prices. As outlined in Section 2.7, the online shopping expenditure of Australians is growing strongly versus that of traditional retail. Australian online shopping expenditure demonstrated strong growth in 2011, reaching $13.9 billion. This represented a yearon-year growth rate of approximately 16%, which is considerably higher than the comparable year-on-year growth in traditional retail sales of approximately 2%. Furthermore, Nielsen research indicates that the use of online comparison services among Online Australians is likely to grow strongly over the next 12 months. 46% of Online Australians surveyed by Nielsen are more likely to use an online comparison service now than in the last 12 months. 87% of Online Australians are at least somewhat likely to use an online comparison service to research and/or compare a product in the next 12 months, and 67% of Online Australians are at least somewhat likely to use an online comparison service to purchase a product in the next 12 months. For many years iselect has been developing its brand identity, its websites and its comparison and sales platform to take advantage of the increased use by consumers of online comparison tools and online purchasing. Therefore, the Company is very well placed to deliver on its vision to become the home of comparison for insurance, household utilities and financial products iselect has a scalable business model underpinned by a unique and sophisticated technology platform iselect has undertaken significant investment in its technology platform over several years, including development of its websites, development of proprietary back-office software applications, development of DSS and iconnect, and integration of the iselect sales systems with the systems of several major Product Providers. iselect s established platform is readily scalable across new underlying product markets. iselect is capable of handling increased transactional and enquiry volume via its websites and Consumer Advice Team. iselect s ability to connect the right consumer with the right product is supported by its continuous product innovation and the organisation s ability to understand the needs of consumers and Product Providers through the use of intelligent data analytics. iselect has invested in lead management recommendation platforms and data-mining capabilities which, together, have resulted in improvements in lead conversion ratios. As set out in Section 3.5.4, iselect has applied for patents to help protect the competitive advantage provided by its proprietary algorithms (for iconnect) A strong track record of strategic execution and growth Since the establishment of the Health business unit in 2000, iselect has grown and in FY12 iselect has seven business units, approximately 2.9 million sales leads, approximately 169,000 sales transactions (excluding sales leads and associated sales from the Money business unit) 57 with a conversion ratio growing 58% (from 3.6% in FY10 to 5.7% in FY12). This delivered $111.9 million of revenue and $24.1 million of EBITDA in FY12 representing a CAGR of 60% and 61% respectively from FY10. In pursuit of its vision to become the home of comparison, iselect successfully acquired InfoChoice in FY12, establishing a presence in the personal financial product comparison sector. 56 Based on visits to iselect s websites (refer to Figure for details) and brand awareness. 57 Key operating metrics for the Money business unit are generally reported separately to iselect s other business units, as different reporting definitions are used. Further information on the Company s key operating metrics is included in Section 4.6.

56 54 Company overview iselect is exposed to the attractive underlying dynamics of the Australian private health insurance market With the cost of health services increasing, the price of private health insurance policies and premiums increasing, and more Australians taking out private health insurance, there is increasing utility to consumers of a service that allows them to compare the price and features of the relevant products and to obtain advice regarding the product best suited to their needs. Health is iselect s largest and most established business, contributing 81% of Group revenue in FY12. From an underlying product market that had little to no intermediation in 2000, iselect has established itself as a significant player in the underlying product market, selling approximately 15% 20% of all new ( new to system policies plus policyholders transferring between funds) policy sales in FY12. In addition, the fundamentals of the private health insurance industry are positive for iselect: The volume of private health insurance policies has increased in each of the past three financial years. iselect expects this trend to continue; The value of private health insurance policies is increasing; 58 and The sector is supported by the Federal Government as a key source of national healthcare funding, with the regulatory framework providing stability to the underlying product market A high quality management team and Board of Directors The Board of Directors and management team offer significant breadth and depth of industry experience that positions them well to manage and harness growth. The team has delivered strong revenue growth and sustained product innovation and development for over a decade. Under the leadership of iselect s Board and management team, iselect has grown from a company with a single website to a dual brand and multi-product comparison platform What is iselect s growth strategy? iselect will continue to build out its offering to realise its vision to become the home of comparison for consumers purchasing insurance, household utilities and financial products. The key elements of this strategy are to extend the reach of iselect s offer to more consumers, offer them more products from additional underlying markets and increase its Product Provider relationships. iselect will pursue this objective through a number of strategic initiatives, designed to harness organic growth in existing underlying product markets, increase its share of the online comparison sector and identify appropriate strategic acquisitions as they present themselves in the future Continue investment in the iselect brand Through an increase in marketing investment, iselect aims to achieve increased brand awareness in the Australian online product comparison sector. iselect s marketing strategy will continue to build upon its strong marketing creative content and established brand to drive greater consumer awareness and lead volumes. iselect will also use its expertise in data analytics to improve its media buying and customer segment targeting capabilities. Consumers attracted to iselect because of its strong brand, particularly in private health insurance, are exposed to iselect s other business units. As the Company grows in scale, iselect will increase the reach of its cross sell programme to include a greater range of products from its business units Build out the iselect consumer offering new business units and E2E iselect will continue to assess new product comparison categories, prioritised on their ability to meet the demands of Australian consumers. For its existing business units that currently operate under a lead generation model, being Money and Broadband, iselect will work toward transitioning them to an E2E business model in order to replicate the iselect experience in other business units Continue to leverage and invest in iselect s unique technology, insights and people iselect s iconnect platform is a key strategic focus for the Company. iselect will continue its investment in the combination of people and technology to ensure that consumers are provided with the best possible experience. While many of these investments are initially applied to the private health insurance business, iselect will apply this expertise and intellectual property to its other business units to augment their current growth trajectories Build greater and deeper relationships with Product Providers iselect will continue to expand its panel of Product Providers in order to enhance the utility of the iselect comparison service to consumers, and to further build the iselect brand. As part of iselect s ongoing arrangement with its Product Providers, iselect assists with product development, based on consumer feedback and demand during the use of the iselect service, which has led to many enhancements and from time to time, access to exclusive product offerings for iselect Assess opportunities to accelerate growth through strategic acquisitions iselect will continue to assess strategic acquisition opportunities to accelerate its growth. When assessing acquisition opportunities, iselect focuses on either access to an audience at low cost (i.e. strong brand position or strong search engine optimisation position in a market) or capability (i.e. team of people with specific skills that are hard to acquire in the market or technology complementary to iselect s platform) Assess international opportunities While iselect s focus is on immediate growth opportunities in the Australian comparison sector, it plans to also assess potential international market entry options over the next 12 to 24 months. 58 The value of private health insurance policies was measured using total aggregate premiums paid in the market in the given period.

57 55 Financial Information 4

58 56 4. Financial Information 4.1 Introduction The Financial Information for iselect contained in this Section (Financial Information) has been prepared by iselect and includes: Historical Financial Information for iselect, being the: consolidated income statements for FY10, FY11, FY12 and the six months ended 31 December 2012 (1H FY13) (Historical Results); consolidated cash flow statements for FY10, FY11, FY12 and 1H FY13; and consolidated balance sheets as at 30 June 2012 and 31 December 2012, (together the Historical Financial Information); Forecast Financial Information for iselect, being the: consolidated income statements for the 12 month period ending 30 June 2013 (FY13F), the 12 month period ending 31 December 2013 ( Calendar Year 2013 or CY13F) and the six months ending 31 December 2013 (1H FY14F) (Forecast Results); and consolidated cash flow statements for FY13F, CY13F and 1H FY14F, (together the Forecast Financial Information); and Pro forma consolidated balance sheet as at 31 December 2012, (the Pro Forma Balance Sheet). Collectively the Financial Information; and Pro forma adjustment information for iselect, being the: Pro forma adjustments to NPAT and EBITDA for FY10, FY11, FY12, FY13F, CY13F, 1H FY13 and 1H FY14F; and Pro forma adjustments to the consolidated cash flow statements for FY10, FY11, FY12, FY13F, CY13F, 1H FY13 and 1H FY14F, (together the Pro Forma Adjustments). All amounts disclosed in Section 4 are presented in Australian dollars and, unless otherwise noted, are rounded to the nearest thousand. 4.2 Basis of Preparation of the Financial Information The Financial Information included in this Section 4 has been prepared and presented in accordance with the recognition and measurement principles of Australian Accounting Standards adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act The Financial Information provided complies with International Financial Reporting Standards (IFRS) adopted by the International Accounting Standards Board (IASB). The Financial Information is presented in an abbreviated form insofar as it does not include all the disclosures, statements or comparative information as required by Australian Accounting Standards applicable to annual financial reports prepared in accordance with the Corporations Act Significant accounting policies of iselect relevant to the Financial Information are included in Appendix 1. The Financial Information presented in this Prospectus has been reviewed by Ernst & Young Transaction Advisory Services Limited in its Investigating Accountant s Report. Investors should note the scope and limitations of that report (refer to Section 8) Preparation of Historical Financial Information The Historical Financial Information of iselect has been extracted from the audited general purpose statutory consolidated financial statements of iselect for FY10, FY11 and FY12 on which unqualified opinions were issued by Ernst & Young. The 1H FY13 Financial Information has been extracted from the special purpose management Financial Information on which an unqualified review opinion was issued by Ernst & Young. iselect is a reporting entity and prepares and lodges general purpose financial reports, the most recent being for the year ended 30 June These are available on the Company s website The Financial Information presented throughout this Section 4 is intended as a summary only and should be read in conjunction with the detailed discussions of the Financial Information, as well as the risk factors, set out in Section 5. Investors should note that past results are not a guarantee of future performance Preparation of Forecast Financial Information The Forecast Financial Information has been prepared by iselect based on an assessment of present economic and operating conditions and best estimate assumptions regarding future events and actions as set out in Sections and Given the uncertainty around the timing of the return to the private health insurance comparison sector of consumers affected by changes to means testing, CY13F forecast Financial Information has been included. The FY13F results comprise seven months unaudited historical financial results ended 31 January 2013 and five months forecast results ending 30 June The CY13F results comprises one month unaudited historical financial results ended 31 January 2013 and 11 months forecast results ending 31 December Both Forecast Results do not include any financial effect of the IPO transaction costs or the impact of the Offer (Pro Forma Adjustments) and only include the financial impact of additional public company costs from the assumed date of listing of the Shares on the ASX. The Forecast Financial Information is subject to the risks set out in Section 5. This information is intended to assist investors in assessing the reasonableness and likelihood of the assumptions occurring and is not intended to be a representation that the assumptions will occur. iselect believes the best estimate assumptions when taken as a whole to be reasonable at the time of preparing this Prospectus. However, this information is not fact and investors are cautioned not to place undue reliance on the Forecast Financial Information. Investors should be aware that the timing of actual events and the magnitude of their impact might differ from that assumed in preparing the Forecast Financial Information and that this may have a material positive or material negative effect on the actual financial performance or financial position of iselect. Accordingly, neither iselect nor any other person can give investors any assurance that the outcomes presented in the Forecast Financial Information will arise.

59 iselect Limited The Forecast Financial Information in Section should be read in conjunction with the general assumptions as set out in Section , the specific assumptions as set out in Section , the sensitivities as set out in Section 4.7, the risk factors as set out in Section 5 and other information in this Prospectus Preparation of Pro Forma Balance Sheet The Pro Forma Balance Sheet has been prepared by adjusting the 31 December 2012 consolidated balance sheet for the adjustments outlined in Section 4.4 relating to the Offer. 4.3 Historical Results and Forecast Results Table 4.1 presents the consolidated historical income statements for FY10, FY11 and FY12, and the consolidated forecast income statements for FY13F and CY13F. Additional discussion on the key drivers of the movements in the Financial Information presented below is included in Section 4.6. Table 4.1: Consolidated historical income statements from FY10 to FY12 and consolidated forecast income statements for FY13F and CY13F (excluding IPO transaction costs) (A$000s) FY10 FY11 FY12 FY13F CY13F Upfront fee revenue 1 21,271 34,803 57,303 73,795 81,210 Trail commission revenue 2 22,220 37,639 54,625 47,764 51,272 Operating revenue 3 43,491 72, , , ,482 ( ) Cost of sales (22,369) (36,026) (56,970) (61,766) (66,319) Gross profit 21,122 36,416 54,958 59,793 66,163 ( ) Overhead expenses (11,865) (19,047) (30,876) (33,765) (36,139) EBITDA 3 9,257 17,369 24,082 26,028 30,024 ( ) Depreciation and amortisation (1,428) (3,185) (4,054) (4,894) (5,003) EBIT 7,829 14,184 20,028 21,134 25,021 (( ) / +) Net interest (expense) / income (895) (1,317) 810 Profit before tax 8,229 15,025 19,133 19,817 25,831 ((+) / ) Tax benefit / (expense) (2,449) (4,368) (6,204) (5,294) (6,930) NPAT 5,780 10,657 12,929 14,523 18,901 Key metrics Upfront fee revenue growth 4,5 28.7% 63.6% 64.6% 28.8% n.a. Trail commission revenue growth 4, % 69.4% 45.1% (12.6%) n.a. Upfront revenue as % of operating revenue % 48.0% 51.2% 60.7% 61.3% Gross profit margin % 50.3% 49.1% 49.2% 49.9% EBITDA growth 9, % 87.6% 38.6% 8.1% n.a. EBITDA margin % 24.0% 21.5% 21.4% 22.7% Notes: 1 For further detail on upfront fee revenue refer to the management discussion and analysis in Section For further detail on trail commission revenue refer to the management discussion and analysis in Section For further detail on FY12 revenue and EBITDA refer to the disclosure entitled: Change in accounting estimate point of revenue recognition in the section immediately following. 4 Upfront fee revenue growth and trail commission revenue growth for FY10 is calculated by reference to the FY09 results, which are not presented in the above table. 5 Upfront fee revenue growth is the growth of upfront fee revenue compared to the prior corresponding period. 6 Trail commission revenue growth is the growth of trail commission compared to the prior corresponding period. 7 Upfront fee revenue as a percentage of operating revenue represents upfront fee revenue divided by operating revenue. 8 Gross profit margin represents gross profit divided by operating revenue. 9 EBITDA growth for FY10 is calculated by reference to the FY09 results, which are not presented in the above table. 10 EBITDA growth is the growth of EBITDA compared to the prior corresponding period. 11 EBITDA margin represents EBITDA divided by operating revenue.

60 58 Financial Information Change in accounting estimate point of revenue recognition Prior to June 2012, iselect recognised revenue from the sale of health, car and life insurance policies at the point in time where the consumer made their first payment to the relevant Product Provider (known as the time a sale becomes financial or a Financial Sale ). Due to continual improvements in iselect s technology and internal processes, and the availability of more extensive and conclusive historical statistical and trend data, iselect can more accurately determine the measurement point at which its contracted service with its Product Providers is essentially complete, and whether it is probable that the Company will receive revenue in relation to that consumer. As such, the measurement of revenue is reliable on the basis of the probability of a referred sale becoming a financial sale. Where this information cannot be reliably measured, the Company continues to recognise revenue at the time a consumer makes its first payment to the Product Provider. As a result, during FY12, the Company changed its estimate for recognising revenue in the Health, Car and Life business units from a financial basis to a referred basis, resulting in a one-off incremental change in estimate impact of $7.0 million in FY12 to both revenue and EBITDA. Revenue from the time of this change is recognised on a net basis of the historical percentage of referred sales expected to become financial and is adjusted to actual percentages experienced at each reporting date. This change in revenue estimation allows iselect to better monitor key operating metrics on a timely basis and make more accurate business decisions, thus aligning revenue measurement to the way the business is managed on an ongoing basis. As FY12 revenue and EBITDA consist of both sales recognised on a financial basis (up to May 2012) and a referred basis (June 2012 sales onwards), the estimated adjustment to enable like-for-like comparatives is dependent on the basis of recognition for the comparable period: If FY12 earnings were undertaken on a 100% financial basis (i.e. to enable a like-for-like comparative prepared on the same basis as FY10 and FY11), FY12 revenue and EBITDA would both be reduced by $7.0 million to $104.9 million and $17.1 million respectively; If FY12 earnings were undertaken on a 100% referred basis (i.e. to enable a like-for-like comparative prepared on the same basis as FY13F, CY13F and 1H FY14F), an indicative restatement using the data and assumptions available at the date of the change in estimate would indicate FY12 revenue and EBITDA would both be reduced by approximately $4.2 million to $107.7 million and $19.9 million respectively, as a proportion of sales recognised in July 2011 are adjusted to the prior period (being the period of referral ); and An indicative restatement of FY10 and FY11 revenue and EBITDA from a financial to a referred basis of revenue measurement using the data and assumptions available at the date of the change in estimate, would indicate a net increase of approximately $2.9 million and $2.0 million respectively to both revenue and EBITDA for both years. IPO transaction costs The summary Historical Results for FY10 to FY12 and the Forecast Results for FY13F and CY13F do not include $11.9 million of estimated transaction costs relating to the IPO. It is anticipated that $10.8 million of these costs will be offset against equity raised in the Offer and the remaining $1.1 million will be expensed through the income statement. If these capitalised costs were to be included into the Forecast Results this would increase FY13F and CY13F costs by $10.8 million.

61 iselect Limited Table 4.2 presents the consolidated historical income statement for 1H FY13 and the consolidated forecast income statement for 1H FY14F. Additional discussion on the key drivers of the movements in the Financial Information presented below is included in Section 4.6. Table 4.2: Consolidated historical income statement for 1H FY13 and consolidated forecast income statement for 1H FY14F (excluding IPO transaction costs) (A$000s) 1H FY13 1H FY14F Upfront fee revenue 1,2 29,400 36,815 Trail commission revenue 1,3 17,754 21,262 Operating revenue 47,154 58,077 ( ) Cost of sales (26,899) (31,452) Gross profit 20,255 26,625 ( ) Overhead expenses (16,327) (18,701) EBITDA 3,928 7,924 ( ) Depreciation and amortisation (2,416) (2,525) EBIT 1,512 5,399 (( ) / +) Net interest (expense) / income (1,509) 618 Profit before tax 3 6,017 ((+) / ) Tax benefit / (expense) 202 (1,434) NPAT 205 4,583 Key metrics Upfront fee revenue growth 2,4 n.a. 25.2% Trail commission revenue growth 3,5 n.a. 19.8% Upfront fee revenue as % of operating revenue % 63.4% Gross profit margin % 45.8% EBITDA growth 8,9 n.a % EBITDA margin 9 8.3% 13.6% Notes: 1 Revenue presented in the above table has been recognised on a referred basis. 2 For further details on upfront fee revenue refer to the management discussion and analysis in Section For further details on trail commission revenue refer to the management discussion and analysis in Section Upfront fee revenue growth is the growth of upfront fee revenue compared to the prior corresponding period. 5 Trail commission revenue growth is the growth of trail commission fee compared to the prior corresponding period. 6 Upfront fee revenue as percentage of operating revenue represents upfront fee revenue divided by operating revenue. 7 Gross profit margin represents gross profit divided by operating revenue. 8 EBITDA growth is the growth of EBITDA compared to the prior corresponding period. 9 EBITDA margin represents EBITDA divided by operating revenue.

62 60 Financial Information Pro forma adjustments to the consolidated income statements Tables 4.3 and 4.4 set out the pro forma adjustments to the historical NPAT and EBITDA and forecast NPAT and EBITDA of iselect to reflect the impact of the Offer and the capital structure that will be in place immediately following Completion of the Offer to enable a like-for-like comparison of financial periods applying a consistent capital structure. These adjustments are summarised below. Table 4.3: Pro forma adjustments to historical NPAT and EBITDA from FY10 to FY12 and Forecast NPAT and EBITDA for FY13F and CY13F (A$000s) FY10 FY11 FY12 FY13F CY13F NPAT (excluding expensed IPO transaction costs) 5,780 10,657 12,929 14,523 18,901 IPO transaction costs expensed (1,103) (1,103) NPAT (including expensed IPO transaction costs) 5,780 10,657 12,929 13,420 17,798 Incremental ASX listed company costs (588) (588) (588) (523) (121) Interest differential for repayment of borrowings 1,770 2,894 1,723 Interest differential for net cash position 2,550 3,100 2,794 2,049 2,049 Tax effect of pro forma adjustments (589) (754) (1,193) (995) (764) Pro Forma NPAT 7,153 12,415 15,712 16,845 20,685 EBITDA (excluding expensed IPO transaction costs) 9,257 17,369 24,082 26,028 30,024 IPO transaction costs expensed (1,103) (1,103) EBITDA (including expensed IPO transaction costs) 9,257 17,369 24,082 24,925 28,921 Incremental ASX listed company costs (588) (588) (588) (523) (121) Pro Forma EBITDA 8,669 16,781 23,494 24,402 28,800 The pro forma adjustments made to the Historical Results and Forecast Results of iselect reflect the following events and assumptions on an annualised basis: IPO transaction costs total costs of the Offer incurred by iselect are estimated at $11.9 million, of which $10.8 million will be offset directly against equity raised in the offer. Incremental ASX listed company costs the incremental ASX listed company costs are based on Management s estimate of the incremental annual costs that iselect will incur once listed on the ASX (in addition to those costs already incurred by iselect as a public company not presently listed on the ASX). These costs include ASX listing fees, share registry fees, increased audit fees, Directors and Officers liability insurance, annual general meeting and annual report costs. The Forecast Results include these costs from the assumed date of listing iselect s Shares on the ASX whereas the Pro forma NPAT and EBITDA include these costs on a full year basis; Interest differential for repayment of borrowings of the proposed $100.0 million raised by iselect under the Offer, iselect intends to use $11.9 million to pay for IPO transaction costs and $25.0 million to repay its existing bank debt (of which $20.0 million was drawn as at the last reviewed balance sheet date of 31 December 2012). Refer to Section 4.8 for details on the indebtedness of iselect. Interest expense on borrowings recognised in the Historical and Forecast Results has been adjusted to reflect the anticipated debt profile of iselect following Completion of the Offer. The Company had no borrowings in FY10 and FY11; Interest differential for pro forma net cash position of the proposed $100.0 million raised by iselect under the Offer, iselect intends to use $11.9 million to pay for IPO transaction costs and $25.0 million to repay its existing bank debt (of which $20.0 million was drawn as at the last reviewed balance sheet date of 31 December 2012). Refer to Section 4.8 for details on the indebtedness of iselect. Interest revenue recognised in the Historical and Forecast Results has been adjusted to reflect the anticipated net cash position of iselect following Completion of the Offer; and Tax effect of pro forma adjustments the income tax impact of the above pro forma adjustments is calculated at the corporate tax rate of 30%. If these same Pro Forma Adjustments were applied to the Historical Results for 1H FY13 and the Forecast Results for 1H FY14F, the impact as summarised in Table 4.4.

63 iselect Limited Table 4.4: Pro forma adjustments to historical NPAT and EBITDA for 1H FY13 and forecast NPAT and EBITDA for 1H FY14F (A$000s) 1H FY13 1H FY14F NPAT (excluding expensed IPO transaction costs) 205 4,583 IPO transaction costs expensed NPAT (including expensed IPO transaction costs) 205 4,583 Incremental listed company costs (402) Interest differential for repayment of borrowings 2, Interest differential for net cash position 1,024 1,024 Tax effect of pro forma adjustments (808) (577) Pro Forma NPAT 2,090 5,930 EBITDA (excluding expensed IPO transaction costs) 3,928 7,924 IPO transaction costs expensed EBITDA (including expensed IPO transaction costs) 3,928 7,924 Incremental ASX listed company costs (402) Pro Forma EBITDA 3,526 7,924

64 62 Financial Information 4.4 Historical and Pro Forma Balance Sheet Table 4.5 sets out the pro forma adjustments that have been made to the consolidated balance sheet of iselect as at 31 December 2012 to prepare the Pro Forma Balance Sheet for iselect. The adjustments reflect the impact of the operating and capital structure that will be in place immediately following Completion of the Offer as if it had occurred or were in place as at 31 December Table 4.5: Consolidated historical and Pro Forma Balance Sheet (A$000s) 30 June December 2012 Impact of the Offer Pro Forma 31 December 2012 Assets Current assets Cash and cash equivalents 20,012 18,307 68,106 86,413 Trade and other receivables 15,338 6,840 6,840 Trail commission receivable 26,534 26,390 26,390 Other assets 1,160 3,228 3,228 Total current assets 63,044 54,765 68, ,871 Non-current assets Trade and other receivables 9,230 9,230 Trail commission receivable 64,925 68,668 68,668 Property, plant and equipment 9,380 8,229 8,229 Intangible assets 37,048 37,625 37,625 Total non-current assets 111, , ,752 Total assets 174, ,517 68, ,623 Liabilities Current liabilities Trade and other payables (21,246) (12,330) (12,330) Provisions (4,232) (3,766) (3,766) Borrowings (35,000) (20,000) 20,000 Other (313) (276) (276) Total current liabilities (60,791) (36,372) 20,000 (16,372) Non-current liabilities Provisions (2,858) (2,730) (2,730) Net deferred tax liabilities (17,742) (17,195) 3,568 (13,627) Total non-current liabilities (20,600) (19,925) 3,568 (16,357) Total liabilities (81,391) (56,297) 23,568 (32,729) Net assets 93, ,220 91, ,894 Equity Issued capital 49,759 78,510 92, ,956 Share-based payments reserve 2,384 2,642 2,642 Business combination reserve 5,571 5,571 5,571 Retained earnings/(losses) 35,292 35,497 (772) 34,725 Total equity 93, ,220 91, ,894

65 iselect Limited Pro forma adjustments to the historical consolidated balance sheet The pro forma adjustments made to the historical consolidated balance sheet of iselect as at 31 December 2012 (being the most recently reviewed balance sheet date) reflect the following events and assumptions: Proceeds from the Offer an increase in issued capital reflecting new capital raised of $100.0 million under the Offer, less capitalised transaction costs of $11.9 million; IPO transaction costs total costs of the Offer incurred by iselect are estimated at $11.9 million, of which $10.8 million will be directly offset against issued capital. An additional $1.2 million will be borne by SaleCo. It is assumed iselect s share of these costs are deductible to iselect for tax purposes over five years, resulting in a total deferred tax asset of $3.6 million; and Borrowings it is assumed that a portion of the proceeds will be used to repay $20.0 million of borrowings, being the amount drawn down at 31 December 2012 (overdraft and bank debt facilities). Post 31 December 2012, a further $5.0 million was drawn down from the Term Debt Facility (which will also be repaid from the proceeds of the Offer). Refer to Section 4.8 for further detail on indebtedness of iselect. These adjustments include assumptions relating to matters that are not known as at the Prospectus Date, such as the Offer Price and amount raised. The Pro Forma Balance Sheet is therefore provided for illustrative purposes only and is not represented as being necessarily indicative of iselect s view on its future financial position. 4.5 Consolidated Historical and Forecast Cash Flow Statements Consolidated cash flow statements Table 4.6 presents the consolidated historical cash flow statements for FY10, FY11 and FY12, and the consolidated forecast cash flow statements for FY13F and CY13F. Additional discussion on the key drivers of the movements in the Financial Information presented below is included in Section 4.6. Table 4.6: Consolidated historical cash flow statements from FY10 to FY12 and consolidated forecast cash flow statements for FY13F and CY13F (excluding IPO transaction costs) (A$000s) FY10 FY11 FY12 FY13F CY13F EBITDA 9,257 17,369 24,082 26,028 30,024 Movement in trail commission receivable (15,360) (23,230) (29,979) (18,589) (19,758) Movement in other net working capital items 3,602 1,944 4,978 (3,931) 1,537 Other non-cash items ,401 Income tax paid Operating cash flow (2,227) (3,259) (362) 4,223 13,204 Capital expenditure (1,976) (4,007) (13,404) (3,288) (2,899) Acquisition of business (net of cash acquired) (31,348) Net cash flow before financing (4,203) (7,266) (45,114) ,305 Net interest (paid) / received (550) (2,587) (635) Net proceeds from / (repayment) of borrowings 35,000 (10,000) 5,000 Net proceeds from issuance of Shares ,486 13,177 28,406 NIA facility (18,719) (19,859) Net cash flow (3,661) 10,061 2,513 (1,965) (5,189) Key metrics EBITDA to operating cash conversion 1 (24.1%) (18.8%) (1.5%) 16.2% 44.0% Note: 1 EBITDA to operating cash conversion represents operating cash flow divided by EBITDA.

66 64 Financial Information Table 4.7 presents the consolidated historical cash flow statement for 1H FY13 and the consolidated forecast cash flow statement for 1H FY14F. Additional discussion on the key drivers of the movements in the Financial Information presented below is included in Section 4.6. Table 4.7: Consolidated historical cash flow statement for 1H FY13 and consolidated forecast cash flow statement for 1H FY14F (excluding IPO transaction costs) (A$000s) 1H FY13 1H FY14F EBITDA 3,928 7,924 Movement in trail commission receivable (3,599) (4,768) Movement in other net working capital items (2,821) 2,647 Other non-cash items Income tax paid Operating cash flow (2,234) 6,747 Capital expenditure (1,842) (1,453) Acquisition of business (net of cash acquired) Net cash flow before financing (4,076) 5,294 Net interest (paid) / earned (1,805) 147 Net repayment of borrowings (15,000) Net proceeds from issuance of Shares 28,406 NIA facility (9,230) (10,370) Net cash flow (1,705) (4,929) Key metrics EBITDA to operating cash conversion 1 (56.9%) 85.1% Note: 1 EBITDA to operating cash conversion represents operating cash flow divided by EBITDA Pro forma adjustments to the consolidated cash flow statements Table 4.8 sets out the adjustments to the consolidated historical cash flow statements for FY10 to FY12 and the consolidated forecast cash flow statements for FY13F and CY13F to reflect the full year impact of the Offer, and the capital structure that will be in place immediately following Completion of the Offer, to enable a like-for-like comparison of financial periods applying a consistent capital structure. Table 4.8: Pro forma adjustments to the consolidated historical cash flow statements for FY10 to FY12 and the consolidated forecast cash flow statements for FY13F and CY13F (A$000s) FY10 FY11 FY12 FY13F CY13F Net cash flow (3,661) 10,061 2,513 (1,965) (5,189) IPO transaction costs (11,894) (11,894) Repayment of borrowings (25,000) (25,000) Proceeds from the Offer 100, ,000 Incremental ASX listed company costs (588) (588) (588) (523) (121) Interest differential for repayment of borrowings 1,425 3,487 2,264 Interest differential for net cash position 2,550 3,100 2,794 2,049 2,049 Pro Forma net cash flow (1,699) 12,572 6,144 66,154 62,108

67 iselect Limited The consolidated adjustments made to the consolidated historical cash flow statements for FY10 to FY12 and the consolidated forecast cash flow statements for FY13F and CY13F for iselect reflect the following events and assumptions on an annualised basis: IPO transaction costs total costs of the Offer incurred by iselect are estimated at $11.9 million; Repayment of borrowings of the proposed $100.0 million raised by iselect under the Offer, iselect intends to use $25.0 million to repay existing bank debt (of which $20.0 million was drawn as at the last reviewed balance sheet date of 31 December 2012); Proceeds from the Offer iselect proposes to raise $100.0 million under the Offer; Incremental ASX listed company costs the incremental ASX listed company costs are based on Management s estimate of the incremental annual costs that iselect will incur once listed on the ASX (in addition to those costs already incurred by iselect as a public company not presently listed on the ASX). These costs include ASX listing fees, share registry fees, increased audit fees, Directors and Officers liability insurance, annual general meeting and annual report costs. The Forecast Results include these costs from the assumed date of listing iselect s Shares on the ASX whereas the pro forma NPAT and EBITDA include these costs on a full year basis; Interest differential for repayment of debt facility of the proposed $100.0 million raised by iselect under the Offer, iselect intends to use $11.9 million to pay for IPO transaction costs and $25.0 million to repay existing bank debt (of which $20.0 million was drawn as at the last reviewed balance sheet date of 31 December 2012). Refer to Section 4.8 for further detail on indebtedness of iselect. Interest expense on borrowings recognised in historical and forecast cash flows has been adjusted to reflect the anticipated debt profile of iselect following Completion of the Offer; Interest differential for pro forma net cash position of the proposed $100.0 million raised by iselect under the Offer, iselect intends to use $11.9 million to pay for IPO transaction costs and $25.0 million to repay existing bank debt (of which $20.0 million was drawn as at the last reviewed balance sheet date of 31 December 2012). Refer to Section 4.8 for further detail on indebtedness of iselect. Interest revenue recognised in historical and forecast cash flows has been adjusted to reflect the anticipated net cash position of iselect following Completion of the Offer; and Tax effect of pro forma adjustments as iselect has not been in a tax payable position during the historical period, and is not expected to be in a tax payable position for FY13F or CY13F, pro forma adjustments to the cash flow statements have not been adjusted for tax paid. If these same Pro Forma Adjustments were applied to the consolidated historical cash flow statement for 1H FY13 and the consolidated forecast cash flow statement for 1H FY14F, the impact as summarised in Table 4.9. Table 4.9: Pro forma adjustments to the consolidated historical cash flow statement for 1H FY13 and the consolidated forecast cash flow statement for 1H FY14F (A$000s) 1H FY13 1H FY14F Net cash flow (1,705) (4,929) Incremental ASX listed company costs (402) Interest differential for repayment of borrowings 2,266 1,043 Interest differential for net cash position 1,024 1,024 Pro Forma net cash flow 1,183 (2,862)

68 66 Financial Information 4.6 Management discussion and analysis of Financial Information iselect s key operating metrics Table 4.10 sets out iselect s key operating metrics for the historical periods FY10 to FY12 and the forecast periods FY13F and CY13F. As Money revenue consists primarily of Click-through, subscription and advertising revenue, these metrics have been reported separately. Table 4.10: Consolidated key operating metrics FY10 FY11 FY12 FY13F CY13F Consolidated (excluding Money) Leads (000s) 1,519 1,911 2,945 3,306 3,531 Conversion ratio (%) 1 3.6% 4.8% 5.7% 6.1% 6.3% Number of net product sales (000s) Average revenue per sale ($) Leads growth (%) n.m. 25.8% 54.1% 12.3% n.a. Product sales growth (%) n.m. 67.3% 83.7% 18.9% n.a. Money Leads (000s) n.a. n.a ,692 1,711 Conversion ratio (%) n.a. n.a. n.m. n.m. n.m. Number of Click-throughs (000s) n.a. n.a Average revenue per Click-through ($) n.a. n.a Leads growth (%) n.a. n.a. n.a. 93.6% n.a. Click-through growth (%) n.a. n.a. n.a. 44.6% n.a. Notes: 1 Conversion ratio is calculated as the number of net sales divided by sales leads (i.e. the average percentage of sales leads that are converted into sales). 2 Average revenue per sale is calculated as revenue divided by the number of sales (net of terminations and Sales Direct to Fund). Leads iselect categorises a lead for all business units (excluding Money) as a second-page visit to one of its websites, or an inbound telephone call from a potential consumer to the Consumer Advice Team. This is a more conservative metric than considering all visits to the homepage as sales leads. Leads for the Money business unit are sourced via the InfoChoice website, which operates under a lead generation model, providing a low cost source of sales leads for both the Money and E2E business units of iselect. As a result, iselect categorises a lead for the Money business unit differently, namely as a visit to its website. Discussion on key drivers of sales lead growth is provided in Section Sales conversion ratio Once a lead is generated, iselect provides purchase advice and information to the consumer. If that purchase advice results in a referral to a Product Provider, then the lead is considered to have been converted. Product sales are subject to claw back provisions and lapses before the enforcement of the polices. The conversion ratio expresses net number of product sales (adjusted for claw back and lapses before the enforcement of policies) achieved as a percentage of total sales leads and is used by iselect to measure its efficiency in turning sales leads into sales. An increase in the conversion ratio increases iselect s earnings as without the need for additional marketing spend, iselect has leveraged efficiencies from its existing resources to achieve a greater number of sales from the same lead pool. This uplift in efficiency then creates the margin to enable further spend on advertising and brand investment (where market conditions are appropriate) in order to grow market share. Under the lead generation model operated by the Money business unit, consumers are able to click through to Product Providers via third party online affiliate arrangements, which do not register as a visit to the InfoChoice website. As a result, the Click-through is recorded

69 iselect Limited without registering a corresponding lead as defined above. As such, the conversion ratio metric described in the above table is not meaningful for the Money business unit. Discussion on key drivers of the improvement in the conversion ratio is provided in Section Revenue per sale (RPS) iselect s RPS measures the average revenue generated from each lead that is converted to a sale. Discussion on key drivers of the trend in RPS is provided in Section It should be noted that the RPS of different products sold by iselect varies considerably, from as low as $30 to as much as $3,000 (excluding Money products) Historical Financial Information Set out below is a discussion of the general factors affecting iselect s historical operating results and Management s discussion and analysis of iselect s Historical Financial Information General factors affecting the Historical Results of iselect Below is a brief discussion of the main factors which affected iselect s operating and financial performance in FY10, FY11, FY12 and 1H FY13 that iselect believes may continue to affect iselect s operating and financial performance in the future. The discussion of these general factors is intended to provide a summary overview only and does not intend to identify all factors that affected iselect s historical operating and financial performance, nor all aspects that may impact its future performance. Financial Information in this Section 4 should be read in conjunction with the risk factors set out in Section 5 and the other information contained in this Prospectus. Leads growth Leads have increased over the historical period, driven by direct marketing campaigns and the impact of iselect s substantial brand investment. Further, iselect s new business units have made a substantial contribution to sales lead growth since FY10, as consumers increasingly contact iselect in connection with product categories in addition to private health insurance. Additional discussion on the key drivers of lead growth and its impact on the historical financial results is provided in Section Marketing efficiency is an important factor in driving growth in lead volumes. Marketing efficiency can be achieved through several means, including the effectiveness of the creative marketing platform to attract target segments and optimisation of media buying. Due to fluctuations in the level of demand for products within the key underlying product markets that iselect operates in, iselect closely monitors market conditions, to identify periods where it is able to reach the largest portion of the addressable market (including having regard to regulatory changes that may impact markets e.g. means testing of private health insurance cover). iselect is also able to reduce marketing spend when expected sale volumes are likely to be weaker. In doing so, iselect aims to maximise the return on investment of its marketing spend. Conversion From FY10 to FY12, the overall sales lead conversion ratio (excluding Money, which was acquired in FY12) increased from 3.6% to 5.7% through operational improvements such as the launch of the Follow-up Channel in March 2010, the refinement of the iconnect platform and improved training of members of the Consumer Advice Team. Discussion of the impact of these changes on financial results for the historical period is provided in this Section. Investment in emerging businesses In recent years, iselect has sought to grow and diversify its business by investing in comparison services other than insurance products, including home loans, money, broadband and energy. Undertaking these investments has impacted iselect s consolidated margins and cash flows as profits derived from the Health business unit were reinvested to build and develop these new businesses. Cost control iselect invested in additional resources to support significant growth plans for the business in FY12. During 1H FY13, management undertook a review of overhead costs to realign the Company s resourcing with its future growth priorities in FY13F, allowing margins to be maintained whilst positioning the Company to invest in future growth. iselect management continually monitors the effectiveness of its cost base and is able to respond rapidly to any change in efficiency. Seasonality As a result of the timing of the announcement of annual price increases in private health insurance (typically occurring February/ March, but effective 1 April each year), and a higher number of consumers looking to initiate or switch their private health insurance policies during the final months of a financial year (prior to the 30 June tax year end), there is a seasonal fluctuation regarding private health insurance comparison. Therefore, iselect generates peak volumes of private health insurance sales leads during the second half of the financial year and also enjoys a higher conversion ratio during this period. As a result, sales and EBITDA (and margins) are generally higher in the second half of the financial year. As iselect s other emerging businesses continue to grow, it is expected that the impact of this seasonality on earnings will moderate. Impact of consumer switching on the present value of trail commissions Under fee arrangements whereby iselect is remunerated via a trail commission arrangement, iselect is entitled to receive trail commission in respect of a consumer transaction for an agreed term without having to perform further services, provided the consumer continues to hold the relevant product. In the instance of a consumer switching through iselect to a different product from the same Product Provider, the previous trail commission is terminated and a new trail commission transaction initiated. On initial recognition, trail receivables are recognised at fair value, being the present value of expected future trail receivables discounted to its net present value using discounted cash flow valuation techniques. Subsequent to initial recognition, the trail receivable is valued at amortised cost using the interest and discount rates existing at the time of initial recognition to recompute estimated future cash flows. Further details of iselect s accounting policies which underpin this treatment are contained in Appendix 1 and the risks of a change to the Accounting Standards are contained in in Section

70 Trail commission revenue Trail commission revenue Trail commission revenue 68 Financial Information Table 4.11: Composition of revenue arrangements for iselect s E2E businesses for FY13 Number of Product Providers Business unit Trail commission only Hybrid Upfront fee only Health Insurance Car Insurance Life Insurance Home Loans Energy Note: 1 Home loans are sold through Australian Finance Group Limited, an independent Australian mortgage broking group and aggregator. In the instance of a consumer electing to terminate or switch to a different product, either with the same or different Product Provider (referred to as a lapse ), the carrying value of the related trail commission asset is reduced by the corresponding discounted present value of the related future cash flow foregone. During periods of significant switching between Product Providers by consumers, there are generally more frequent lapse events, which in turn may lead to a reduction in the present value of future cash flows of the trail commission receivable. Although an increase in switching may give rise to a short-term decrease of trail commission receivable recognised on the Company s balance sheet, in the medium to long term it may increase the size of the Company s addressable market. Expectations of such lapse events (e.g. related to specific policy announcements) are included within iselect s discounted cash flow valuation techniques to recognise current period new sales attaching trail commission, together with recomputation of expected cash flows to be derived from trail commission receivable recognised on the consolidated balance sheet. Figure 4.1 presents the build-up of the trail commission receivable from throughout the historical period. Figure 4.1: Historical build-up of trail commission receivable 1 $140.0m $120.0m $54.6m ($24.6m) $100.0m $91.5m $80.0m $60.0m $40.0m $20.0m $22.9m $22.2m ($6.9m) $38.3m $37.6m ($14.4m) $61.5m 0 FY09 Closing Balance Cash Receipts FY10 Closing Balance Cash Receipts FY11 Closing Balance Cash Receipts FY12 Closing Balance 1 Figure 4.1 has been prepared on the basis of management data for additional information purposes. Income statement impact The trail commission receivable is initially recorded at fair value, then adjusted on an amortised cost basis for changes in expected cash flows, using the discounted cash flow method. In addition to this annual adjustment and the revenue from new trail commission sales being recognised, included in trail commission revenue is an interest income component relating to the unwind of the discount to present value. These components of trail commission revenue are presented in further detail later in this Section.

71 iselect Limited Balance sheet impact The net present value of trail commission that is expected to be received in future years is recorded as a receivable on iselect s consolidated balance sheet as both a current and non-current receivable. As iselect s business has grown, the value of the total trail commission receivable held on the consolidated balance sheet has grown significantly. This reflects the value of contracted future cash flows iselect expects to receive from Product Providers. The movement in the present value of iselect s trail commission receivable is broken into three components: Current year movement in the present value of trail commissions, representing the present value of sales attracting trail commissions generated during the current year; Net adjustment to the present value of prior years trail commissions, representing expected cash flow adjustments to the trail asset (as a result of adjustment to any cash flow impacting valuation assumptions utilised), and any lapses relating to sales made in the current and prior years, over and above the assumed lapse rate contained in the present value calculations. The adjustment is net, as there may be both upward and downward adjustments to the various assumptions; and Interest income relating to the unwind of discount on the present value of the trail commission receivable. Further details of iselect s accounting policies which underpin this treatment are contained in Appendix 1 and the risks of a change to the Accounting Standards are contained in Section Table 4.12: Consolidated historical trail commission receivable reconciliation from FY10 to FY12 and the forecast receivable reconciliation for FY13F and CY13F (A$000s) FY10 FY11 FY12 FY13F CY13F Opening balance 22,890 38,250 61,480 91,459 95,058 Trail commission revenue 22,220 37,639 54,625 47,764 51,272 Cash receipts (6,860) (14,409) (24,646) (29,175) (31,514) Closing balance 38,250 61,480 91, , ,816 Cash flow impact Given the significant increase in the value of the trail commission receivable over the historical period, EBITDA to operating cash conversion has historically been low, as cash flows are deferred to future periods. Operating cash flows are dependent on the structure of the Provider arrangements agreed with Product Providers, which can comprise: upfront fees either as a percentage of referred product price / premium or fixed fee per sale; and trail commissions either as a percentage of product price / premium or as a fixed fee per sale. Arrangements with Product Providers may include a hybrid of the above fee structures (e.g. an upfront fee and subsequent payment of trail commission). The terms over which fees are payable (either upfront or trail commission) vary among iselect s Product Providers and as a result, the timing of cash collection can vary significantly, whilst the timing of revenue recognition treatment of all three fee arrangements is identical. Impact of changing upfront fee revenue and trailing commission revenue mix on cash flow iselect expects the proportion of upfront fee revenue (as a percentage of total revenue) to increase in future periods, primarily driven by: the proportion of upfront fee revenue increasing within the Health business unit; and iselect s emerging businesses increasing their contribution to overall Group performance (reducing the weighting of the Health business unit, which traditionally has had substantial trail commission revenue). iselect management continually assesses the viability of moving trail commission arrangements to upfront fee arrangements. Holding all other factors constant, this change in revenue mix is expected to result in an increase in operating cash conversion in the same period of sales activity. In addition to increasing upfront cash conversion, this trend should also reduce the scope for any impact of the revaluation of trail commission receivable on iselect s consolidated balance sheet. Effect of tax losses As a result of the timing differences between when accounting income (and tax expense) is recognised versus when certain income is treated as assessable for tax purposes (i.e. when cash is actually received), iselect has accrued carry forward tax losses in the earlier years of the Company s development. The Company currently has $13.5 million of deferred tax assets, of which $9.0 million represents recognised carried forward losses. Accordingly, the Company does not expect to pay tax in respect of profits from its operations until those losses are exhausted. The use of carried forward tax losses in future years is subject to satisfying Australian Tax Office regulations as they relate to the ability to offset losses against taxable profits in the year the taxable profit arises. Upon recognition of revenue under a trail commission arrangement (i.e., on a deferred cash basis), a corresponding deferred tax liability is recognised.

72 70 Financial Information Segment financials iselect has two operating segments, that are comprised of business units that share similar economic characteristics, including: sales methodology; number of interactions required to complete a sale; ability to generate cross-sell opportunities; complexity of pricing structures; and average life-cycle of product. Health and Car Insurance The Health and Car Insurance segment offers comparison and referral services across private health insurance and car insurance categories. Household Utilities and Financial The Household Utilities and Financial segment offers comparison and lead referral services across a range of household utilities and personal financial products including life insurance, broadband, retail electricity and gas products, home loans, savings accounts, term deposits, credit cards and personal loans. Table 4.13: Segment composition Segment Business units Financial year launched / acquired Health and Car Insurance Household Utilities and Financial Health Car Life Home Loans Broadband Money Energy FY00 FY09 FY07 FY11 FY11 FY12 FY12 Table 4.14: Segment financials 1 (A$000s) FY10 FY11 FY12 FY13F CY13F Operating revenue Health and Car Insurance 36,296 64,120 97,983 97, ,258 Household Utilities and Financial 7,195 8,322 13,945 24,261 26,224 Consolidated Group 43,491 72, , , ,482 EBITDA Health and Car Insurance n.a. n.a. 40,447 37,335 41,698 Household Utilities and Financial n.a. n.a. (5,552) 807 2,167 Unallocated (Corporate) n.a. n.a. (10,813) (12,114) (13,841) Consolidated Group n.a. n.a. 24,082 26,028 30,024 Note: 1 Prepared on the basis of management data for additional information purposes.

73 iselect Limited Table 4.15: Segment key operating metrics FY10 FY11 FY12 FY13F CY13F Health and Car Insurance Leads (000s) 1,329 1,694 1,972 1,967 2,205 Conversion ratio (%) 1 3.8% 5.0% 6.7% 6.6% 6.8% Net number of sales (000s) Average revenue per sale ($) Household Utilities and Financial (excluding Money) Leads (000s) ,339 1,326 Conversion ratio (%) 2.6% 3.1% 3.8% 5.3% 5.7% Net number of sales (000s) 3 n.m. n.m Average revenue per sale ($) 3 n.m. n.m Money Leads (000s) n.a. n.a ,692 1,711 Conversion ratio (%) n.a. n.a. n.m. n.m. n.m. Net number of Click-throughs (000s) n.a. n.a Average revenue per Click-through ($) n.a. n.a Notes: 1 Conversion ratio is calculated as the number of net sales divided by sales leads (i.e. the average percentage of sales leads that are converted into sales). 2 Average revenue per sale is calculated as revenue divided by the number of sales (net of terminations and Sales Direct to Fund). 3 Over the historical period the composition of the Household Utilities and Financial segment has been amended to include the Home Loans and Broadband business units (launched in FY11) and the Money (acquired in FY12) and Energy (launched in FY12) business units. As such, net number of sales and average revenue per sale has not been provided for FY10 and FY11 as they do not provide a consistent and meaningful basis of comparison. Discussion of key drivers for these key operating metrics is provided in Section Year-on-year management discussion and analysis Year ended 30 June 2011 compared to year ended 30 June 2010 Table 4.16: Selected consolidated income statement items: FY11 compared to FY10 (A$000s) FY10 FY11 Change % Upfront fee revenue 21,271 34, % Click-through revenue Other business revenue 81 n.m. Total upfront fee revenue 21,271 34, % Trail commission revenue current period sales 14,627 31, % Trail commission revenue expected cash flow adjustments 6,249 1,309 (79.1%) to historical trail receivable Trail commission revenue interest income relating to the 1,344 5, unwind of the discount on historical trail receivable Total trail commission revenue 22,220 37, % Total operating revenue 43,491 72, % Gross profit 21,122 36, % Gross profit margin 48.6% 50.3% EBITDA 9,257 17, % EBITDA margin 21.3% 24.0% EBIT 7,829 14, % EBIT margin % 19.6% Note: 1 EBIT margin represents EBIT divided by operating revenue.

74 72 Financial Information Revenue FY11 operating revenue increased by 66.6% from $43.5 million to $72.4 million, driven by a 27.5% increase in sales leads in the Health and Car Insurance segment assisted by successful marketing campaigns (including the Mr iselect launch), as well as organic growth in the online comparison sector. Revenue benefited from a significant increase in conversion ratios across the Health and Car Insurance segment, increasing from 3.8% in FY10 to 5.0% in FY11. This improvement in conversion was driven by a combination of the introduction of the Follow-up Channel in March 2010, improvement in web conversion relating to website redesign, and the ramp up of the recently launched Car Insurance business unit in the prior year Gross profit and gross profit margin Gross profit increased by 72.4% from $21.1 million in FY10 to $36.4 million in FY11 driven by increased revenue from significantly improved conversion ratios. Gross profit margin increased from 48.6% in FY10 to 50.3% in FY11, reflecting substantial improvement in margins in the Health and Car Insurance segment (50.1% in FY10 to 54.3% in FY11). Despite the large increase in gross profit margin, this increase in margin was partially offset by a 46.3% increase in marketing costs and an increase in Consumer Advice Team headcount from 158 to EBITDA and EBITDA margin EBITDA increased by 87.6% to $17.4 million in FY11 from $9.3 million in FY10 driven by revenue growth. The EBITDA margin growth from 21.3% to 24.0%, was driven by an increase in gross profit against a slower indirect cost base, demonstrating the power of scale in the business. Notwithstanding, this increase in EBITDA margin, there continued to be investment in the launch and development of new business units (Home Loans and Broadband) over this period. Table 4.17: Selected consolidated cash flow statement items: FY11 compared to FY10 (A$000s) FY10 FY11 Change % EBITDA 9,257 17, % Movement in trail commission receivable (15,360) (23,230) 51.2% Movement in other net working capital items 3,602 1,944 (46.0%) Other non-cash items % Income tax paid Operating cash flow (2,227) (3,259) 46.3% Capital expenditure (1,976) (4,007) 102.8% Net cash flow before financing (4,203) (7,266) 72.9% Net interest received % Net proceeds from the issuance of shares ,486 n.m. Net cash flow (3,661) 10,061 n.m. EBITDA to operating cash flow conversion (24.1%) (18.8%) Net cash flow Operating cash flow Operating cash flow declined by $1.1 million from a net operating cash outflow of ($2.2 million) in FY10 to ($3.3 million) in FY11, driven primarily by the growth in the current portion of the trail commission receivable (increasing by approximately $11.3 million), in addition to growth of other trade receivables, as new business written outstripped cash collection, reflecting the strong revenue growth experienced in FY11. This increase in net working capital was partially offset by an increase in payables of approximately $2.3 million, primarily driven by the growth of the business. EBITDA to operating cash conversion improved from (24.1%) in FY10 to (18.8%) in FY11.

75 iselect Limited Capital expenditure Major items of capital expenditure in FY10 included capitalised software development costs ($0.8 million) and the acquisition of computer software primarily relating to the optimisation of a telephone sales leads management system ($0.5 million). In FY11, capital software development costs increased to approximately $2.4 million, which, together with the acquisition of an additional $0.7 million of computer software and $0.6 million of computer and office equipment, comprised the majority of the increase in total capital expenditure to $4.0 million. Financing cash flow Financing cash flow increased by $16.8 million, as a result of the raising of $16.5 million of capital and an increase in the number of options exercised from FY10 to FY Year ended 30 June 2012 compared to year ended 30 June 2011 Table 4.18: Selected consolidated income statement items: FY12 compared to FY11 (A$000s) FY11 FY12 Change % Upfront fee revenue 34,722 52, % Click-through revenue 2,034 n.m. Other business revenue 81 2,667 n.m. Total upfront fee revenue 34,803 57, % Trail commission revenue current period sales 31,128 44, % Trail commission revenue expected cash flow adjustments to historical trail receivable Trail commission revenue interest income relating to the unwind of the discount on historical trail receivable 1,309 3, % 5,202 7, % Total trail commission revenue 37,639 54, % Total operating revenue 72, , % Gross profit 36,416 54, % Gross profit margin 50.3% 49.1% EBITDA 17,369 24, % EBITDA margin 24.0% 21.5% EBIT 14,184 20, % EBIT margin 19.6% 17.9% Revenue FY12 operating revenue increased by 54.5% from $72.4 million to $111.9 million, driven by a 16.4% increase in sales leads for the Health and Car Insurance segment, as a result of an increase in marketing investment of 55.0%, and an increase of 346.8% in the Household Utilities and Financial segment due to the full year contribution of the Home Loan and Broadband business units in addition to the launch of the Energy business unit. Revenue growth also benefited from continued improvements in conversion in the Health and Car Insurance segment (up 34.0% from the prior year), as further refinements were made to the Follow-up Channel, such as the launch of initiatives such as iconnect. In November 2011, iselect acquired InfoChoice, which contributed $3.4 million of subscription, advertising and Click-through revenue to FY12 revenue post acquisition. Included in operating revenue for FY12 is a $7.0 million increment relating to a change in estimate from a financial basis to a referred basis of revenue. This is explained in further detail in Section 4.3.

76 74 Financial Information In FY12, upward revaluations of trail commission receivable was partially offset by a one-off decrement of expected future cash flows of $3.4 million relating to one of iselect s car insurance Product Providers, resulting from higher than expected lapse rates experienced by that Product Provider Gross profit and gross profit margin Gross profit increased by 50.9% from $36.4 million in FY11 to $55.0 million in FY12. Gross margin decreased from 50.3% in FY11 to 49.1% in FY12, reflecting a change in media buying strategy. iselect increased its exposure to media in peak TV viewing times and investments in sponsorships, as a new means of increasing brand awareness. While the margin declined against a backdrop of a 55.0% increase in marketing spend in the Health and Car Insurance segment, this was partially offset by improvements in overall conversion (excluding Money) from 4.8% to 5.7% EBITDA and EBITDA margin EBITDA increased 38.6% from $17.4 million in FY11 to $24.1 million in FY12 as the business capitalised on strong revenue growth during this period. EBITDA margin decreased, from 24.0% in FY11 to 21.5% in FY12, which reflected the substantial investments made in branding, technology platforms and management structure to effectively support the newly launched business units. Included in EBITDA for FY12 is a $7.0 million increment relating to a change in estimate to some business units from a financial basis to a referred basis for revenue. This is explained in further detail in Section 4.3. Table 4.19: Selected consolidated cash flow statement items: FY12 compared to FY11 (A$000s) FY11 FY12 Change % EBITDA 17,369 24, % Movement in trail commission receivable (23,230) (29,979) 29.1% Movement in other net working capital items 1,944 4, % Other non-cash items (15.3 %) Income tax paid Operating cash flow (3,259) (362) 88.9% Capital expenditure (4,007) (13,404) 234.5% Acquisition of business (net of cash acquired) (31,348) n.m. Net cash flows before financing (7,266) (45,114) 520.9% Net interest (paid) / received 841 (550) n.m. Net proceeds from borrowings 35,000 n.m. Net proceeds from the issuance of Shares 16,486 13,177 (20.1%) Net cash flow 10,061 2,513 (75.0%) EBITDA to operating cash flow conversion (18.8%) (1.5%) Net cash flow Operating cash flow Operating cash flow improved by $2.9 million from ($3.3 million) in FY11 to ($0.4 million) in FY12, as upfront fee revenue growth (64.6% growth in FY12), outstripped growth in trail commission revenue (45.1% growth in FY12), driven by the increased contribution of new businesses such as Broadband and Home Loans, in addition to the contribution of the newly acquired InfoChoice business. This is reflected in the improvement in EBITDA to operating cash flow conversion from (18.8%) in FY11 to (1.5%) in FY12. The movement in net working capital in FY12 was driven primarily by the growth in upfront receivables, which increased approximately $10.2 million, reflecting strong upfront fee revenue growth of 64.6%, which includes the contribution of the newly acquired InfoChoice business. In addition the current portion of the trail commission receivable increased by $6.3 million, reflecting continued growth in trail commission revenue (up 45.1% on FY11). This increase in net working capital was partially offset by an increase in trade payables of approximately $11.7 million, reflecting the strong growth in marketing activity and headcount, as well as timing of payments.

77 iselect Limited Capital expenditure In FY12, capital software development costs increased to approximately $4.9 million, consisting of further investments for the Energy, Money and Home Loans business units as well as the new generation of the iconnect platform. The majority of the remaining increase in capital expenditure comprised leasehold improvements of $6.6 million and computer and office equipment of $1.4 million relating to the move to the new Cheltenham campus. Acquisition of business In November 2011, the Company acquired InfoChoice Limited for $33.5 million. At the date of acquisition, InfoChoice had $2.2 million of cash, which was included in the net assets acquired in the transaction. Financing cash flow Financing cash flow increased as a result of the draw down of $35.0 million from debt facilities for the purpose of acquiring InfoChoice Limited. In addition to the draw down of financing facilities, approximately $13.2 million of options were exercised in FY Forecast Financial Information The Forecast Financial Information has been prepared on the basis of the significant accounting policies adopted by iselect, which are in accordance with Australian Accounting Standards adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act An extract of these policies is disclosed in Appendix 1. It is assumed that there will be no changes to Accounting Standards, the Corporations Act 2001 or other financial reporting requirements that may have a material effect on iselect s accounting policies during the forecast period. The Forecast Financial Information is based on a large number of best estimate assumptions concerning future events as set out below. iselect believes that it has prepared the Forecast Financial Information with due care and attention and considers all assumptions when taken as a whole to be reasonable at the time of preparing this Prospectus, including each of the general assumptions set out in Section and specific assumptions set out in Section The Forecast Financial Information in this Section 4 should be read in conjunction with the risk factors set out in Section 5 and the other information contained in this Prospectus. However, the actual results are likely to vary from those forecast and any variation may be materially positive or materially negative. The assumptions on which the Forecast Financial Information is based are by their nature subject to significant uncertainties and contingencies, many of which are outside the control of iselect and its Directors, and cannot be reliably predicted. Accordingly, none of iselect, its Directors or any other person can give any assurance that the Forecast Financial Information or any prospective statement contained in this Prospectus will be achieved. Events and outcomes might differ in quantum and timing from the assumptions, with a material consequential impact on the Forecast Financial Information. Investors are advised to review the best-estimate assumptions set out below in conjunction with the description of the basis of preparation of the Forecast Financial Information above, and the sensitivity analysis in Section 4.7 and they should be read in conjunction with the risk factors set out in Section 5 and other information in this Prospectus General assumptions In preparing the Forecast Financial Information, the following general assumptions have been adopted for the forecast period: there is no material change to the competitive operating environment in which iselect operates; there is no significant deviation from current market expectations of broader economic conditions and consumer sentiment relevant to the Australian e-commerce industry and online comparison sector; there is no material change in the legislative regimes (including taxation) and regulatory environment in the areas in which iselect and its key Product Providers operate; there are no material amendments to any of iselect s key Product Provider contracts; there are no material terminations of agreements with Product Providers; there is no loss of key management personnel and iselect maintains its ability to recruit and retain required personnel; there is no change in iselect s capital structure. The expected changes flowing directly from the Offer as set out in or contemplated by this Prospectus are presented within the Pro Forma Adjustments included in this Section 4 and are not included with the Forecast Financial Information; there are no material acquisitions or disposals, restructuring or investments; there will be no full year dividend paid in FY13F or interim dividend paid in 1H FY14F; and the Offer proceeds in accordance with the timetable set out on page 3 of this Prospectus Specific assumptions The following Section presents a summary of specific assumptions applied when preparing the Forecast Financial Information for iselect. Further detail on these assumptions is provided in Sections Table 4.10 (Consolidated key operating metrics), Table 4.15 (Segment financials), (Management discussion and analysis for year ended 30 June 2013 compared to year ended 30 June 2012) and (Management discussion and analysis for the six months ending 31 December 2013 compared to six months ended 31 December 2012) Revenue assumptions The Forecast Financial Information is based on the following key revenue assumptions: Leads growth is based on historical run-rates adjusted for known macroeconomic conditions, regulatory impacts (e.g. means testing for private health insurance), and expected return on forecast marketing spend; Conversion ratios (excluding Money) are based on historical run rates plus the expected improvements due to the maturity and/or implementation of operational initiatives over the forecast period; Gross annual premiums and/or product prices are based on historical run rates, adjusted for expected increases in underlying premiums and/or product prices and expected changes in product mix; and

78 76 Financial Information Revenue per sale is based on expected changes in gross annual premiums and/or product prices, adjusted for expected changes to Product Provider mix. No change in the present value of expected cash flows relating to the trail commission receivable has been forecast. The Company engaged Deloitte Actuaries & Consultants Limited to perform an expert valuation of the trail commission receivable portfolio at 31 December The expert valuation methodology includes anticipated future changes in the key input assumptions. Further detail on the expected sensitivity of changes to key revenue assumptions is provided in Section Margin and expense assumptions The Forecast Financial Information is based on the following key margin and expense assumptions: Staff costs are built up in detail for each individual using known salary information and known wage increases (average increase of 3.0%); Direct marketing costs are forecast based on expected spend required to support the relevant lead forecasts, in line with run rates, adjusted for expected market demand; Overheads (excluding staff costs) are forecast based on the most recent run rate, with some items considered separately if there are any known changes; Incremental costs associated with being a company listed on the ASX (above those already incurred by iselect as a non-listed public company) are estimated to be $0.5 million per annum, which has been applied to FY13F on a pro rata basis (from the estimated date of listing on the ASX to 30 June 2013). Incremental costs for 1H FY14F have been applied on a pro rata basis, except where the entire cost is expected to be incurred in that half (e.g. half year review fees and AGM). The annualised cost of these incremental costs are included within the Pro Forma Adjustments contained in this Section 4 and are not included in the Forecast Financial Information. For further detail on the composition of these costs, refer to Sections and 4.5.2; Depreciation and amortisation are forecast based on existing depreciation and amortisation rates and expected capital expenditure for the forecast period; and CPI has been applied where appropriate at a rate of 3.0% per annum Year ending 30 June 2013 compared to year ended 30 June 2012 Table 4.20: Selected consolidated income statement items: FY13F compared to FY12 (A$000s) FY12 FY13F Change % Upfront fee revenue 52,602 63, % Click-through revenue 2,034 2, % Other business revenue 2,667 7, % Total upfront fee revenue 57,303 73, % Trail commission revenue current period sales 44,106 40,318 (8.6%) Trail commission revenue expected cash flow 3,081 (452) n.m. adjustments to historical trail receivable Trail commission revenue interest income 7,438 7, % relating to the unwind of the discount on historical trail receivable Total trail commission revenue 54,625 47,764 (12.6%) Total operating revenue 111, , % Gross profit 54,958 59, % Gross profit margin 49.1% 49.2% EBITDA 24,082 26, % EBITDA margin 21.5% 21.4% EBIT 20,028 21, % EBIT margin 17.9% 17.4%

79 iselect Limited Revenue FY13F operating revenue is forecast to increase by 8.6% from $111.9 million to $121.6 million, driven by a forecast improvement of 12.3% in sales leads on the prior year (excluding Money) and a 7.0% increase in conversion on prior year (excluding Money). However, the most significant impact on revenue growth relates to regulatory changes in the private health insurance market, which introduced changes to means testing, which provided incentive for consumers to review and potentially pay upfront their health insurance premiums for the coming period prior to 30 June 2012 in order to maintain their existing rebate status (Prepaid PHI Consumers). This had a material impact on the market in 1H FY13, resulting in a temporary lessening of demand and distortion of the seasonal earning profile of the Health business unit. Management believes this to be a temporary disruption to the market in 1H FY13, as a number of Prepaid PHI Consumers are likely to return to the market upon seeing significant increases to their private health insurance premiums at the end of the prepaid period. Furthermore, there are a large number of consumers in the private health insurance market who are impacted by the means testing and will be liable to repay some or all of the 30% rebate they claimed without entitlement. These repayments will become due in the 1H FY14F. Means testing and government regulation In 2012, the Federal Government introduced reforms to means test the Federal Government Rebate and the Medicare Levy Surcharge, by: reducing the applicable percentage rebates at certain income thresholds, and removing it entirely above a certain income threshold; and increasing the Medicare Levy Surcharge applicable if singles/ families do not have an appropriate level of private patient hospital cover. Regulatory changes can affect the demand for private health insurance by changing the economic or taxation-based incentives to have such insurance. In the case of means testing, this arguably increased the cost of the policy by reducing the rebate available to higher-income consumers to hold private health insurance. However, due to Australian Taxation Office rules, consumers were able to lock in their pre-means test tax effective insurance arrangements for FY13F by pre-purchasing private health insurance prior to the commencement of FY13F. In February 2013, iselect engaged an external actuarial consultant, Deloitte Actuaries & Consultants Limited, to undertake a review of the private health insurance market in Australia, including a total market sales volume forecast (representing the combined volume of new to private health insurance policies and switching policies), for the period from 1 April 2012 to 31 December Although Deloitte considered multiple scenarios, the conclusion of its report was that as individuals who prepaid their private health insurance came to the end of the period for which they prepaid (and consequently became exposed to the new regulatory environment for the first time), the number of potential sales transactions within the private health insurance market is likely to increase. This is consistent with iselect s position on forecast growth in the health insurance comparison sector. Notwithstanding the forecast flat growth in Health business unit sales leads for FY13F, total sales leads are forecast by iselect to increase by 12.3%, driven by the continued growth of some of the newer Broadband and Home Loans business units as well as the full year contribution of the Energy business unit. Revenue is also expected to benefit from forecast improvement in conversion (excluding Money) from 5.7% to 6.1%, driven by continued improvements in conversion in the Health business unit, as further refinements were made to the Follow-up Channel, in addition to the full year impact of the Energy business unit launched in FY12. Whilst average RPS for the Health and Car Insurance segment is forecast to remain flat, forecast RPS for the Household Utilities and Financial segment is expected to benefit from an increase in RPS for the Life business unit (28.6% increase from FY12) due to the successful renegotiation of Product Provider agreements. The full year revenue contribution of InfoChoice, acquired in November 2011, is also forecast to contribute positively to FY13F revenue growth for the Money business unit Gross profit and gross profit margin Gross profit is forecast to grow by 8.8% in FY13F, and gross profit margin is forecast to remain consistent at 49.2% compared with 49.1% in FY12, translating to a forecast increase in gross profit of $4.8 million from $55.0 million in FY12 to $59.8 million in line with forecast revenue growth. Direct marketing costs are forecast to increase at a lower rate than revenue, as marketing activity decreases in anticipation of flat sales leads growth in the Health and Car Insurance segment. This is forecast to be partially offset by the full year impact of marketing for the Energy business unit, which launched in late FY12. Direct staff costs are forecast to increase by 15.0% to assist in supporting growth in developing businesses within the Household Utilities and Financial segment such as Energy and Broadband. In addition, higher staff costs in the Health and Car segment is forecast in the first half of FY13F in anticipation of growth in the Health business unit that was impacted by Prepaid PHI Consumers EBITDA and EBITDA margin EBITDA is forecast to grow by 8.1% to $26.0 million in FY13F, increasing in line with revenue and gross profit growth, with the EBITDA margin forecast to remain materially consistent with FY12, at 21.4% for FY13F. In anticipation of the temporary softening in demand in the private health insurance market in response to means testing, management undertook a review of overheads to increase efficiency going forward, resulting in a number of cost savings being identified. This, combined with an increased EBITDA contribution from the Household Utilities and Financial segment, as newer businesses continued to grow, allowed management to forecast a maintained EBITDA margin.

80 78 Financial Information Table 4.21: Selected consolidated cash flow statement items: FY13F compared to FY12 (A$000s) FY12 FY13F Change % EBITDA 24,082 26, % Movement in trail commission receivable (29,979) (18,589) (38.0%) Movement in other net working capital items 4,978 (3,931) n.m. Other non-cash items % Income tax paid Operating cash flow (362) 4,223 n.m. Capital expenditure (13,404) (3,288) (75.5%) Acquisition of business (net of cash acquired) (31,348) n.m. Net cash flow before financing (45,114) 935 n.m. Net interest paid (550) (2,587) 370.4% Net proceeds from / (repayment) of borrowings 35,000 (10,000) n.m. Net proceeds from the issuance of shares 13,177 28, % NIA Facility (18,719) n.m. Net cash flow 2,513 (1,965) n.m. EBITDA to operating cash flow conversion (1.5%) 16.2% Net cash flow Operating cash flow Operating cash flow is forecast to increase from ($0.4 million) in FY12 to $4.2 million in FY13F, as upfront fee revenue growth continues to outstrip trail commission revenue growth, reflecting the shift towards upfront fee arrangements with Product Providers (such as in the Life business unit), and the increasing contribution of newer businesses (including the full year contribution of the Energy business unit, which was launched in FY12). Upfront fee revenue is forecast to represent 60.7% of total revenue in FY13F, up from 51.2% in FY12. As a result, EBITDA to operating cash flow conversion is forecast to increase to 16.2% in FY13F. This improvement in forecast operating cash flow is expected to be partially offset by a forecast decrease of $4.5 million in trade payables as a result in the implementation of a new payment management system, which has provided additional granularity over payment cycles (in order to more effectively monitor working capital trends). Capital expenditure Capital expenditure is forecast to be $3.3 million for FY13F, down from $13.4 million in FY12, as a result of the non-recurrence of various capital expenditure items referred to in Section , primarily relating to the move to the new Cheltenham campus in FY12 ($6.6 million), the large software platform development projects that occurred in the previous year, including the Energy, Money and Home Loans platforms, as well as further investments in the iconnect platform. iselect remains committed to investing in its technology platforms, and is currently rebuilding the Car Insurance platform to enable new providers to be efficiently plugged into the iselect platform. Financing cash flow In September and October 2012, the Company raised $28.4 million of equity (less raising costs of $1.2 million), part of which was used to reduce the Goldman Sachs Australia Pty Ltd debt facility. On 30 October 2012, a new $25.0 million facility was entered into with Credit Suisse AG, which has been drawn down upon during FY13F. The remaining proceeds from the issuance of shares arose from the exercise of options. In addition to the refinancing impacts above, iselect has entered into a distribution agreement and provided a deferred payment facility to NIA Limited (NIA). The arrangement provides for a deferral of the payment of the upfront fees. NIA is forecast to utilise $18.7 million of the facility in FY13F. Additional detail regarding this deferred payment facility is contained in Section

81 iselect Limited Six months ending 31 December 2013 compared to six month ended 31 December 2012 Table 4.22: Selected consolidated income statement items: 1H FY13 compared to 1H FY14F (A$000s) 1H FY13 1H FY14F Change % Upfront fee revenue 24,342 31, % Click-through revenue 1,625 1,020 (37.2%) Other business revenue 3,433 4, % Total upfront fee revenue 29,400 36, % Trail commission revenue current period sales 14,283 16, % Trail commission revenue expected cash flow adjustments to historical trail receivable Trail commission revenue interest income relating to the unwind of the discount on historical trail receivable (452) - n.m. 3,923 4, % Total trail commission revenue 17,754 21, % Total operating revenue 47,154 58, % Gross profit 20,255 26, % Gross profit margin 43.0% 45.8% EBITDA 3,928 7, % EBITDA margin 8.3% 13.6% EBIT 1,512 5, % EBIT margin 3.2% 9.3% Revenue Revenue is forecast to increase 23.2% in 1H FY14F, driven by an increase in demand for private health insurance comparison, as described in Section In addition to the forecast increase in the Health business unit sales leads as prepaid private health insurance consumers continue to return to the market, sales leads are forecast to increase for the Health and Car Insurance segment, due to an increase in direct marketing investment. This comes after a focus on improving profitability for the Car business unit in the prior period. In addition to the forecast increase in sales leads, conversion is forecast to increase for the Household Utilities and Financial segment due to the continued growth in the newly launched Energy business unit, and the introduction of the dialler software for the Life business unit Gross profit and gross profit margin Gross profit is forecast to increase by 31.4% from $20.3 million in 1H FY13 to $26.6 million in 1H FY14F, reflecting a forecast increase in gross profit margin from 43.0% to 45.8% as revenue growth is forecast to outpace growth in direct marketing and staff costs, reflecting the scalability of the Health business unit. In addition, the conversion ratio is forecast to increase to 6.3%, providing further efficiencies in direct costs EBITDA and EBITDA margin EBITDA is forecast to increase by 101.7% from $3.9 million in 1H FY13 to $7.9 million for 1H FY14F, achieved by a combination of gross profit improvement as the market returns to typical levels of demand in private health insurance, as well as the savings in the overhead cost base as continued efficiencies are generated in 1H FY14F. As a result, EBITDA margin is forecast to increase from 8.3% in 1H FY13 to 13.6% in 1H FY14F.

82 80 Financial Information Table 4.23: Selected consolidated cash flow statement items: 1H FY13 compared to 1H FY14F (A$000s) 1H FY13 1H FY14F Change % EBITDA 3,928 7, % Movement in trail commission receivable (3,599) (4,768) 32.5% Movement in other net working capital items (2,821) 2,647 n.m. Other non-cash items % Income tax paid Operating cash flow (2,234) 6,747 n.m. Capital expenditure (1,842) (1,453) (21.1%) Net cash flow before financing (4,076) 5,294 n.m. Net interest (paid) / received (1,805) 147 n.m. Net repayment of borrowings (15,000) n.m. Net proceeds from the issuance of Shares 28,406 n.m. NIA facility (9,230) (10,370) 12.4% Net cash flow (1,705) (4,929) 189.1% EBITDA to operating cash flow conversion (56.9%) 85.1% Net cash flow Operating cash flow Net working capital for 1H FY14F is forecast to increase as a result of comparatively higher growth in upfront fee revenue (25.2% growth from 1H FY13 to 1H FY14F) than trail commission revenue (19.8% growth from 1H FY13 to 1H FY14F), the non-recurrence of the one-off decrease in days payable outstanding as a result of the introduction of a new payments system, and the timing of payments in 1H FY13. These factors are forecast to increase EBITDA to operating cash flow conversion from (56.9%) in 1H FY13 to 85.1% in 1H FY14F. Capital expenditure Forecast capital expenditure in 1H FY14F is expected to remain materially consistent with that for 1H FY13. Financing cash flow Financing cash flows are forecast to decrease by approximately $12.6 million, as a result of the non-recurrence of refinancing and capital raising activities that occurred in 1H FY13.

83 iselect Limited Sensitivity analysis The Forecast Financial Information included in Section is based on a number of key assumptions which have been outlined above and which are subject to change. The Forecast Financial Information is also subject to a number of risks as outlined in Section 5. Investors should be aware that future events cannot be predicted with certainty and as a result, deviations from the figures forecast in this Prospectus are to be expected. To assist investors in assessing the impact of these assumptions on the Forecast Financial Information, the sensitivity of the forecast NPAT for FY13F and CY13F to changes in certain key assumptions is set out below. The sensitivity analysis is intended to provide a guide only and variations in actual performance could exceed the ranges shown. Table 4.24: Sensitivity analysis on forecast NPAT for FY13F and CY13F FY13F NPAT impact Assumption Variance (A$000s) CY13F NPAT impact (A$000s) Leads (excluding Money) + / 1.0% (relative) + / / 749 Total conversion ratio (excluding Money) + / 0.25% (absolute) + / 1,496 + / 2,909 Gross annual premium + / 1.0% (relative) + / / 701 Revenue per sale (Health business unit only) + / 1.0% (relative) + / / 615 Discount rate for trail receivable + / 1.0% (relative) (248) / 266 (507) / 544 Care should be taken in interpreting these sensitivities. The estimated impact of changes in each of the variables has been calculated in isolation from changes in other variables, in order to illustrate the likely impact on the forecast. In practice, changes in variables may offset each other or be additive, and it is likely that the Company would respond to any adverse change in one variable by seeking to minimise the net effect on iselect s NPAT. For example, a change in conversion may result in changes to staffing levels, marketing expenditure, and allocation of resources. In addition to impacting forecast earnings and cash flow, changes in the following key assumptions would also impact the fair value of trail commission receivable from historical sales recognised on the consolidated balance sheet. Table 4.25 presents the estimated impact of changes to key assumptions on the fair value of the trail commission receivable as at 31 December Table 4.25: Sensitivity analysis on trail commission receivable as at 31 December 2012 Assumption Variance Gross annual premium + / 1.0% (relative) 3,748 / (3,469) Lapse rate for trail commission receivable + / 1.0% (relative) (3,961) / 4,326 Balance sheet impact as at 31 December 2012 (A$000s)

84 82 Financial Information 4.8 Indebtedness Table 4.26: Indebtedness of iselect (A$000s) Historical (before Completion of the Offer) 31 December 2012 Pro Forma Adjustments Pro Forma (following Completion of the Offer) 31 December 2012 Cash and cash equivalents 18,307 68,106 86,413 Bank loans 1 (20,000) 20,000 Net total (indebtedness) / cash and cash equivalents (1,693) 88,106 86,413 Note: 1 Net total indebtness is presented above at the most recently reviewed balance sheet date. On 6 February 2013, $5.0 million was drawn down from the Term Debt Revolving Facility, increasing total drawn down debt to $25.0 million. iselect has existing secured financing arrangements with the Commonwealth Bank of Australia (CBA). A brief summary of iselect s existing facilities is included below in Table Table 4.27: Summary of facilities ($ million) Lender Facility Use of proceeds Limit Commonwealth Bank of Australia Term Debt Revolving Facility Working capital and general corporate purposes (e.g. refinancing/retiring existing indebtedness; permitted acquisitions; and / or capital expenditure) 35.0 Commonwealth Bank of Australia LC Facility Working capital and general corporate purposes 5.0 Total facilities 40.0 Financial covenants The agreement under which the CBA facilities will be made available contains financial covenants typical for facilities of this nature. iselect expects to remain in compliance with these undertakings. A brief summary of these financial covenants is included below in Table Table 4.28: Financial covenants Financial Covenant Required amount/ratio Borrowing Base <50% up to 30 June 2013, then <45% up to 30 June 2014, then <40% EBITDA >$23,000,000 up to 30 December 2013, then >$25,000,000 up to 29 June 2014, then >$27,500,000 to 30 December 2014, then >$30,000,000. Available Liquidity >$18,000,000 up to 30 June 2013, then >$10,000,000 Borrowing Base (tested quarterly): meaning, the amount expressed as a percentage that financial indebtedness bears to the present value of trail commission receivable as reported in the financial statements of iselect; EBITDA (tested quarterly): meaning, the EBITDA of iselect for the preceding 12 months (adjusted for exceptional and extraordinary items appropriate for a facility of this nature); and Available Liquidity (tested quarterly): meaning, the aggregate of all uncommitted cash or cash equivalents freely available for repayment of financial indebtedness by a member of iselect, any cash provided to CBA as cover for moneys owed and any available commitment under the Term Debt Revolving Facility with CBA. iselect is currently in compliance with its financial covenants and expects to remain in compliance with them.

85 iselect Limited Security iselect which, from time to time together hold at least 95% of Group total assets and generate at least 95% of Group EBITDA, are or will be guarantors under the CBA facilities and have provided or will provide to CBA fixed and floating charges over all their respective present and after-acquired property and other security interests as required by CBA from time to time (e.g. cash cover security in respect of the LC Facility). 4.9 Dividend policy The Company has no current plans to pay a dividend in FY13F or FY14F. The Company has a number of growth strategies it is pursuing, and the Board will consider the payment of dividends in the future having regard to the funding requirements of those growth strategies. Shares issued pursuant to this Prospectus will rank equally with each other for dividend entitlements. iselect does not provide any assurance of the future level of dividends or the extent to which they are franked. The ability to pay dividends and their franking will depend on a number of factors, some of which are beyond the control of iselect and its Directors.

86

87 85 Risks 5

88 86 5. Risks iselect s business is subject to risk factors, both specific to its business activities and of a more general nature. Individually, or in combination, these factors may affect the future operating performance of iselect and the value of an investment in the Company. Each of the risks set out below could, if they eventuate, have a material adverse impact on iselect s business, financial condition and results of operations. 5.1 Risks specific to an investment in iselect iselect is exposed to potential changes in government policy and legislation, in particular with respect to the Australian private health insurance market Each of the main product markets in which iselect provides its comparison services is subject to varying degrees of government policy and regulation. There is a risk that governments may from time-to-time make changes to regulatory policy. Changes in the regulatory regime applicable to a given product market have the potential to adversely affect consumer behaviour, including affecting purchasing decisions that are made by consumers. This has the potential to impact iselect s sales volumes in a given product market (as well as the value of any commissions or fees that it may be entitled to earn from sales of products in that market). Increased regulation can also result in greater compliance costs for iselect. As a result, adverse regulatory changes have the potential to impact on iselect s profitability and its future growth prospects. This is especially the case for the Australian private health insurance market. Given the importance of the sale of private health insurance policies to iselect s revenue, and the regulated nature of the private health insurance market, this risk is most relevant to the Health business unit. The Federal Government supports the private health insurance market as a means of reducing funding pressure on the public healthcare system and has implemented a range of initiatives to encourage the take up of private health insurance as described in more detail in Section 2.9. Changes to that regulatory regime could have a detrimental impact on the level of revenue that iselect earns from Health. For example, if the Federal Government removed the Medicare Levy Surcharge, this could reduce demand for private health insurance (as there would no longer be any taxation disincentive from failing to acquire a private health insurance policy). The Federal Government could also impact the demand for private health insurance policies by adjusting the Federal Government Rebate, e.g. by introducing more stringent means testing than it already has done. Amendments to existing regulation or the introduction of additional Federal Government policies could adversely affect the attractiveness and future demand for private health insurance which in turn could impact the volume of sales that iselect can deliver through its platform, adversely impacting the Company s profitability and prospects for future growth. In addition, the ways in which iselect provides and charges for comparison services are themselves subject to a risk of changes in government policy and regulation. For example, changes in government regulation may affect the ways in which iselect may communicate with its consumers. Such regulatory changes have the potential to adversely impact iselect s operational model, which in turn can detract from iselect s ability to maximise its sales revenue and profitability iselect may face significant competition from product aggregators, direct providers and potential new entrants to the Australian online product comparison sector The markets for insurance, personal finance, home loans, broadband and energy products in Australia are competitive. iselect not only competes with other online comparison sites but also competes against intermediaries and brokers selling products in the relevant product markets as well as Product Providers who are not using iselect as a distribution channel, but who instead market to consumers directly through traditional media and/or branches or centres. In addition, iselect may also face significant competition from potential new entrants to the Australian online comparison sector. Increased competition could result in a reduction of iselect s ability to generate revenue, which could negatively impact iselect s profitability and prospects for future growth as follows: increased competition could result in iselect attracting a smaller share of the market for sales in each of the underlying product markets in which it operates, which could result in a reduction in the level of fees and commission revenue that it earns from Product Providers; and new entrants to the product comparison sector may provide more attractive terms and conditions for Product Providers, which could result in a decline in the number of products which Product Providers choose to distribute through iselect s platform iselect s cash receipts from future trail commissions may be lower than expected iselect derives the majority of its revenue from fees paid by its Product Providers for each successful sale. As described in more detail in Section 3.6, the Company earns the majority of its revenue from two distinct streams of fee revenue, namely upfront fees and trail commissions. Historically, trail commissions (being the ongoing fees related to the private health insurance, life insurance, car insurance and home loan consumers that iselect has referred to Product Providers and who remain with the relevant Product Provider for a pre-determined period after the initial product purchase) have historically made up the largest proportion of iselect s revenue (FY12 was the first year when upfront revenue comprised a larger portion of revenue than trail commissions). iselect s trail commission portfolio is a significant business asset whose value exceeded $95.0 million as at 31 December Upon initial recognition, trail receivables are recognised at fair value on the Company s consolidated balance sheet, being the present value of expected future trail revenue receivables, discounted to their present value using discounted cash flow valuation techniques. The recognition of future trail commission revenue requires iselect to make certain estimates and assumptions based on industry data and historical experience which will have a direct impact on the present value of estimated trail commission revenue. These estimates and assumptions are complex and include but are not limited to: forecast product price increases; the rate of product termination (e.g. mortgage repayments and refinancing) or lapse of insurance policies (including mortality allowance);

89 iselect Limited population mortality rates; inflation, risk free rates of return and other discount rates; the Product Provider agreement terms and conditions; the credit risk of Product Providers who have the obligation to pay trail commissions to iselect; and estimated impact of known Australian Federal and state government policy. Subsequent to initial recognition and on an ongoing basis, trail commission receivable is recognised at amortised cost which requires that discount rates, including interest rates, are not altered from the time of initial recognition of the trail commission revenue. In addition, some Product Providers have the ability to claw back a proportion of commission paid should a consumer terminate their agreement with the Product Provider shortly after the sale. iselect s revenue is recognised net of claw back amounts. Claw back periods vary by Product Provider and product, but can range between 0 and 12 months. Forecasting iselect s revenue involves making an estimate of future claw back rates, and there is a risk that the Company could underestimate the amount of commission that is clawed back. This would result in an overestimation of future revenue and lead to a reduction in profitability when that overestimation is corrected. The assumptions and model for valuing the trail commission receivable is subject to ongoing review by actuaries (including quarterly review within the Health business unit and bi-annually within the Life business unit). The trail commission portfolio was subject to expert valuation by Deloitte Actuaries & Consultants Limited at 31 December However, if actual experience diverges from assumptions, or if assumptions underpinning the valuations change, this could materially affect the value of the trail commission receivable, which in turn would impact iselect s profitability, cash flows and consolidated balance sheet. If iselect is required to impair the value of trail commission receivable recognised on its consolidated balance sheet by adjusting such assumptions, this may result in a significant loss which in turn could affect iselect s profitability and resultant cash flows iselect is impacted by adverse decisions taken by Product Providers iselect earns the majority of its revenue (FY12: 81%) from the sale of products in the Health business unit. In turn, iselect derives a majority of its Health revenue from several key Product Providers. In FY12, it derived 89% of its Health business unit revenues through the intermediation of products from its top five Product Providers. Other business units also have varying levels of reliance on key Product Provider relationships. Key Product Providers may make fewer products available, may not make certain products available or may not make any products available to iselect. This may be for a number of reasons, including, in the case of Product Providers who are insurers, decisions they take to limit the number of new policies that they write in response to changes in market conditions, their perception of where their best growth opportunities may lie or as a result of a lack of sufficient capital or funds generally which are required to underpin new policy growth. The loss or impairment of any of these Product Provider relationships, or a reduction in the nature and amount of products they make available, could adversely impact iselect s business, financial condition and results from operations including iselect s ability to meet its financial forecasts. While new arrangements can be made to replace any loss of sales in the instance of the loss or impairment of a relationship with a Product Provider (either through new or existing Product Providers), there is no guarantee that terms negotiated will be as favourable. In order to diversify the range of Product Providers on the iselect panel in the longer term, the Company aims to increase the number of Product Providers who distribute their products through its service. iselect s ability to do this not only depends on demonstrating the benefits of using iselect s distribution channel but also requires it to change Product Providers perceptions about the appropriateness of the end-to-end distribution model offered by a third party intermediary such as iselect. There is no guarantee that iselect will be able to influence Product Providers to use iselect which may result in a reduction in the expected growth in sales of products in each business unit iselect relies upon attracting and retaining management, technical, operating, sales and marketing personnel iselect s ability to effectively execute its growth strategy depends upon the performance and expertise of staff. As a full service comparison provider, iselect relies on trained and technical staff in order to operate its comparison platforms and information technology systems, trained salespeople to manage the Consumer Advice Centre, and professional staff who have specialist knowledge of the Company s underlying product markets. iselect may not be able to attract and retain key staff or be able to find effective replacements in a timely manner. The loss of any key staff, or any delay in their replacement, could have a material adverse effect on iselect s ability to service consumers across its business units, and may hamper its ability to achieve its strategic growth objectives and its financial performance forecasts iselect may be unable to attract a sufficient level of traffic to its websites The attractiveness of the comparison platform provided by iselect to its Product Providers is influenced by iselect s ability to draw consumers to its websites who compare and ultimately purchase products provided by the Product Providers. A decline in the level of traffic to iselect s website could have a material adverse effect on iselect s ability to generate commissions and fees from the sale of products through its websites as well as on its relationships with Product Providers. There are a number of factors that can negatively affect the volume of traffic to the iselect websites, which include: Any changes to the algorithms or terms of service of search engines, such as Google, which cause iselect s websites either to be ranked lower or be excluded from search results presented on those search engines can lead to a significant decline in traffic to iselect s websites. Search engines are a key driver of consumer traffic to the iselect websites and so iselect depends heavily on strong organic search rankings for its websites. If iselect is unable to quickly recognise and adapt to any adverse changes in its search results, this can have a material adverse impact on the level of traffic received on iselect s websites;

90 88 Risks If iselect s marketing and advertising activities are not effective in attracting consumers to its websites, this can also lead to reduction in the level of traffic; Security breaches or negative publicity that affect consumer confidence in the iselect brand in comparison offering may also detract from the level of traffic to iselect s websites, as could a failure of iselect s information technology and communication systems that result in the iselect websites being unavailable for a prolonged period of time; and The degree of success of iselect s substantial investments in advertising and marketing campaigns across both online and traditional media in establishing and maintaining the iselect brand and raising consumer awareness of its comparison offering. There is no guarantee that these activities will be successful and, if they are not, this may affect the volume of traffic to the iselect website iselect s relationship with current and potential Product Providers may be affected by iselect s support of new market entrants iselect may from time-to-time be supportive of new Product Providers into existing product markets who cater to consumer demand for new product arrangements. For example, iselect agreed to provide a secured facility to NIA to enable NIA to defer the timing of payment of upfront fees that it owes to iselect for referred sales during the period of the facility, expiring in 24 months on 31 July 2014 (with the ability to extend for a further 12 months). Whilst involvement with new entrants who provide innovative products may help increase the competitiveness of iselect s comparison service, it also carries risks. For example, existing or potential Product Providers may become less inclined to use iselect as a distribution channel if they perceive that this may indirectly result in an increase in competition in their product market or causes them to doubt iselect s comparison services. Further, new entrants may not be successful and may experience difficulties in meeting their obligations to pay fees and commissions to iselect in full or at all in circumstances where iselect has been unable to obtain sufficiently valuable security for the full amounts deferred under the relevant arrangements iselect is exposed to changes to Accounting Standards Australian Accounting Standards are set by the Australian Accounting Standards Board ( AASB ) and are outside the control of either iselect or its Directors. The AASB is due to introduce new or refined Accounting Standards during the period from 2014 to 2018, which may affect future measurement and recognition of key income statement and balance sheet items, including revenue and receivables. There is also a risk that interpretations of existing Accounting Standards, including those relating to the measurement and recognition of key income statement and balance sheet items, including revenue and receivables, may differ. Changes to Accounting Standards issued by the AASB or changes to the commonly held views on the application of those standards could materially adversely affect the financial performance and position reported in iselect s consolidated financial statements. In particular, there is currently no specific guidance in Accounting Standards as to the recognition and measurement of trail commission revenue and receivables other than the principles contained in general revenue recognition and financial instruments Accounting Standards. There is a risk that if the AASB issues specific amendments or interpretation guidance relating to trail commission revenue and receivables, which differs to the manner in which the Company currently accounts for trail commission revenue and receivables, the Company may need to change the way in which it accounts for trail commission revenue and receivables, potentially affecting the initial and subsequent recognition of trail commission revenue which may adversely impact key income statement and balance sheet items of the Company The timing of iselect s earnings is currently biased strongly towards the second half of the financial year. This is due to its reliance on revenue from the sale of private health insurance policies, with a large proportion of annual revenue generated in June. iselect currently earns the majority of its revenue from its Health business unit (FY12: 81%), and is therefore exposed to the seasonal fluctuation in sales of private health insurance policies that is prevalent in that market. As a result of the timing of the announcement of annual premium increases in private health insurance policies (typically occurring February/March, but which take effect from 1 April in a given year), and a higher number of consumers looking to initiate or switch their private health insurance policies during the final months of a financial year (prior to the 30 June tax year end) compared to in the first nine months of the tax year, there is a seasonal fluctuation in the level of private health insurance policy sales. Therefore, iselect generates peak volumes of private health insurance leads during the final quarter of the financial year, with peak demand typically occurring in the month of June (and in particular, in the second half of June). Accordingly, the financial performance of the Health business unit in the month of June (and in particular, in the second half of June) has historically been a material driver of the Company s annual financial result. Given the materiality of financial performance in June to iselect s annual financial result, there is a risk that iselect may not become aware of any material divergence in its financial position and performance from its earlier expectations or published forecasts or guidance (if any) and so may not be in a position to update the market until late in the month of June (or even only after the end of June) in any given financial year Inability to achieve anticipated growth in existing business units iselect has been diversifying its business, both organically through the launch of new business units, and via acquisition with a view to reducing the proportion of its revenue that comes from the Health business unit. It is iselect s intention to expand its business units in Money and Broadband by applying its end-to-end model in those underlying product markets. However, it is difficult to estimate the rate at which consumers for products in those business units will adapt to, and use, iselect s distribution model. Further, the take up of the service these business units provide will be dependent upon Product Providers participating in those iselect business units. As a result, there is a risk that these business units may achieve less take up than anticipated, which could impact the Company s ability to achieve its forecast earnings.

91 iselect Limited iselect may be unable to effectively manage the integration of new acquisitions The Company may continue to engage in acquisitions in the future to further grow its business. An important factor in the prospects for future growth of iselect is the successful integration of any acquired businesses into iselect s existing business. If iselect is unable to transition new businesses onto its technology platform, implement its standards, policies and business procedures, retain key personnel, or otherwise effectively manage its growth, its prospects may be affected as it may be unable to provide the same product offering and consumer service across its various underlying product markets. Furthermore, if any businesses acquired by iselect, either historically or in the future, do not meet business expectations, iselect may be required to impair goodwill and other intangible assets associated with these acquisitions iselect relies on its websites to provide its comparison service The availability of iselect s comparison service requires the efficient functioning of iselect s websites, which in turn depends on the performance, reliability and availability of its information technology and communications systems. These systems may be adversely affected by a number of factors including damage, equipment faults, power failure, computer viruses, misuse by employees or contractors, external malicious interventions such as hacking, fire, natural disasters or weather interventions. Furthermore, potential faults on iselect s websites which could cause transaction errors or misrepresentation of products available on those websites, including but not limited to description of benefits, terms or prices, could result in legal exposure (either from iselect s consumers or its Product Providers), potentially leading to a loss of suppliers, damage the iselect brand and its reputation or even cause a breach of certain regulatory requirements (including those affecting any required licence) Breach of licences and regulatory requirements iselect must operate its business within the applicable regulatory environment. For example, members of iselect are required to hold an Australian Financial Services Licence (AFSL) or Australian Credit Licence (ACL) in respect of certain products and as part of those licences are required to comply with certain conditions. A loss of required licences would have a material adverse impact on iselect s revenue and profitability as it would prevent iselect from being able to participate in the relevant businesses requiring those licences. There are a number of other important regulatory requirements that affect iselect. For example: iselect must also comply with Australian consumer law and any other similar legislative requirements, in relation to its advertising and selling of products and services. There is no guarantee that iselect s views about the accuracy of its advertising and promotional activities will not be challenged by competitors, consumers and regulators (including the ACCC or ASIC), with the result that iselect may be forced to modify its marketing activities or in extreme cases provide undertakings, or become obliged to pay fines or compensation; iselect is required to adhere to regulatory guidance about the provision of comparison services, including guidance about what representations can be made to consumers about the extent to which a given comparison has taken into account all products in the relevant product market; iselect is subject to the requirements of privacy regulation when collecting and handling personal information; and Once it is listed on the ASX, iselect will also be subject to increased disclosure and other requirements. Failure to comply with relevant regulatory requirements could result in a number of consequences including warnings and fines from regulators, increased cost to iselect to change its compliance procedures, loss of its AFSLs and/or reputational damage to iselect iselect is exposed to potential breaches of data security Through the ordinary course of business, iselect collects a wide range of personal and financial data from consumers using its website through the secure transmission of confidential information over public networks. This includes information such as personal contact details as well as payment information and credit card details. iselect has a number of mechanisms in place that form a control network to prevent any potential data security breaches. Among others, these include firewalls, encryption of consumer data, a privacy policy, and policies to restrict access to data to authorised employees. However, there is no guarantee that the measures taken by iselect will be sufficient to detect or prevent breaches. Advancements in computing capabilities and cryptography (or other similar developments) may lead to a compromise or even breach of the technology platform used by iselect to protect confidential information. Third parties may attempt to penetrate the iselect network security and misappropriate consumer information. If successful, any data security breaches or iselect s failure to protect confidential information could result in loss of information integrity, breaches of iselect s obligations under applicable privacy laws (which will soon result in heavy penalties for serious and repeated breaches) or customer and Product Provider agreements and website and system outages, each of which may potentially have a material adverse impact on iselect s reputation as well as iselect s level of sales revenue and profitability iselect relies on core information technology and other systems to provide its comparison service The availability of iselect s comparison service (in particular, its websites), depends on the performance, reliability and availability of its information technology and communication systems. This includes its core technologies such as its phone systems, its computer servers, its back-end processing systems as well as its websites. These systems may be adversely affected by a number of factors including major events such as acts of terrorism or war, a breakdown in utilities such as electricity and fibre optic cabling and even pandemics. Events of that nature may cause one or more of those core technologies to become unavailable. There are also internal and external factors that may adversely affect those systems and technologies such as natural disasters, misuse by employees or contractors or other technical issues. The Company s

92 90 Risks disaster recovery plans may not adequately address every potential event and its insurance policies may not cover loss or damage that iselect suffers as a result of a system failure. Any damage to, or failure of, iselect s key systems can result in disruptions in iselect s ability to run its websites as well as its consumer contact centre and functions of its Consumer Advice Team. This in turn can reduce the Company s ability to generate revenue, impact consumer service levels and damage the iselect brand. This could adversely affect iselect s ability to generate new business and cause it to suffer financial loss iselect is exposed to the risk of damage to its reputation arising from relationships with associated parties iselect s business and brand are closely linked to the provision of products to consumers from various Product Providers and may also be affected by its relationships with its suppliers, consumers and other associates of iselect who iselect supports but who engage in activities outside of iselect s business. There is risk of damage to iselect s reputation or brand arising from any association with its Product Providers or other associates, which is perceived by consumers or others to be inappropriate, unethical or inconsistent with iselect s business values. Such damage may reduce the attractiveness of iselect to consumers and may lead to negative publicity, loss of revenue and loss of existing and potential client business. Sustained reputational damage could have a material adverse impact on iselect s financial performance as a result of reductions in revenue and an impact on its ability to make sales in the future Protection of intellectual property iselect has developed specialised technology and matching algorithms for its business. In particular, iselect uses two categories of algorithms, DSS and iconnect, as described in Section iselect uses, or has applied for, certain patents in relation to the protection of its algorithms. The laws relating to intellectual property and patents assist to protect its proprietary rights. Despite these measures, there can be no guarantee that unauthorised use or copying of iselect software, data, specialised technology or algorithms will be prevented. Patent applications may take a number of years to be finalised and iselect is currently in the process of registering a number of patent applications in relation to its algorithms. In addition, iselect cannot be certain that the validity, ownership or authorised use of intellectual property relevant to the business of iselect will not be successfully challenged by third parties. 5.2 General risks of an investment in iselect Price of Shares The price at which Shares are quoted on the ASX may increase or decrease due to a number of factors. These factors may cause the Shares to trade at prices below the Offer Price. There is no assurance that the price of the Shares will increase following the quotation on the ASX, even if iselect s earnings increase. Some of the factors which may affect the price of the Shares include fluctuations in the domestic and international market for listed stocks, general economic conditions, including interest rates, inflation rates, exchange rates, commodity and oil prices, changes to government fiscal, monetary or regulatory policies, legislation or regulation, inclusion in or removal from market indices, the nature of the markets in which iselect operates and general operational and business risks. Other factors which may negatively affect investor sentiment and influence iselect specifically or the stock market more generally include acts of terrorism, an outbreak of international hostilities or fires, floods, earthquakes, labour strikes, civil wars and other natural disasters iselect is exposed to general economic conditions in Australia iselect s business is affected by general economic conditions in Australia and broader consumer sentiment for products marketed through the iselect platform. For example, weak economic conditions and/or negative consumer sentiment could have a significant adverse impact on the number of new sales facilitated through the iselect platform and/or renewal rates of insurance policies referred to individual private health insurance funds by iselect. As a result, such conditions could have an adverse impact on iselect s financial performance Existing Shareholders retain a significant stake in iselect post-listing Following completion of the Offer, the Existing Shareholders will hold approximately 55.1% of the issued capital of iselect (excluding any Shares acquired by Existing Shareholders under the Offer and approximately 8.88 million LTIP Shares). A significant sale of Shares by the Existing Shareholders, or the perception that such sales have occurred or might occur, could adversely affect the price of Shares. Alternatively, the absence of any sale of Shares by the Existing Shareholders may cause or contribute to a diminution in the liquidity of the market for the Shares Risk of Shareholder dilution In the future, iselect may elect to issue shares to engage in fundraisings and also to fund, or raise proceeds, for acquisitions the Company may decide to make. While the Company will be subject to the constraints of the Listing Rules regarding the percentage of its capital it is able to issue within a 12 month period (other than where exceptions apply), Shareholders may be diluted as a result of such issues of shares and fundraisings Exposure to changes in tax rules or their interpretation Tax rules or their interpretation in relation to equity investments may change. In particular, both the level and basis of taxation may change. In addition, an investment in the Shares involves tax considerations which may differ for each Shareholder. Each prospective shareholder is encouraged to seek professional tax advice in connection with any investment in the Company Force majeure events Events may occur within or outside Australia that could impact upon the global and Australian economies, the operations of iselect and the price of the Shares. The events include but are not limited to acts of terrorism, an outbreak of international hostilities, fires, floods, earthquakes, labour strikes, civil wars, natural disasters, outbreaks of disease or other natural or man-made events or occurrences that can have an adverse effect on the demand for iselect s services and its ability to conduct business. iselect has only a limited ability to insure against some of these risks.

93 91 Key people, interests and benefits 6

94 92 6. Key people, interests and benefits 6.1 Board of Directors The Directors bring to the Board relevant expertise and skills, including industry and business knowledge, financial management and corporate governance experience. Figure 6.1.1: Board of Directors Director Position Experience Damien Waller Executive Chairman Damien is an Australian online entrepreneur based in Melbourne, Australia and is the Executive Chairman and co-founder of iselect Under Damien s leadership over the past 13 years the Company has grown to become a leading Australian online-driven comparison service In recent years, Damien spearheaded the expansion of the Company into new underlying markets including Home Loans, Money and Energy Damien s position within iselect has evolved over the years and has included Managing Director, CEO and now, Executive Chairman Prior to iselect, Damien was recruited by JB Were & Son via its elite graduate program Damien is currently a director of Nimble Money Pty Ltd, and other related Nimble entities. Damien is a Fellow of FINSIA (the Financial Services Institute of Australasia) and a member of the Australian Institute of Company Directors (AICD) Matt McCann Greg Camm Chief Executive Officer Non-Executive Director and Deputy Chairman Matt was appointed as Chief Executive Officer of iselect in January 2012 and to the iselect Board of Directors in February 2012 Matt joined iselect in 2008 as Corporate Development Director to drive iselect s group strategy, including Mergers and acquisitions (M&A) and corporate finance. In this role, Matt was responsible for expanding the iselect consumer offering via the launch of new business categories and for attracting additional investment to support the continued growth of the Company. Since 2011, Matt has also led the successful acquisition and integration of InfoChoice. Matt was appointed as Company Secretary in September 2010 and held that position until February 2012 Matt has over 17 years of strategy, M&A, corporate finance, legal and operational experience in early stage, high growth companies. Prior to joining iselect, Matt spent a decade in the U.K., developing and running start-up technology and media businesses. During his time in the U.K., Matt was the Commercial and Strategy Director of British Telecom s mobile TV business unit Movio Prior to this, he was the Business Affairs Director and Company Secretary for Shazam Entertainment, where he was responsible for commercial and corporate strategy, and international development (including fundraising and investor relations) Matt holds an LLB and trained at the international law firm Allens Arthur Robinson. He is admitted to practice in the Supreme Court of Victoria and the Federal and High Courts of Australia Greg joined the iselect Board in August 2012 and has nearly 40 years experience in the financial services industry in Australia and New Zealand Greg spent 16 years in senior roles at Australia and New Zealand Banking Group Limited, including Managing Director of the Mortgage Division, Managing Director of ANZ New Zealand and Managing Director of the Australian Retail Banking Division of ANZ Following ANZ, he served as Managing Director of AMP Financial Services (New Zealand). He then served as CEO of Superpartners Pty Ltd for five years. Greg retired from executive management roles in 2012 Greg holds an MBA from The University of Melbourne and a BBus (Accounting & Finance) from Monash University. He is a Certified Practising Accountant and a Senior Fellow of FINSIA. He serves on the Boards of mecu Ltd (trading as bankmecu) and Bottlecyclers Pty Ltd. He is a Trustee of the Australian Cancer Research Foundation

95 iselect Limited Director Position Experience Pat O Sullivan Non-Executive Director Pat was appointed to the iselect Board of Directors in September 2010 Pat brings over 30 years of international commercial and business management experience to the iselect Board Pat s prior professional experience includes Chief Financial Officer of Nine Entertainment Co. between 2007 and Prior to that he was Chief Operating Officer of Publishing and Broadcasting Ltd (PBL), a position he has held since February Before joining PBL, Pat was the Chief Financial Officer of SingTel Optus Pty Ltd, a position he held for over five years with responsibility for the company s financial affairs including corporate finance, taxation, treasury, risk management, procurement and property Previously, Pat held a number of positions at Goodman Fielder, Burns, Philp & Company, and PwC Pat is also a non-executive director of carsales.com Limited and Little Company of Mary Health Care Ltd Pat is currently a member of The Institute of Chartered Accountants in Ireland and The Institute of Chartered Accountants in Australia, and is a graduate of the Harvard Business School s Advanced Management Program Leslie Webb Shaun Bonètt Non-Executive Director Non-Executive Director Leslie was appointed to the iselect Board of Directors in February He brings legal expertise to the Board given his experience as a barrister and solicitor Leslie has consulted extensively to both publicly listed and unlisted public companies in the information technology (IT) and biotechnology industries on corporate and financial planning, intellectual property, corporate governance and strategic planning issues. In his role as a consultant, he has been actively involved in advising on the globalisation of Australian companies Previously, Leslie was a director of the ASX listed biotechnology company Gradipore Ltd, non-executive Chairman of Stem Cell Sciences (Australia) and a non-executive director of Stem Cell Sciences PLC (previously listed on the London Alternative Investment Market) Leslie is currently a non-executive director of Generic Health and is non-executive Chairman of Nimble Money Pty Ltd Leslie is a member of the AICD Shaun was appointed to the iselect Board of Directors in May Shaun founded and is the Chief Executive Officer of Precision Group, an investor, developer and financier of retail and commercial property across Australia. Precision Group owns over A$1 billion of commercial assets in Australia and has diversified its business into financial services and private equity investments, primarily in the IT and health sectors Shaun is a qualified lawyer and Barrister and Solicitor of the High Court of Australia and previously held various corporate advisory roles with publicly listed and private companies. He is also a member of the AICD and Young Presidents Organisation Shaun is also a Director and Chairman of Litigation Lending Services Ltd Shaun is founder and trustee of the Heartfelt Foundation, an Australian charitable trust The composition of iselect s Board committees and a summary of its key corporate governance policies are set out in Section 6.4. Each Director above has confirmed to iselect that he anticipates being available to perform his duties as a non-executive Director or executive Director as the case may be of iselect without constraint from other commitments.

96 94 Key people, interests and benefits 6.2 Management Figure 6.2.1: Management team Executive Position Experience Matt McCann Chief Executive Officer Refer to Section 6.1 David Chalmers Chief Financial Officer and Company Secretary David joined iselect in February 2012 and held the role of Corporate Development Director until being promoted to the role of Chief Financial Officer later that year. In his current role, David maintains overall responsibility for iselect s finance and administration functions David has over 15 years experience across corporate finance, strategy, investment banking and M&A Before joining iselect, David led the corporate M&A and strategy function for DuluxGroup. Prior to this, he held corporate finance and private equity management roles of increasing responsibility with Macquarie Capital. During his time at Macquarie Group, David took a lead role in developing Macquarie Capital s private equity business in Asia David holds a BComm (Hons) from The University of Melbourne and a MBA from INSEAD Jo Thomas Operations Director Jo joined iselect in 2008 to lead the Consumer Advice Team and following increasing levels of responsibility was promoted to the role of Operations Director in Jo maintains responsibility for iselect s end-to-end consumer experience, including the Consumer Advice Centre, e-commerce and online technology platform With over a decade of experience in leading large sales teams, Jo has worked with, and on behalf of, some of Australia s largest companies including Telstra, Citibank, Metlife, Aegis Pty Ltd, Vodafone, Westpac and TRUenergy Jo holds a Bachelor of Communication Studies from The University of Auckland and a MBA from Monash University Scott Wilson Commercial Director Scott joined iselect in February 2013 and holds the position of Commercial Director and maintains overall responsibility for the Company s individual business units and Product Provider relationships Scott has over 20 years of sales and key account management experience within multinational fast-moving consumer goods and entertainment companies Prior to joining iselect, Scott was Sales Director (Australia & New Zealand) for 20th Century Fox Home Entertainment, following senior national sales roles at PZ Cussons and SPC Ardmona Scott holds a Master of Business and Graduate Certificate of Business Administration from The University of Newcastle Elise Morris Human Resources Director Elise joined iselect in February 2012 and leads iselect s human resources function Prior to this, Elise held human resources roles of increasing responsibility for over a decade within some of Australia s most well-recognised companies including Seek Limited and Pacific Brands. During her career, Elise has also held senior management positions within the U.K.-based confectionery manufacturer Cadbury and its parent company Kraft Foods Elise holds a BBus (Marketing), a Master of Management from Monash University and graduate qualifications in Psychology

97 iselect Limited Executive Position Experience Roger McBride Marketing Director Roger joined iselect in 2004 as Marketing Manager and over the years has been a driving force behind the strategic development of the iselect brand in Australia Chris Billing Chief Innovation Officer Today, Roger directs all marketing operations at iselect and brings extensive experience and a record of success in innovative marketing including B2B and B2C across online and integrated media and business landscapes Prior to iselect, Roger held various senior marketing and innovation roles across a number of large national and multinational corporations, leading the development and marketing of globally recognised and iconic brands such as Sensis, Thomson Reuters and Ford Motor Company Roger holds a BBus (Marketing) from Monash University Chris joined iselect in 2009 as Product Director, later leading both product and IT delivery and in 2013 became Chief Innovation Officer. Before coming to iselect, Chris held various senior management positions with REA Group, Uecomm Pty Ltd and Sensis. He has 18 years strategy, product management and marketing experience with online and IT companies Today, Chris is responsible for business innovation and future growth at iselect Chris holds a BBus from Victoria University and a Masters of Marketing from The University of Melbourne iselect s Executive Chairman, Damien Waller, is primarily responsible for the strategic development of the Company. Damien has a multi faceted role, which involves oversight of certain major strategic projects (e.g. the deployment of new data analytics techniques) and, in recent years, oversight of the expansion of the Company into new underlying markets including Home Loans, Money and Energy. Matt McCann is iselect s Chief Executive Officer. Matt supervises the day-to-day operations of the Company (including all members of Management), and, along with the Executive Chairman, identifies strategic opportunities and other initiatives for the Company. 6.3 Interests and benefits This Section 6.3 sets out the nature and extent of the interests and fees of certain persons involved in the Offer. Other than as set out below or elsewhere in this Prospectus, no: Director or proposed Director; Person named in this Prospectus and who has performed a function in a professional, advisory or other capacity in connection with the preparation or distribution of this Prospectus; Promoter of iselect; or Underwriter to the Offer, holds at the time of lodgement of this Prospectus with ASIC, or has held in the two years before lodgement of this Prospectus with ASIC, an interest in: The formation or promotion of iselect; Property acquired or proposed to be acquired by iselect in connection with its formation or promotion, or in connection with the Offer; or The Offer, and no amount (whether in cash, Shares or otherwise) has been paid or agreed to be paid, nor has any benefit been given or agreed to be given to any such person for services in connection with the formation or promotion of iselect or the Offer or to any Director or proposed Director to induce them to become, or qualify as, a Director Interests of advisors iselect has engaged the following professional advisors: Credit Suisse (Australia) Limited and Baillieu Holst Ltd have acted as JLMs to the Offer. iselect and SaleCo have paid, or agreed to pay, the JLMs the fees described in Section for these services; Gilbert + Tobin has acted as Australian legal advisor (other than in respect of taxation matters) to iselect in relation to the Offer. iselect has paid, or agreed to pay, approximately $1,530,000 (excluding disbursements and goods and services tax (GST)), for these services up until the Prospectus Date. Further amounts may be paid to Gilbert + Tobin in accordance with its normal time-based charges;

98 96 Key people, interests and benefits Ernst & Young Transaction Advisory Services Limited has acted as the Investigating Accountants and has prepared the Investigating Accountant s Report and has performed work in relation to due diligence enquiries. iselect has paid, or agreed to pay, approximately $95,000 (excluding disbursements and GST) for the above services up until the Prospectus Date; Ernst & Young has performed work in relation to due diligence enquiries. iselect has paid, or agreed to pay, approximately $825,000 (excluding disbursements and GST) for the above services up until the Prospectus Date; and Deloitte Actuaries & Consultants Limited has provided actuarial services to iselect in relation to the Offer. iselect has paid or agreed to pay approximately $160,000 (excluding disbursements and GST) for these services. These amounts, and other expenses of the Offer, will be paid out of funds raised under the Offer or cash otherwise available to iselect (or one of its subsidiaries). Further information on the use of proceeds and payment of expenses of the Offer is set out in Section Directors interests and remuneration Executive Chairman The total salary for Damien Waller in his position as Executive Chairman is $574,426 per annum (inclusive of superannuation). Mr Waller s salary is subject to annual review. In addition, Mr Waller may also receive a bonus of 45% of his salary per annum where key performance indicators and target earnings (as agreed with the Company) are achieved. Mr Waller may also receive an additional annual bonus where performance targets are exceeded (see Section for more details of Mr Waller s entitlements under the STI Plan). Mr Waller is also eligible to participate in the iselect LTI Plan (see Section for more details). Mr Waller may terminate his employment, by giving 12 months written notice or by giving one month s notice within six months of him ceasing to hold the position of Executive Chairman, or Executive Director or where the scope of his responsibilities or authority is materially diminished (other than in certain circumstances) or immediately upon the Company committing a serious breach of his contract. The Company may terminate Mr Waller s employment by making payment of his salary, superannuation and bonuses for the next 12 months in lieu of notice or where there are unrectified grounds for summary dismissal or serious breach of his contract. Termination of Mr Waller s employment by either party will not terminate Mr Waller s position as a Director and he will be under no obligation to resign as a Director (unless summarily dismissed). Upon termination of Mr Waller s employment contract he: will be subject to a restraint of trade for 12 months. The enforceability of the restraint clause is subject to all usual legal requirements; and is entitled to retain copies of all confidential information that the Board has determined may not cause real detriment to the Company if retained by Mr Waller, all intellectual property created by Mr Waller in the course of his employment and all information relating to his capacity as a shareholder or officer of the Company. Mr Waller may not use any confidential information in competition with the Company for a period of 24 months from the date of termination. Details of Mr Waller s escrow arrangements are set out in Section 7.6. Details of Mr Waller s initial long-term incentive grant of Shares are set out in Section Chief Executive Officer The total fixed remuneration (including superannuation) for Matt McCann in his position as CEO is $500,225 per annum. In addition, Mr McCann is also eligible to receive a bonus of 34% of his salary where key performance indicators and target earnings (as agreed with the Company) are achieved. Mr McCann may also receive an additional annual bonus where performance targets are exceeded (see Section for more details of Mr McCann s entitlements under the STI Plan). Mr McCann is also eligible to participate in the iselect LTI Plan (see Section for more details). Either Mr McCann or the Company may terminate Mr McCann s employment by giving 12 months written notice or alternatively, in iselect s case, payment of total fixed remuneration in lieu of notice. The Company may also direct Mr McCann to take enforced leave during his notice period, during which time he will remain an employee and remain entitled to receive remuneration and all other contractual benefits. Upon termination of Mr McCann s employment contract, he will be subject to a restraint of trade for a maximum of 18 months. The enforceability of the restraint clause is subject to all usual legal requirements. Details of Mr McCann s escrow arrangements are set out in Section 7.6. Non-executive Director remuneration Under the Constitution, the Directors decide the total amount paid to each Director as remuneration for their services as a Director to iselect. However, under the listing rules of the ASX (ASX Listing Rules or History Rules), the total amount of fees paid to all Directors for their services (excluding, for these purposes, the salary of any executive Director) must not exceed in aggregate in any financial year the amount fixed by iselect s general meeting. This amount has been fixed by iselect (and approved by the shareholders at a general meeting of the Company) at $950,000 per annum. iselect currently has four non-executive Directors. As at the date of this Prospectus, three of the four non-executive Directors each receive $68,500 per annum in fees (inclusive of superannuation). As a nominee of ninemsn, Pat O Sullivan has not previously received any fees from iselect for acting as a non-executive Director; however, following completion of the Offer Pat O Sullivan will remain on the Board as a non-executive Director and will receive the same fees on the same terms as the other non-executive Directors. After completion of the Offer, each non-exective Director will receive fees of $85,000 per annum (inclusive of superannuation). The Executive Chairman is not paid any fees in addition to his salary disclosed in Section The Deputy Chairman is paid a fee of $10,000 per annum (in addition to his Director fee). In addition, the chairman of each of the Audit and Risk Management, Remuneration and Nominations Committees will be paid $10,000 annually. The remuneration of Directors must not include a commission on, or a percentage of profits or operating rate. All Directors fees include superannuation at the minimum rate required under applicable legislation currently 9% of the respective amounts.

99 iselect Limited Listing bonuses In the event of a successful Listing of the Company, the Executive Chairman, Chief Executive Officer and three other Directors may become eligible to receive a one-off cash bonus. The final amount paid will depend on the size and success of the Offer and each individual s contribution at the discretion of the Remuneration Committee of the Board. The maximum amounts payable are $150,000 for the Chief Executive Officer, $50,000 for the Executive Chairman and $20,000 to each non-executive Director that is not a nominee Director. Deeds of access, insurance and indemnity for Directors iselect has entered into deeds of access, insurance and indemnity with each Director which contain rights of access to certain books and records of iselect for a period of seven years after the Director ceases to hold office. This seven year period can be extended where certain proceedings or investigations commence before the seven year period expires. Pursuant to the Constitution, iselect is required to indemnify all Directors and officers, past and present, against all liabilities allowed under law. Under the deed of access, insurance and indemnity, iselect indemnifies parties against all liabilities to another person that may arise from their position as an officer of iselect or its subsidiaries or any other entity to which a party to the deed has been appointed as a nominee director at iselect s request to the extent permitted by law. The deed stipulates that iselect will meet the full amount of any such liabilities, including reasonable legal costs and expenses. Pursuant to the Constitution, iselect may arrange and maintain Directors and Officers insurance for its Directors to the extent permitted by law. Under the deed of access, insurance and indemnity, iselect must obtain such insurance during each Director s period of office and for a period of seven years after a Director ceases to hold office. This seven year period can be extended where certain proceedings or investigations commence before the seven year period expires. Other information Directors may also be reimbursed for travel and other expenses incurred in attending to iselect s affairs. If a Director renders or is called on to perform extra services or make any special exertions in connection with the affairs of the Company, the Directors may arrange for special remuneration to be paid to that Director, either in addition to or substitution for that Director s remuneration set out in Section There are no retirement benefit schemes for non-executive Directors, other than statutory superannuation contributions. The interests of Directors and Management are set out in Sections 6.3, 7.1.5, 7.12 and 9.3. Directors shareholdings and optionholdings Directors are not required under the Constitution to hold any Shares or Options. The table below shows the interests of each Director (whether held directly or indirectly) in securities of iselect as at the date of this Prospectus: Figure : Directors interests Director Shares Options Damien Waller 31,377,660 1 nil Matt McCann 235,230 2 nil Greg Camm 60,000 nil Pat O Sullivan nil nil Leslie Webb (ITV Consulting) 2,400, ,000 (at an exercise price of $2.365 per option) Shaun Bonètt 300,000 nil 1 Excludes 1,351,350 LTIP Shares granted to Damien Waller on 24 May Excludes 1,891,890 LTIP Shares granted to Matt McCann on 24 May Leslie Webb (ITV Consulting) has agreed to sell 350,000 of these Shares to SaleCo. See Section 9.2. Directors may hold their relevant interests in securities shown above directly, or through holdings by companies and trusts. The above disclosure of Leslie Webb s Shareholding excludes 3,750,000 Shares which are held by a superannuation fund of which Leslie Webb is a member, and in which he has an indirect interest. These Shares are not subject to any escrow arrangements. That fund may sell all or a portion of these Shares during the Escrow Period.

100 98 Key people, interests and benefits Executive remuneration Executive Chairman and Chief Executive Officer See Section Other management personnel iselect s other management personnel are employed under individual executive services agreements. These establish: Total compensation, inclusive of base salary and superannuation contribution to a fund of the individual s election; Eligibility to participate in iselect s short term incentive scheme and long term incentive scheme. For further details about iselect s short term incentive scheme and long term incentive scheme, refer to Section 9.3; Variable notice and termination provisions of up to 6 months, or by iselect without notice in the event of serious misconduct; Restraint and confidentiality provisions; and For employees, leave entitlements as per the National Employment Standard and applicable legislation. Certain members of management and other personnel are eligible to receive a discretionary cash bonus in the event of a successful Listing and Offer. The final amount payable to this group will not exceed $350,000 in aggregate. The Remuneration Committee has full discretion in granting these bonuses Incentive schemes Full details of iselect s incentive arrangements for its employees and senior management (including executive Directors) are contained in Section Corporate governance This Section 6.4 explains how the Board oversees the management of iselect s business. The Board is responsible for the overall corporate governance of iselect, including establishing and monitoring key performance goals. The Board monitors the operational and financial position and performance of iselect and oversees its business strategy including approving the strategic goals of iselect and considering and approving an annual business plan, including a budget. The Board is committed to maximising performance, generating appropriate levels of Shareholder value and financial return, and sustaining the growth and success of iselect. In conducting iselect s business with these objectives, the Board seeks to ensure that iselect is properly managed to protect and enhance Shareholder interests, and that iselect, its Directors, officers and personnel operate in an appropriate environment of corporate governance. Accordingly, the Board has created a framework for managing iselect including adopting relevant internal controls, risk management processes and corporate governance policies and practices which it believes are appropriate for iselect s business and which are designed to promote the responsible management and conduct of iselect. iselect is seeking a listing on the ASX. The ASX Corporate Governance Council has developed and released its ASX Corporate Governance Principles and Recommendations (ASX Recommendations) for Australian listed entities in order to promote investor confidence and to assist companies in meeting stakeholder expectations. The recommendations are not prescriptions, but guidelines. However, under the ASX Listing Rules, iselect will be required to provide a statement in its annual report disclosing the extent to which it has followed the ASX recommendations in the reporting period. Where iselect does not follow a recommendation, it must identify the recommendation that has not been followed and give reasons for not following it. Details of iselect s key policies and practices and the charters for the Board and each of its committees are available at The Board of Directors The Board of Directors is comprised of the Executive Chairman, the Chief Executive Officer and four non-executive Directors. The Board consists of: Damien Waller Executive Chairman; Matt McCann Chief Executive Officer; Greg Camm Non-Executive Director and Deputy Chairman; Pat O Sullivan Non-Executive Director; Leslie Webb Non-Executive Director; and Shaun Bonètt Non-Executive Director. Detailed biographies of the Board members are provided in Section 6.1. Each Director has confirmed to iselect that he anticipates being available to perform his duties as a non-executive Director or executive Director without constraint from other commitments. The Board considers an independent Director to be a non-executive Director who is not a member of iselect s management and who is free of any business or other relationship that could materially interfere with or reasonably be perceived to interfere with the independent exercise of their judgement. The Board will consider the materiality of any given relationship on a case-by-case basis and has adopted guidelines to assist in this regard. The Board reviews the independence of each Director in light of interests disclosed to the Board from time to time. The iselect Board Charter sets out guidelines and thresholds of materiality for the purpose of determining independence of Directors in accordance with the ASX Recommendations and has adopted a definition of independence that is based on that set out in the ASX Recommendations. The Board considers thresholds of materiality for the purpose of determining independence on a case-by-case basis, having regard to both quantitative and qualitative principles. Without limiting the Board s discretion in this regard, the Board has adopted the following guidelines: The Board will determine the appropriate base to apply (e.g. revenue, equity or expenses), in the context of each situation; In general, the Board will consider an affiliation with a business which accounts for less than 5% of the relevant base to be immaterial for the purpose of determining independence. However, where this threshold is exceeded, the materiality of the particular circumstance with respect to the independence of the particular Director should be reviewed by the Board; and

101 iselect Limited Overriding the quantitative assessment is the qualitative assessment. Specifically, the Board will consider whether there are any factors or considerations which may mean that the Director s interest, business or relationship could, or could be reasonably perceived to, materially interfere with the Director s ability to act in the best interests of iselect. The Board considers that each of Greg Camm, Leslie Webb and Shaun Bonètt is free from any business or any other relationship that could materially interfere with, or reasonably be perceived to interfere with, the independent exercise of the Director s judgement and is able to fulfil the role of independent Director for the purpose of the ASX Recommendations. Pat O Sullivan was originally the nominated Board nominee on behalf of ninemsn and subject to ninemsn s sale of its Existing Shares and on Completion of the Offer he will become an independent Director. Pat O Sullivan is not expected to hold any shares on Listing. Damien Waller and Matt McCann are currently considered by the Board not to be independent. Damien Waller is the co-founder of iselect and Executive Chairman and is expected to hold 12.11% of the Shares (excluding the 1.4 million LTIP Shares held by Damien Waller and not taking into account any other LTIP Shares in the calculation) on Listing (including through associated entities). Matt McCann is currently the Chief Executive Officer of iselect. Matt McCann is expected to hold 0.1% of the Shares on Listing (excluding the 1.9 million LTIP Shares held by Matt McCann and not taking account any other LTIP Shares in the calculation). Accordingly as at Listing, the Board will consist of a majority of independent Directors. The Board recognises the ASX Corporate Governance Council s recommendation that the Chairman should be an independent director and it also recognises that Damien Waller does not meet the definition of independence. However, the Board believes that Damien Waller is the most appropriate person to lead the Board as Executive Chairman and that he is able to, and does, bring considered and independent judgment to all relevant issues falling within the scope of the role of Chairman and that the Company as a whole benefits from his long standing experience of its operations and business relationships Board Charter The Board Charter adopted by the Board sets out the responsibilities of the Board in greater detail. It envisages that the Board should comprise Directors with a range of skills, expertise, experience and diversity which are relevant to iselect s businesses and the Board s responsibilities. The Board Charter allows the Board to delegate powers and responsibilities to committees established by the Board. The Board retains ultimate accountability to Shareholders in discharging its duties Board committees The Board may from time to time establish appropriate committees to assist in the discharge of its responsibilities. The Board has established an Audit and Risk Management Committee, a Nominations Committee and a Remuneration Committee. Other committees may be established by the Board as and when required. Membership of Board committees will be based on the needs of iselect, relevant legislative and other requirements and the skills and experience of individual Directors. Under the Board Charter, Board committee performance evaluations will occur annually. Audit and Risk Management Committee The role of the Audit and Risk Management Committee is to assist the Board in fulfilling its responsibilities for corporate governance and overseeing iselect s internal control structure and risk management systems. The Audit and Risk Management Committee also confirms the quality and reliability of the Financial Information prepared by iselect, works with the external auditor on behalf of the Board and reviews non-audit services provided by the external auditor, to confirm they are consistent with maintaining external audit independence. The Audit and Risk Management Committee provides advice to the Board and reports on the status and management of the risks to iselect. The purpose of the committee s risk management process is to ensure that risks are identified, assessed and appropriately managed. The Board has adopted a policy regarding the services that iselect may obtain from its external auditor. It is the policy of iselect that its external auditor: Must be independent of iselect and the Directors and senior executives. To ensure this, iselect requires a formal confirmation of independence from its external auditor on a six monthly basis; and May not provide services to iselect that are, or are perceived to be, materially in conflict with the role of the external auditor. Non-audit or assurance services that may impair, or appear to impair, the external auditor s judgement or independence are not appropriate. However, the external auditor may be permitted to provide additional services which are, or are not perceived to be, materially in conflict with the role of the auditor, if the Board or Audit and Risk Management Committee has approved those additional services. Such additional services may include financial audits, tax compliance, advice on accounting standards and due diligence in certain acquisition or sale transactions. The Audit and Risk Management Committee must comprise, to the extent practicable given the size and composition of the Board from time to time, at least three Directors, all of whom must be nonexecutive Directors and the majority of which must be independent in accordance with the independence criteria set out in the Board Charter. A member of the Audit and Risk Management Committee, that does not chair the Board, shall be appointed the chair of the committee. The Board acknowledges the ASX Recommendation that the Audit and Risk Management Committee should be chaired by an independent director (who is not chair of the board) and in recognition of this, Pat O Sullivan will chair the Audit and Risk Management Committee. The Audit and Risk Management Committee will meet as often as is required by the Audit and Risk Management Committee Charter or other policy approved by the Board to govern the operations of the Audit and Risk Management Committee. The chair of the Audit and Risk Management Committee may invite members of senior management and representatives of the external auditor to be present at meetings of the committee and seek advice from external advisors. The Audit and Risk Management Committee will regularly report to the Board about committee activities, issues and related recommendations. The committee comprises Pat O Sullivan (chair), Shaun Bonètt and Greg Camm.

102 100 Key people, interests and benefits Remuneration Committee The role of the Remuneration Committee is to review and make recommendations to the Board on remuneration packages and polices related to the Directors and senior executives and to ensure that the remuneration policies and practices are consistent with iselect s strategic goals and human resources objectives. The Remuneration Committee will meet as often as is required by the Remuneration Committee Charter or other policy approved by the Board to govern the operation of the Remuneration Committee. Following each meeting, the Remuneration Committee will report to the Board on any matter that should be brought to the Board s attention and on any recommendation of the Remuneration Committee that requires Board approval. The committee comprises Leslie Webb (chair), Shaun Bonètt and Pat O Sullivan. Nominations Committee The Nominations Committee is responsible for reviewing and making recommendations in relation to the composition and performance of the Board and its committees and ensuring that adequate succession plans are in place (including for the recruitment and appointment of Directors and senior management). Independent advice will be sought where appropriate. The Nominations Committee will meet as often as is required by the Nominations Committee Charter or other policy approved by the Board to govern the operation of the Nominations Committee. Following each meeting, the Nominations Committee will report to the Board on any matter that should be brought to the Board s attention and on any recommendation of the Nominations Committee that requires Board approval. The committee comprises Shaun Bonètt (chair), Leslie Webb and Damien Waller Diversity The workforce of iselect is made up of individuals with diverse skills, backgrounds, perspectives and experiences and this diversity is recognised, valued and respected. iselect is committed to providing an environment in which all employees are treated with fairness and respect and have equal access to workplace opportunities. Following Listing, the Company will give further consideration to the development of a diversity policy, appropriate to the stage and nature of the business Disclosure and Shareholder Communication Policies Once listed, iselect will be required to comply with the continuous disclosure requirements of the ASX Listing Rules and the Corporations Act. iselect will be required to disclose to the ASX any information concerning iselect which is not generally available and which, if it was made available, a reasonable person would expect to have a material effect on the price or value of iselect s securities. The Board aims to ensure that Shareholders and stakeholders are informed of all major developments affecting iselect s state of affairs. As such, iselect has adopted a Disclosure Policy and Shareholder Communication Policy, which together establish procedures to ensure that Directors and senior management are aware of, and fulfil, their obligations in relation to providing timely, full and accurate disclosure of material information to iselect s stakeholders and comply with iselect s disclosure obligations under the Corporations Act and Listing Rules. The Disclosure Policy also sets out procedures for communicating with Shareholders, the media and the market. iselect is committed to observing its disclosure obligations under the ASX Listing Rules and the Corporations Act. Information will be communicated to Shareholders through the lodgement of all relevant financial and other information with the ASX and continuous disclosure announcements will be made available on iselect s website, Share Trading Policy iselect has adopted a Share Trading Policy which will apply to iselect and its Directors, officers, employees and senior management, including those persons having authority and responsibility for planning, directing and controlling the activities of iselect ( Key Management Personnel ), whether directly or indirectly. The policy is intended to explain the types of conduct in relation to dealings in Shares that is prohibited under the Corporations Act and establish procedures in relation to Directors, senior management or employees dealing in the Shares. Subject to certain exceptions, including exceptional financial circumstances, the policy defines certain closed periods during which trading in Shares by the Company s directors, officers, employees and Key Management Personnel is prohibited. Those closed periods are currently defined as the following periods: The period commencing 6 weeks prior to the announcement of release of iselect s half-year and annual financial results to the ASX and ending 24 hours after such release; and The period commencing 2 weeks prior to the Company s annual general meeting and ending 24 hours after the annual general meeting. Outside of these periods, Directors, management and iselect employees must receive clearance for any proposed dealing in Shares. In all instances, buying or selling Shares is not permitted at any time by any person who possesses price-sensitive information.

103 101 Details of the Offer 7

104 Details of the Offer 7.1 The Offer This Prospectus relates to an initial public offering of million shares in iselect at an Offer Price of $1.85 per Share. The Shares offered under this Prospectus will represent approximately 44.9% of the Shares on issue on completion of the Offer (excluding approximately 8.88 million LTIP Shares). The Offer is expected to raise approximately $215.4 million (comprising $100.0 million from the issue of New Shares by iselect for iselect s benefit and $115.4 million for the transfer of Existing Shares by SaleCo). The proceeds from the issue of the New Shares by iselect will be used by the Company as described in Section The ninemsn Sale Price will be paid to ninemsn by SaleCo and the Other Sale Price will be paid to ITV Consulting by SaleCo. Neither ninemsn or ITV Consulting own or are related to SaleCo. ninemsn is not offering any Shares under this Prospectus, and did not prepare and is not issuing this Prospectus. Figure 7.1.1: SaleCo structure ninemsn and ITV Consulting Sale of existing shares SaleCo Transfer of existing shares Successful Applicants Issue of new shares The Offer is made on the terms, and is subject to the conditions, set out in this Prospectus Structure of the Offer The Offer comprises: The Broker Firm Offer, which is only to Australian resident investors who are not Institutional Investors and who have received a firm allocation from their Broker; The Institutional Offer, which consists of an invitation to bid for Shares made to Institutional Investors in Australia and certain other eligible jurisdictions; and The Employee Priority Offer, which is only open to Eligible Employees. No general public offer of Shares will be made under the Offer. The allocation of Shares between the Broker Firm Offer and the Institutional Offer was determined by the Joint Lead Managers in consultation with iselect, having regard to the allocation policy outlined in Section The Offer has been fully underwritten by the JLMs. A summary of the Underwriting Agreement, including the events which would entitle the JLMs to terminate the Underwriting Agreement, is set out in Section Purpose of the Offer and use of proceeds The Offer is expected to raise approximately $215.4 million. Of this amount, $115.4 million (less costs agreed to be payable by SaleCo) represents proceeds from the sale of Existing Shares by SaleCo and will be paid to SaleCo. The ninemsn Sale Price will be paid to ninemsn by SaleCo and the Other Sale Price will be paid to ITV Consulting by SaleCo. The remaining $100.0 million represents proceeds from the issue of the New Shares by iselect. The purpose of the Offer is to: Provide funding flexibility to support future growth, including by acquisition; Raise capital to strengthen the Company s balance sheet and to pay down debt; and Create liquidity in iselect Shares by listing on the ASX which will allow existing and new shareholders to sell their shares or buy further shares on market.

105 iselect Limited Figure : Sources and uses of funds Sources of funds $ million % Uses of funds $ million % Cash proceeds received for Existing Shares sold under the Offer % Proceeds to SaleCo (ultimately payable to ninemsn & ITV Consulting) for sale of Existing Shares (inclusive of $1.18m of Offer costs borne by ninemsn and ITV Consulting) % Repayment of debt % Cash available for acquisitions % iselect s expenses of the Offer % Working capital % Cash proceeds received for New Shares issued under the Offer % Total proceeds to iselect for issue of new Shares % Total sources % Total uses % Pro Forma Balance Sheet iselect s Pro Forma Balance Sheet following Completion of the Offer, including details of the pro forma adjustments, is set out in Section Indebtedness iselect s indebtedness as at 30 June 2012, before and pro forma for Completion of the Offer, is set out in Section Shareholding structure The details of the ownership of Shares and Options on Listing are set out below: Figure : iselect Shares pre and post Offer and outstanding Options Pre Offer Post Offer Shares (m) % Shares (m) % Options ninemsn 62,001, % nil 0% nil Damien Waller 31,377, % 31,377, % nil Spectrum Equity 19,765, % 19,765, % nil Other Existing Shareholders 91,866, % 91,516, % 5,219,200 4 Total Existing Shareholders 205,010, % 142,659, % 2 5,219,200 Eligible employees 1,081, % nil New Shareholders pursuant to the Offer 115,324, % 2 nil Total 205,010, % 259,064, % 5,219,200 1 Excludes 1,351,350 LTIP Shares granted to Damien Waller on 24 May Excludes: (a) any Shares acquired by Existing Shareholders under the Offer; and (b) 7,532,320 LTIP Shares granted to employees on 24 May Excludes 8,883,670 LTIP Shares (being all LTIP Shares on issue), granted on 24 May Assumes that no Options are exercised between the date of this Prospectus and Listing. ninemsn has irrevocably offered to sell a total of 62,001,590 Existing Shares to SaleCo subject to Completion of the Offer. ITV Consulting has irrevocably offered to sell a total of 350,000 Existing Shares to SaleCo subject to completion of the Offer (see Section 9.2 for further details of these sales). Details of the Shares that will be subject to voluntary escrow arrangements are set out in Section 7.6.

106 104 Details of the Offer Control implications of the Offer The Directors do not expect any Shareholder to control iselect on Completion of the Offer (as defined in Section 50AA of the Corporations Act) Potential effect of the fundraising on the future of iselect The Directors believe that iselect has sufficient working capital to carry out its stated objectives. 7.2 Broker Firm Offer Who can apply in the Broker Firm Offer The Broker Firm Offer is open to persons who have received a firm allocation from their Broker and who have a registered address in Australia. Investors who have been offered a firm allocation by a Broker will be treated as an Applicant under the Broker Firm Offer in respect of that allocation. Investors should contact their Broker to determine whether they may be allocated Shares under the Broker Firm Offer. The Broker Firm Offer is not open to persons in the United States How to apply for Shares under the Broker Firm Offer Applications for Shares may only be made on an Application Form attached to or accompanying this Prospectus. If you are an investor applying under the Broker Firm Offer, you should complete and lodge your Application Form with the Broker from whom you received your firm allocation. Application Forms must be completed in accordance with the instructions given to you by your Broker and the instructions set out on the reverse of the Application Form. By making an Application, you declare that you were given access to this Prospectus, together with an Application Form. The Corporations Act prohibits any person from passing an application form to another person unless it is attached to, or accompanied by, a hard copy of this Prospectus or the complete and unaltered electronic version of this Prospectus. Applicants under the Broker Firm Offer should contact their Broker about the minimum and maximum Application Amount. iselect and the JLMs reserve the right to aggregate any Applications which they believe may be multiple Applications from the same person. iselect may determine a person to be eligible to participate in the Broker Firm Offer, and may amend or waive the Broker Firm Offer application procedures or requirements, in its discretion in compliance with applicable laws. Applicants under the Broker Firm Offer must lodge their Application Form and Application Monies with the relevant Broker in accordance with the relevant Broker s directions in order to receive their firm allocation. Applicants under the Broker Firm Offer must not send their Application Forms to the Share Registry. The Broker Firm Offer opens at 9.00 am (Melbourne time) on 11 June 2013 and is expected to close at 5.00 pm (Melbourne time) on 17 June iselect and the JLMs may elect to extend the Offer or any part of it, or accept late Applications either generally or in particular cases. Your Broker may impose an earlier closing date. Applicants are therefore encouraged to submit their Applications as early as possible. Please contact your Broker for instructions Payment methods Applicants under the Broker Firm Offer must pay their Application Monies in accordance with instructions from their Broker Application Monies iselect reserves the right to decline any Application and all Applications in whole or in part, without giving any reason. Applicants under the Broker Firm Offer whose Applications are not accepted, or who are allocated a lesser number of Shares than the amount applied for, will receive a refund of all or part of their Application Monies, as applicable. Interest will not be paid on any monies refunded Allocations under the Broker Firm Offer The allocation of firm stock to Brokers has been determined by the JLMs in consultation with iselect. Shares which have been allocated to Brokers for allocation to their Australian resident retail clients will be issued or transferred to the Applicants who have received a valid allocation of Shares from those Brokers. It will be a matter for the brokers how they allocate Shares among their retail clients, and they (and not iselect or the JLMs) will be responsible for ensuring that retail clients who have received an allocation from them, receive the relevant Shares. 7.3 Institutional Offer Invitations to bid The Institutional Offer consisted of an invitation to certain Institutional Investors in Australia and a number of other eligible jurisdictions to apply for Shares. The JLMs separately advised Institutional Investors of the Application procedures for the Institutional Offer Allocation policy under the Institutional Offer The allocation of Shares between the Institutional Offer and the Broker Firm Offer was determined by the JLMs in consultation with iselect. The JLMs in consultation with iselect, had absolute discretion regarding the basis of allocation of Shares among Institutional Investors. Participants in the Institutional Offer have been advised of their allocation of Shares, if any, by the JLMs. The allocation policy was influenced by the following factors: Number of Shares bid for by particular Applicants; The timeliness of the bid by particular Applicants; iselect s desire for an informed and active trading market following Listing; iselect s desire to establish a wide spread of institutional Shareholders; Overall level of demand under the Broker Firm Offer, Institutional Offer, and Employee Priority Offer; The size and type of funds under management of particular Applicants; The likelihood that particular Applicants will be long-term Shareholders; and Any other factors that iselect and the JLMs considered appropriate. 7.4 Employee Priority Offer Eligible Employees who are employed as at 5.00 pm (Melbourne time) on 24 May 2013 are eligible to participate in the Employee Priority Offer. Eligible Employees may apply for Shares online and must comply with the instructions on the website,

107 iselect Limited Eligible Employees will receive a guaranteed minimum allocation of $500 worth of Shares at the Offer Price, subject to an aggregate total allocation to Eligible Employees of $2 million worth of shares. If this $2 million threshold is reached, Applications will be subject to scale back. Applicants under the Employee Priority Offer whose Applications are not accepted, or who are allocated a lesser number of Shares than the amount applied for, will receive a refund of all or part of their Application Monies, as applicable. Interest will not be paid on any monies refunded. iselect and the JLMs have absolute discretion regarding the allocation of Shares to Applicants in the Employee Priority Offer and may reject an Application, or allocate fewer Shares than the amount applied for, in their absolute discretion. Applications under the Employee Priority Offer must be for a minimum of $500 worth of Shares and in multiples of $100 worth of Shares thereafter. Payment may be made via BPAY only. Application Monies must be received by the Share Registry by 5.00 pm (Melbourne time) on 17 June To make a payment via BPAY, you will need to apply online at and must comply with the instructions on the website. It is your responsibility to ensure that your BPAY payment is received by the Share Registry by no later than 5.00 pm (Melbourne time) on 17 June You should be aware that your financial institution may implement earlier cut-off times with regards to electronic payment, and you should therefore take this into consideration when making payment. 7.5 Underwriting arrangement The Offer is fully underwritten by Credit Suisse and Baillieu Holst, the Underwriters. The Underwriters and iselect have entered into an Underwriting Agreement under which the Underwriters agree, subject to certain conditions and termination events, to underwrite Applications for all Shares under the Offer. The Underwriting Agreement sets out a number of circumstances under which the Underwriters may terminate the agreement and the underwriting obligations. A summary of certain terms of the agreement and underwriting arrangements, including the termination provisions, is provided in Section Voluntary escrow arrangements All of the Existing Shares held at Listing by Damien Waller, Matt McCann, Greg Camm, Shaun Bonètt and Leslie Webb, and their respective controlled entities (the Escrowed Shares and Escrowed Shareholders) will be subject to voluntary escrow arrangements until the date on which iselect s full year accounts for FY13F are released to the ASX by iselect. After this date, 850,000 Shares owned by ITV Consulting (controlled by Leslie Webb) will be released from the voluntary escrow arrangements, and the remaining Escrowed Shares (i.e. 36,416,130 Shares) will continue to be subject to voluntary escrow arrangements, until the date on which iselect s half year accounts for the period ending 31 December 2013 are released to the ASX by iselect. Each of these Escrowed Shareholders has agreed to enter into an escrow deed in respect of their Escrowed Shareholding retained following the Offer, which prevent them from disposing of their respective Escrowed Shares for the relevant escrow period. ITV Consulting s current intention in relation to the 850,000 Shares that will be released from the voluntary escrow arrangements upon announcement of iselect s FY13F results is that it will sell a portion of those Shares during the escrow period applicable to the remaining Escrowed Shares. The Escrowed Shareholders may be released early from these escrow obligations to enable: The Escrowed Shareholder to accept an offer under a takeover bid in relation to its Shares and holders of at least half of the Shares the subject of the bid that are not held by the Escrowed Shareholders have accepted the takeover bid; or The Shares held by the Escrowed Shareholders to be transferred or cancelled as part of a merger by scheme of arrangement under Part 5.1 of the Corporations Act. During the escrow period, the Escrowed Shareholders whose Shares are subject to escrow, may deal in any of their Shares to the extent the dealing is required by applicable law (including an order of a court of competent jurisdiction). The restriction on disposing is broadly defined and includes, among other things, selling, assigning, transferring or otherwise disposing of any interest in the Shares, encumbering or granting a security interest over the Shares, doing, or omitting to do, any act if the act or omission would have the effect of transferring effective ownership or control of any of the Shares or agreeing to do any of those things. 7.7 Restrictions on distribution No action has been taken to register or qualify this Prospectus, the Shares or the Offer or otherwise to permit a public offering of the Shares in any jurisdiction outside Australia. This Prospectus does not constitute an offer or invitation to subscribe for Shares in any jurisdiction in which, or to any person to whom, it would not be lawful to make such an offer or invitation or issue under this Prospectus. This Prospectus may not be released or distributed in the United States or elsewhere outside Australia, unless it has attached to it the selling restrictions applicable in the jurisdictions outside Australia, and may only be distributed to persons to whom the Offer may lawfully be made in accordance with the laws of any applicable jurisdiction. The Shares have not been, and will not be, registered under the U.S. Securities Act or the securities laws of any state of the United States and may not be offered or sold in the United States. Each Applicant in the Broker Firm Offer and Employee Priority Offer, will be taken to have represented, warranted and agreed as follows: It understands that the Shares have not been, and will not be, registered under the U.S. Securities Act or the securities laws of any state of the United States and may not be offered, sold or resold in the United States; It is not in the United States; It has not and will not send the Prospectus or any other material relating to the Offer to any person in the United States; and It will not offer or sell the Shares in the United States or in any other jurisdiction outside Australia. Each Applicant under the Institutional Offer will be required to make certain representations, warranties and covenants set out in the confirmation of allocation letter distributed to it. 7.8 Discretion regarding the Offer iselect and SaleCo may withdraw the Offer at any time before the issue of Shares to successful Applicants under the Broker Firm Offer, Institutional Offer and Employee Priority Offer. If the Offer, or any part of it, does not proceed, all relevant Application Monies will be

108 106 Details of the Offer refunded (without interest) as soon as practicable in accordance with the requirements of the Corporations Act. iselect, SaleCo and the JLMs also reserve the right to extend the Offer or any part of it, accept late Applications or bids either generally or in particular cases, reject any Application or bid, or allocate to any Applicant fewer Shares than the amount applied or bid for ASIC relief ASIC has exempted SaleCo, iselect, the directors and members of SaleCo, and the Underwriters from Sections 606 and 671B of the Corporations Act to: Allow SaleCo to acquire a relevant interest in 20% or more of the Shares in iselect, subject to certain conditions; and Relieve from the substantial shareholder reporting obligations SaleCo and any associate of SaleCo, on certain conditions. ASIC has also granted the following exemptions from, and modifications to, the Corporations Act: Relief under s 741(1) of the Corporations Act from the preprospectus advertising and publicity rules in Section 734(2) of the Corporations Act to permit iselect to communicate with employees and existing Shareholders of iselect about the Offer; Relief under Section 741(1)(a) of Corporations Act from the application of Section 707(3) of the Corporations Act in respect of shares that may be issued upon the exercise of outstanding options under the 2011 Option Plan and the 2010 Option Plan to enable holders of those Shares to freely on-sell those Shares post-listing without requiring a prospectus. This relief is given only in respect of Shares which are issued on the exercise of Options within 12 months from the time that iselect is listed on the ASX ASX Listing, Registers and Holding Statements, Deferred Settlement Trading Application to the ASX for listing of iselect and quotation of Shares iselect will apply for admission to the official list of the ASX and quotation of the Shares on the ASX within seven days of the date of this Prospectus. iselect s ASX code is expected to be ISU. The ASX takes no responsibility for this Prospectus or the investment to which it relates. The fact that the ASX may admit iselect to the official list is not to be taken as an indication of the merits of iselect or the Shares offered for subscription. If permission is not granted for the official quotation of the Shares on the ASX within three months after the date of this Prospectus (or any later date permitted by law), all Application Monies received by iselect will be refunded without interest as soon as practicable in accordance with the requirements of the Corporations Act. iselect will be required to comply with the ASX Listing Rules, subject to any waivers obtained by iselect from time to time CHESS and issuer sponsored holdings iselect will apply to participate in the ASX s Clearing House Electronic Subregister System ( CHESS ) and will comply with the ASX Listing Rules and the ASX Settlement Operating Rules. CHESS is an electronic transfer and settlement system for transactions in securities quoted on the ASX under which transfers are effected in an electronic form. When the Shares become approved financial products (as defined in the ASX Settlement Operating Rules), holdings will be registered in one of two subregisters, being an electronic CHESS subregister or an issuer sponsored subregister. For all successful Applicants, the Shares of a Shareholder who is a participant in CHESS or a Shareholder sponsored by a participant in CHESS will be registered on the CHESS subregister. All other Shares will be registered on the issuer sponsored subregister. Following Completion of the Offer, Shareholders will be sent a holding statement that sets out the number of Shares that have been allocated to them. This statement will also provide details of a Shareholder s Holder Identification Number ( HIN ) for CHESS holders or, where applicable, the Securityholder Reference Number ( SRN ) of issuer sponsored holders. Shareholders will subsequently receive statements showing any changes to their Shareholding. Certificates will not be issued. Shareholders will receive subsequent statements during the first week of the following month if there has been a change to their holding on the register and as otherwise required under the ASX Listing Rules and the Corporations Act. Additional statements may be requested at any other time either directly through the Shareholder s sponsoring broker in the case of a holding on the CHESS subregister or through the Share Registry in the case of a holding on the issuer sponsored subregister. iselect and the Share Registry may charge a fee for these additional issuer sponsored statements Deferred settlement trading and selling shares on market It is expected that trading of the Shares on the ASX (on a deferred basis) will commence on or about 24 June It is the responsibility of each person who trades in Shares to confirm their holding before trading in Shares. If you sell Shares before receiving a holding statement, you do so at your own risk. iselect, the Share Registry, the JLMs and SaleCo disclaim all liability, whether in negligence or otherwise, if you sell Shares before receiving your holding statement, even if you obtained details of your holding from the iselect Offer Information Line or confirmed your firm allocation through a Broker. Shares are expected to commence trading on the ASX on a normal settlement basis on or about 28 June Constitution and rights attaching to the Shares Introduction The rights and liabilities attaching to ownership of Shares are: Detailed in the Constitution of iselect which may be inspected during normal business hours at the registered office of iselect; and In certain circumstances, regulated by the Corporations Act, Listing Rules, the ASX Settlement Operating Rules and the general law. A summary of the significant rights, liabilities and obligations attaching to the Shares and a description of other material

109 iselect Limited provisions of the Constitution are set out below. This summary is not exhaustive nor does it constitute a definitive statement of the rights and liabilities of Shareholders. The summary assumes that iselect is admitted to the official list of the ASX Voting at a general meeting At a general meeting of iselect, every Shareholder present in person or by proxy, representative or attorney has one vote on a show of hands and, on a poll, one vote for each Share held. On a poll, every member (or his or her proxy, attorney or representative) is entitled to vote for each fully paid Share held and in respect of each Share which is not fully paid, a fraction of a vote for each partly paid share held equivalent to the proportion which the amount paid on the share bears to the total amounts paid and payable on the share or to the number of votes comprising the proportion of votes which would have been exercisable if such Shares were fully paid, equal to that proportion of the total issue of such a Share which has been paid Meetings of members Each Shareholder is entitled to receive notice of and, except in certain circumstances to attend and vote at, general meetings of iselect and to receive all notices, accounts and other documents required to be sent to Shareholders under the Constitution, the Corporations Act and the ASX Listing Rules Dividends Subject to the Corporations Act, the Constitution and any special terms and conditions of issue, the Board may from time to time determine to pay or declare any interim, special or final dividends, as in their judgement, the financial position of iselect justifies. The Directors may fix the amount and the method of payment of the dividends. The payment of a dividend does not require any confirmation by a general meeting Transfer of Shares Subject to the Constitution, Shares may be transferred by a proper transfer effected in accordance with the ASX Settlement Operating Rules, by a written instrument of transfer which complies with the Constitution or by any other method permitted by the Corporations Act, the ASX Listing Rules or the ASX Settlement Operating Rules. The Board may refuse to register a transfer of Shares where the transfer is not in registrable form or where the refusal to register the transfer is permitted under the Corporations Act, the ASX Listing Rules or the ASX Settlement Operating Rules. If the Board declines to register a transfer iselect must give the party lodging the transfer written notice of the refusal and the reason for refusal Issue of further Shares Subject to the Corporations Act, the ASX Listing Rules and the ASX Settlement Operating Rules and any rights and restrictions attached to a class of shares, iselect may issue, or grant options in respect of, or otherwise dispose of further shares on such terms and conditions (including preferential, deferred or special rights, privileges or conditions, or restrictions) as the Directors see fit Winding up If iselect is wound up, then subject to the Constitution and any special resolution or preferential rights or restrictions attached to a class of shares, any surplus must be divided among iselect s members in the proportions which the amount paid and payable (including amounts credited) on the shares of a member is of the total amount paid and payable (including amounts credited) on the shares of all members of iselect Unmarketable parcels Subject to the Corporations Act, the ASX Listing Rules and the ASX Settlement Operating Rules, iselect may sell the Shares of a Shareholder who holds less than a marketable parcel of Shares Share buy-backs Subject to the Corporations Act, the ASX Listing Rules and the ASX Settlement Operating Rules, iselect may buy back shares in itself on terms and at times determined by the Board if in their judgment, the financial position of the Company justifies provided such actions comply at all times with applicable laws Proportional takeover provisions The Constitution contains provisions requiring shareholder approval before any proportional takeover bid can proceed. These provisions will cease to apply unless renewed by special resolution of the Shareholders in general meeting by the third anniversary of the date of the Constitution s adoption Variation of class rights At present, iselect s only class of shares on issue is ordinary shares. Subject to the Corporations Act and the terms of issue of a class of shares, wherever the capital of iselect is divided into different classes of shares, the rights attaching to any class of shares may be varied or cancelled: With the consent in writing of the holders of three-quarters of the issued shares included in that class; or By a special resolution passed at a separate meeting of the holders of those shares. In either case, in accordance with the Corporations Act, the holders of not less than 10% of the votes in the class of shares, the rights of which have been varied or cancelled, may apply to a court of competent jurisdiction to exercise its discretion to set aside such a variation or cancellation Dividend reinvestment plan The Constitution contains a provision allowing Directors to implement a dividend reinvestment plan and a dividend selection plan. It is not currently intended that either a dividend reinvestment, or dividend selection, plan will be implemented Directors appointment and removal Under the Constitution, the minimum number of Directors that may comprise the Board is three and the maximum is fixed by the Directors but may not be more than 10 unless the Shareholders pass a resolution varying that number. Directors are elected at annual general meetings of iselect. Retirement will occur on a rotational basis so that any Director who has held office for three or more years or three or more annual general meetings (excluding any managing director) faces re-election. The Directors may also appoint a Director to fill a casual vacancy on the Board or in addition to the existing Directors, who will then hold office until the next annual general meeting of iselect Directors voting Questions arising at a meeting of the Board will be decided by a majority of votes of the Directors present at the meeting and

110 108 Details of the Offer entitled to vote on the matter. In the case of an equality of votes on a resolution, the chairperson of the meeting has a casting vote Directors remuneration See Section for a description of the remuneration arrangements for Directors Indemnities iselect, to the extent permitted by law, indemnifies each Director (former or current), officer (former or current) or auditor (former or current, if so determined by the Directors) of the Company against any liability incurred by that person as an officer of iselect or its related bodies corporate, and reasonable legal costs incurred by that person in defending an action for a liability of that person. iselect, to the extent permitted by law, may indemnify any director (former or current), officer (former or current) or auditor (former or current, if so determined by the Directors) of the Company against any liability incurred by that person as an officer of a body corporate that is not a related body corporate of the Company in circumstances where that person has been appointed as an officer of that body corporate by the Company or is occupying that office at the Company s request, and reasonable legal costs incurred by that person in defending an action for a liability of that person. iselect, to the extent permitted by law, may pay, or agree to pay, a premium for a contract insuring any eligible person named in the Constitution against any liability incurred by the person as an officer or auditor of the Company or of a related body corporate or as an officer of a body corporate that is not a related body corporate in circumstances where that person has been approved by the Company or is occupying that office at the Company s request Amendment The Constitution can only be amended by special resolution passed by at least three-quarters of the votes cast by Shareholders present (in person or by proxy) and entitled to vote on the resolution at a general meeting of iselect. iselect must give at least 28 days written notice of a general meeting of iselect.

111 109 Investigating Accountant s Report 8

112 Investigating Accountant s Report Investigating Accountant s Report and Financial Services Guide 31 May 2013 The Board of Directors iselect Limited 294 Bay Road Cheltenham VIC 3192 The Directors iselect SaleCo Pty Ltd 294 Bay Road Cheltenham VIC 3192 Dear Directors Part 1 - Investigating Accountant s Report on the Historical Financial Information, Pro Forma Balance Sheet and Forecast Financial Information 1. Introduction We have prepared this Investigating Accountants Report (the Report ) on the historical, pro forma and forecast financial information of iselect Limited ( iselect ) for inclusion in the Initial Public Offering Prospectus ( Prospectus ) to be dated on or about 31 May 2013, and to be issued by iselect Limited and iselect SaleCo Pty Ltd ( SaleCo ), in respect of the Initial Public Offer of iselect equity ( the Offer ). Expressions defined in the Prospectus have the same meaning in this Report. Ernst & Young Transaction Advisory Services Limited ( Ernst & Young Transaction Advisory Services ) holds an Australian Financial Services Licence (AFS Licence Number ). Jo Barker is a Director and Representative of Ernst & Young Transaction Advisory Services. We have included our Financial Services Guide as Part 2 of this Report. 2. Scope Ernst & Young Transaction Advisory Services has been requested to prepare this Report to cover the following financial information: Ernst & Young Transaction Advisory Services Limited, ABN Australian Financial Services Licence No

113 iselect Limited Historical Financial Information The historical financial information, detailed in section 4.1 and set out in tables 4.1, 4.2, 4.5, 4.6 and 4.7 of the Prospectus comprises: The consolidated income statement for the years ended 30 June 2010 ( FY10 ), 30 June 2011 ( FY11 ), 30 June 2012 ( FY12 ) and the six months ended 31 December 2012 ( 1H FY13 ); and The consolidated balance sheets as at 30 June 2012 and 31 December 2012; and The consolidated cash flow statement for FY10, FY11, FY12 and 1H FY13. (Hereafter the Historical Financial Information ). The Historical Financial Information for FY10, FY11 and FY12 has been extracted from the audited statutory financial statements, which were audited by Ernst & Young and on which unqualified audit opinions were issued. The Historical Financial Information for 1HFY13 was extracted from the special purpose management financial information on which an unqualified review opinion was issued by Ernst & Young. Pro forma Balance sheet The pro forma balance sheet detailed in section 4.1 and as set out in table 4.5 of the Prospectus comprises: The pro forma balance sheet as at 31 December (Hereafter the Pro Forma Balance Sheet ). The Pro Forma Balance Sheet assumes completion of the proposed transactions outlined in section of the Prospectus. Forecast Financial Information The forecast financial Information as detailed in section 4.1 and set out in tables 4.1, 4.2, 4.6 and 4.7 of the Prospectus comprises: Forecast income statement summary of iselect for the year ending 30 June 2013 ( FY13F ), the twelve months ending 31 December 2013 ( CY13F ) and the six months ending 31 December 2013 ( 1H FY14F ); and Forecast cash flow statement of iselect FY13F, CY13F and 1H FY14F. (Hereafter the Forecast Financial Information ). (Collectively, the Financial Information ).

114 112 Investigating Accountant s Report Investigating Accountant s Report and Financial Services Guide 31 May 2013 The Board of Directors iselect Limited 294 Bay Road Cheltenham VIC 3192 The Directors iselect SaleCo Pty Ltd 294 Bay Road Cheltenham VIC 3192 Dear Directors Part 1 - Investigating Accountant s Report on the Historical Financial Information, Pro Forma Balance Sheet and Forecast Financial Information 1. Introduction We have prepared this Investigating Accountants Report (the Report ) on the historical, pro forma and forecast financial information of iselect Limited ( iselect ) for inclusion in the Initial Public Offering Prospectus ( Prospectus ) to be dated on or about 31 May 2013, and to be issued by iselect Limited and iselect SaleCo Pty Ltd ( SaleCo ), in respect of the Initial Public Offer of iselect equity ( the Offer ). Expressions defined in the Prospectus have the same meaning in this Report. Ernst & Young Transaction Advisory Services Limited ( Ernst & Young Transaction Advisory Services ) holds an Australian Financial Services Licence (AFS Licence Number ). Jo Barker is a Director and Representative of Ernst & Young Transaction Advisory Services. We have included our Financial Services Guide as Part 2 of this Report. 2. Scope Ernst & Young Transaction Advisory Services has been requested to prepare this Report to cover the following financial information: Ernst & Young Transaction Advisory Services Limited, ABN Australian Financial Services Licence No

115 iselect Limited engagements. Our procedures consist of reading of relevant Board minutes, reading of relevant contracts and other legal documents, inquiries of management personnel and the Directors of iselect, and analytical and other procedures applied to iselect s accounting records. These procedures do not provide all the evidence that would be required in an audit, thus the level of assurance provided is less than that given in an audit. We have not performed an audit and, accordingly, we do not express an audit opinion on the Historical Financial Information or the Pro Forma Balance Sheet. Forecast Financial Information Our responsibility is to express a conclusion on the Forecast Financial Information based on our review. We have conducted an independent review of the Forecast Financial Information in order to state whether, on the basis of the procedures described, anything has come to our attention that would cause us to believe that: a. The Directors best-estimate assumptions do not provide a reasonable basis for the preparation of the Forecast Financial Information; b. The Forecast Financial Information was not prepared on the basis of the best-estimate assumptions; c. The Forecast Financial Information does not present fairly: - The income statement of iselect for FY13F, CY13F and 1H FY14F; and - The cash flow statement of iselect for FY13F, CY13F and 1H FY14F. in accordance with the recognition and measurement requirements (but not all of the presentation and disclosure requirements) of Australian Accounting Standards as if the bestestimate assumptions set out in Sections and of the Prospectus; and d. The Forecast Financial Information is unreasonable. The Forecast Financial Information has been prepared by the Directors to provide investors with a guide to iselect s potential future financial performance based upon the achievement of certain economic, operating, developmental and trading assumptions about future events and actions that have not yet occurred and may not necessarily occur. There is a considerable degree of subjective judgement involved in the preparation of the Forecast Financial Information. Actual results may vary materially from this Forecast Financial Information and the variation may be materially positive or negative. Accordingly, investors should have regard to the Risk Factors set out in Section 5 of the Prospectus and Sensitivity Analysis set out in Sections 4.7 of the Prospectus. Our independent review of the Forecast Financial Information has been conducted in accordance with Australian Auditing and Assurance Standards applicable to review engagements. Our procedures consist of reading of relevant Board minutes, reading of relevant contracts and other legal documents, inquiries of management personnel and the Directors of iselect, and analytical and other procedures applied to iselect s accounting records. These procedures do not provide all the evidence that would be required in an audit, thus the level of assurance provided is less than that given in an audit. We have not performed an audit and, accordingly, we do not express an audit opinion on the Forecast Financial Information.

116 114 Investigating Accountant s Report 5 5. Conclusion Review conclusion on Historical Financial Information and Pro Forma Balance Sheet Based on our independent review, which is not an audit, nothing has come to our attention which causes us to believe that: a. The Historical Financial Information does not present fairly: - The income statement for FY10, FY11, FY12 and 1H FY13; - The balance sheet as at 30 June 2012 and 31 December 2012; and - The cash flow statement for FY10, FY11, FY12 and 1H FY13. in accordance with the measurement and recognition requirements (but not all of the presentation and disclosure requirements) of Australian Accounting Standards and the accounting policies adopted by iselect as summarised at Appendix 1 of the Prospectus; b. The pro forma transactions / assumptions do not provide a reasonable basis for the Pro Forma Balance Sheet; c. The Pro Forma Balance Sheet has not been prepared on the basis of the transactions / assumptions set out in Section of the Prospectus; d. The Pro Forma Balance Sheet is not presented fairly as at 31 December in accordance with the measurement and recognition requirements (but not all of the presentation and disclosure requirements) of Australian Accounting Standards as if the pro-forma transactions set out in Section of the Prospectus had occurred at 31 December Review conclusion on Forecast Financial Information Based on our review of the Forecast Financial Information, which is not an audit, and based on an investigation of the reasonableness of the Directors best-estimate assumptions giving rise to the prospective financial information, nothing has come to our attention which causes us to believe that: the Directors best-estimate assumptions do not provide a reasonable basis for the preparation of the Forecast Financial Information; the Forecast Financial Information was not prepared on the basis of the best-estimate assumptions; and the Forecast Financial Information does not present fairly: - The income statement of iselect for FY13F, CY13F and 1H FY14F; and - The cash flow statement of iselect for FY13F, CY13F and 1H FY14F.

117 iselect Limited in accordance with the recognition and measurement requirements (but not all of the presentation and disclosure requirements) of Australian Accounting Standards and the accounting policies adopted by iselect as summarised at Appendix 1 of the Prospectus as if the best-estimate assumptions set out in Sections and of the Prospectus; and the Forecast Financial Information is unreasonable. The best-estimate assumptions set out in Sections and of the Prospectus, are subject to significant uncertainties and contingencies often outside the control of iselect and the Directors. If events do not occur as assumed, actual results achieved and distributions provided by iselect may vary significantly from the Forecast Financial Information. Accordingly, we do not confirm or guarantee the achievement of the Forecast Financial Information, as future events, by their very nature, are not capable of independent substantiation. We disclaim any assumption of responsibility for any reliance on this Report or on the Financial Information to which this Report relates for any purposes other than the purpose for which it was prepared. This Report should be read in conjunction with the Prospectus. 6. Independence or Disclosure of Interest Ernst & Young Transaction Advisory Services does not have any pecuniary interests that could reasonably be regarded as being capable of affecting its ability to give an unbiased conclusion in this matter. Ernst & Young provides audit and other advisory services to iselect, and Ernst & Young Advisory Services will receive a professional fee for the preparation of this Report. Yours faithfully Ernst & Young Transaction Advisory Services Limited Jo Barker Director and Representative

118 116 Investigating Accountant s Report 31 May 2013 THIS FINANCIAL SERVICES GUIDE FORMS PART OF THE INVESTIGATING ACCOUNTANT S REPORT PART 2 FINANCIAL SERVICES GUIDE 1. Ernst & Young Transaction Advisory Services Ernst & Young Transaction Advisory Services Limited ( Ernst & Young Transaction Advisory Services or we or us or our ) has been engaged to provide general financial product advice in the form of an Independent Accountant s Report ( Report ) in connection with a financial product of another person. The Report is to be included in documentation being sent to you by that person. 2. Financial Services Guide This Financial Services Guide ( FSG ) provides important information to help retail clients make a decision as to their use of the general financial product advice in a Report, information about us, the financial services we offer, our dispute resolution process and how we are remunerated. 3. Financial services we offer We hold an Australian Financial Services Licence which authorises us to provide the following services: financial product advice in relation to securities, derivatives, general insurance, life insurance, managed investments, superannuation, and government debentures, stocks and bonds; and arranging to deal in securities. 4. General financial product advice In our Report we provide general financial product advice. The advice in a Report does not take into account your personal objectives, financial situation or needs. You should consider the appropriateness of a Report having regard to your own objectives, financial situation and needs before you act on the advice in a Report. Where the advice relates to the acquisition or possible acquisition of a financial product, you should also obtain an offer document relating to the financial product and consider that document before making any decision about whether to acquire the financial product. We have been engaged to issue a Report in connection with a financial product of another person. Our Report will include a description of the circumstances of our engagement and identify the person who has engaged us. Although you have not engaged us directly, a copy of the Report will be provided to you as a retail client because of your connection to the matters on which we have been engaged to report. Ernst & Young Transaction Advisory Services Limited, ABN Australian Financial Services Licence No

119 iselect Limited Remuneration for our services We charge fees for providing Reports. These fees have been agreed with, and will be paid by, the person who engaged us to provide a Report. Our fees for Reports are based on a time cost or fixed fee basis. Our directors and employees providing financial services receive an annual salary, a performance bonus or profit share depending on their level of seniority. The estimated fee for this Report is $95,000 (inclusive of GST). Ernst & Young Transaction Advisory Services is ultimately owned by Ernst & Young, which is a professional advisory and accounting practice. Ernst & Young may provide professional services, including audit, tax and financial advisory services, to the person who engaged us and receive fees for those services. Except for the fees and benefits referred to above, Ernst & Young Transaction Advisory Services, including any of its directors, employees or associated entities should not receive any fees or other benefits, directly or indirectly, for or in connection with the provision of a Report. 6. Associations with product issuers Ernst & Young Transaction Advisory Services and any of its associated entities may at any time provide professional services to financial product issuers in the ordinary course of business. 7. Responsibility The liability of Ernst & Young Transaction Advisory Services is limited to the contents of this Financial Services Guide and the Report. 8. Complaints process As the holder of an Australian Financial Services Licence, we are required to have a system for handling complaints from persons to whom we provide financial services. All complaints must be in writing and addressed to the AFS Compliance Manager or the Chief Complaints Officer and sent to the address below. We will make every effort to resolve a complaint within 30 days of receiving the complaint. If the complaint has not been satisfactorily dealt with, the complaint can be referred to the Financial Ombudsman Service Limited. 9. Compensation Arrangements The Company and its related entities hold Professional Indemnity insurance for the purpose of compensation should this become relevant. Representatives who have left the Company s employment are covered by our insurances in respect of events occurring during their employment. These arrangements and the level of cover held by the Company satisfy the requirements of section 912B of the Corporations Act Contacting Ernst & Young Transaction Advisory Services AFS Compliance Manager Ernst & Young 680 George Street Sydney NSW 2000 Telephone: (02) Contacting the Independent Dispute Resolution Scheme: Financial Ombudsman Service Limited PO Box 3 Melbourne VIC 3001 Telephone: This Financial Services Guide has been issued in accordance with ASIC Class Order CO 04/1572.

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121 119 Additional information 9

122 Additional information 9.1 Company tax status iselect is subject to tax at the Australian corporate tax rate. 9.2 Sale of Shares by SaleCo SaleCo, a special purpose vehicle, has been established to facilitate the sale of Existing Shares by ninemsn and ITV Consulting. SaleCo is a special purpose vehicle which has no material assets, liabilities or operations other than its interests in and obligations under the Underwriting Agreement and deeds described below. The directors and shareholders of SaleCo are Matt McCann and Greg Camm, each of whom are also directors of iselect. At the date of this Prospectus, ninemsn has entered into a deed with iselect and SaleCo under which it has irrevocably offered to sell to SaleCo a total of 62,001,590 Existing Shares which will be sold by SaleCo into the Offer, free from encumbrances and third party rights, and conditional on the Completion of the Offer and receipt by SaleCo of the proceeds under the offer for the Existing Shares. The price payable by SaleCo for these Shares will be the ninemsn Sale Price. iselect has provided a guarantee to ninemsn of SaleCo s obligations under the deed, including the obligation to pay the ninemsn Sale Price. SaleCo has entered into a deed with ITV Consulting on materially the same terms as the deed entered into with ninemsn (save that it provides for the sale of 350,000 Existing Shares to SaleCo for the Other Sale Price). The Existing Shares which SaleCo acquires from ninemsn and ITV Consulting will be transferred to successful Applicants under the Offer. ninemsn is not offering any shares under this Prospectus and did not prepare and is not issuing this Prospectus. 9.3 Management incentive plans iselect has established both a short term ( STI Plan ) and long-term incentive plan ( LTI Plan ) to assist in the attraction, retention and motivation of iselect management Short-term incentive arrangements The Executive Chairman, Damien Waller, the Chief Executive Officer, Matt McCann, as well as the other members of the management team named in Section 6.2, are eligible to participate in iselect s Short Term Incentive Plan ( STI Plan ). Selected other members of management are also entitled to short term financial incentives on similar terms to those set out below. Participants in the STI Plan are eligible to receive up to a specified percentage of their fixed annual remuneration in the form of a cash bonus ( STI Plan Incentive Bonus ), which is contingent on the extent of the achievement of certain performance conditions. The performance conditions require the achievement of: a predetermined EBITDA target (EBITDA Target); a predetermined Gross Profit target (Gross Profit Target); and certain key non-financial performance metrics based on the functional responsibility of the individual participant (Non Financial Targets). The relative weighting of these performance conditions for each participant is dependent on their individual functional responsibilities. STI Plan Incentive Bonuses are payable on the following basis: cash bonuses relating to the achievement of the EBITDA Target are payable annually after finalisation of the financial results for the year ending 30 June; and cash bonuses relating to the achievement of the Gross Profit Target or any Non-Financial Targets are payable on a quarterly basis up to 30 June 2013, and bi-annually thereafter. Neither Damien Waller nor Matt McCann is currently entitled to receive any cash bonuses in respect of achievement of any Non Financial Targets. The terms of the STI Plan are assessed and each of the above targets are set annually and do not change other than at the discretion of the Remuneration Committee for one-off or non recurring events outside the control of management. The achievement of the EBITDA Target or Profit Target is measured by adopting the same Accounting Standards as those adopted in the financial statements for that financial year. STI Plan Incentive Bonus for Damien Waller and Matt McCann in FY13F Mr Waller and Mr McCann are eligible in FY13F for an STI Plan Incentive Bonus of $260,000 and $170,000 per annum, respectively, representing 45% and 34% of their respective fixed annual remuneration. The STI Plan bonus is payable upon achievement of an EBITDA Target and Gross Profit Target (set by the Company at the start of the financial year). Mr Waller and Mr McCann may also receive an additional annual STI Plan Incentive Bonus where their respective performance targets are exceeded (this also applies to STI Plan Incentive Bonuses payable to other members of management). Figure presents the composition of the STI Plan Incentive Bonus for Mr Waller and Mr McCann for FY13F. EBITDA Target Component Gross Profit Target Component Damien Waller 50% 50% Matt McCann 50% 50% An STI Plan Incentive Bonus of the sizes disclosed above is payable to Mr Waller and Mr McCann if the Company achieves FY13F gross profit of $72.7 million and EBITDA of $30.7 million. Where performance is between these figures and $69.1 million and/or $27.6 million respectively, a reduced bonus is payable. Performance at or below both these lower figures would result in no bonus being payable. The total maximum STI Plan Incentive Bonus available to Mr Waller and Mr McCann is $520,000 and $340,000 respectively, payable upon achievement of FY13F gross profit of $75.0 million and FY13F EBITDA of $33.7 million, representing achievement over FY13F gross profit and EBITDA forecasts of 25% and 30% respectively.

123 iselect Limited Corporate Activity Bonus: In 1H FY13 Mr Waller and Mr McCann were paid a one-off discretionary bonus of $60,690 and $80,920 respectively in relation to the successful raise of $28.8 million of equity in October Mr Waller and Mr McCann are also eligible to receive a one-off bonus upon the successful listing of the Company as outlined in Section Long-term incentive arrangements LTI Plan iselect s LTI Plan has been established as the long-term incentive component of remuneration in order to assist in the attraction, reward and retention of certain employees. The LTI Plan is designed to link long-term reward with the ongoing creation of shareholder value, through the allocation of LTIP Shares which are subject to satisfaction of long-term performance conditions. A key design benefit of the LTI Plan is that it facilitates immediate LTIP Share ownership by key employees, thereby aligning their interests with those of shareholders. The LTI Plan also links a significant proportion of employees potential remuneration to iselect s ongoing LTIP Share price and the returns generated for shareholders. The iselect Board considered a number of alternative models when approving the design of the LTI Plan, and believes that the LTI Plan will promote behaviours that will achieve superior performance for iselect over the longer term. The key terms of the LTI Plan are as follows: participants are provided with a limited recourse loan from iselect for the sole purpose of subscribing for LTIP Shares in the Company. Participants are not charged interest on the loan; the LTIP Shares are issued to each participant upfront, with the number of LTIP Shares determined by dividing the loan amount by the market value of the LTIP Shares at the time of allocation; the LTIP Shares will only vest upon satisfaction of conditions set by the Board at the time of the offer; if the conditions are met and LTIP Shares vest, the loan becomes repayable and participants have up to five years from the date of allocation of the LTIP Shares to repay the outstanding balance. The LTIP Shares cannot be dealt with (other than to repay the loan) until the loan in respect of the vested LTIP Shares is repaid in full; until the LTIP Shares vest, the participant is not entitled to exercise any voting rights attached to the LTIP Shares. Any dividends paid on the LTIP Shares while the loan remains outstanding are applied (on a notional after-tax basis) towards repayment of the loan; and in general, if the conditions are not satisfied by the relevant testing date for those conditions, or if the participant ceases employment before the LTIP Shares vest, the participant forfeits all interest in the LTIP Shares in full satisfaction of the loan offer under LTI Plan The performance condition for the 2013 offer is a compound annual growth rate (CAGR) in total shareholder return (TSR). TSR measures the total change in the value of the Shares over a period, plus the value of any dividends and other distributions being treated as if they were reinvested in Shares. In relation to the 2013 offer, vesting starts where CAGR over the period is 12%. At this level, 50% of the LTIP Shares will vest. All LTIP Shares will vest if CAGR over the period is 15% or more. Between these points, the percentage of vesting increases on a straight line basis. In respect of the first offer made under the LTI Plan, in order to provide for direct LTIP Share ownership by participants and alignment with shareholder interests as soon as possible following establishment of the Plan, LTIP Shares may vest in three tranches if the relevant condition is met in respect of that period. The first testing date (in respect of 20% of LTIP Shares under the 2013 offer) is 30 June The remaining LTIP Shares may vest in two equal tranches (tested as at 30 June 2014 and 30 June 2015) if the performance condition is met. It is the Board s current intention that the performance condition will be tested over the full performance period in respect of any future offers under the LTI Plan. If the performance condition is not satisfied, any LTIP Shares which remain unvested following testing of Tranche 1 and/or Tranche 2 (as applicable) will be aggregated and tested on a cumulative basis at subsequent testing dates (i.e. subject to the TSR CAGR being met over the period through to financial years ending FY14 or FY15 (as applicable)). Any LTIP Shares which remain unvested following testing of Tranche 3 will be forfeited and surrendered in full satisfaction of the loan, in which case participants will have no further interest in the LTIP Shares. In this event, the iselect Board believes that the loss of any remuneration value from the LTI Plan is sufficient penalty to the participants. Participation in the 2013 offer iselect s executive directors, Mr McCann and Mr Waller, are the only iselect Directors who will participate in the LTI Plan. The value of the loans made to Mr McCann and Mr Waller under the 2013 offer were $3,500,000 and $2,500,000, respectively. The allocation was made before the one for ten share split undertaken by the Company before Listing ( Share Split ). The allocation price under the 2013 offer was $18.50 per LTIP Share, which was determined by reference to the arms length price under the Company s most recent capital raising in September and October 2012 and the off market trading in shares in the past 6 months. Accordingly, Mr McCann was issued 189,189 LTIP Shares (1,891,890 LTIP Shares following the Share Split), and Mr Waller was issued 135,135 LTIP Shares (1,351,350 LTIP Shares following the Share Split) under the 2013 offer. Issues of LTIP Shares under the LTI Plan have also been made to a number of other employees and to an ex-employee prior to lodgement of the Prospectus. In total, (excluding LTIP Shares issued to Mr McCann and Mr Waller), these employees were granted 5,640,430 LTIP Shares. Cessation of employment Except where the Board determines otherwise in a specific instance, where a participant ceases employment with iselect prior to any conditions attaching to LTIP Shares issued under the LTI Plan being satisfied, their LTIP Shares will be forfeited and surrendered (in full satisfaction of the loan) and the participant will have no further interest in the LTIP Shares. However the Board has discretion to approve the reason for a participant ceasing employment before LTIP Shares have vested in appropriate circumstances. Such circumstances may include ill health, death, redundancy or other circumstances approved by the Board.

124 122 Additional information Where the Board has approved the reason for ceasing employment, it has discretion to determine any treatment in respect of the unvested LTIP Shares it considers appropriate in the circumstances for example, that a pro-rata number of LTIP Shares are eligible to vest, having regard to time worked during the performance period and the extent the performance condition has been satisfied at the time of cessation. In relation to vested LTIP Shares that remain subject to the loan, the participant will have 12 months from the date of the cessation of their employment to repay the loan. Once the loan is repaid, the participant may deal in the LTIP Shares. For the purposes of Sections 200B and 200E of the Corporations Act, iselect Shareholders have approved the giving of any potential benefits under the LTI Plan provided in connection with any future retirement of a participant who holds a managerial or executive office such that for the purposes of the provisions, those benefits will not be included in the statutory limit. Change in control Unless the Board determines otherwise, all LTIP Shares will vest upon a change of control (which excludes the IPO), and participants loans will become repayable (including in respect of any outstanding loan where LTIP Shares had already vested prior to the change of control ). If the Share price has fallen, LTIP Shares will be forfeited and surrendered in full satisfaction of the loan Existing Employee and Executive Equity Plans iselect has, as at the date of this Prospectus, the following existing plans which it had previously put in place to assist in the attraction, retention and motivation of employees and management of iselect. These plans are: 2011 Option Plan; and 2010 Option Plan. The 2010 Option Plan and 2011 Option Plan are the predecessors to the LTI Plan and following completion of the Offer, no additional awards will be made under these plans. However, awards previously granted under the 2010 Option Plan and 2011 Option Plan will continue to be governed by the respective terms of these plans. A summary of the Options on issue under the 2010 Option Plan and 2011 Option Plan are set out below: Tranche No. of Options Vested Unvested Exercise Price Expiry date 2010 Option Plan Tranche 1 900, ,000 0 $ March ,069,450 1,069,450 0 $ November , ,000 0 $ July , ,000 0 $ January , ,000 0 $ March Option Plan Tranche 2 450, ,500 37,500 $ June 2015 Tranche 3 349, , ,921 $ December 2014 Tranche 4 50,000 nil 50,000 $ March 2015 A summary of the key terms of each of the 2010 Option Plan and 2011 Option Plan is set out below Option Plan iselect s 2010 Share Option Plan commenced on 2 October Consideration Options were granted and issued under this plan for no consideration. Vesting conditions The Board may determine that the options will be subject to vesting conditions and, if so, will specify these in the offer. Vesting conditions may include conditions relating to continuous employment or the performance of iselect. Variation of terms and conditions The Board may vary the terms and conditions of the 2010 Option Plan subject to obtaining the written consent of any participant if, in the Board s opinion, such variation would have the net effect of materially prejudicing the participant s rights and entitlements.

125 iselect Limited Disposal restrictions Subject to certain exceptions, Options issued under this plan cannot be disposed of, or otherwise dealt with without the prior approval of the Board. Cessation of employment Subject to the occurrence of certain circumstances including permanent disablement or death, if an optionholder ceases to be employed by the Group all Options which have vested will lapse 30 days after cessation of employment. Change in control of iselect Options will become exercisable if and when a takeover scheme or takeover announcement is made in respect of iselect at a time when iselect is listed on the ASX. Other terms The plan contains customary and usual terms for dealing with changes in iselect s capital structure and the administration, amendment, suspension and termination of the plan Option Plan Consideration Options were granted and issued under this plan for no consideration. Vesting conditions The Board may determine that the options will be subject to vesting conditions and, if so, will specify these in the offer. Vesting conditions may include conditions relating to continuous employment or the performance of iselect. Variation of terms and conditions The Board retains the discretion to vary the terms and conditions of the 2011 Option Plan provided that no amendment may be made which materially reduces the rights of participants in respect of the Options they hold. Disposal restrictions Subject to certain exceptions, Options issued under this plan cannot be transferred without the prior approval of the Board. Lapse of Options The Board may determine that any Options (vested or unvested) lapse if the optionholder acquires an equity interest of 5% or more in a competitor of an iselect Company or engages in activity that in the opinion of the Board, has or will cause material damage to iselect. Cessation of employment The 2011 Option Plan contains provisions concerning the treatment of vested and unvested Options in the event a plan participant ceases employment. If a participant ceases employment with iselect, all unvested Options held by the participant will lapse. This does not include any Options which are subject to any service conditions which have been satisfied, which will remain on foot and may vest if any performance conditions attached to those options are met. If a participant ceases employment by reason of termination for cause, is terminated during their probationary period or resigns within 12 months after the grant of their Options, all Options held by the participant will lapse. Change of Control The Tranche 3 and Tranche 4 Options (as listed in the table in Section ) are subject to change in control provisions. Subject to a person acquiring (or the Board determining it is reasonably likely that a person will acquire) 90% of the Shares, certain of the Tranche 3 Options will vest and be exercisable. In respect of the Tranche 4 Options, subject to a person acquiring 50% of the Shares or all or substantially all of iselect s business, any service condition attached to the Options will be satisfied but the Options will remain subject to any other performance conditions which will be tested on the earlier of the date on which the person acquires more than 50% of the Shares or the relevant businesses of iselect, or the date on which the Board determined that a change in control is reasonably likely to occur. Other terms The plan contains customary and usual terms for dealing with changes in iselect s capital structure and the administration, amendment, suspension and termination of the plan Offer to Director under the 2011 Option Plan A number of Options have been granted to Mr Leslie Webb under the 2011 Option Plan in lieu of director s fees on the terms generally described above in Section and as follows: Grant date 01/07/2012 Number 450,000 (412,500 of which have vested as at the date of the Prospectus) Consideration Nil Exercise price $2.365 Expiry date 30 June 2015 Service condition Must be a Director of iselect or a related body corporate of iselect Vesting conditions Options vest monthly in equal instalments during the period between 1 July 2012 and 30 June Material contracts The Directors consider that there are a number of contracts which are significant or material to iselect or of such a nature that an investor may wish to have details of them when making an assessment of whether to apply for Shares. The main provisions of these contracts are summarised below, or elsewhere in this Prospectus. These summaries do not purport to be complete and are qualified by the text of the contracts themselves Underwriting Agreement Settlement of the Offer is underwritten by the Joint Lead Managers pursuant to an underwriting agreement between iselect, SaleCo and the Joint Lead Managers entered into on or about the date of this Prospectus ( Underwriting Agreement ). Under the Underwriting Agreement, the Joint Lead Managers have agreed to arrange, manage and underwrite the Offer.

126 124 Additional information Commission, fees and expenses iselect has agreed to pay the Joint Lead Managers fees equal to 5.3% of the gross proceeds of the New Shares, and SaleCo has agreed to pay fees of 1% of the gross proceeds of the sale of SaleCo s Existing Shares and, at iselect s sole discretion, iselect may pay the Joint Lead Managers an incentive fee of 0.75% of the gross Offer proceeds. iselect must also pay to Baillieu an additional fee of $110,000 in connection with the Offer. In addition to the fees described above, iselect has agreed to reimburse the Joint Lead Managers for certain agreed costs and expenses incurred by the Joint Lead Managers in relation to the Offer. Termination events The Joint Lead Managers may, at any time on or after lodgement of this Prospectus with ASIC and on or before the settlement date of the Offer or at any other time as specified below, terminate the Underwriting Agreement (without any cost or liability to the Joint Lead Managers by notice to iselect and SaleCo), if any of the following events occur: A statement in any of the Offer Documents becomes misleading or deceptive or is likely to mislead or deceive, or a matter required to be included is omitted from an Offer Document (including, without limitation, having regard to the provisions of Part 6D.2 of the Corporations Act); There occurs a new circumstance that arises after the Prospectus is lodged that would have been required to be included in the Prospectus if it had arisen before the lodgement; iselect issues or, in the reasonable opinion of the Joint Lead Manager seeking to terminate, become required to issue a supplementary prospectus to comply with Section 719 of the Corporations Act; the Company lodges a supplementary prospectus with ASIC in a form and substance that has not been approved by the Joint Lead Managers as required by the agreement; The S&P/ASX 200 Index falls to a level which is 90% or less than the level it was at the close of trading on day of the institutional bookbuild for 2 consecutive Business Days or on the Business Day immediately prior to the settlement date of the Offer, whichever is shorter; The deed polls entered into by ninemsn or ITV Consulting are varied, terminated, rescinded, altered or amended, breached or failed to be complied with, or the offer contained in the deed poll is withdrawn by ninemsn or ITV Consulting; Any of the Voluntary Escrow Deeds are withdrawn, varied, terminated, rescinded, altered or amended, breached or failed to be complied with; There are not, or there ceases to be, reasonable grounds in the reasonable opinion of the Joint Lead Manager seeking to terminate for any statement or estimate in the Offer Documents which relate to a future matter or any statement or estimate in the Offer Documents which relate to a future matter is, in the reasonable opinion of the Joint Lead Manager seeking to terminate, unlikely to be met in the projected timeframe (including in each case financial forecasts); Any member of iselect, SaleCo or any of their directors or officers (as those terms are defined in the Corporations Act) engage, or have engaged since the date of the underwriting agreement, or are alleged to have engaged in any fraudulent conduct or activity whether or not in connection with the Offer; Approval is refused or not granted, (or approval subject to conditions other than customary conditions) to iselect s admission to the official list of the ASX on or before the shortfall notification date or quotation of the Offer Shares on ASX, or for the Offer Shares to be traded through CHESS on or before the quotation date, or if granted, the approval is subsequently withdrawn, qualified (other than by customary condition) or withheld; Any of the following notifications are made in respect of the Offer: ASIC issues an order (including an interim order) under Section 739 of the Corporations Act; ASIC holds a hearing under Section 739(2) of the Corporations Act; An application is made by ASIC for an order under Part 9.5 of the Corporations Act in relation to the Offer or an Offer Document or ASIC commences any investigation or hearing under Part 3 of the Australian Securities and Investments Commission Act 2001 (Cth) in relation to the Offer or an Offer Document; Any person who has previously consented to the inclusion of its name in the Offer Documents withdraws that consent; or Any person gives a notice under Section 730 of the Corporations Act in relation to an Offer Document, A closing certificate is not given by the time required or is incorrect or misleading; If any of the obligations of the relevant parties under any of the material contracts or any contract that is material to the business of iselect as a whole are not capable of being performed in accordance with their terms (in the reasonable opinion of the Joint Lead Managers seeking to Terminate) or if all or any part of any of the material contracts or any contract that is material to the business of the Group as a whole: is terminated, withdrawn, rescinded, avoided or repudiated; ceases to have effect, otherwise than in accordance with its terms; or is or becomes void, voidable, illegal, invalid or unenforceable (other than by reason only of a party waiving any of its rights) or capable of being terminated, withdrawn, rescinded, avoided or withdrawn or of limited force and affect, or its performance is or becomes illegal; The Prospectus is not lodged by the Company and SaleCo by the lodgement date; iselect or SaleCo withdraws an Offer Document or the Offer; Any member of iselect or SaleCo becomes insolvent or there is an act or omission which is likely to result in a member of iselect or SaleCo becoming insolvent; an event specified in the timetable up to and including the settlement date is delayed by more than 1 Business Day (other than any unreasonable delay caused solely by the Joint Lead Managers or any delay agreed between the Company and the Joint Lead Managers consent not to be unreasonably withheld);

127 iselect Limited iselect is prevented from issuing and allotting the Offer Shares or SaleCo is prevented from transferring the Existing Shares in the required timeframe, the Offer Documents, the Listing Rules, by applicable laws, an order of a court of competent jurisdiction or a Governmental Authority; iselect alters its issued capital or any member of iselect disposes or attempts to dispose of a substantial part of the business or property of iselect, without the prior written consent of the Joint Lead Managers; if a regulatory body withdraws, revokes or amends any regulatory approvals required for the Company or SaleCo to perform its obligations under this agreement or to carry out the transactions contemplated by the Offer Documents; the Company or any of its affiliates charges, or agrees to charge, the whole or a substantial part of the business or property of the Company or iselect other than as disclosed in the Prospectus or as agreed with the Joint Lead Managers in writing; or there is an event or occurrence, including any statute, order, rule, regulation, directive or request (including one compliance with which is in accordance with the general practice of persons to whom the directive or request is addressed) of any Governmental Agency which makes it illegal for the Joint Lead Managers to satisfy an obligation under this document, or to market, promote or settle the Offer. Termination events subject to materiality The Joint Lead Managers may, at any time on or after lodgement of this Prospectus with ASIC and on or before the settlement date of the Offer, terminate the Underwriting Agreement (without any cost or liability to the Joint Lead Managers by written notice to iselect and SaleCo), if any of the following events occur and the Joint Lead Managers have reasonable grounds to believe that the event: (i) has or is likely to have a material adverse effect on the success, settlement or marketing of the Offer, ability of the Joint Lead Manager to market or promote or settle the Offer or the likely price at which the Shares will trade on ASX or the willingness of investors to subscribe for the Shares; or (ii) will, or is likely to, give rise to a liability of that Joint Lead Managers under, or a contravention by that Joint Lead Manager of, any applicable law: Any of the Offer Documents or any aspect of the Offer does not comply with the Corporations Act, the Listing Rules or other applicable law or regulation; If any of the obligations of the relevant parties under any of the material contracts or any contract that is material to the business of iselect as a whole are not capable of being performed in accordance with their terms (in the reasonable opinion of the Joint Lead Managers seeking to Terminate) or if all or any part of any of the material contracts or any contract that is material to the business of the Group as a whole: is altered, amended or varied without the consent of the Joint Lead Managers (acting reasonably); is breached, or there is a failure by a party to comply, in a respect that the Joint Lead Manager seeking to terminate believes may be expected to have a material adverse effect on the Offer or outcome of the Offer; the due diligence report or verification material or any other information supplied by or on behalf of the Company or SaleCo to the Joint Lead Managers in relation to iselect or the Offer is, or becomes, false or misleading or deceptive, including by way of omission; any adverse change occurs in the assets, liabilities, financial position or performance, profits, losses or prospects of the Company and iselect (insofar as the position in relation to an entity in iselect affects the overall position of the Company), including any adverse change in the assets, liabilities, financial position or performance, profits, losses or prospects of the Company or iselect from those respectively disclosed in any offer document or the public information; Hostilities not presently existing at the date of the Underwriting Agreement commence (whether war has been declared or not) or an escalation of existing hostilities occurs (whether war has been declared or not) involving any one or more of Australia, New Zealand, the United States, Canada, Japan, the United Kingdom, the People s Republic of China, South Korea, Israel, Singapore or any member state of the European Union or a major terrorist act is perpetrated on any one of those countries or any diplomatic, military, commercial or political establishment of any of those countries; A new law is introduced, or there is a public announcement of a proposal to introduce, into the Parliament of Australia, New Zealand, the United States, the United Kingdom, Japan, Hong Kong, Singapore, Switzerland or any member state of the European Union or any State or Territory of Australia a new law, or the Reserve Bank of Australia, or any Commonwealth or State authority, including ASIC adopts or announces a proposal to adopt a new policy (other than a law or policy which has been announced before the date of this agreement); iselect or any member of iselect contravene the Corporations Act, the Competition and Consumer Act 2010 (Cth), the Australian Securities and Investments Commission Act 2001 (Cth), its Constitution or any Listing Rule; There is a change in the Management or the Board of iselect; Any of the following occur: A Director of a member of iselect or SaleCo is charged with an indictable offence; Any Government agency commences any public action against a member of iselect, SaleCo or any of their director in their capacity as a director, or announces that it intends to take such action; Any Director of a member of iselect or SaleCo is disqualified from managing a corporation under Part 2D.6 of the Corporations Act; A representation, warranty, undertaking or obligation contained in this agreement on the part of the Company or SaleCo (whether severally or jointly) is breached, becomes not true or correct or is not performed; the Company or SaleCo defaults on one or more of its obligations under the agreement; the Company varies any term of its constitution without the prior written consent of the Joint Lead Managers;

128 126 Additional information the commencement of legal proceedings against any member of iselect or SaleCo or against a Director/officer of a member of iselect or SaleCo or any regulatory body commences an inquiry or public action against any member of iselect or SaleCo; Information about the Offer that is supplied by or on behalf of iselect or SaleCo to the Joint Lead Managers is or is found to be false or misleading or deceptive or likely to mislead or deceive; Any of the following occurs: (i) a general moratorium on commercial banking activities in Australia, New Zealand, Japan, Singapore, Hong Kong, the United Kingdom, the United States, the People s Republic of China or a member state of the European Union is declared by the relevant central banking authority in those countries or there is a disruption in commercial banking or security settlement or clearance services in any of those countries; (ii) any adverse effect on the financial markets in Australia, New Zealand, Japan, Singapore, Hong Kong, the United Kingdom, the United States, the People s Republic of China or a member state of the European Union, or in foreign exchange rates or any development involving a prospective change in political, economic or financial conditions in any of those countries; or (iii) trading in all securities quoted or listed on ASX, the New Zealand Exchange, New York Stock Exchange, London Stock Exchange, Hong Kong Stock Exchange or the Tokyo Stock Exchange is suspended or limited in a material respect for 1 day (or a substantial part of 1 day) on which that exchange is open for trading. Conditions, warranties, undertakings and other terms The Underwriting Agreement contains certain standard representations, warranties and undertakings by iselect and SaleCo to the Joint Lead Managers (as well as common conditions precedent, including the entry into a Voluntary Escrow Deed by each of the Escrowed Shareholders and the Joint Lead Managers having received signed, valid, binding and duly completed confirmation of allocation and registration forms and confirmation advices for the Shares allocated under the Institutional Offer and to brokers and comanagers under the Broker Firm Offer). The warranties relate to matters such as conduct by iselect and SaleCo and information provided by iselect and SaleCo, Financial Information, material contracts, licences, insurance, information in this Prospectus and the conduct of the Offer. iselect and SaleCo s undertakings include that they will not, during the period following the date of the Underwriting Agreement until the announcement to ASX of iselect s FY13 financial results, alter the capital of the Company, amend the Company s constitution or dispose of the Company s business or property (in whole or substantial part) except with the prior written consent of the Joint Lead Managers (which must not be unreasonably withheld or delayed), and that it will, during the period following the date of the Underwriting Agreement until 90 days after the date on which settlement of the Shares occurs, carry on its business and procure that each member of iselect carries on its business, in the ordinary course and not dispose (or permit any other member of iselect to dispose) of any material part of its business except in the ordinary course and as disclosed in this Prospectus. Indemnity Subject to certain exclusions relating to, among other things, gross negligence, fraud, or wilful misconduct of an indemnified party, iselect and SaleCo agree to keep the Joint Lead Managers and certain affiliated parties indemnified from losses suffered in connection with the Offer Finance facilities iselect has existing secured financing arrangements with CBA. CBA has made available to iselect a secured term debt revolving facility of up to $35,000,000 and a secured letter of credit facility of up to $5,000,000. The material terms of these facilities are set out in Table 9.1 and in the remainder of this Section Table 9.1: Summary of facilities (A$ millions) Lender Facility Use of proceeds Limit (current) Limit (post Listing) Commonwealth Bank of Australia Commonwealth Bank of Australia Term Debt Revolving Facility LC Facility Working capital and general corporate purposes (e.g. refinancing/retiring existing indebtedness; permitted acquisitions; capital expenditure) Working capital and general corporate purposes Total facilities $ Term The various secured finance facilities are provided for the following terms: Term Debt Revolving Facility: 3 years from 18 April 2013, the date of the CBA facility agreement LC Facility: 3 years from 18 April 2013, the date of the CBA facility agreement

129 iselect Limited Guarantee As at 19 April 2013, iselect and all its wholly owned subsidiaries on that date were guarantors under the CBA facilities. In addition, iselect must ensure, from time to time, that the guarantors under the CBA facilities together hold at least 95% of group total assets, and generate at least 95% of group EBITDA (including by procuring any new subsidiary to execute a deed of accession and become a guarantor, under the CBA facilities.) Security As at 19 April 2013 iselect and all its wholly owned subsidiaries on that date have provided to CBA fixed and floating charges over all their respective present and after-acquired property and are also obliged to grant any other security interests reasonably required by CBA from time to time (such as, for example, cash cover security in respect of the LC facility). In addition, iselect must ensure, from time to time, that the security-providers under the CBA facilities together hold at least 95% of group total assets and generate at least 95% of group EBITDA (including by procuring any new subsidiary to become a security-provider under the CBA facilities). iselect has also provided specific account security in favour of ANZ in respect of the facilities provided by it to iselect. Interest iselect must pay interest to CBA at predominantly variable rates as agreed between iselect and the bank. Representations, warranties and undertakings Each of the secured finance facilities contain a number of general representations, warranties and undertakings that are generally customary for facilities of their nature including undertakings to provide information, a negative pledge (with appropriate carve outs), restrictions as to disposals of assets (subject to exceptions usual for facilities of their nature) and provision of financial accommodation (also subject to exceptions usual for facilities of their nature). The facilities also contain a number of financial covenants (tested quarterly for monthly compliance) such as the requirement to ensure group EBITDA for the preceding 12 months and Available Liquidity do not fall below, and the Borrowing Base does not exceed, certain agreed levels, Defaults Each of the secured finance facilities also contain certain events of default which are customary for facilities of their nature. These events of default include the failure to make payments due, a breach of any financial covenants imposed, a breach of any other obligation under the facilities, the misrepresentation of facts pertaining to any finance document, the occurrence of a cross-default, a change of control and the occurrence of any insolvency event as well as any event which has a material adverse effect on, for example, the business or operations of iselect and iselect s subsidiaries. It is also an event of default under the secured finance facilities if following listing on the ASX, the shares of iselect are removed from the official list of the ASX or suspended from trading for seven consecutive trading days. In a number of instances, the events of default are subject to materiality thresholds and cure periods. Upon the occurrence of an event of default, CBA will be entitled to, among other things, declare that all monies owing to it under one or more of the finance facilities are immediately due and payable, terminate all or part of its obligations to iselect and the group, take enforcement action to recover amounts owed to it (including by appointing receivers and taking possession of any relevant secured property) and charge iselect additional fees and interest. There are no existing events of default. Review Events If a material revenue contract is terminated or if the short term credit rating of any health fund contributing more than 20% of iselect s present value of trail commission is downgraded below agreed levels or any health insurance provider removes itself from iselect s panel of health insurance providers or removes the authority of iselect to distribute any of its products for a period of at least four consecutive months where the aggregate revenue generated from all contracts with that health insurance provider was at least 25% of iselect s total revenue for the preceding 12 month period, then CBA has the right to review the finance facilities provided by it to iselect and, following such review, to either agree revised terms with iselect or, if agreement cannot be reached, to require iselect to repay these facilities. There are no subsisting review events. Conditions Precedent and Subsequent Use of the finance facilities is subject to iselect satisfying a number of conditions to the satisfaction of CBA. Within certain agreed timeframes following the CBA facilities being made available to iselect, iselect is also obliged to comply with certain conditions subsequent such as the refinancing of all iselect s existing non-cba transactional and merchant banking facilities, and the noting of CBA s interest on certain applicable insurance policies taken out by iselect. Accession As mentioned above, iselect must ensure, from time to time, that the guarantors and security-providers under the CBA facilities hold at least 95% of group total assets, and generate at least 95% of group EBITDA. In order to comply with this requirement, iselect must procure any relevant new subsidiary to execute a deed of accession and accede to the CBA finance facilities as guarantors. Each entity acceding as a guarantor must provide CBA with certain information and security, including a fixed and floating charge over all its present and after-acquired property Secured NIA facility iselect has provided a secured facility to NIA Health for the sole purpose of allowing NIA Health to defer the time at which it is required to make payments under the distribution arrangements. The facility does not allow NIA Health to draw down cash amounts; rather, it creates a deferred payment obligation for which NIA Health provides security and pays interest. The key terms are as follows: NIA Health must pay interest every 3 months to iselect on the amount outstanding under the facility. Interest is payable at variable rates. The rate as at 31 March 2013 is 9.1% per annum.

130 128 Additional information Unless repaid earlier by NIA, all amounts drawn under the facility shall be finally repaid by NIA Health to iselect on 31 July 2014, unless: (a) an extension is requested by NIA Health to 31 July 2015 by NIA Health giving notice to iselect that NIA Health is unable to refinance the facility; (b) an event of default or review event occurs under the facility which will entitle iselect to accelerate repayment of the facility. The maximum total size of the facility is $75 million. As at 31 December 2012, $9.2 million is outstanding under the facility and a further $65.8 million may be drawn down (if the facility is extended to 31 July 2015). NIA Health has provided a fixed and floating charge over all its present and after-acquired property. In addition, NIA Health s parent company, NIA, has provided a share mortgage over all the present and after-acquired shares in NIA Health and a guarantee from NIA to iselect in respect of the facility. The NIA facility contains a number of representations, warranties, undertakings (including financial covenants) and events of default from NIA and NIA Health that are customary for an ordinary secured facility. The events of default include certain financial covenants on NIA and NIA Limited or NIA failing to pay on the due date any amount payable pursuant to the facility, among other typical events of default. 9.5 Ownership restrictions The sale and purchase of Shares in Australia is regulated by a number of laws that restrict the level of ownership or control by any one person (either alone or in contribution with others). This Section contains a general description of these laws Foreign Acquisitions and Takeovers Act 1975 (Cth) Generally, the Foreign Acquisitions and Takeovers Act 1975 (Cth) applies to acquisitions of shares and voting power in a company of 15% or more by a single foreign person and its associates ( Substantial Interest ), or 40% or more by two or more unassociated foreign persons and their associates ( Aggregate Substantial Interest ). Where an acquisition of a Substantial Interest meets certain criteria, the acquisition may not occur unless notice of it has been given to the Federal Treasurer and the Federal Treasurer has either stated that there is no objection to the proposed acquisition in terms of the Federal Government s Foreign Investment Policy ( Policy ) or a statutory period has expired without the Federal Treasurer objecting. An acquisition of a Substantial Interest or an Aggregate Substantial Interest meeting certain criteria may also lead to divestment orders unless a process of notification, and either a statement of non-objection or expiry of a statutory period without objection, has occurred. In addition, in accordance with Policy, acquisitions of a direct investment in an Australian company by foreign governments and their related entities should be notified to the Foreign Investment Review Board for approval, irrespective of value. According to Policy, a direct investment will typically include any investment of 10% or more of the shares (or other securities or equivalent economic interest or voting power) in an Australian Company but may also include investment of less than 10% where the investor obtains influence or control over the target investment Corporations Act The takeover provisions in Chapter 6 of the Corporations Act restrict acquisitions of shares in listed companies, and unlisted companies with more than 50 members, if the acquirer s (or another party s) voting power would increase to above 20%, or would increase from a starting point that is above 20% and below 90%, unless certain exceptions apply. The Corporations Act also imposes notification requirements on persons having voting power of 5% or more in iselect either themselves or through an associate. 9.6 Legal proceedings So far as the Directors are aware, other than as described elsewhere in this Prospectus, there is no current or threatened civil litigation, arbitration proceedings or administrative appeals, or criminal or governmental prosecutions of a material nature in which iselect is directly or indirectly concerned which is likely to have a material adverse impact on the business or financial position of iselect. 9.7 Consents Written consents to the issue of this Prospectus have been given and, at the time of lodgement of this Prospectus with ASIC, had not been withdrawn by the following parties: Each of Credit Suisse and Baillieu Holst has given, and has not withdrawn prior to the lodgement of this Prospectus with ASIC, its written consent to be named in this Prospectus as Joint Lead Manager to the Offer; Gilbert + Tobin has given, and has not withdrawn prior to the lodgement of this Prospectus with ASIC, its written consent to be named in this Prospectus as Australian legal advisor (other than in relation to taxation matters) to iselect in relation to the Offer in the form and context in which it is named; Ernst & Young Transaction Advisory Services Limited has given, and has not withdrawn prior to the lodgement of this Prospectus with ASIC, its written consent to be named in this Prospectus as Investigating Accountant to iselect in relation to the Financial Information in the form and context in which it is named and has given and not withdrawn its consent to the inclusion in this Prospectus of its Investigating Accountant s Report in the form and context in which it is included; Ernst & Young has given, and has not withdrawn prior to the lodgement of this Prospectus with ASIC, its written consent to be named in this Prospectus as providing due diligence services to iselect in relation to the Financial Information in the form and context in which it is named; Deloitte Actuaries & Consultants Limited has given, and not withdrawn prior to the lodgement of this Prospectus with ASIC, its written consent to be named in this Prospectus as having performed an expert valuation of trail commission entitlements and a review of private health insurance market sales volumes, in the form and context in which it is named; Computershare Investor Services Pty Limited has given, and has not withdrawn prior to the lodgement of this Prospectus with ASIC, its written consent to be named in this Prospectus as the Share Registry in the form and context in which it is named. Computershare Investor Services Pty Limited has

131 iselect Limited had no involvement in the preparation of any part of this Prospectus other than being named as Share Registry to iselect. Computershare Investor Services Pty Limited has not authorised or caused the issue of and expressly disclaims and takes no responsibility for any part of the Prospectus; Nielsen has given, and not withdrawn prior to the lodgement of this Prospectus with ASIC, its written consent to be named in this Prospectus and to the inclusion of the references to it in the form and context in which it is named; Rice Warner Actuaries has given, and not withdrawn prior to the lodgement of this Prospectus with ASIC, its written consent to be named in this Prospectus and to the inclusion of the references to it in the form and context in which it is named; IBIS World has given, and not withdrawn prior to the lodgement of this Prospectus with ASIC, its written consent to be named in this Prospectus and to the inclusion of the references to it in the form and context in which it is named; Plan For Life Actuaries & Researchers has given, and not withdrawn prior to the lodgement of this Prospectus with ASIC, its written consent to be named in the Prospectus and to the inclusion of the references to it in the form and context in which it is named; and Experian Hitwise has given, and not withdrawn prior to the lodgement of this Prospectus with ASIC, its written consent to be named in the Prospectus and to the inclusion of the references to it in the form and context in which it is named. 9.8 Taxation considerations The following comments provide a general summary of Australian tax issues for Australian tax resident shareholders who acquire Shares under this Prospectus. The categories of Shareholders considered in this summary are limited to individuals, companies (other than life insurance companies), trusts, partnerships and complying superannuation funds that hold their shares on capital account. This summary does not consider the consequences for non-australian tax resident Shareholders, insurance companies, banks, Shareholders that hold their Shares on revenue account or carry on a business of trading in shares or Shareholders who are exempt from Australian tax. This summary also does not cover the consequences for Shareholders who are subject to Division 230 of the Income Tax Assessment Act 1997 (the Taxation of Financial Arrangements or TOFA regime). Shareholders who are subject to TOFA should obtain their own tax advice as to the implications under TOFA (if any). This summary is based on the law in Australia in force at the time of issue of this Prospectus. Australian tax laws are complex. It also does not take into account the tax law of countries other than Australia. This summary is general in nature and is not intended to be an authoritative or complete statement of the applicable law. The taxation laws of Australia or their interpretation may change. The precise implications of ownership or disposal will depend upon each Shareholder s specific circumstances. Shareholders should seek professional advice on the taxation implications of holding or disposing of the Shares, taking into account their specific circumstances Dividends on a Share Australian resident individuals and complying superannuation entities Where dividends on a Share are distributed by the Company, those dividends will constitute assessable income of an Australian tax resident Shareholder. Australian tax resident Shareholders who are individuals or complying superannuation entities should include the dividend in their assessable income in the year the dividend is paid, together with any franking credit attached to that dividend. Such Shareholders should be entitled to a tax offset equal to the franking credit attached to the dividend subject to being a qualified person (refer further comments below). The tax offset can be applied to reduce the tax payable on the Shareholder s taxable income. Where the tax offset exceeds the tax payable on the Shareholder s taxable income, such Shareholders should be entitled to a tax refund. Where a dividend paid by the Company is unfranked, the Shareholder will generally be taxed at his or her prevailing marginal rate on the dividend received with no tax offset. Corporate shareholders Corporate Shareholders are also required to include both the dividend and associated franking credit in their assessable income. A tax offset is then allowed up to the amount of the franking credit on the dividend. An Australian resident corporate Shareholder should be entitled to a credit in its own franking account to the extent of the franking credit on the dividend received. Such corporate Shareholder s can then pass on the benefit of the franking credits to its own shareholder(s) on the payment of dividends. Excess franking credits received cannot give rise to a refund, but may be able to be converted into carry forward tax losses. Trusts and partnerships Shareholders who are trustees (other than trustees of complying superannuation entities) or partnerships should include the franking credit in determining the net income of the trust or partnership. The relevant beneficiary or partner may be entitled to a tax offset equal to the beneficiary s or partner s share of the net income of the trust or partnership as the case may be. Shares held at risk The benefit of franking credits can be denied where a Shareholder is not a qualified person in which case the Shareholder will not be able to include an amount for the franking credits in their assessable income and will not be entitled to a tax offset. Broadly, to be a qualified person, a Shareholder must satisfy the holding period rule and, if necessary, the related payment rule. The holding period rule requires a Shareholder to hold the Shares at risk for more than 45 days continuously, measured as the period commencing the day after the Shareholder acquires the Shares and ending on the 45th day after the Shares become ex-dividend. The date the Shares are acquired and disposed of are ignored for the purposes of determining the 45 day period. Any day on which a Shareholder has a materially diminished risk or loss of opportunity for gain (through transactions such as granting options or warrants over Shares or entering into a contract to sell the Shares) will not be counted as a day on which the Shareholder held the Shares at risk.

132 130 Additional information This holding period rule is subject to certain exceptions, including where the total franking offsets of an individual in a year of income do not exceed A$5,000. Special rules apply to trusts and beneficiaries. On 14 May 2013, the Commonwealth Government announced changes that will apply dividend washing arrangements and the amendments are proposed to be made through the 45 day holding period rules. No legislation has yet been released in respect of this change. Shareholders should consider the impact of this proposed change given their own personal circumstances. Under the related payment rule, a different testing period applies where the Shareholder has made, or is under an obligation to make, a related payment in relation to a dividend. The related payment rule requires the Shareholder to have held the Shares at risk for a period commencing on the 45th day before, and ending on the 45th day after the day the Shares become ex-dividend. Practically, this should not impact Shareholders who continue to hold Shares and also do not pass the benefit of the dividend to another person. Shareholders should obtain their own tax advice to determine if these requirements have been satisfied Disposal of Shares The disposal of a Share by a Shareholder will be a capital gains tax (CGT) event. A capital gain will arise where the capital proceeds on disposal exceed the cost base of the Share (broadly, the amount paid to acquire the Share plus any transaction costs). In the case of an arm s length on-market sale, the capital proceeds will generally be the cash proceeds from the sale. A CGT discount may be applied against the net capital gain where the Shareholder is an individual, complying superannuation entity or trustee, the Shares have been held for more than 12 months and certain other requirements have been met. Where the CGT discount applies, any capital gain arising to individuals and entities acting as trustees (other than a trust that is a complying superannuation entity) may be reduced by one-half after offsetting current year or prior year capital losses. For a complying superannuation entity, any capital gain may be reduced by one third, after offsetting current year or prior year capital losses. A capital loss will be realised where the reduced cost base of the Share exceeds the capital proceeds from disposal. Capital losses may only be offset against capital gains realised by the Shareholder in the same income year or future income years, subject to certain loss recoupment tests being satisfied. Capital losses cannot be offset against other assessable income Goods and Services Tax Investors should not be liable for GST in respect of their investment in Shares. Investors may not be entitled to claim full input tax credits in respect of any GST paid on costs incurred in connection with their acquisition of the Shares. Separate GST advice should be sought by investors in this respect Stamp Duty Investors should not be liable for stamp duty in respect of their holding of Shares. Under current stamp duty legislation, no stamp duty would ordinarily be payable by Shareholders on any subsequent transfer of Shares Tax File numbers A Shareholder is not required to quote their tax file number (TFN) to the Company. However, if valid TFN or exemption details are not provided, Australian tax will be required to be deducted by the Company from distributions and/or dividends at the maximum marginal tax rate plus the Medicare levy. A Shareholder that holds Shares as part of an enterprise may quote their Australian Business Number instead of their TFN. Non-residents are exempt from this requirement. 9.9 Governing law This Prospectus and the contracts that arise from the acceptance of the Applications and bids under this Prospectus are governed by the laws applicable in Victoria and each Applicant under this Prospectus submits to the exclusive jurisdiction of the courts of Victoria Statement of Directors This Prospectus is authorised by each director of iselect and SaleCo who consents to its lodgement with ASIC and its issue.

133 131 Appendix 1 Significant accounting policies

134 132 Appendix 1 Significant accounting policies The following significant accounting policies have been adopted in the preparation of the Financial Information included in Section 4 of this Prospectus. These accounting policies are consistent with the last audited general purpose financial report of the Company for the year ended 30 June Basis of consolidation The consolidated financial statements comprise the financial statements of iselect Limited and its controlled entities as at 30 June each year ( the Company ). Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Company. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Company takes into consideration potential voting rights that currently are exercisable. The Company measures goodwill at the acquisition date as: the fair value of the consideration transferred; plus the recognised amount of any non-controlling interests in the acquiree; less the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed. When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss. The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss. Transaction costs other than those associated with the issue of debt or equity securities, that the Company incurs in connection with a business combination are expensed as incurred. Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profit or loss. Adjustments are made to bring into line any dissimilar accounting policies that may exist. All inter-company balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in full. Unrealised losses are eliminated unless costs cannot be recovered. Subsidiaries are consolidated from the date on which control is transferred to the Company and cease to be consolidated from the date on which control is transferred out of the Company. Where there is loss of control of a subsidiary, the consolidated financial statements include the results for the part of the reporting year during which the Company has control. Business combination reserve The internal group restructure performed in the 2007 financial year, which interposed the holding company, iselect Limited, into the consolidated Group was exempted by AASB 3 Business Combinations as it precludes entities or businesses under common control. The carry-over basis method of accounting was used for the restructuring of iselect. As such the assets and liabilities were reflected at their carrying amounts. No adjustments were made to reflect fair values, or recognise any new assets or liabilities. No goodwill was recognised as a result of the combination and any difference between the consideration paid and the equity acquired was reflected within equity as an equity reserve entitled Business Combination Reserve. Significant accounting judgements, estimates and assumptions Significant accounting estimates and assumptions The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities presented within the Forecast Financial Information in Section 4 are: Revenue recognition Revenue is recognised at the point in time where the Company has essentially completed its contracted service with its Product Providers and it is probable that the Company will receive revenue in relation to the underlying consumer. This point in time is where a consumer is referred to a Product Provider. As such, the Company determines reliable measurement of its revenue on the basis of the probability of a referred sale becoming a financial or paid sale on the basis of extensive historical statistical and trend data. Revenue is recognised on a net basis of the historical percentage of referred sales expected to become financial and is adjusted to actual percentages experienced at each reporting date. Where this information cannot be reliably measured, the Company recognises revenue at the time a consumer makes its first payment to a Product Provider. Present value of trail commissions The Company has elected to account for trail commission revenue at the time of selling a product to which trail commission attaches, rather than on the basis of actual payments received from the relevant fund or providers involved. This method of revenue recognition requires the Directors and management to make certain estimates and assumptions based on industry data and the historical experience of the Group. In undertaking this responsibility, the Company engaged Deloitte Actuaries & Consultants Limited, a firm of consulting actuaries, to perform an expert valuation of the trail commission receivable at 31 December 2012 for Health, Life, and Home Loans trail revenue, including a review of the accuracy of assumptions for Health, Life and Home Loans trail revenue. The Car trail commission is a Director valuation and is based on the same principles as outlined above. These estimates and assumptions include, but are not limited to: termination or lapse rates, mortality rates, inflation, risk free and other discount rates, counter party credit risk, forecast health fund premium increases and the estimated impact of known Australian Federal and State Government policy. The full impact of any private health insurance rebate and other legislative changes is still yet to be determined with any known certainty as at the date of this Prospectus. Estimates of the likely impact of announced changes have been considered by the

135 iselect Limited Company s actuaries at the reporting date. The Directors consider this method of trail commission recognition to be a more accurate representation of the Company s financial results. This method is further detailed in the subsequent policy disclosures. Please see Section for disclosure about the risks of a change to the applicable Accounting Standards, or their interpretation, in relation to this treatment of trail commissions. Claw back provisions Upfront fees received from certain insurance funds and mortgage brokers can be clawed back in the event of early termination of membership. They vary across the insurance and mortgage industries and are usually triggered where a member terminates their policy. Each relevant Product Provider has an individual agreement and the claw back period may range between 0 and 12 months, depending on the agreement. The Company provides for this liability based upon historical average rates of attrition and recognises revenue net of these claw back amounts. Taxation The Company s accounting policy for taxation requires management s judgement as to the types of arrangements considered to be a tax on income in contrast to an operating cost. Judgement is also required in assessing whether deferred tax assets and certain deferred tax liabilities are recognised on the statement of financial position. Deferred tax assets, including those arising from unrecouped tax losses, capital losses and temporary differences, are recognised only where it is considered more likely than not that they will be recovered, which is dependent on the generation of sufficient future taxable profits. Assumptions about the generation of future taxable profits depend on management s estimates of future cash flows. These depend on estimates of future sales volumes, operating costs, capital expenditure, dividends and other capital management transactions. Judgements are also required about the application of income tax legislation in respect of the availability of carry forward tax losses. These judgements and assumptions are subject to risk and uncertainty, hence there is a possibility that changes in circumstances will alter expectations, which may impact the amount of deferred tax assets and deferred tax liabilities recognised on the statement of financial position and the amount of other tax losses and temporary differences not yet recognised. In such circumstances, some or all of the carrying amounts of recognised deferred tax assets and liabilities may require adjustment, resulting in a corresponding credit or charge to the statement of comprehensive income in future periods. Provisions for employee entitlements Provisions are measured at the present value of management s best estimate of the expenditure required to settle the present obligation at the reporting date using the discounted cash flow methodology. The risks specific to the provision are factored into the cash flows and as such a risk-free government bond rate relative to the expected life of the provision is used as a discount rate. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects the time value of money and the risks specific to the liability. The increase in the provision resulting from the passage of time is recognised as interest expense. Research and development costs Internal project costs are classified as research or development based on management s assessment of the nature of each cost and the underlying activities performed. Management performs this assessment against the Company s development costs policy which is consistent with the requirements of AASB 138 Intangible Assets. Share based payments Accounting judgements, estimates and assumptions in relation to share based payments have been discussed in subsequent policy disclosures. Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Fee revenue The Company primarily earns two streams of fee based revenue: upfront fees and trail commission. i. Upfront fees Upfront fees are fees earned upon new members joining a health fund, initiating a life insurance policy, obtaining car insurance products, mortgages or energy products via iselect. Upfront fees may trigger a claw back of revenue in the event of early termination by consumers as specified in individual fund agreements and as such, upfront fees are recognised net of these amounts. These claw backs are provided for by the Company on a monthly basis by utilising industry data and historical experience. ii. Trail commission Trail commissions are ongoing fees related to consumers referred to individual insurance funds or applied for mortgages via iselect. Trail commission revenue represents commission earned calculated as a percentage of the value of the underlying policy and in the case of mortgages a proportion of the underlying value of the loan. The Company is entitled to receive trail commission without having to perform further services. On initial recognition, trail revenue and receivables are recognised at fair value, being the present value of expected future trail revenue receivables discounted to their net present value using discounted cash flow valuation techniques. These calculations require the use of assumptions. Due to differences in underlying product characteristics and Product Provider circumstances, the discount rates applied in the most recent valuation of the trail commission receivable range between 8.0% and 12.0%. The key assumptions underlying the fair value calculations of trail revenue receivable at reporting date include: lapse and mortality rates, commission term, premium increases and discount rate, incorporating risk free rates and estimates of the likely credit risk associated with the funds and credit providers. It is the Directors responsibility to determine the assumptions used and the fair value of trail revenue. In undertaking this responsibility, the Company engaged Deloitte Actuaries & Consultants Limited, a firm of consulting actuaries, to perform an expert valuation of the Company s trail commission receivable at 31 December 2012, for the Health, Life and Home Loans business units. The Car trail commission receivable is a director valuation and is based on the same principles as outlined above. Subsequent to initial recognition and measurement, the trail revenue asset is measured

136 134 Appendix 1 Significant accounting policies at amortised cost. The carrying amount of the trail revenue asset is adjusted to reflect actual and revised estimated cash flows by recalculating the carrying amount through computing the present value of estimated future cash flows at the original effective interest rate. The resulting adjustment is recognised as income or expense in the statement of comprehensive income. Interest Revenue is recognised as interest accrues (using the effective interest method, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument) to the net carrying amount of the financial asset. Click-through revenue Revenue is recognised dependent on the contractual arrangement with the relevant Product Provider. This can occur at one of three points, either when an internet user clicks on a paying advertiser s link, submits an application, or a submitted application is approved. Other revenue Revenue for contracted services, including advertising and subscription revenue, is recognised systematically over the term of the contract. Revenue for services provided other than pursuant to a defined period contract is recognised during the month services are provided. Leases The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset. Finance leases, which transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised as an expense in profit and loss. Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term. Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as the lease income. Operating lease payments are recognised as an expense in the statement of comprehensive income on a straight-line basis over the lease term. Lease incentives are recognised when they are received and amortised over the life of the lease. Cash and cash equivalents Cash and short-term deposits in the statement of financial position comprise cash at bank and on hand and short-term deposits with an original maturity of three months or less. For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. Trade and other receivables All trade and other receivables recognised as current assets are due for settlement within no more than 30 days for upfront fees and within one year for trail commission. Trade receivables are measured on the basis of amortised cost and trail commission receivable is initially recognised at fair value and subsequently measured at amortised cost. Recoverability of trade and other receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for doubtful debts is raised where some doubt as to collection exists. Income tax Tax expense comprises current and deferred tax. Current and deferred tax is recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income. Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Current tax payable also includes any tax liability arising from the declaration of dividends. Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for: temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss; temporary differences related to investments in subsidiaries and associates and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future; taxable temporary differences arising on the initial recognition of goodwill; tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition at that date, would be recognised subsequently if new information about facts and circumstances changed. The adjustment would either be treated as a reduction to goodwill (as long as it does not exceed goodwill) if it was incurred during the measurement period or in the profit or loss. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date. In determining the amount of current and deferred tax the Company takes into account the impact of uncertain tax positions and whether additional taxes and interest may be due. The Company believes that its accruals for tax liabilities are adequate for all open tax years based on its assessment of many factors, including interpretations of tax law and prior experience. This assessment relies on estimates and assumptions and may involve a series of judgements about future events. New information may become available that causes the Company to change its judgement regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense in the period that such a determination is made.

137 iselect Limited Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Additional income tax expenses that arise from the distribution of cash dividends are recognised at the same time that the liability to pay the related dividend is recognised. The Company does not distribute non-cash assets as dividends to its shareholders. Tax consolidation legislation iselect Limited and its wholly owned Australian controlled entities have formed an income tax consolidated group and implemented the tax consolidation legislation. Members of the tax consolidated group have entered into a tax funding agreement. Each entity is responsible for remitting its share of the current tax payable (receivable) assumed by the head entity. In accordance with UIG 1052 and Company accounting policy, the Company has applied the separate taxpayer within group approach in which the head entity, iselect Limited, and the controlled entities in the tax consolidated group continue to account for their own current and deferred tax amounts. In addition to its own current and deferred tax amounts, iselect Limited 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 allocation of taxes to the head entity is recognised as an increase/decrease in the controlled entities intercompany accounts with the tax consolidated group head entity. Other taxes Revenues, expenses and assets are recognised net of the amount of GST except: where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority, are classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. Property, plant and equipment Plant and equipment is stated at cost less accumulated depreciation. Such cost includes the cost of replacing parts that are eligible for capitalisation when the cost of replacing the parts is incurred. Similarly, when each major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement only if it is eligible for capitalisation. Depreciation is calculated over the estimated useful life of the asset as follows: Useful Life Method Computer software/equipment 2 to 5 years Straight line method Furniture, fixtures and fittings 8 years Straight line method Leasehold Improvements 5 to 6.5 years Straight line method Motor Vehicles 3 years Straight line method An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the statement of comprehensive income in the period the item is derecognised. Impairment The carrying values of plant and equipment are reviewed for impairment at each reporting date, with recoverable amount being estimated when events or changes in circumstances indicate that the carrying value may be impaired. The recoverable amount of plant and equipment is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, recoverable amount is determined for the cash-generating unit to which the asset belongs, unless the asset s value in use can be estimated to be close to its fair value. Impairment exists when the carrying value of an asset or cash-generating units exceeds its estimated recoverable amount. The asset or cash-generating unit is then written down to its recoverable amount. Intangible Assets Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is measured at fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is recognised in profit or loss in the year in which the expenditure is incurred. The useful lives of intangible assets are assessed to be either finite or infinite. Intangible assets with finite lives are amortised over the useful life and tested for impairment whenever there

138 136 Appendix 1 Significant accounting policies 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 either reviewed at the end of each reporting period or amortised over the life of the asset. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for prospectively by changing the amortisation period or method, as appropriate, which is a change in accounting estimate. Amortisation is calculated over the estimated useful life of the asset as follows: Development costs (including website development) Trademarks & Domain names Computer Software Goodwill Consumer Contracts Useful Life 2 to 5 years indefinite 2 to 4 years indefinite 3 months The amortisation expense on intangible assets with finite lives is recognised in profit or loss in the expense category consistent with the function of the intangible assets. Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash-generating unit level. Such intangibles are not amortised. The useful life of an intangible asset with an indefinite life is reviewed at each reporting period to determine whether indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is accounted for as a change in an accounting estimate and is made on a prospective basis. Research and development costs Research costs are expensed as incurred. An intangible asset arising from development expenditure on an internal project is recognised only when the Company can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete the development and the ability to measure reliably the expenditure attributable to the intangible asset during its development. Following the initial recognition of the development expenditure, the asset is carried at cost less any accumulated amortisation and accumulated impairment losses. Amortisation of the asset begins when development is complete and the asset is available for use. Any expenditure so capitalised is amortised over the period of expected benefit from the related project. Web site development costs, consumer lists and brand names capitalised as an intangible asset are amortised on a straight line basis with a useful life as detailed above. Goodwill Goodwill that arises upon the acquisition of subsidiaries is included in intangible assets. For the measurement of goodwill at initial recognition, see previous policy disclosures. Subsequent measurement of goodwill is measured at cost, tested for impairment annually. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Company 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. Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained. Investments Investments in controlled entities are carried at the lower of cost and recoverable amount. Impairment of assets The Company monitors throughout the year whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Company makes an estimate of the asset s recoverable amount. An asset s recoverable amount is the higher of its fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets and the asset s value in use cannot be estimated to be close to its fair value. In such cases the asset is tested for impairment as part of the cash-generating unit to which it belongs. When the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset or cash-generating unit is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses relating to continuing operations are recognised in those expense categories consistent with the function of the impaired asset. An assessment is also made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior periods. Such reversal is recognised in statement of comprehensive income. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

139 iselect Limited Trade and other payables Trade payables and other payables are carried at amortised cost and represent liabilities for goods and services provided to the Company prior to the end of the reporting date that are unpaid and arise when the Company becomes obliged to make future payments in respect of the purchase of these goods and services. Loans and borrowings Loans and borrowings are recognised initially at fair value plus directly attributable transaction costs. After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. Gains and losses are recognised in the statement of comprehensive income when the liabilities are derecognised as well as through the effective interest rate method amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate method. The effective interest rate method amortisation is included in finance costs in the statement of comprehensive income. Provisions Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Company expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the statement of comprehensive income net of any reimbursement. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a borrowing cost. Employee benefits Provision is made for employee benefits accumulated as a result of employees rendering services up to the reporting date. These benefits include wages and salaries, annual leave and long service leave. Liabilities arising in respect of wages and salaries, annual leave and any other employee benefits expected to be settled within twelve months of the reporting date are measured at their nominal amounts based on remuneration rates which are expected to be paid when the liability is settled. All other employee benefit liabilities are measured at the present value of the estimated future cash outflow to be made in respect of services provided by employees up to the reporting date. In determining the present value of future cash outflows, the market yield as at the reporting date on national government bonds, which have terms to maturity approximating the terms of the related liability, are used. Employee benefits expenses and revenues arising in respect of wages and salaries, non-monetary benefits, annual leave, long service leave and other leave benefits; and other types of employee benefits are recognised against profits on a net basis in their respective categories. Share based payments The Company provides benefits to its employees (including key management personnel) in the form of share based payments, whereby employees render services in exchange for shares or rights over shares (equity-settled transactions). During the historical period, there were two plans in place to provide these benefits: the Employee Share Option Plan, which provides benefits to employees, including Directors; and CEO Plan, which provides benefits to the Chief Executive Officer. The Employee Share Option Plan is no longer utilised, and a new Long Term Incentive (LTI) Plan has been implemented. Further information on this LTI plan is provided in Section The CEO Plan has ceased. The cost of these equity-settled transactions with employees is measured by reference to the fair value of the equity instruments at the date at which they were granted. The fair value was determined by the Directors and management using a Binomial model. In valuing equity-settled transactions, no account is taken of any vesting conditions. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled (the vesting period), ending on the date on which the relevant employees become fully entitled to the award (the vesting date). At each subsequent reporting date until vesting, the cumulative charge to the statement of comprehensive income is the product of (i) the grant date fair value of the award; (ii) the current best estimate of the number of awards that will vest, taking into account such factors as the likelihood of employee turnover during the vesting period and the likelihood of non-market performance conditions being met; and (iii) the expired portion of the vesting period. The charge to the statement of comprehensive income for the period is the cumulative amount as calculated above less the amounts already charged in previous periods. There is a corresponding credit to equity. Until an award has vested, any amounts recorded are contingent and will be adjusted if more or fewer awards vest than were originally anticipated to do so. Any award subject to a market condition is considered to vest irrespective of whether or not that market condition is fulfilled, provided that all other conditions are satisfied. If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. An additional expense is recognised for any modification that increases the total fair value of the share based payment arrangement, or is otherwise beneficial to the employee, as measured at the date of modification. If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph.

140 138 Appendix 1 Significant accounting policies Comparative balances Except as disclosed in the policy discussion regarding the change in revenue estimate, accounting policies have been adopted consistently over the historical period. Where expenses have been reallocated between departments or within expense lines, the comparatives for the previous year have been reallocated also to assist comparability between the years. Onerous contracts A provision for onerous contracts is recognised when the expected benefits to be derived by the Company from the contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Company recognises any impairment loss on assets associated with the contract. Interest expense Interest expense comprises interest expense on borrowings and is recognised in profit or loss using the effective interest method. Contributed equity 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. Operating segments Whilst not included in the accounting policies contained within the 30 June 2012 financial report as it was not a policy that applied to iselect at the time, Section 4 of this Prospectus includes operating segment data. For management purposes, the Company is organised into business units based on its products and services and has two reportable segments as follows: The Health and Car Insurance segment, which offers comparison services across private health insurance and car insurance categories; and The Household Utilities and Financial segment, which offers comparison services across a range of household utilities and personal finance products including life insurance, broadband, retail energy products, home loans, savings accounts, term deposits, credit cards and personal loans. No operating segments have been aggregated to form the above reportable operating segments. The Executive Management Committee monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss and is measured consistently with operating profit or loss in the consolidated financial statements. However, Group financing (including finance costs and finance income) and income taxes are managed on a Group basis and are not allocated to operating segments. Transfer prices between operating segments are on an arm s length basis in a manner similar to transactions with third parties.

141 139 Appendix 2 Glossary

142 140 Appendix 2 Glossary The following expressions and words have these meanings in this Prospectus, unless the context otherwise requires: Term 1H FY13 Six months ended 31 December H FY14F Six months ending 31 December 2013 $ Australian dollars AASB Australian Accounting Standards Board AASBs or Australian Accounting Standards Australian Accounting Standards or Accounting Standards ABS Australian Bureau of Statistics ACCC Australian Competition and Consumer Commission Adjusted Historical Results Has the meaning given in Section 4 Aided Awareness Reflects a situation where, when asked about a product category, a survey respondent is aided with a list of company or brand names, and recognises a company or brand from the list provided Appendix An Appendix to this Prospectus Applicant A person who submits an Application Application An application made to subscribe for Shares offered under this Prospectus Application Form The application form attached to or accompanying this Prospectus (including the electronic form provided by an online application facility) Application Monies or Application Amount The amount accompanying an Application Form submitted by an Applicant APRA Australian Prudential Regulation Authority ASIC Australian Securities and Investments Commission ASX ASX Limited (ACN ) ASX Listing Rules or Listing Rules The listing rules of ASX ASX Settlement Operating Rules The rules of ASX Settlement Pty Ltd (ACN ) Available Liquidity Has the meaning given in Section 4.8 Baillieu Holst Baillieu Holst Ltd (ACN ) Board or Board of Directors The Board of Directors of iselect from time to time Borrowing Base Has the meaning given in Section 4.8 Broadband iselect s broadband business unit, which is reported within the Company s Household Utilities and Financial segment Broker A broker who is offered a firm allocation of Shares under the Broker Firm Offer Broker Firm Offer The offer of Shares under this Prospectus to Australian residents who are sophisticated or professional investors (within the meaning of Sections 708(8) and 708(11) of the Corporations Act, respectively) or, following lodgement of this Prospectus, to Australian resident investors who are not Institutional Investors and have received a firm allocation from their Broker Broker Firm Offer Applicant A person who submits an Application under the Broker Firm Offer CAGR Compound annual growth rate Car iselect s car insurance business unit, which is reported within the Company s Health and Car Insurance segment CBA Has the meaning given in Section 4.8 CGT Capital gains tax CHESS Clearing House Electronic Sub-register System, operated in accordance with the Corporations Act Click-through A click-through occurs when a web visitor clicks on a link through to a Product Provider s website via the InfoChoice website or third-party online affiliate portal

143 iselect Limited Term Closing Date The date by which Applications must be lodged for the Broker Firm Offer, and Employee Priority Offer, being 17 June 2013 unless varied Completion of the Offer Completion in respect of the allotment of Shares of the Offer in accordance with the Underwriting Agreement Constitution The constitution of the Company Consumer Advice Team iselect s experienced team of more than 220 telephone-based consumer advisors Conversion ratio Ratio of effectively converted consumer enquiries made to iselect into revenue-generating transactions Corporations Act Corporations Act 2001 (Cth) CPI Consumer Price Index Credit Suisse Credit Suisse (Australia) Limited (ACN ) CY13F Calendar year ended 31 December 2013 Deloitte Deloitte Actuaries & Consultants Limited (ACN ) Directors Each of the Directors of iselect from time to time DSS or Decision Support System Has the meaning given in Section EBIT Earnings before interest and tax. This is a non-ifrs measure EBITDA Earnings before interest, tax, depreciation and amortisation This is a non-ifrs measure Eligible Employees Australian resident permanent employees of iselect as at 5.00 pm (Melbourne time) on 24 May 2013 Eligible U.S. Fund Manager Means a dealer or professional fiduciary organised, incorporated or (if an individual) resident in the United States that is acting solely for an account (other than an estate or trust) held for the benefit or account of persons that are not U.S. Persons for which it has and is exercising investment discretion, within the meaning of Rule 902(K)(2)(i) of Regulation S under the U.S. Securities Act Employee Priority Offer The Offer of Shares to certain employees of iselect as described in Section 7.4 Energy iselect s energy business unit, which is reported within the Company s Household Utilities and Financial segment E2E or end-to-end Has the meaning given in Section 2.3 Existing Shares Shares held by all Existing Shareholders as at the date of this Prospectus Existing Shareholders Means those persons holding Shares as at the date of this Prospectus Exposure Period The seven day period after the date of this Prospectus, which may be extended by ASIC for up to an additional seven days, during which an Application must not be accepted Escrowed Shareholders Means Damien Waller, Matt McCann, Greg Camm, Leslie Webb and Shaun Bonètt and their controlled entities who hold Shares Financial Information Has the meaning given in Section 4.1 Follow-up Channel iselect s follow-up consumer contact centre, which contacts consumers who have expressed an interest in a product by undertaking a comparison of those products online, on an iselect website Follow-up Team The members of the Consumer Advice Team who support the Follow-up Channel Forecast Financial Information Has the meaning given in Section 4.1 Forecast Results Has the meaning given in Section 4.1 FY10 Financial year ended 30 June 2010 FY11 Financial year ended 30 June 2011 FY12 Financial year ended 30 June 2012 FY13F Financial year ending 30 June 2013 FY14F Financial year ending 30 June 2014 Health iselect s private health insurance business unit, which is reported within the Company s Health and Car Insurance segment

144 142 Appendix 2 Glossary Term HIN Holder Identification Number Historical Financial Information Has the meaning given in Section 4.1 Home Loans iselect s home loans business unit, which is reported within the Company s Household Utilities and Financial segment IASB International Accounting Standards Board IFRSs International Financial Reporting Standards Inbound Team The members of the Consumer Advice Team who handle inbound consumer telephone enquiries and sales Institutional Investor An investor: in Australia who is either a professional investor or sophisticated investor under sections 708(11) and 708(8) of the Corporations Act; and in certain other jurisdictions, as agreed between the Company and the Underwriters, to whom offers or invitations in respect of securities can be made without the need for a lodged or registered prospectus or other form of disclosure document or filing with, or approval by, any governmental agency (except one with which the Company and SaleCo are willing, in their absolute discretion, to comply), in either case, provided that such person is not in the United States or, if in the United States, is an Eligible U.S. Fund Manager Institutional Offer The invitation to bid for Shares made to Institutional Investors under this Prospectus to acquire Shares as described in Section 7.3 Investigating Accountant Ernst & Young Transaction Advisory Services Limited (ACN ) Investigating Accountant s Report Means the report contained in Section 8 iselect or the Company iselect Limited (ACN ) and its subsidiaries as the context requires ITV Consulting ITV Consulting Pty Ltd (ACN ), an entity controlled by Leslie Webb ISP Internet Service Provider Joint Lead Managers or JLMs Credit Suisse and Baillieu Holst Life iselect s life insurance business unit, which is reported within the Company s Household Utilities and Financial segment Listing Listing of the Company and quotation of the Shares on the ASX LTI Loan A loan made by iselect to an LTI Plan participant to fund their subscription for LTIP Shares, as detailed further in section LTI Plan The Long Term Incentive Plan established by iselect as the long-term incentive component of remuneration in order to assist in the attraction, reward and retention of certain employees LTIP Shares Shares issued under the LTI Plan. LTIP Shares will not be quoted on ASX until satisfaction of all conditions to vesting and repayment of the applicable LTI Loan. LTIP Shares vest and holders will be entitled to exercise their rights as ordinary Shareholders only if certain total shareholder return ( TSR ) performance hurdles and continuing employment criteria are satisfied by holders, and their LTI Loan repaid in full. Vesting of the LTIP Shares granted under the LTI Plan will occur in three tranches, ending on 30 June 2015, as detailed further in Section Until vested, LTIP Shares cannot be voted. Any LTIP Shares remaining unvested following the final testing date will be forfeited and surrendered by holders in full satisfaction of the LTI Loan Management The executives of iselect identified in Section 6.2 Money n.a. n.m. iselect s credit product and deposit product business unit (whose products include credit cards, personal loans, car loans and deposit accounts), which is reported within the Company s Household Utilities and Financial segment Not applicable Not meaningful

145 iselect Limited Term New Shares Shares to be issued by iselect pursuant to this Prospectus Nielsen Australia March 2013 Research Has the meaning given in Section ninemsn ninemsn Pty Ltd (ABN ) ninemsn Sale Price $113,527, NPAT Net profit after tax Offer Offer under this Prospectus of 54,054,054 million New Shares to be issued by iselect and the transfer of 62,351,590 million Existing Shares by SaleCo Offer Document The documents issued or published by or on behalf of the Company in respect of the Offer, including the Prospectus, any application forms, any investor presentation used in connection with the Institutional Offer and any supplementary prospectus Offer Price $1.85 per Share, payable on application for the Shares Online Australians The internet user population in Australia, which captures Australians over the age of 18 who have used the internet within the past month, as defined by Nielsen Option Other Sale Price An option to be issued a Share $640, PHI Private health insurance PHIAC Private Health Insurance Administration Council Pro Forma Balance Sheet Has the meaning given in Section 4.1 Product Provider or Provider The provider of a product that is available for comparison via one of iselect s websites Prospectus This document (including the electronic form of this Prospectus) and any replacement or supplement prospectus in relation to this document Rebate The Federal Government Private Health Insurance Rebate Related Body Corporate Has the meaning given by Section 50 of the Corporations Act SaleCo iselect SaleCo Pty Ltd (ACN ) SaleCo Directors Each of the Directors of SaleCo from time to time Sales Direct to Fund A sale completed by a Product Provider based on a consumer visiting iselect Section A section of this Prospectus Settlement Settlement of the Offer Share Registry Computershare Investor Services Pty Limited (ABN ) Share A fully paid ordinary share in the capital of iselect Shareholder A person who holds Shares Share Split Has the meaning given in Section Spectrum Equity Spectrum Equity Investors, L.P. SRN Shareholder Reference Number TFN Tax file number TPD Total permanent disability Underwriters Credit Suisse and Baillieu Holst Underwriting Agreement The agreement of that name between the Company, SaleCo and the Underwriters, entered into on or about the date of this Prospectus Unprompted Awareness Also known as top of mind awareness, reflects a situation where a survey respondent automatically recalls a particular brand name, because they associate the brand with the product category mentioned, without being provided with a list of members of that category U.S.$ U.S. dollars U.S. Person Has the meaning given to it under Regulation S of the U.S. Securities Act U.S. Securities Act U.S. Securities Act of 1933, as amended

146 144 Corporate directory ISELECT REGISTERED OFFICE 294 Bay Road Cheltenham VIC 3192 FINANCIAL ADVISER TO THE COMPANY AND JOINT LEAD MANAGER Credit Suisse (Australia) Limited Level 31, Gateway 1 Macquarie Place Sydney NSW 2000 JOINT LEAD MANAGER Baillieu Holst Ltd Level Collins Street Melbourne VIC 3000 AUSTRALIAN LEGAL ADVISOR Gilbert + Tobin Level Collins Street Melbourne VIC 3000 INVESTIGATING ACCOUNTANT Ernst & Young Transaction Advisory Services Limited Level 23 8 Exhibition Street Melbourne VIC 3000 AUDITOR Ernst & Young Level 23 8 Exhibition Street Melbourne VIC 3000 SHARE REGISTRY Computershare Investor Services Pty Limited GPO Box 2975 Melbourne VIC 3001 Australia ISELECT OFFER INFORMATION LINE Within Australia: Outside of Australia: Hours of operation: 8.30 am to 5.00 pm (Melbourne time) Monday to Friday

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