INVESTSMART GROUP LIMITED — Net Asset Value 2008

Dec 14, 2008

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November 2008 NTA Release

1. Details of Performance and Net Asset Backing at Month end

The net asset backing (“ NTA ”) of Fat Prophets Australia Fund Limited (“ Fat Fund ”) as at 28 November 2008 was $0.7913 per share on a before tax basis, calculated in accordance with ASX Listing Rule 19:12, and represents a decline of 8.47 % over the month. By comparison, the Fat Fund’s benchmark, the S&P/ASX 300 Accumulation Index decreased 6.30% in November 2008.

After adjusting for the impact of taxation on both realised and unrealised gains, the Fat Fund’s after tax NTA at the end of November 2008 was $0.8764 per share .

2. Performance Commentary

The major influences on the Fat Fund’s performance versus the benchmark during the month of November 2008 were as follows (* denotes acquired during month):

Positive Influences	Positive Influences	Positive Influences	Negative Influences	Negative Influences	Negative Influences
Company	%move	Position	Company	%move	Position
GPT Group26%OverweightBHP Billiton11%OverweightWoodside Petrol.-14%UnderweightIncitec Pivot-27%UnderweightWH Soul Pattinson-2%Overweight			Everest BacbcockBrown-37%OverweightNational Aust. Bnk-17%OverweightNewcrest18%UnderweightTelstra-1%UnderweightRIO Tinto-40%Overweight

We are certainly living in times that are by all accounts ‘unprecedented’. Rarely has this word had so much press. It seems everything about this market is ‘unprecedented’. In many ways this is true. We have seen what started out as the US sub-prime mortgage crisis morph into a financial crisis and finally a global economic crisis which has tipped the worlds developed economies into recession. The pace and depth of wealth destruction has been staggering. It is very clear that much of this wealth was fuelled by cheap and easy debt.

It is important to recall at this point that the response to the crisis by central banks, governments and regulators is also unprecedented. The world has NEVER seen so much simultaneous global policy stimulus in response to an economic crisis. Interest rates across the globe are virtually in free fall and central banks and governments are going to ‘unprecedented’ lengths with a myriad of new measures to ensure that credit markets return to normal. This process takes time however recently we have seen evidence that their efforts are bearing fruit. Macquarie Bank’s recent $2.6bn bond issue is an example of this. There are several more examples like this. This is very encouraging for equity markets.

Equity markets continue to remain focused on the debt profiles of companies and less so on company valuations. This is arguably justified, given we have seen several high profile over-levered companies hit the wall such as ABC Learning and Allco Finance. Notwithstanding this more arduous environment for equities, we remain of the view that they are cheap.

FAT PROPHETS AUSTRALIA FUND LIMITED ACN 62 111 772 359

Level 33, 2 Park St, Sydney NSW 2000 telephone 02 8258 0015 fatfund@fatprophets.com.au

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One way to illustrate this is if we look at the forward dividend yield for the Australian Market of 6.6% versus the 10 year bond yield of 4.4%, the spread here is the highest it has been in the history of the series which dates back to 1994. This dividend yield is based on data from mid October and at the time of writing the market is approximately 16% lower!

Notwithstanding the fact that dividends and payout ratios are being reduced, the spread here is of historic proportions. The last time we saw the spread between bonds and equities near this level was early 2003 which marked the end of the bear market. To go further back than 1994 we can look at the trailing dividend yield, which is approximately 6%; also comfortably above the bond yield and does so for the first time in the history of the data. The last time the spread was in this vicinity was in September of 1974- this time it also signalled the bottom of the bear market. The market rallied approximately 7 fold from late 1974 to December of 1986. Needless to say, the portfolio remains close to fully invested.

There have been no significant portfolio changes since our last update.

FAT PROPHETS AUSTRALIA FUND LIMITED ACN 62 111 772 359

Level 33, 2 Park St, Sydney NSW 2000 telephone 02 8258 0015 fatfund@fatprophets.com.au

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3. Top 15 Holdings at 28 November 2008

Company	Symbol	% Weighting
BHP Billiton	BHP	15.45
National Aust. Bank	NAB	8.49
Westpac	WBC	7.18
Commonwealth Bank	CBA	6.70
QBE Insurance	QBE	5.75
ANZ Bank	ANZ	5.42
Woolworths	WOW	5.29
Beach Petroleum	BPT	3.03
GPT Group	GPT	3.0
Washington H Soul Pattinson & Co LT	SOL	2.88
Wesfarmers	WES	2.69
Westpac Bank New Shares	WBCN	2.69
Lion Selection	LST	2.44
Rio Tinto	RIO	2.34
Insurance Australia Group	IAG	2.20

Andrew Brown[a & ] Steve O’Hanna[a ] 15 December 2008

• a: Andrew Brown and Steve O’Hanna are employees of Tidewater Investments Limited. A controlled entity of Tidewater Investments Limited, Tidewater Asset Management P/L (AFSL# 302802) currently manages the Fat Fund under a sub-contract agreement dated 24 May 2007 with fat Prophets Funds Management Australia P/L.

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 Asset Management Pty. 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.