1. MLC Diversified Debt Teleconference July 2008

2. 2 General advice warning and disclaimer This document was prepared by MLC Investments Limited (ABN 30 002 641 661), and MLC Limited (ABN 90 000 000 402), members of the National group of companies, as an information service without assuming a duty of care. Accordingly, reliance should not be placed by anyone on this document as the basis for making any investment, financial or other decision. While the information included is believed to be accurate, no member of the MLC Investments Limited or any member company of the National Group of companies accepts responsibility for any inaccuracy or for investment decisions or any other actions taken by any person on the basis of the material included. An investment with MLC does not represent a deposit with or a liability of National Australia Bank Limited, MLC Investments Limited, MLC Limited, or other member company of the National Group of companies and is subject to investment risk including possible delays in repayment and loss of income and capital invested. None of National Australia Bank Limited (ABN 12 004 044 937), MLC Investments Limited, MLC Limited, other member companies in the National Group of companies, the underlying fund managers of the investments, any trustees or their respective officers guarantee the repayment of capital invested, the payment of income, the performance of the specific investments selected by investors or the performance of any MLC products except where specified on the current disclosure document.

3. 3 Agenda Economic and Investment Market update Building a diversified debt strategy

4. 4 Agenda Economic and Investment Market update Building a diversified debt strategy

5. 5 The state of play Too much liquidity Too much leverage Too much complacency Voracious risk appetites A benign macroeconomic environment Have led to…. Risk being way underpriced – too little reward on offer for risks that have not been properly understood In short, returns have been too high, and volatility has been too low, and this situation is now normalising The problem was (and still is) much larger than just US sub-prime mortgages!

6. 6 When too much debt just isn’t enough Total US debt as % of GDP “In the end, the root of the problem is unavoidable. At some point US consumption will have to come into line with US incomes, and US growth will need to be built without constantly growing debt levels. This adjustment will be painful. The pain can be spread across time and across people, but it cannot be avoided.” - Bridgewater 24 March 2008

7. 7 US housing: the state of play Source: Thomson Financial Datastream

8. 8 The US economy is probably in recession already Source: Thomson Financial Datastream

9. 9 No, it’s not just a US problem Source: Thomson Financial Datastream, MLC Investment Management

10. 10 Some of the major central banks have started the rescue operation… Source: Thomson Financial Datastream. US rate is target rate for Federal Funds. For Europe, short-term repo rate. Canadian rate is Bank of Canada policy rate. Australian rate is the RBA cash rate target. Chinese rate is the 1yr benchmark lending rate. NZ rate is RBNZ cash rate target.

11. 11..but how much more debt can be rammed down the throats of consumers in the English speaking world?.. Source: Thomson Financial Datastream

12. 12 House prices in the English speaking (!?) economies

13. 13 “.. there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns -- the ones we don't know we don't know." …” What we don’t know…(and may not know, that we don’t know) ?How far US house prices will fall ?How much damage will be done to household balance sheets ?The full impact on US financial institutions’ balance sheets (and hence their ability to create credit) ?The full impact on household spending and hence the economy ?The full impact on corporate earnings

14. 14 Previous US house price booms…

15. 15 Previous US house price booms…and the subsequent busts

16. 16 Australian economic prospects Australian economic growth to slow significantly (either the economy slows ‘by itself’ or RBA will make it slow!) (Patriotism has paid handsomely over past five years, but this will not last!)

17. 17 An already tight labour market became even tighter over the last year…

18. 18..helping to keep inflation above the RBA’s target range

19. 19 Has RBA done enough? (Are borrowing costs too high?)

20. 20

21. 21 Retail sales, confidence figures suggest rate are starting to have an effect Source: NAB Survey

22. 22 Source: NAB Survey

23. 23 Asset Class Returns to June 2008 * Source: MLC Investment Management

24. 24 Global economic and investment prospects Global economy slowing down (the US is in recession now)..but the Chinese economy is well-placed to weather the storm (good news for some parts of the Australian economy) The US Federal Reserve now understands the magnitude of the problem, and is responding....and the economy and financial markets will eventually recover....but we are most unlikely to see a repeat of the kind of investment returns seen in recent years.

25. 25 Agenda Economic and Investment Market update Building a diversified debt strategy

26. 26 Question: Is the same debt portfolio suitable for all investors regardless of risk profile? Why Diversified Debt? Roles of Debt within a portfolio: Reduce risk (dampen volatility) Protect capital Provide steady income Enhance returns Diversification in economic environments where other asset classes may perform poorly

27. 27 A tailored diversified debt strategy can diversify across…. Different risks: Interest Rate Risk Inflation Risk Credit Risk Currency Risk Domestic & Global exposures Different types of assets: Sovereign Corporate High yield Emerging markets Inflation-linked May also include commodities, hybrids, equity securities from capital restructures Result is a strategy focussed on real capital preservation, with higher long-term return seeking strategies

28. 28 Typical debt sector funds provide limited market exposure Debt sub-sector allocations Source: MLC Investment Management

29. 29 Philosophy on Diversified Debt 1.Start with a wide definition of opportunity set; 2.Understand investor demands from debt assets; 3.Tailor strategy risk profiles to client needs; 4.Build robust strategies via environmental diversification; 5.Be flexible with manager and mandate strategy; 6.Continually innovate & evolve strategy Outcomes: Avoid segmentation effects Understand risks you are taking (& being compensated for) Robust portfolio construction: across sectors & managers

30. 30 Start with a broad opportunity set DomesticGlobalGovt Corporate / Securitised Inv GradeSub-IG NominalILBsPhysicalDerivative$-Market Bond Market Secured Unsecured & Sub Debt Bank Debt Bonds Public Issue Private Placement Domicile Issuer Credit Rating Inflation ExposureImplementationMaturity Capital Structure Funding SourceRaising Fluidity in strategy creates opportunities, reduces costs & avoids segmentation effects

31. 31 Understand investor demands from debt differ Based on: Investment Objectives; Risk Profiles; Investment Time Horizon

32. 32 Tailor investment strategy accordingly Four key investment risks Interest rate riskInflation riskCredit riskCurrency risk Domestic v Global Resulting strategy 0/100 Low = 1.8 years duration Protection via cash, short maturity nominal debt and ILBs Small allocation to HY and EMD 100% strategically hedged Predominantly domestic Nominal capital preservation, lower volatility risk/return outcome 30/70 50/50 70/30 85/15 Higher = 4.7 years duration Protection via ILBs, real return strategies and commodities Greater exposure to high yield, emerging markets Small unhedged exposure for diversification, more manager flexibility Balance of domestic and global Real capital preservation, higher real return seeking strategy Asset Allocation

33. 33 Understand economic exposures of sub- sectors Economic growth High Low  Investment Grade Corporate Debt  High Yield Corporate Debt  Emerging Markets Debt  Commodities  Nominal Government Debt  Inflation Linked Government Debt  Cash and Short Term Securities Inflation  Inflation Linked Government Debt  Commodities  Cash and Short Term Securities  Nominal Government Debt  Investment Grade Corporate Debt  High Yield Corporate Debt  Emerging Markets Debt Seek diversification so returns are not dependent upon specific macro-economic scenarios

34. 34 Create flexibility in manager and mandate allocations Multiple managers per sector Multiple sectors per manager * NSIM, UBS, BlackRock and PIMCO manage both short maturity and all maturity mandates

35. 35 Continually innovate & refine strategy 1985Multi-manager domestic strategy commenced 1991Introduction of new debt classes & styles · Global sovereign debt · Index enhanced Australian fixed interest · Australian inflation linked securities 1997 Introduction of: Short term high quality global credit & mortgages 2000Treat debt as 1 global asset class Introduction of new debt sub-sectors: · Extended global credit & mortgages · Global inflation linked bonds · Global high yield debt · Global emerging markets debt 2003 Introduction of: A tailored debt strategy for each diversified portfolio Unshackling managers from benchmarks 2005Real Return strategies evolved · · · 2007/8 Alternative debt

36. MLC Diversified Debt Fund Exposures

37. 37 MLC Diversified Debt Fund provides exposure to a greater range of debt sub-sectors Debt sub-sector allocations Source: MLC Investment Management

38. 38 With access to four non-standard debt sub-sectors Domestic Inflation Protected Debt Returns driven by real yields plus actual inflation Global Unhedged Nominal Debt Small allocation to foreign currency for diversification Global High Yield Debt Higher yielding corporate debt securities Global Real Return Strategies Flexible global mandates designed to achieve inflation plus return outcomes

39. 39 Investment Manager Allocations Source: MLC Investments Source: MLC Investment Management

40. 40 Diversification benefits versus growth assets* Ten worst calendar quarters for Australian Equities (1998- June 2008) The MLC Diversified Debt Strategy has preserved capital and outperformed cash during past negative equity markets * Based on the All Maturities Strategy of Horizon 5 (Superannuation) before investment fees and tax. Australian Equities returns shown are for the ASX 300 Index, Domestic Cash returns shown are for the UBS Australia Bank Bill Index. Calendar QuarterAustralian Equities MLC Diversified Debt Strategy Domestic CashMLC DDS versus Australian Equities MLC DDS versus Quarterly Total Return Cash Mar-08-14.61%2.06%1.82%16.67%0.24% Sep-01-11.80%3.40%1.30%15.30%2.10% Sep-02-6.50%3.80%1.30%10.40%2.60% Jun-02-5.10%2.20%1.10%7.30%1.00% Mar-03-2.80%1.90%1.20%4.70%0.70% Dec-07-2.70%1.50%1.70%4.20%-0.20% Sep-98-2.00%4.30%1.30%6.30%3.00% Dec-00-2.00%4.00%1.60%6.00%2.40% Sep-99-2.00%1.30%1.20%3.20%0.00% Jun-98-1.90%2.90%1.20%4.80%1.70% AVERAGE-5.14%2.74%1.37%7.89%1.35%

41. 41 And a strategy expected to preserve capital during negative equity markets* Negative growth asset scenariosAustralian Equities Total Return p.a. Expected Excess Return per annum of MLC Diversified Debt versus Cash Global depression or stagnation (1930s)-18.5% Financial collapse Risk-16.8% Aust Deflation – destructive (Japan 1990s)-13.4% Recession-7.7% Aust economic crisis, world weak-6.9% Market bust, economy not okay (rise in correlations)-4.9% Aust only bust (world economy not weak)-3.6% Global conflict / war-3.5% Credit / monetary contraction-2.9% Bubble bursts (economy okay)-1.6% Global Catastrophe adverse economic environment-1.5% Stagflation-0.6% Investor Pessimism - rise in risk premiums-0.3% * Based on MLC scenario analysis modelling over a 5 year time horizon. Returns are nominal returns, before tax but after investment manager fees Diversified Debt is expected to outperform Cash by an average of +1.2% p.a.

42. 42 Inflation erodes real purchasing power over time Value of $100,000 today Value of $100,000 in 10 years time with inflation of 3% p.a. is $74,000 Inflation erodes purchasing power 56% of the MLC Diversified Debt Fund is invested in inflation protected debt and real return strategies

43. 43 What differentiates a diversified approach to debt strategy? Consider debt as one allocation to minimise impact of market segmentations Tailor approach to client requirements – across multiple dimensions/risks Emphasise relevant diversification – look at economic exposures Combine manager skill sets and tailor mandates Continuous refinement of investment strategy Only possible via efficient implementation and scale

44. 44 MLC provides a complete debt sector solution The MLC Diversified Debt Fund provides: Access to non-standard debt sub-sectors The ability to tailor a customised strategy A strategy focussed on generating real returns A strategy focussed on capital preservation when its needed most

45. 45 Performance of MLC’s debt strategy components Real return strategies have performed strongly in the current environment Gross returns to 30 June 2008 Source: MLC Investment Management

46. 46 Realised risk/return outcomes Source: MLC Investment Management

47. Product Overview

48. 48 MLC Diversified Debt Fund ObjectiveAims to provide returns higher than cash, over the medium to long-term, from a diverse range of mostly debt investments. Investment StrategyPrimarily invests in a diversified range of Australian and global debt assets and other assets, where the overall risk and return characteristics are expected to be similar to debt. The Fund may also have some exposure to growth and other assets such as commodities, hybrid assets and shares. The Fund is currently actively managed. The Fund’s foreign currency exposure is predominantly hedged back to the Australian dollar. Investment fees / MER 0.43 - 0.75% Based on chosen platform Platforms AvailableMasterKey and MasterKey Custom Research RatingsLonsec – Investment Grade