INVESTSMART GROUP LIMITED — Net Asset Value 2005

Sep 13, 2005

Fat Prophets Australia Fund Limited ACN 111 772 359 Level 33, 2 Park St Sydney, NSW 2000 1 300 88 11 77 fatfund@fatprophets.com.au

AUGUST 2005 NTA RELEASE

14 September, 2005

Net Tangible Asset Backing as of:
	Aug 31	July 31	June 30	$M$ av 31	April 30
Before Tax' \$	1.077	1.067	1.032	0.981	0.976
After Tax \$	1.048	1.042	1.014	0.980	0.976
Cash Holdings %	12	20	25	41	72

Portfolio Sector Allocation including Cash as of August 31
GICS Sector Positions + Cash S&P/ASX 300 Index	Index ℅	Fund %	Active Position $pp^2$
Energy	4.5	8.6	4.1
Materials	20.1	21.1	1.0
Industrials	8.9	23.8	14.9
Consumer Discretionary	6.7	0.0	$-6.7$
Consumer Staples	6.7	2.6	$-4.1$
Health Care	3.4	6.3	2.9
Financials	43.3	20.6	$-22.7$
Information Technology	0.7	0.4	$-0.3$
Telecommunications Services	4.1	4.5	0.4
Utilities	1.5	0.0	$-1.5$
Cash		12.0

$^{-1}$ defined as before providing for the estimated tax on unrealised income and gains.
$^{-2}$ Percentage points

Top 15 Holdings

As the portfolio is largely established, we will release the top 15 holdings and will continue this practice on a monthly basis.

Top 15 Holding by Portfolio Weight as of 31 Aug 2005
Company	Code	Portfolio Weight %
BHP BILLITON LIMITED	BHP	9.09
OIL SEARCH LIMITED	OSH	7.71
REPCOL LIMITED	RPC	6.93
ESPREON LIMITED	EON	6.00
ANZ BANKING GROUP LIMITED	ANZ	5.97
COMMONWEALTH BANK OF AUSTRALIA	CBA	5.14
TELSTRA LIMITED	TLS	4.40
WESTPAC BANKING CORPORATION	WBC	3.43
GROPEP LIMITED	GRO	3.13
MACQUARIE INFRASTRUCTURE GROUP	MIG	3.10
AMMTEC LIMITED	AEC	3.05
TOWER LIMITED	TWR	2.80
TRIBECA CORPORATION LTD	TBC	2.80
IMAGE RESOURCES NL	IMA	2.69
RIO TINTO LIMITED	RIO	2.18

Dear Fat Fund Shareholders,

The Fat Fund's pre-tax NTA appreciated by 0.94% on a before-tax basis in August 2005. Since inception the NTA has appreciated by 10.3% or 27.5% on a hypothetical annualised basis. In dollar terms, the pre-tax NTA rose from \$1.067 to \$1.077 for a gain of 1.0 cents.

Against its benchmark, the S&P/ASX 300 Accumulation Index, the pre-tax NTA underperformed by 1.07% in August 2005.

In August the Portfolio was adversely affected by Telstra. We reduced the Telstra position in late August and early September ahead of the most recent leg down in share price.

The portion of cash held within the portfolio continues to fall and at the end of August 2005 was 12% compared to 20% at the end of July 2005.

Company Commentary

As has become our practice, we discuss a recent investment made on behalf of the Company.

Konekt

Konekt is a small company that helps injured workers return to work. It operates in the complex world of occupational health and safety, risk management and injury management. As a result of its investment in systems, people and competitor acquisitions, it is favourably positioned to compete for national tenders by insurers and employers.

In Australia, each State has workers compensation legislation that provides a safety net for all workers. However, the system of getting workers rehabilitated quickly has largely been ad hoc. Much of the effort has involved case workers employed by small firms specialising in a specific geographic location.

Due to a lack of organisation and process this informal system has been criticised for having a general lack of rigour with regard to the myriad of small things that need to be done to get someone back to work and sometimes a lack of pace with regard to execution as things fall through the cracks (sometimes just reminding a client that they have a doctor's appointment can mean returning to work weeks earlier).

In response, Konekt has developed a system known as Konektiva. This work-flow scheduling system encourages a uniform and detailed approach to case management. The result is that individual cases can be handled faster with better outcomes for all parties:

• Individuals get closer attention and get back to work faster.
• Employers get their employees back faster. $\bullet$
• Workers compensation costs should fall over time benefiting State budgets and employers.
• Insurance companies have fewer injury management firms to deal with and get better outcomes.

Konekt has addressed the balance between achieving better health outcomes and containing the associated costs to business. The business model focuses on integrating people, processes and technology to deliver genuine business outcomes.

KKT came to our attention after halving in value from a high of \$1:33 in November 2004.

Konekt's goal is to rationalise and professionalise this cottage industry, thereby achieving and implementing;

• National coverage,
• Consistency of approach,
• Robust technology,
• Process and systems,
• Better outcomes for patients and insurance companies, and
• Higher margins.

Concurrent to Konekt's efforts the insurance industry has consolidated. We believe it is more likely that these large entities will be increasingly likely to give a larger proportion of their business to a more efficient provider like Konekt.

We have also seen a trend by large company's in relatively 'safe' businesses to self-insure and thus avoid the standard workers compensation insurance charges. These firms present a new opportunity for Konekt to provide outsourced employee rehabilitation services.

Konekt has reported modest losses in recent years as it spent to build its systems platform and on staff training. Konekt has also undertaken a number of acquisitions designed to quickly grow the business and achieve scale.

More recently Konekt reported a positive \$1.6 million cash flow for the June quarter 2005 - a significant achievement for a company capitalised at \$27 million. Whilst this number can not be annualised near term because of the seasonality of revenues it proves that economies of scale are beginning to occur within the overall business. As revenues grow an increasing portion should now flow to the bottom line.

We like Konekt's competitive position of being a national firm aligned against a myriad of smaller players in Australia. The company is also looking overseas via a recent joint venture in the UK market that will utilise the Konektiva platform.

In late August 2005 Konekt announced a \$5.2 million capital raising at \$0.55 per share to fund growth and retire debt. The Fat Prophets Australia Fund Limited has accepted an entitlement to a portion of this raising, effectively doubling the size of our position.

As of 31 August 2005, KKT would have made up 3.77% of the portfolio, assuming Konekt shareholders approve the recent capital raising.

Stocks Disclosed to Date - Summary

To date we have written about the following stock positions. The weight of these positions within the Fat Fund portfolio at close of business Aug 31, 2005 was:

Company Company	ASX Code	Portfolio Weight	See Monthly
		$\begin{bmatrix} \odot & \cdots & \odot \odot \odot \odot & \cdots & \cdots \odot \odot \odot \odot \odot \odot \cdots & \cdots & \cdots \odot \odot \odot \odot \odot \cdots & \cdots & \cdots \odot \odot \odot \odot \odot \odot \cdots & \cdots & \cdots \odot \odot \odot \odot \odot \odot \odot \cdots & \cdots \odots \odot \odot \odot \odot \odot \odot \cdots & \cdots \odots \odot \odot \odot \odot \odot \odot \cdots & \cdots \odots \odot \odot \odot \odot \odot$	Report for
			Commentary
AMMTEC	AEC.	3.05	June 05
AUST WORLDWIDE	AWE	0.66	May 05
EXPLORATION
COFFEY INTERNATIONAL	COF	1.87	June 05
ESPREON	EON	6.00	July 05
GROPEP	GRO	3.13	June 05
KONEKT	KKT	3.77	Aug 05
OIL SEARCH	OSH	7.71	April 05
REPCOL	RPC.	6.93	April 05
TRIBECA	TBC	2.80	June 05

Annual General Meeting - Date Changed

Please note that the date of our Annual General Meeting has changed. We had previously advised that the AGM would be held on 7 October 2005 in Sydney. Unfortunately, due to procedural necessity, the date of the AGM must be changed.

The new date of the AGM is Friday, 25 November 2005. The meeting will be held at 10 am in the Smith Room of the Wesley Centre, 220 Pitt St. Sydney.

A replacement notice of annual general meeting is being prepared and will be mailed to all shareholders immediately.

We sincerely apologise for this change and hope that it has not caused undue inconvenience.

Should you wish to discuss this change in more detail please feel free to call Drew Wilson, Chief Operating Officer, Fat Prophets Funds Management (Australia) Pty Ltd on 02 9024 6725.

As always, we remind you that the share and option that make up each stapled security can not be traded separately, until after the unstapling date of 20 April 2006.

Again, on behalf of the Board we thank you for your support and look forward to updating you again next month.

Kindest Regards

Your Board of Directors and the Fat Prophets Funds Management* Team

*Fat Prophets Funds Management (Australia) Pty Ltd is the Manager of the Fat Prophets Australia Fund Limited investment portfolio.

This report has been prepared solely for the benefit of the Fat Fund and its shareholders. It summarises information on the financial products held by the Fat Fund and the views of the Fat Fund as at the date of preparation of the report. These views and financial products may and will change after the issue of this report. No assurance can be given by the Fat Fund or Fat Prophets Funds Management Australia Pty Limited (the Manager) as to the accuracy and completeness of the information used to compile this report. Past performance is not necessarily indicative of future performance.

By making this report available, the Fat Fund and the Manager are not providing any general advice or personal advice within the meaning of section 766B of the Corporations Act regarding the Fat Fund, any potential investment in the Fat Fund or any investments or potential investments of the Fat Fund. This report is made without consideration of any specific person's investment objectives, financial situation or needs. The Fat Fund, the Manager and directors and employees of the Fat Fund and the Manager do not accept any liability for the results of any action taken or not taken on the basis of the information contained in this report, any negligent mis-statements, errors or omissions.