Why invest in shares?

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Investing in the previous year’s best performing asset class 31-Dec-82International Shares$10, Dec-83Australian Shares$13, Dec-84International Shares$12, Dec-85International Shares$22, Dec-86Australian Shares$32, Dec-87Australian Fixed Interest$29, Dec-88Australian Shares$32, Dec-89International Shares$38, Dec-90Australian Fixed Interest$32, Dec-91Australian Shares$40, Dec-92Australian Fixed Interest$39, Dec-93Australian Shares$45, Dec-94Australian Cash$48, Dec-95International Shares$58, Dec-96Australian Shares$61, Dec-97International Shares$69, Dec-98International Shares$72, Dec-99International Shares$85, Dec-00Australian Listed Property$87, Dec-01Australian Listed Property$99, Dec-02Australian Listed Property$111, Dec-03Australian Listed Property $121,440 Cumulative returns for each year to 31 December Data based on index returns, all distributions reinvested. Source: UBS Warburg Australia Bank Bill Index (91 day Commonwealth Treasury Note Index pre Jan 1989), UBS Warburg Australian Composite Bond Index 0+ Years (CBBI All Series All Mats Accumulation pre Oct 1989), S&P/ASX 200 Property Accumulation Index (ASX Property Trusts Accumulation Index pre April 2000), S&P/ASX 300 Accumulation Index, (ASX All Ordinaries Accumulation Index pre April 2000), MSCI World Net Index ($A). IRESS, RIMES Asset ClassValue

Investing in the previous year’s worst performing asset class 31-Dec-82 Australian Shares $10, Dec-83 Australian Cash $16, Dec-84 Australian Shares $18, Dec-85 Australian Listed Property $26, Dec-86 Australian Cash $36, Dec-87 Australian Shares $41, Dec-88 International Shares $48, Dec-89 Australian Listed Property $61, Dec-90 Australian Shares $67, Dec-91 Australian Cash $90, Dec-92 Australian Shares $96, Dec-93 Australian Cash $139, Dec-94 Australian Shares $147, Dec-95 Australian Cash $177, Dec-96 International Shares $190, Dec-97 Australian Cash $269, Dec-98 Australian Cash $282, Dec-99 Australian Listed Property $297, Dec-00 International Shares $350, Dec-01 International Shares $316, Dec-02 International Shares $230, Dec-02 International Shares $228,960 Cumulative returns for each year to 31 December Data based on index returns, all distributions reinvested. Source: UBS Warburg Australia Bank Bill Index (91 day Commonwealth Treasury Note Index pre Jan 1989), UBS Warburg Australian Composite Bond Index 0+ Years (CBBI All Series All Mats Accumulation pre Oct 1989), S&P/ASX 200 Property Accumulation Index (ASX Property Trusts Accumulation Index pre April 2000), S&P/ASX 300 Accumulation Index, (ASX All Ordinaries Accumulation Index pre April 2000), MSCI World Net Index ($A). IRESS, RIMES Asset ClassValue

What are the two main investment risks ? 1.Loss of capital 2.Not meeting your investment objectives

IncomeCapital Value Source: IRESS, S&P ASX All Industrials used prior to July S&P ASX 300 Industrials used after July Reserve Bank of Australia, ‘Bank Deposits $5,000-$100,000 1 year rates’ Shares can provide capital growth & income Return on investment of $100,000 in Shares vs Term Deposits

What has inflation done to $100,000? $ $38,925 $100,000 Source: IRESS. Data to 31st December 2003

Shares or cash? Return Rolling one year returns *35% Australian shares; 25% Global Shares; 10% Aust Property Securities; 25% Aust Fixed Interest; 5% Cash Source: UBS Warburg Australia Bank Bill Index (91 day Commonwealth Treasury Note Index pre Jan 1989), UBS Warburg Australian Composite Bond Index 0+ Years (CBBI All Series All Mats Accumulation pre Oct 1989), S&P/ASX 200 Property Accumulation Index (ASX Property Trusts Accumulation Index pre April 2000), S&P/ASX 300 Accumulation Index, (ASX All Ordinaries Accumulation Index pre April 2000), MSCI World Net Index ($A). IRESS/RIMES

Shares or cash? Rolling five year returns Return *35% Australian shares; 25% Global Shares; 10% Aust Property Securities; 25% Aust Fixed Interest; 5% Cash Source: UBS Warburg Australia Bank Bill Index (91 day Commonwealth Treasury Note Index pre Jan 1989), UBS Warburg Australian Composite Bond Index 0+ Years (CBBI All Series All Mats Accumulation pre Oct 1989), S&P/ASX 200 Property Accumulation Index (ASX Property Trusts Accumulation Index pre April 2000), S&P/ASX 300 Accumulation Index, (ASX All Ordinaries Accumulation Index pre April 2000), MSCI World Net Index ($A). IRESS/RIMES

Shares or cash? Rolling ten year returns Return *35% Australian shares; 25% Global Shares; 10% Aust Property Securities; 25% Aust Fixed Interest; 5% Cash Source: UBS Warburg Australia Bank Bill Index (91 day Commonwealth Treasury Note Index pre Jan 1989), UBS Warburg Australian Composite Bond Index 0+ Years (CBBI All Series All Mats Accumulation pre Oct 1989), S&P/ASX 200 Property Accumulation Index (ASX Property Trusts Accumulation Index pre April 2000), S&P/ASX 300 Accumulation Index, (ASX All Ordinaries Accumulation Index pre April 2000), MSCI World Net Index ($A). IRESS/RIMES

Shares or cash? Rolling twenty year returns *35% Australian shares; 25% Global Shares; 10% Aust Property Securities; 25% Aust Fixed Interest; 5% Cash Return Source: UBS Warburg Australia Bank Bill Index (91 day Commonwealth Treasury Note Index pre Jan 1989), UBS Warburg Australian Composite Bond Index 0+ Years (CBBI All Series All Mats Accumulation pre Oct 1989), S&P/ASX 200 Property Accumulation Index (ASX Property Trusts Accumulation Index pre April 2000), S&P/ASX 300 Accumulation Index, (ASX All Ordinaries Accumulation Index pre April 2000), MSCI World Net Index ($A). IRESS/RIMES

Interest rates Source: Bloomberg, RBA Cash rate June Dec-92Dec-94Dec-96Dec-98Dec-00Dec-02Dec-04

The imputation impact 3.91%3.25%After tax yield 3,9143,254 After tax return 861,496 Tax payable 1,714 -Less Imputation credit 1,8001,496 Tax 31.5% 5,7144,750 Gross/taxable return 1,714 -Imputation credit - 4,750 Interest % 4,000 - Dividend Yield - 4%, Fully Franked 100,000 Investment SharesCash 31.50%Marginal tax rate: 2.94%2.45%After tax yield 2,9432,446 After tax return 1,0572,304 Tax payable 1,714 -Less Imputation credit 2,7712,304 Tax 48.5% 5,7144,750 Gross/taxable return 1,714 -Imputation credit - 4,750 Interest % 4,000 - Dividend Yield - 4%, Fully Franked 100,000 Investment SharesCash Marginal tax rate: * Assumes a corporate tax rate of 30%, cash return of 4.75%, dividend yield of 4%

Conclusion  Investment markets are unpredictable  Cash is often not the best long term investment strategy  The impact of tax & inflation is important in investing  Investing for the long term smooths returns