MLC Investments Performance Update Year ended 30 September 2009

General advice warning and disclaimer Any advice in this communication has been prepared without taking account of individual objectives, financial situation or needs. Because of this you should, before acting on any information in this communication, consider whether it is appropriate to your objectives, financial situation and needs. You should obtain a Product Disclosure Statement or other disclosure document relating to any financial product issued by MLC Investments Limited (ABN ) and MLC Nominees Pty Ltd (ABN ) as trustee of The Universal Super Scheme (ABN ), and consider it before making any decision about whether to acquire or continue to hold the product. A copy of the Product Disclosure Statement or other disclosure document is available upon request by phoning the MLC call centre on or on our website at mlc.com.au. An investment in any product offered by a member company of the National group does not represent a deposit with or a liability of the National Australia Bank Limited ABN or other member company of the National Australia Bank group of companies and is subject to investment risk including possible delays in repayment and loss or income and capital invested. None of the National Australia Bank Limited, MLC Limited, MLC Investments Limited or other member company in the National Australia Bank group of companies guarantees the capital value, payment of income or performance of any financial product referred to in this publication. Past performance is not indicative of future performance. The value of an investment may rise or fall with the changes in the market. Please note that all return figures reported are before management fees and taxes, and for the period up to 30 September 2009, unless otherwise stated. The specialist investment management companies are current as at 30 September Funds under management figures are as at 30 September 2009, unless otherwise stated. Investment managers are regularly reviewed and may be appointed or removed at any time without prior notice to you.

Contents The recent environment Impact on asset class returns Impact on MLC multi-manager funds The outlook

The view through the rear view mirror still looks awful Source: Datastream

The windscreen looks much better.. Source: Datastream

The emerging world is powering along! The Stress index is based on external debt, budget deficit, credit growth vs GDP, and the current A/c balance. Periods of high stress for emerging markets explain poor absolute and relative economic performance vs the developed world.

What a difference 6 months makes! * Index data source: S&P/ASX 300, MSCI All Countries (hedged), MSCI All Countries, MSCI Emerging Markets, S&P/ASX 200 LPT, UBS Global REIT (hedged), UBS Composite Bond (all mats), BCGA Global Agg (hedged), BCGA US Corp HY BB/B (hedged), UBS Inflation Linked Bonds (all mats), UBS Australian Bank Bill respectively.

Significant positive impact on your MLC Horizon Portfolio Returns quoted are for the MLC Super Fundamentals Horizon series and are net of admin fees, issuer fees, investment fees and super tax, but before the deduction of entry/exit fees and policy charges.

MLC Horizon 4 - Consistent added value across market cycles MLC Horizon 4’s 5 year return has never dipped below 0% in the past. Losses over 1 year periods occur relatively regularly. The rally in risky assets of CYTD2009 is reflected in the up tick in total returns on the RHS. Source: Mercers Retail Balanced Growth Universe, net of super tax and Gold star fees. Mercer data updated around the 20th day after month end.

MLC Horizon 4 – Competitive peer relative returns % of time outperformed competitors: 1 year: 50% 3 years: 61% 5 years: 72% Source: Mercers Retail Balanced Growth Universe, net of super tax and Gold star fees. Mercer data updated around the 20 th day after month end.

MLC Super Horizon 4: lower than peer volatility helps manage risk The MLC Super GS Balanced Portfolio has had lower volatility than peers 62% of the time. Source: Mercers Retail Balanced Growth Universe, net of super tax and Gold star fees. Mercer data updated around the 20th day after month end.

Disciplined rebalancing & daily dollar cost averaging has contributed to your recovery 22 nd Jan, 3 rd July, 9 th Oct and 19 th Nov: Maintained your portfolio strategy by selling bonds and buying Aust’n & global shares. 7th April, 11th June, 31st July and 14th Aug: Maintained your portfolio strategy by selling Australian shares & buying bonds and global shares. Returns based on MLC Super GS Horizon 4 Balanced Portfolio and are net of management fees which include administration fees, issuer fees and investment fees and any Super tax payable, but do not take into account entry/exit fees or policy charges.

The recovery of the Australian share market has been substantial… The market returned +8.5% in the year and is 55% higher than its low point in March

… and clients have participated fully in the market’s recovery: Excess returns of MLC Australian shares strategy (top) and Managers (bottom) year to 30 September 2009

MLC’s managers have successfully identified banks as superior performers

MLC IncomeBuilder’s distribution is forecast to be lower than last year’s Company profits are weaker and are expected to remain under pressure for much of the remainder of the year Many companies have responded to the difficult environment by cutting dividends (e.g. ANZ’s latest dividend is 24% lower than last years) Dividend income received by MLC IncomeBuilder TM will be therefore be down this year. Stocks such as Coca-Cola Amatil (2.4% of MLC IncomeBuilder TM portfolio) with a strong history of dividend growth will help cushion the impact ($10,000 invested in Coca-Cola Amatil shares on 30/06/99 would so far have provided $8,800 of dividends +franking credits)

MLC’s AREIT strategy has protected investors from the worst of the sector’s fall (and it’s worst performers) Massive capital raisings have stabilised the sector but issues remain (concentration, retail dominance, lack of choice). MLC’s AREIT strategy has substantially outperformed with both appointed managers also outperforming (left diagram). Underperformance in the quarter was due to better returns of poor quality REITs Sector issues require an active management approach to differentiate between good and bad within the sector.

MLC’s Global REIT strategy has also protected investors from the worst of the sector’s fall MLC’s Global REIT strategy has outperformed the index with a high degree of consistency (below diagram). Manager returns have generally been better than index (except recently). Holdings of Asian REITs and underweighting Australia have until recently been very rewarding The breadth of the sector, with over 200 REITs to choose from, justifies an active management approach to differentiate between good and bad within the sector.

Global Shares Markets have risen strongly from previous lows Source: Bloomberg

MLC’s global shares performance continues to improve… The performance gap between the MLC strategy and the index continues to narrow (as illustrated in the diagram below). The strategy’s emerging markets exposure continues to benefit returns as emerging markets have outperformed developed markets. Manager performances were mixed but in line with expectations (considering the market environment).

An alternative approach to accessing emerging markets – developed market companies trading with emerging markets CompanyCountry of listingKey EM featureTheme Consumption growth Switzerland (Developed) EMs achieved organic sales growth of 15.4% in 2008 and represents about 35% in volume (CHF 35 billion). Communications & media Financial services Health care South Africa (EM) USA (Developed) Multinational electronic media company with 70% of revenue from South Africa. UK (Developed) 90% of profit from Asia, Africa and Middle East. China's largest medical equipment manufacturer with a home customer base. Source: Company Specific Reports

MLC global shares manager returns The recent rally has produced divergent results for the year to 30 September, which is not unexpected within such a broadly diversified manager panel. Walter Scott’s impressive return is due to ownership of quality, financially sound companies (though this detracted from returns in the quarter when riskier stocks did better). Newly appointed managers performed as expected in the last six months, with Sands the strongest (+34% return since appointment in February ’09 versus +2% by the index)

MLC’s Global Private Assets strategy: accessing the world’s best managers and opportunities MLC’s Private Assets strategy is intentionally global, spanning many countries and private asset categories (left diagram). MLC currently has 46 managers who are invested in over 2,000 companies The capital-constrained market of the last 1-2 years has provided MLC with attractive opportunities to invest (below diagram).

Diversified debt Debt markets have started to normalise The post-Lehman Brothers sharp rise in yields (and falls in value) of securities with credit risk have been mostly offset in last 6 months The strategy has underperformed its benchmark by 5.3% over the year, but has been improving in the last 6 months Prior to the GFC, Diversified Debt usually outperformed cash by a significant margin over 3 year periods

Diversified debt

Diversified debt – Investing in emerging markets debt

Cash Fund Cash has preserved your capital in the worst financial crisis since the Great Depression. Cash rates are now extremely low by historical standards. The RBA has started the increasing phase of the interest rate cycle.

Cash Fund

The Global Outlook Worst of the crisis over, but the recession is not. Economic recovery is going to be VERY subdued – consumers (especially in the English speaking world) will take time to repair balance sheets, re-build savings Australia has been late into this…more bad news to come on employment, trade, investment. Prospects for the emerging economies are brighter than they’ve been for many years Interest rates likely to stay lower for longer – world’s central banks won’t mind a bit more inflation? Investment returns in this recovery are likely to be more modest than we’ve been used to How long before memories fade? Longer this time than usual!