INVESTSMART GROUP LIMITED — Capital/Financing Update 2007

Mar 7, 2007

Fat Prophets Australia Fund Limited ACN 111 772 359 Level 33, 2 Park St Sydney, NSW, 2000 02 8258 0015

Company Announcements Office Australian Stock Exchange Limited 20 Bridge Street SYDNEY NSW 2000

8 March 2007

Dear Sir/Madam,

Please find attached a letter which was sent to all Fat Prophets Australia Fund Limited Option Holders today, together with a personalised Option Exercise Form.

Yours sincerely.

lace I Parte

Clare Porta Company Secretary

IF brookers' australia for Fritain

Fat Prophets Australia Fund Limited ACN 111 772 359 Level 33, 2 Park St Sydney, NSW, 2000 02 8258 0015

5 March 2007

Name Address 1 Name Address 2 Name Address 3 Name Address 4 Name Address 5 Name Address 6

IMPORTANT INFORMATION PLEASE READ AND CONSIDER CAREFULLY

Dear Option Holder

Re: Dividend and Possible Early Exercise of your Options in Fat Prophets Australia Fund Limited ("the Fat Fund")

On 22 February 2007, the Fat Fund reported an after tax profit for the half year ended 31 December 2006 of \$1,715,470. The Fat Fund declared a 2 cent per share fully franked interim dividend as well as a 1 cent per share fully franked special dividend payable to all ordinary shareholders recorded on the Fat Fund's share register at 30 March 2007.

As an option holder, you will NOT receive this dividend unless you exercise your options (by payment of \$1.00 per option) prior to 30 March 2007.

For certain option holders, it may be sensible to exercise Fat Fund options early to receive the upcoming 3 cent per share dividend (interim plus special) and all future dividends. While it is not compulsory to exercise your options early, your Directors strongly encourage you to seek immediate professional advice if you are in doubt as to what to do regarding your options.

Should you wish to exercise your options, please complete the attached Option Exercise Form and return it together with your cheque in the enclosed reply paid envelope or send it to:

Fat Prophets Australia Fund c/- Registries Limited PO Box R67 Royal Exchange NSW 1223

Your cheque should be made payable to "Fat Prophets Australia Fund Ltd."

To be eligible to receive the recently declared 3 cent per share dividend, your Option Exercise Form and cheque must be received prior to 30 March 2007.

If you require further information, please contact Steve O'Hanna, Senior Fund Manager, Fat Prophets Australia Fund on 02 8258 0015 or Steve.OHanna@tidewater.com.au

Kind regards

TERMS OF OPTIONS

Fat Prophets Australia Fund Limited

Register

The Company will maintain a register of holders of Options in accordance with Section 168(1)(b) of the Corporations Act. subsequent to the Unstapling Date

Transfer/Transmission

An Option may be transferred or transmitted in any manner approved by ASX except for the stapling restrictions set out below.

Exercise

An Option may be exercised on any Business Day after the Unstapling Date to 20 April 2008 (inclusive), but not thereafter.

An Option may be exercised by delivery to the Company of a duly completed Notice of Exercise of Options signed by the registered holder of the Option, together with payment to the Company of \$1.00 per Option being exercised and the relevant Option certificate.

A Notice of Exercise of Options is only effective when the Company has received the full amount of the exercise price in cleared funds.

Dividend Entitlement

Options do not carry any dividend entitlement until they are exercised. Shares issued on exercise of Options rank equally with other issued Shares of the Company seven Business Days after their date of issue and are entitled to dividends paid on and from this date.

Participating rights

An Option holder may only participate in new issues of Securities to holders of Shares in the Company if the Option has been exercised and Shares allotted in respect of the Option before the record date for determining entitlements to the issue. The Company must give at least seven Business Days notice to Option holders of any new issue before the record date for determining entitlements to the issue in accordance with the Listing Rules of ASX.

If between the date of issue and date of exercise of an Option the Company makes one or more rights issues (being a pro rata issue of Shares in the capital of the Company that is not a bonus issue), the exercise price of Options on issue will be reduced in respect of each rights issue according to the following formula:

$$
NE = OE - E[P - (S + D)]
$$

(N + 1)

whare.

NE is the new exercise price of the Option:

OE is the old exercise price of the Option:

E is the number of underlying Shares into which one Option is exercisable:

P is the average closing sale price per Share (weighted by reference to volume) during the five trading days ending on the day before the ex rights date or ex entitlements date (excluding special crossings and overnight sales);

S is the subscription price for a Share under the rights issue:

D is the dividend due but not yet paid on each Share at the relevant time; and

N is the number of Shares that must be held to entitle holders to receive a new Share in the rights issue.

If there is a bonus issue to the holders of Shares in the capital of the Company, the number of Shares over which the Option is exercisable will be increased by the number of Shares which the holder of the Option would have received if the Option had been exercised before the record date for the bonus issue.

Reconstructions and Alteration of Capital

Any adjustment to the number of outstanding Options and the exercise price under a reorganisation of the Company's share capital must be made in accordance with the Listing Rules.

ASX Listing

.
. . . . . .

The Company must make application for quotation of Shares issued on exercise of the Options on ASX in accordance with the Listing Rules. Shares so issued will rank equally with other issued Shares of the Company.

NOTICE OF EXERCISE OF OPTION

To: Fat Prophets Australia Fund Limited, C/- Registries Limited, PO Box R67, Royal Exchange, Sydney NSW 1223 $M = 22$ $M = 32$

i i we indiile Awuress 1
Name Address 2 Name Address 3		BARCODE
Name Address 4
Name Address 5
Name Address 6
hereby exercise my options to apply for
		(in figures)
PLEASE SIGN HERE:	fully paid ordinary shares in the capital of Fat Prophets Australia Fund Limited and I/we enclose my/our cheque for \$ in payment of such shares at \$1.00 per option subscription. I/we request that you allot me/us on the share register the number of shares to which I am/we are entitled and I/we agree to accept such shares subject to the Company's Constitution.
Shareholder 1 (Individual)	Joint Shareholder 2 (Individual)	Joint Shareholder 3 (Individual)
Sole Director & Sole Company Secretary	Director	Director / Company Secretary
Business Telephone (	Date