INVESTSMART GROUP LIMITED — Net Asset Value 2010

May 13, 2010

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April 2010 NTA Release

Dear Shareholders,

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 the end of April 2010 was $1.1723 per share , before tax basis, calculated in accordance with ASX Listing Rule 19:12, and represents a fall of 1.25% over the month. By comparison, the Fat Fund’s benchmark, the S&P/ASX 300 Accumulation Index fell 1.35% over the same period.

After adjusting for the impact of taxation on both realised and unrealised gains, the Fat Fund’s after tax NTA at the end of April 2010 was $1.1142 per share .

2. Performance Commentary

The major influences on the Fat Fund’s performance versus its benchmark during the month were as follows;

Positive Influences	Positive Influences	Positive Influences	Negative Influences	Negative Influences	Negative Influences
Company	% move	Position	Company	% move	Position
Lihir Gold 26% Overweight Nkwe Platinum 27% Overweight Catalpa Resources 8% Overweight Sedgman Ltd 4% Overweight QBE Insurance 1% Overweight			Coffey International -29% Overweight BT Investment Mgt -12% Overweight Macquarie Group 6% Underweight Magellan Financial -7% Overweight CSL Limited -11% Overweight

The ‘sovereign stress’ highlighted in last months NTA release certainly came to the foreground in financial markets over the last few weeks. The euro fell sharply against all major currencies as global capital markets began pricing an increased risk of default by Greece. Yields on government bonds issued by Greece, Spain, Italy, Portugal and Ireland all rose to historic levels above that of Germany as the Euro zone procrastinated throughout April over the best way to address the situation. As illustrated very clearly during the global financial crisis, markets hate procrastination and uncertainty. These anxieties precipitated a sharp sell-off of global equities, with our own market falling by around 10% from the peak.

In the US, an already very nervous market plunged intraday by nearly 10%, the largest such decline since 1987. Whilst blame was laid at the feet of the quant traders relying on algorithms and computer generated trading, we believe the markets were headed for a correction regardless with most stock markets overextended following an unprecedented run since March 2009.

Under pressure on all side, Europe responded with a bailout package that rivalled that of the US Government in 2008. Although the package buys the problematic member states in Europe some time, yet to be addressed are the more embedded structural issues of “living beyond sustainable means”. With people dying in the streets in Athens, we believe the political will to dramatically reduce spending and restore debt levels to more prudent levels is far easier said than done .

FAT PROPHETS AUSTRALIA FUND LIMITED ACN 62 111 772 359

Level 33, 2 Park St, Sydney NSW 2000 telephone 02 9024 6727 fatfund@fatprophets.com.au

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Greece, along with the other financially irresponsible nations in Europe will find the reality of being made to adhere to fiscal discipline extremely challenging. We would also argue that in the case of Greece, there is little precedent of fiscal restraint, so what is happening today is normal from an historic perspective, the only difference being that the Greek government cannot orchestrate a bailout by printing money and devaluing the drachma as they have done in the past.

The European Central bank has established precedent in recent weeks with the announced bailout package. The plan effectively calls for debt monetisation on a scale that rivals the US. This establishes a dangerous new direction for euro policy and we believe there will be further fallout for the euro, with eventual parity against the US dollar no longer beyond the realms of possibility.

Against this backdrop, it was no surprise that gold rose to record highs and we sleep well at night with nearly 9% of the portfolio invested within the sector and 9% in cash. We continue to believe there are relatively few safe places to hide in fiat currencies and that gold is steadily remonetising as a consequence.

Closer to home, the political landscape heated up dramatically with the Rudd Governments proposed resource rent tax. If passed, we believe the tax will prove to be a disaster for the resources sector in years to come. Australia is reliant on international capital inflows for funding on most projects. The new tax will in our view cause significant dislocation in capital markets leading to the cancellation and delay of many projects. Since the tax was announced, billions of dollars in value were wiped from many leading and emerging resource companies. Untold damage has been caused amongst the international investment community with respect to how Australia is perceived. Markets hate instability. The Rudd Government has been very successful at causing this instability, and we question whether the banks are likely to be next!

In late April, we fortuitously reduced overweight positions in BHP and Rio Tinto back to index before the resource rent tax was announced. Sentiment in bulk commodities, namely iron ore and coal reached euphoric levels and given the macro headwinds that were gathering pace, we took the opportunity to lock in profits.

In the US, the economic recovery continues to gain traction. We have seen various improvements in economic indicators such as non-farm payroll numbers and the PMI index. This is encouraging for the global economy, especially in light of the European debt crisis. Local stocks exposed to the US should all benefit perhaps with the added benefit of some further weakness in the Australian dollar. QBE and CSL are two names we are currently overweight.

In China clear evidence is emerging that credit growth is slowing and the property market is cooling. This will stabilise the economy over the longer term, reducing the risk of a crash in asset prices and return China to a sustainable level of growth. Near term volatility however could be transmitted to the commodity markets and the commodity currencies such as the A$ and C$. For this reason we continue to be somewhat cautious towards resources in the short term.

Elsewhere in the portfolio, we sold positions in Coffey International and Westpac Office Trust. Coffey’s recent profit warning removed any earnings visibility for us in the near term and Westpac Office Trust is subject to a takeover offer from Mirvac.

FAT PROPHETS AUSTRALIA FUND LIMITED ACN 62 111 772 359

Level 33, 2 Park St, Sydney NSW 2000 telephone 02 9024 6727 fatfund@fatprophets.com.au

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3. Top 15 Holdings at 30[th] April 2010

Company	Symbol	% Weighting
BHP Billiton	BHP	12.0
Westpac Bank	WBC	9.2
Commonwealth Bank	CBA	8.0
ANZ Bank	ANZ	6.6
National Australia Bank	NAB	6.5
QBE Insurance	QBE	3.8
Lihir Gold	LGL	3.4
Wesfarmers	WES	3.3
Telstra	TLS	3.2
Woolworths	WOW	3.2
Rio Tinto	RIO	2.8
CSL Limted	CSL	2.5
Woodside Petroleum	WPL	2.1
Santos	STO	1.9
Oceania Capital	OCP	1.7

Angus Geddes[ & ] Steve O’Hanna 14 May 2010 Fat Prophets Funds Management Australia

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.

FAT PROPHETS AUSTRALIA FUND LIMITED ACN 62 111 772 359

Level 33, 2 Park St, Sydney NSW 2000 telephone 02 9024 6727 fatfund@fatprophets.com.au