Written by Brian Parker, Senior Investment Strategist, MLC ‘After a year of economic and political cliff-hangers, the global environment remains very uncertain – we’re not out of the woods yet.’ In 2012, serious economic and political challenges kept financial markets on edge for much of the year. It was only the actions of central banks to pump massive amounts of cash into banking systems that eventually calmed market nerves and led to strong investment returns in What’s ahead for 2013? The outlook for the world economy and financial markets remains very uncertain. There are many paths the world economy could take. Overall, it’s likely that the world will continue to muddle through – that decisions on the most difficult economic issues will keep being put off and central bankers will keep taking extraordinary measures to keep up the appearance of economic and financial health. However, the risk of another sharp downturn in global activity and more instability is higher than usual. The potential concerns aren’t just economic issues; geopolitical risks (like developments in the Middle East and political transition in China) could also make markets unstable. Perhaps the most worrying thing is how much the future of the world economy depends on policy makers taking sensible decisions, as it’s not clear they’ll do this. In the US, political negotiations about government spending and tax will continue to be a drag on US growth in 2013 and are a significant risk to the outlook. The eurozone crisis is nowhere near resolved and much of it remains in recession. There’s a significant risk that forecasts of a eurozone economic recovery in the next year or two won’t be met. Government debt levels in much of Europe are far too high, and further defaults and debt restructurings are likely. As chart 1 shows, GDP and business confidence in the eurozone are still falling. March 2013 Investment news 2013: another year of living dangerously?

Investment news 2013: another year of living dangerously? Important information This information has been provided by MLC Investments Limited (ABN ) and MLC Limited (ABN ) members of the National Australia Bank group of companies, 105–153 Miller Street, North Sydney This communication contains general information and may constitute general advice. Any advice in this communication has been prepared without taking account of individual objectives, financial situation or needs. It should not be relied upon as a substitute for financial or other specialist advice. Before making any decisions on the basis of this communication, you should consider the appropriateness of its content having regard to your particular investment objectives, financial situation or individual 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. 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 performance reported is before management fees and taxes, unless otherwise stated. Chart 1: Eurozone GDP growth and business sentiment are still declining What about Australia? Australia’s economic performance during and since the global financial crisis has been impressive. However, the picture is very mixed across our economy and there are still risks. We're heavily exposed to developments in China. If growth in China slowed sharply, there would be significant impacts on Australian exports, investment, employment and the financial markets. In those circumstances, it’s likely the Australian dollar would fall considerably and policy makers would act to soften the economic impact. However, there’s a risk our economy could stall if our dollar doesn’t fall far or fast enough, or policy makers don’t act. What does the uncertain outlook mean for you? In such an uncertain investment environment, your investment portfolio needs to be able to withstand a wide range of possible market conditions. MLC assesses the paths economies and markets could take, identifies both risks and opportunities and positions its portfolios to manage the risks and capture the potential returns.