Do not put content on the brand signature area Do not put content on this area Economic & Asset Class Update June 2011

Do not put content on the brand signature area Do not put content on this area Section 1 – Economic update

Do not put content on the brand signature area Do not put content on this area Global overview Data released in the United States over May indicated the economy had weakened in recent months. The Australian dollar’s extended period of outperformance against its major peers was interrupted in May. In Australia, Q1 GDP data showed the economy contracted by 1.2%, the largest decline in 20 years. Australia held official interest rates steady at 4.75% on June 7, after stating floods and cyclones had thrown the economy into reverse and Europe remained plagued by debt fears.

Do not put content on the brand signature area Do not put content on this area United States: key economic news Economic indicators released in the US in May were poor. U.S. employment held back by weak economy - The US Labor Department reported in May that the unemployment rate rose 0.1% to 9.1%, with the economy adding 54,000 jobs for the month, the weakest growth since September The U.S. inflation rate rose to 3.6% in May. The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2% in May on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported on June 15. The Federal Reserve decided to hold interest rates at historic low levels as the US recovery is slower and weaker than expected, and hinted that more government relief could come if the recovery stalls. The Conference Board's Consumer Confidence Index fell to 60.8, a six- month low with high gas prices, weak employment outlook and housing market contributing. TradingEconomics.com, Australian Bureau of Statistics

Do not put content on the brand signature area Do not put content on this area United States: key stats Interest Rate Growth Rate Inflation Rate Jobless Rate Government Budget Exchange Rate 0.25%1.80%3.60%9.10% As at 22 June 2011

Do not put content on the brand signature area Do not put content on this area China: key economic news Inflation rate rises to 5.5% in May - its highest level in nearly three years, pushed up by high food prices, even as interest rate increases and other controls are cooling the overheated economy. China's trade surplus expanded to $13.05 billion in May, while strong imports eased fears of a slowdown in the world's number two economy. The PMI Manufacturing Index fell from 52.9 to 52.0, its lowest level in nine months. TradingEconomics.com, Australian Bureau of Statistics

Do not put content on the brand signature area Do not put content on this area China: key stats Interest Rate Growth Rate Inflation Rate Jobless Rate Government Budget Exchange Rate 6.31%9.70%5.50%4.10% As at 22 June 2011

Do not put content on the brand signature area Do not put content on this area Australia: key economic news Economic data releases tended to be on the soft side in May. Australia's economy suffered its biggest contraction in 20 years in Q1 as resource exports collapsed due to floods in a major coal- producing region, exposing the nation's growing dependence on mining revenue. Q1 Gross Domestic Product was down 1.2% from the previous quarter, compared with revised growth of 0.8% in the previous quarter, said the Australian Bureau of Statistics on June 1. The seasonally adjusted Australian unemployment rate was steady at 4.9% in April, as announced by the Australian Bureau of Statistics (ABS) on May 12. Australia held official interest rates steady at 4.75 percent on June 7, saying floods and cyclones had thrown the economy into reverse and Europe remained plagued by debt fears. TradingEconomics.com, Australian Bureau of Statistics

Do not put content on the brand signature area Do not put content on this area Australia: key stats Interest Rate Growth Rate Inflation Rate Jobless Rate Government Budget Exchange Rate 4.75%1.00%3.30%4.90%

Do not put content on the brand signature area Do not put content on this area Section 2 – Economic data

Do not put content on the brand signature area Do not put content on this area World economy – key economic indicators Country ranking by Gross Domestic Product growth rates

Do not put content on the brand signature area Do not put content on this area World economy – key economic indicators Gross government debt as a percentage of GDP, 2010 Sources: Standard and Poor’s (long-term credit) OECD - General Government debt (% of GDP) European Monetary Union – 60% government debt to GDP

Do not put content on the brand signature area Do not put content on this area World economy – key economic indicators Real GDP Growth – year ended Source: Reserve Bank of Australian Chart Pack June 2011

Do not put content on the brand signature area Do not put content on this area World economy – key economic indicators Core Consumer Price Inflation * Year ended Inflation Year ended Source: Reserve Bank of Australian Chart Pack June 2011

Do not put content on the brand signature area Do not put content on this area World economy – key economic indicators Unemployment Rate Source: Reserve Bank of Australian Chart Pack June 2011

Do not put content on the brand signature area Do not put content on this area Australia – GDP Growth and Inflation GDP Growth Consumer Price Inflation * Source: Reserve Bank of Australian Chart Pack June 2011

Do not put content on the brand signature area Do not put content on this area Australia – Household Sector Retail Sales Growth Housing Loan Approvals* Source: Reserve Bank of Australian Chart Pack June 2011

Do not put content on the brand signature area Do not put content on this area Australia - Factors of Production and Labour Market Labour Force Employment Source: Reserve Bank of Australian Chart Pack June 2011

Do not put content on the brand signature area Do not put content on this area Australia – Commodity Prices RBA Index of Commodity Prices 2008/09 average = 100, SDR Commodity Prices SDR, 2003 average = 100, weekly Source: Reserve Bank of Australian Chart Pack June 2011

Do not put content on the brand signature area Do not put content on this area World interest rates over time Source: RBA, BOJ, ECB As at 31/05/2011

Do not put content on the brand signature area Do not put content on this area World interest rate movements in detail Current rateLast moved Direction of last move Australia 4.75%Nov 2010 United States 0% %Dec 2008 Europe (ECB) 1.25%April 2011 Japan 0.00%Oct 2010 United Kingdom 0.50%Mar 2009 China 6.31%May 2011 Source: RBA, BOJ, ECB As at 31/05/2011 Interest rate movements in most of the major global economies were unchanged in May. China raised interest rates for the fourth time in five months bringing the lending rate to 6.31%.

Do not put content on the brand signature area Do not put content on this area Interest rates US Bond Yields 3 – 5 years US Bond Spreads To US government bonds, 3–5 years Source: Reserve Bank of Australian Chart Pack June 2011

Do not put content on the brand signature area Do not put content on this area Interest rates Australian Bond Yields * Australian Bond Spreads * Spread over government yields, monthly Source: Reserve Bank of Australian Chart Pack June 2011

Do not put content on the brand signature area Do not put content on this area Currency movements $1 AUD buys:United States Europe (ECB) Japan United Kingdom Source: DataStream As at 31/05/2011

Do not put content on the brand signature area Do not put content on this area Spotlight on the Aussie Dollar The Australian dollar’s extended period of outperformance against its major peers was interrupted in May. Global economic uncertainty prompted investors to reduce their exposure to commodity-based currencies. The Australian dollar was broadly sold off, losing ground against the US dollar (-2.6%), the Yen (-2.0%) and Sterling (-1.3%) with a modest gain against the Euro (+0.5%).

Do not put content on the brand signature area Do not put content on this area Exchange rates Australian Dollar against US Dollar, Euro and Yen Source: Reserve Bank of Australian Chart Pack June 2011

Do not put content on the brand signature area Do not put content on this area Global markets long term performance Source: IRESS 31/05/2011 $102,983 $9,608$60,683 $56,350 Growth of $10,000 as at 31 May 2011

Do not put content on the brand signature area Do not put content on this area Global share market returns Source: Datastream Date: 30/05/11 1 year %3 years % p.a.5 years % p.a. S&P 500 Index (US) NASDAQ (US Tech.) Dow Jones (US) Nikkei 225 (Japan) Hang Seng (Hong Kong) DAX (Germany) CAC40 (France) FTSE 100 (UK) ASX 200 (Aust.) Global Index Summary as at 31 May 2011

Do not put content on the brand signature area Do not put content on this area Global vs. Australian shares Source: Datastream Timeframe: 01/01/98 – 20/06/11 Data: Australian shares - S&P/ASX 300 Accum. Index, International Shares - MSCI World (ex Aus) in $A Growth of $10,000 invested from January 1998 to May 2011.

Do not put content on the brand signature area Do not put content on this area Australian vs. US markets Source: Iress as at 20/06/11 Growth of $10,000 invested in Australian and US markets over time

Do not put content on the brand signature area Do not put content on this area Section 3 – Asset class review

Do not put content on the brand signature area Do not put content on this area Key asset sector index performance summary Source: Datastream AS at 31/05/2011 Index Performance Summary 31 May month % 3 months % 1 Year % 3 Years % p.a. 5 Years % p.a. Global Equities (MSCI World [ex-Australia] Index, unhedged) Australian Equities (S&P/ASX 300 Accumulation Index) Australian Fixed Interest (UBS Australian Composite Bond Index) Global Fixed Interest (Barclays Capital Global Aggregate Index Hedged $A) Property Securities (S&P/ASX 200 A-REIT Accumulation Index) Cash (UBS Australian Bank Bill Index)

Do not put content on the brand signature area Do not put content on this area Global shares Global sharemarkets succumbed to sustained selling pressure in May, leaving the MSCI World (ex Australia) Index 1.1% lower in local currency terms. In Australian dollar terms the Index rose by 0.7%. In Europe returns were mixed across the continent: ̵ Germany (-2.9%) and France (-2.4%) fell. ̵ Spain retreated 3.7% on political concerns after regional elections ̵ Greece fell 7.8% on elevated concerns over its government debt ̵ Portugal rose 1.6% with its bailout funds approved. The UK FTSE fell 1.3%, with the economy struggling to record a meaningful improvement in economic growth, given a weak consumer environment In Asia, Japanese equity markets fell, with the Nikkei and Topix both down 1.6%. Asia ex-Japan also recorded losses with China (-4.9%), South Korea (-2.3%), Thailand (-1.8%), Singapore (-0.6%) and Hong Kong (-0.2%). Sector performance saw defensives outperform.

Do not put content on the brand signature area Do not put content on this area Global emerging markets Emerging markets shares, as measured by the MSCI Emerging Market Index, delivered 0% in Australian dollar terms in the month of May. Inflation continues to be an issue in the majority of emerging markets. Asia (-1.2%) was the best performing region in May, followed by Latin America (-2.5%), while EMEA declined sharply (-3.5%). Asia (+ 1.2%) remains in the lead year-to-date, followed by EMEA (-0.4%), while Latin America (-7.2%) was the regional laggard, held back by inflation concerns and rising interest rates. All the numbers are in local currency terms. At the sector level, defensives such as Consumer Staples (+1.0%), Discretionary (-0.4%) and Healthcare (+2.0%) outperformed the benchmark in local currency terms. Cyclical sectors, such as Industrials (-3.1%), Energy (-3.9%) and Materials (-3.7%) underperformed the broader benchmark in May.

Do not put content on the brand signature area Do not put content on this area Australian equities The Australian sharemarket posted a fall in May with the S&P/ASX 300 Accumulation Index declining by 2.02%. Offshore events had a major influence on investor sentiment during the month of May – accelerating inflation in China, weaker US job figures and Greek sovereign debt. Commodity prices were volatile with Oil falling by more than 8% in a single trading session during the month of May. A breakdown of the overall Index return revealed a marked disparity in performance at the sectoral level: ̵ Ratings downgrades of the major banks led to a sharp fall in the financials ex REITs (-4.9%) sector, with speculative interests adding to the selling pressure. ̵ Broader economic uncertainty also weighed on the consumer discretionary (-3.0%) and materials (-1.5%) sectors. ̵ The telecommunications (+4.1%) sector was buoyed by the relative stability of its earnings.

Do not put content on the brand signature area Do not put content on this area Australian fixed interest Fixed Income performed well in May - the UBS Australian Composite Bond Index returned 1.28% over the month of May and delivered a 6.40% return over 1 year. Australia held official interest rates steady at 4.75% on June 7, saying floods and cyclones had thrown the economy into reverse and Europe remained plagued by debt fears. The majority of the movement in yields reflected those of offshore government bonds, which on the whole declined on renewed sovereign debt concerns in Greece. Yield curves generally flattened, with the exception of the UK. Credit spreads widened marginally in May in response to the risk-off theme caused by the softer global growth expectations and the resurgence of peripheral Europe concerns. Commonwealth 10-year bonds ended the month 24 basis points (bp) lower at 5.21%, in line with their US counterparts which declined by 29bp to 3.07%.

Do not put content on the brand signature area Do not put content on this area International fixed interest Global bond markets continue to revise their growth outlook down with consensus for US growth lowered from 3.2% to 2.5%. As a result, Global bond markets rallied strongly for May with a return of 1.47% to be up 7.01% over a year. Global markets and policy-makers continued to grapple with the uncertain effects of a potential Greek Government debt restructure. Bond yields decreased across the larger European countries in May. German 10-year bonds decreased by 22 bps to 3.02%. The US bond market returned 1.60% in local terms - the strong return reflects lower growth prospects for the US and a flight to quality from European periphery concerns. In Japan, the 10-year government bond yield declined by 6 bps to finish the month at 1.15%. The UK 10-year Government bond yield declined by 14 bps to 3.29% at month-end.

Do not put content on the brand signature area Do not put content on this area Australian property securities The S&P/ASX 300 A-REIT Accumulation Index posted a flat return for the month of May. Weakness in the diversified (-2.5%) sector offset the solid performance of the industrial (+3.5%), retail (+1.3%) and commercial (+1.0%) sectors.

Do not put content on the brand signature area Do not put content on this area Global property securities Global property securities proved resilient in May, with the UBS Global Investors Index rising by 1.5% in local currency terms. Strength was broadly based, with all of the major regional markets ending the month in positive territory. The markets in Singapore (+2.8%), the UK (+2.7%) and Continental Europe (+2.5%) extended their recent strong performance, outpacing their North American (+1.3%) counterparts. Investors continue to rebuild their holdings in Japan (+0.1%), after having moved aggressively to reduce their exposures following the natural and nuclear disasters of early March.

Do not put content on the brand signature area Do not put content on this area Section 4 – Asset class performance over time

Do not put content on the brand signature area Do not put content on this area Australian sharemarket - S&P/ASX 300 Source: Iress - S&P/ASX 300 as at 31/05/2011 The Australian share market closed down -2.02% in May March 6, May 31,

Do not put content on the brand signature area Do not put content on this area 1 &10 year rolling returns - S&P/ASX 300 ACC Index Source: S&P/ASX 300 ACC Index as at 31/05/2011

Do not put content on the brand signature area Do not put content on this area Long term asset class performance Timeframe: 01/01/83 – 31/05/11 Data: Australian shares - S&P/ASX 300 Accum. Index, International Shares - MSCI World (ex Aus) in $A, Listed Property Trusts - S&P/ASX 200 Prop Trust, Australian Fixed Interest: Commonwealth Bank Bond Index (Pre Sept 89) / UBSA Composite Bond All Maturities Index (Post Sept 89), Cash: 11am Cash Rate (Pre Apr 87) / UBS Bank Bill Index (Post Apr 87). Source: RBA, Datastream Growth of $10,000 over time

Do not put content on the brand signature area Do not put content on this area Short term asset class performance Timeframe: 31/05/10 – 31/05/11 Data: Australian shares - S&P/ASX 300 Accum. Index, International Shares - MSCI World (ex Aus) in $A, Listed Property Trusts - S&P/ASX 200 Prop Trust, Australian Fixed Interest: Commonwealth Bank Bond Index (Pre Sept 89) / UBSA Composite Bond All Maturities Index (Post Sept 89), Cash: 11am Cash Rate (Pre Apr 87) / UBS Bank Bill Index (Post Apr 87) Source: RBA, DataStream Monthly returns as at 31 May 2011

Do not put content on the brand signature area Do not put content on this area Short term asset class performance 1 year returns as at 31 May 2011 Timeframe: 31/05/2011 Data: Australian shares - S&P/ASX 300 Accum. Index, International Shares - MSCI World (ex Aus) in $A, Listed Property Trusts - S&P/ASX 200 Prop Trust, Australian Fixed Interest: Commonwealth Bank Bond Index (Pre Sept 89) / UBSA Composite Bond All Maturities Index (Post Sept 89), Cash: 11am Cash Rate (Pre Apr 87) / UBSA Bank Bill Index (Post Apr 87) Source: DataStream

Do not put content on the brand signature area Do not put content on this area Long term asset class performance Data: Australian Shares - S&P/ASX 300 Accum. Index, International Shares - MSCI World (ex Aus) in $A - unhedged, Property Securities - S&P/ASX 200 Prop Trust, Australian Fixed Interest: Commonwealth Bank Bond Index (Pre Sept 89) / UBSA Composite Bond All Maturities Index (Post Sept 89), Source: Datastream. Note: Returns based on May 1 year rolling returns.

Do not put content on the brand signature area Do not put content on this area Diversified investment strategies long term performance Timeframe: 01/01/83 – 31/05/11 Data: Australian shares - S&P/ASX 300 Accum. Index, International Shares - MSCI World (ex Aus) in $A, Listed Property Trusts - S&P/ASX 200 Prop Trust, Australian Fixed Interest: Commonwealth Bank Bond Index (Pre Sept 89) / UBSA Composite Bond All Maturities Index (Post Sept 89), Cash: 11am Cash Rate (Pre Apr 87) / UBS Bank Bill Index (Post Apr 87) Growth of $10,000 over time using different risk return strategies

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