INVESTSMART GROUP LIMITED — Net Asset Value 2007

May 13, 2007

Fat Prophets Australia Fund Limited ACN 111 772 359 Level 33, 2 Park St Sydney, NSW 2000 02 8258 0015 fatfund@fatprophets.com.au

April 2007 NTA Release

14 May 2007

$\ddot{\mathbf{1}}$ . Details of Performance and Net Asset Backing at Month end

The net asset backing ("NTA") of Fat Prophets Australia Fund Limited ("Fat Fund") at 30 April 2007 was \$1.3649 per share on a before tax basis, calculated in accordance with ASX Listing Rule 19:12, and represents a increase of 1.80% over the month. By comparison, the Fat Fund's benchmark, the S&P/ASX 300 Accumulation Index, rose by 3% in April 2007.

After adjusting for the impact of taxation on both realised and unrealised gains, the Fat Fund's after tax NTA at the end of March 2007 was \$1.3408 per share, undiluted for the \$1.00 strike price options which can be exercised until 20 April 2008. If all of the April 2008 options were exercised at \$1.00; the fully diluted after tax NTA/share would be \$1.1777.

In the months of March and April 2007, a total of 1,893,149 options have been exercised. Due to the gap between NTA/share and the \$1.00 exercise price, these options have a dilutive impact on NTA per share growth. This has amounted to about 1.65% over the past two months, of which 0.78% was accounted for in the month of April 2007. As a better guide to performance, pre tax NTA, in accordance with ASX Listing Rule 19.12, would have grown by 2.56% in April had these options not been exercised.

$2²$ Performance Commentary

The major influences on the Fat Fund's performance versus the benchmark during the month of April 2007 were as follows:

Positive Influences			Negative Influences
Company	$%$ move	Position	Company	$%$ move $ $	Position
Mundo Min.	37.9	Overweight	Lihir Gold	$-8.6$	Overweight
Tassal Grp	20.5	Overweight	Image Res.	$-13.1$	Overweight
Brain Resource	18.2	Overweight	Konekt	$-37.0$	Overweight
QBE Insurance	$-2.2$	Underweight	Orica	24.3	Underweight
Fosters	$-6.7$	Underweight	Tower Aust.	$-4.4$	Overweight

$\overline{3}$ . Top 15 Holdings at 30 April 2007

Company	Symbol	% Weighting
BHP Billiton	BHP	9.80
National Aust. Bank	NAB.	8.50
Westpac Banking Corp	WBC	6.42
ANZ Banking Group	ANZ	6.20
Commonwealth Bank	CBA	5.46
RIO Tinto Ltd	RЮ	4.10
Woolworths	WOW	2.94
Lihir Gold	LHG	2.91
UXC Limited	UXC	2.81
Perseverance Corp	PSV	2.50
Lion Selection Ltd	LST	1.98
Espreon	EON	1.95
IAG Group	IAG	1.89
Commander Communications	CDR	1.88
Tap Oil	TAP	1.73

$\ddot{a}$ . Portfolio Positioning

Despite the payment of the dividend in April, sales of securities and the exercise of options have seen the cash weighting of the portfolio grow to just over 11%. Whilst the environment for company profitability remains generally robust, signs continue to grow of over zealous pricing of future growth and speculative excess. These signals include:

• Ongoing levels of unsubstantiated rumour of corporate activity:
• Ongoing use of leveraged private equity structures within commodity and cyclical type industries:
• Continuation of extremely low spreads between emerging market bonds and their US\$ benchmark counterparts;
• Volatility measures generally remain at lower than average levels.

The performance of the S&P/ASX300 in April was largely influenced by major industrial shares, notably those in the financial sector, which have a positive correlation with financial markets. Additionally, the strength of commodity prices - copper, zinc and nickel all rose by over 10% during the month – had a pronounced impact on the smaller resources companies, with the S&P/ASX Small Ordinaries index rising just over 5% during the month.

There is no major change in our large company strategy of being overweight banks and major resources. The bank reporting season has produced few surprises, and a reaffirmation of the defensive growth characteristics of the domestic sector. Despite the vast amount of speculation regarding potential tie ups between the major resource enterprises, we view the chatter as no more than recognition of the vast cash flow producing capacity of the companies and the fact that relative to other areas of the market, they remain cheap. Our main concern at the present stage is the emerging bubble within Chinese equity markets and the potential implications for growth should there be a sharp near term correction.

Within the portfolio, we received another takeover offer during the month, this time for Gloucester Coal; we have sold all of our shares into the market at prices above the formal offer of \$4.75 per share. This is the fourth takeover offer within the portfolio we have received in the past six months – and rumours abound of at least one more.......

Amongst our smaller companies, we have continued to focus on the telecommunications area as a potential source of industry consolidation and reasonable valuations. SP Telemedia now appears very cheap after the sale of their NBN television unit to PBL at a price well in excess of any analyst valuation, whilst Commander Communications has been harshly dealt with after its first profit guidance downgrade under the current management team.

In the past month, we saw an intriguing opportunity in the biodiesel area through the recapitalisation of Australian Renewable Fuels, a producer from plants in South and Western Australia. The company has now progressed to achieving production targets - from tallow (rather than corn) – to ensure payment of a large Government grant, and also has received interest from the US in the licensing of its processing technology. The purchase of ARW was funded from the sale of our Metgasco shares at around four and a half times the price we acquired them in September 2006.

Andrew Brown^a Steve O'Hanna^a

On behalf of Fat Prophets Funds Management Australia P/L

Andrew Brown and Steve O'Hanna are employees of Tidewater Investments Limited who currently manage a: the Fat Fund under a sub-contract agreement dated 15 March 2006

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) or Tidewater Investments Limited (the sub contract 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.