NAB Private Wealth

1. NAB Private Wealth Investment Backdrop & Opportunities Philip Kimball CFA Chief Investment Officer May 2010

2. Philip Kimball Jr CFAChief Investment Officer, NAB Private Wealth Phil is currently the Chief Investment Officer for NAB Private Wealth, a role he took up in February 2009. As Chief Investment Officer, Phil has overall responsibility for the leadership, management, and planning of investment research and solutions within Private Wealth. Phil chairs the Investment Strategy Committee within Private Wealth which helps develop and clearly articulates the overall investment philosophy for NAB Private Wealth clients. Phil also chairs the Margin Lending Approved Product Committee. Phil’s background involves extensive experience working within both the institutional and UHNW client set, with specific expertise in asset allocation strategies, portfolio construction, opportunistic strategies, and risk management frameworks for individuals. Phil’s international investment career spans 22 years, the majority of this was spent with Citigroup in various Asset Management roles and regions across all asset classes. He was most recently the Global Investment Strategist with the Citigroup Private Bank in Australia where he advised Ultra High Net Worth families on asset allocation strategies, portfolio construction, opportunistic strategies, and implementation options. Prior to this, he was a SIO for Fixed Income at Citigroup Asset Management in Singapore. An American, Phil moved to Australia in 2002 after having spent 7 years working and living in Asia. Prior to moving to Singapore in 1995 to help establish Citigroup’s discretionary capabilities within Fixed Income, he worked in New York in various Asset Management roles including balanced portfolio management. Phil has a BA in Economics from the University of Vermont and is a Chartered Financial Analyst and member of the CFA Institute and CFA Society of Sydney. Phil lives in Sydney with his wife Brenda and their 4 young children.

3. DISCLAIMER: While care has been taken in preparing this material, National Australia Bank Limited (ABN 12 004 044 937, AFSL 230686) does not warrant or represent that the information, recommendations, opinions or conclusions contained in this document (“Information”) are accurate, reliable, complete or current. The Information has been prepared for dissemination to professional investors for information purposes only and any statements as to past performance do not represent future performance. The Information does not purport to contain all matters relevant to any particular investment or financial instrument and all statements as to future matters are not guaranteed to be accurate. In all cases, anyone proposing to rely on or use the Information should independently verify and check the accuracy, completeness, reliability and suitability of the Information and should obtain independent and specific advice from appropriate professionals or experts. To the extent permissible by law, the National shall not be liable for any errors, omissions, defects or misrepresentations in the Information or for any loss or damage suffered by persons who use or rely on such Information (including by reasons of negligence, negligent misstatement or otherwise). If any law prohibits the exclusion of such liability, the National limits its liability to the re-supply of the Information, provided that such limitation is permitted by law and is fair and reasonable. The National, its affiliates and employees may hold a position or act as a price maker in the financial instruments of any issuer discussed within this document or act as an underwriter, placement agent, adviser or lender to such issuer.

4. Macro & Policy Backdrop

5. Macro & Policy Backdrop • Extreme stresses of the financial crisis have been removed • Credit bubble and subsequent de-leveraging still providing strong deflationary forces • Most economies have “recovered” from late 2008 collapse – cannot spend our way to growth • Unemployment rates have risen to historically high levels in many regions and will act as a drag on growth Macro Picture Policy Response • Policy makers reacted swiftly by lowering policy rates and introducing fiscal/public spending to arrest the declines – what can be done now? • Increasing scrutiny on financial regulation Views, opinions, trends and prices expressed are subject to change without prior notice and are expressed solely as a general market commentary and do not constitute investment advice or a guarantee of returns.

6. Market Backdrop • 2009 was spent recovering ground lost during 2008- now back to fundamentals • P/E expansion drove most equity markets in 2009- we view most as fully priced • P/E’s can stay expensive given low rates and low inflation- don’t be too quick to reduce exposure • Bond yields likely to grind higher- risk premium and policy rates • Major unknowns remain policy transition in 2010, GDP growth w/o fiscal programs, budget austerity Views, opinions, trends and prices expressed are subject to change without prior notice and are expressed solely as a general market commentary and do not constitute investment advice or a guarantee of returns.

7. Australian Current Landscape Macro and Market Picture • NAB economists have upgraded their outlook in Australia. Growth is now expected to be 3½% this year and 4¼% next year- cash rate to 6% late 2011 • This reflects the current strengthening momentum, faster trading partner growth (especially in Asia and the USA) and the impact of sharply higher commodity prices • Rate markets have been range-bound but with the economy already growing at or above trend, inflationary concerns and further rate hikes point towards a higher term structure • Australian equities remain fairly priced based on fundamentals, however the economic backdrop and sentiment are positive Source: NAB Views, opinions, trends and prices expressed are subject to change without prior notice and are expressed solely as a general market commentary and do not constitute investment advice or a guarantee of returns.

8. Global Trends/Forces Shaping Markets Private to Public Debt Transfer & De-leveraging Policy Transition in 2010 Inflation/Deflation? Diversification? Yes! Emerging Markets Growth… However Return Moderation

9. Private to Public Debt Transfer & De-leveraging • Debt hasn’t disappeared – fiscal expenditure multiple – future payback • End of the beginning in Europe

10. Policy Transition in 2010 • Loose monetary policy likely to stay longer – favorable for liquidity and equities • Divergence between EM and developed - at the margin impacting EM Equity

11. Inflation/Deflation? • World still de-leveraging - deflationary • Banks thawing, however, will to borrow has not been restored

12. Emerging Markets Growth… However • EM Central Banks are faced with different policy prospects • Occasionally the growth premium gets priced in

13. Asset Allocation Strategy

14. Investment Strategy Committee Conclusions* • Economic recovery continues. A double dip seems very unlikely • Equities broadly at neutral – earnings momentum is slowing or being priced into expectations • Policymakers unlikely to take foot off the gas • RBA policy in Australia is likely to be less accommodative over the next few quarters • Government bond yields are close to ending their multi-decade long bull run. *Mar 18 2010 Views, opinions, trends and prices expressed are subject to change without prior notice and are expressed solely as a general market commentary and do not constitute investment advice or a guarantee of returns.

15. Global Equity Overview • Equities are likely to continue advancing • We believe Australian equities remain fairly priced based on fundamentals, however the economic backdrop and sentiment are favorable • We continue to monitor the EU with caution • Monetary and fiscal stimuli are supportive for equities, however this view should be structured in higher quality, less cyclical sectors as liquidity is slowing being removed NAB Private Wealth 12 month outlook Australian Equities International Equities Emerging Markets Equities Views, opinions, trends and prices expressed are subject to change without prior notice and are expressed solely as a general market commentary and do not constitute investment advice or a guarantee of returns.

16. Global Fixed Income Overview • The outlook for global bonds is negative with policy risk and expectations of tightening cycles across major economies of concern • Corporate’s look more attractive compared to governments • The market outlook remains negative for AUD Bonds with only trading ranges and curve positioning offering opportunities • Despite a recent decline in competition, selectively Australian term deposits are still attractive vs bonds NAB Private Wealth 12 month outlook Australian Bonds International Bonds Global Credit Views, opinions, trends and prices expressed are subject to change without prior notice and are expressed solely as a general market commentary and do not constitute investment advice or a guarantee of returns.

17. Currency Overview • The positive outlook on commodity prices and the upward trend on the RBA cash rate forecasts are all supportive for AUD/USD • We maintain a bias favoring commodity currencies. • We think the prospects for EM currency strength are quite good (particularly in Asia) given higher inflation, narrower output gaps and closing capacity • Euro to remain under pressure

18. Asset Allocation Strategy Source: NAB Private Wealth Views, opinions, trends and prices expressed are subject to change without prior notice and are expressed solely as a general market commentary and do not constitute investment advice or a guarantee of returns.

19. Asset Class Positioning Views, opinions, trends and prices expressed are subject to change without prior notice and are expressed solely as a general market commentary and do not constitute investment advice or a guarantee of returns.

20. What is driving the AUD vs USD? • The commodity boom is helping the AUD and the rise in spot prices in Iron ore and coal • Australia is leading the recovery across developed economies and strong growth prospects point towards further increases in the cash rate • In contrast in the US, the lack of a sustained rebound in housing, high levels of unemployment and weak commercial property support the need for rates to remain exceptionally low throughout 2010 • Improved risk appetite and a more stable global backdrop will favor a further increase in the AUD/USD as investors shift away from ‘safe-haven’ currencies towards those with a higher yield. Close pattern with rate differential and the AUD/USD Views, opinions, trends and prices expressed are subject to change without prior notice and are expressed solely as a general market commentary and do not constitute investment advice or a guarantee of returns.

21. Opportunistic

22. Global Actionable Ideas for 2010 Australian Term Deposits Australia Private Debt – Funding pressures Buy/Write- Global/Australia Multi-strategy hedge funds Active vs Passive Consumer Staples vs Cyclicals

23. Global Actionable Ideas for 2010

24. Important Lessons to be Learned • All Investors should have a plan • Activity and action are NOT the same thing • Always get a second opinion - verify • Risk management is key focus – risk is NOT a number • Entry point and valuation does matter - even in the long-term!

25. Conclusions • Global economy growth on track- sustainability will be questioned • Dispersion Increasing - diversification will work! • Expect volatile markets- but favor equities over fixed incomefor now • Be patient

26. “While the crash only took place six months ago, I am convinced we have now passed through the worst – and with continued unity of effort we shall rapidly recover. There has been no significant bank or industrial failure. That danger, too, is safely behind us.” Herbert Hoover, May 1930

27. ANALYST DISCLAIMER: The person or persons named as the author(s) of this report hereby certify that the views expressed in the research report accurately reflect their personal views about the subject matters discussed. No part of their compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in the research report. Research analysts responsible for this report receive compensation based upon, among other factors, the overall profitability of the Private Wealth Division of National Australia Bank Limited (ABN12 004 044 937, AFSL230686). The views of the author(s) do not necessarily reflect the views of the National Australia Bank Group (“NAB”) and are subject to change without notice.