Investment Updatefor your MLC Horizon 4

Balanced Portfolio

Year to 31 March 2008

Any advice in this communication has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on any advice 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 product issued by MLC Investments Limited and MLC Limited 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 MasterKey Service Centre on 132 652 or on our website at mlc.com.au. For the MLC Investment Trust, a Product Disclosure Statement is available at mlcinvestmenttrust.com.au

Important information

Investment update agenda

• The market environment

• Your portfolio in review

– MLC’s approach to wealth creation

– Sector & Manager Performance

– Recent enhancements to your portfolio

• Outlook & Conclusion

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

• Opportunistic funds being launched that do not really meet the needs of long term investors

• 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!

When too much debt just isn’t enough!

Source: Thomson Financial Datastream

Australian household debt

020406080

100120140160180

Q1 1980 Q1 1985 Q1 1990 Q1 1995 Q1 2000 Q1 2005

as % of GDP

as % of disposable income

%

US household debt

020406080

100120140160180

Q1 1980 Q1 1985 Q1 1990 Q1 1995 Q1 2000 Q1 2005

as % of GDP

as % of disposable income

%

UK household debt

020406080

100120140160180

Q1 1980 Q1 1985 Q1 1990 Q1 1995 Q1 2000 Q1 2005

as % of GDP

as % of disposable income

%

No, it’s not just a US problem

Source: Thomson Financial Datastream, MLC Investment Management

EU, Japanese manufacturing confidence is following US lower..

-3

-2

-1

0

1

2

3

Q1 1990 Q1 1995 Q1 2000 Q1 2005

US EU-15 and Japan

Std deviations away from 5yr average

..and G3 consumer sentiment is also falling

-3

-2

-1

0

1

2

3

Q1 1990 Q1 1995 Q1 2000 Q1 2005

US EU-15 and Japan

Std deviations away from 3yr average

-30%

-20%

-10%

0%

10%

20%

30%

An

nu

alis

ed

Re

turn

s (%

pa

)

3-Months

1 Year

3 Year

Asset Class Returns to March 2008

*

Some of the major central banks have started the rescue operation…

0

1

2

3

4

5

6

7

8

9

May-04 Feb-05 Nov-05 Aug-06 May-07 Feb-08

US Euro-area Japan

Canada UK

Official interest rates %

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 the1yr benchmark lending rate. NZ rate is RBNZ cash rate target.

0

1

2

3

4

5

6

7

8

9

May-04 Feb-05 Nov-05 Aug-06 May-07 Feb-08

Australia China

New Zealand

Official interest rates %

“.. 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

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 Australia)

• 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.

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!)

Australia's economy accelerated while the G4 was slowing

0

1

2

3

4

5

6

Q1 2000 Q1 2002 Q1 2004 Q1 2006 Q1 2008

Annual growth in real GDP %

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

The RBA's worst target 'miss' of the low-inflation era?

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

Q2 1989 Q2 1991 Q2 1993 Q2 1995 Q2 1997 Q2 1999 Q2 2001 Q2 2003 Q2 2005 Q2 2007

Consumer prices y/y% - average of RBA's preferred measures

Outlook for business investment is still very strongEngineering construction

Work done, 2003/04 prices

0

2

4

6

8

10

12

14

Mar-95 Mar-97 Mar-99 Mar-01 Mar-03 Mar-05 Mar-07

By private sector for private sectorBy private for public sectorPublic sectorTotal

$Abn

Non-residential building indicatorsCurrent prices

01

234

567

89

Mar-95 Mar-97 Mar-99 Mar-01 Mar-03 Mar-05 Mar-07

Approvals Commencements Work done

$Abn

Non-residential construction: Still heaps of work in the pipeline

02468

10121416

Sep-86 Mar-93 Sep-99 Mar-06 Mar-90 Sep-96 Mar-030

10

20

30

40

50

60

70Chain volumes $bn $Abn

Work done Work yet-to-be-done

CAPEX survey: latest estimate of year-ahead spending is up sharply on last year

0100002000030000400005000060000700008000090000

2000/01 2002/03 2004/05 2006/07 2008/09

$A million

Australian shares have been incredibly strong. These returns were NEVER going to last

-15

-10

-5

0

5

10

15

20

25

30

Q1 1977 Q1 1982 Q1 1987 Q1 1992 Q1 1997 Q1 2002 Q1 2007

Rolling 5yr real returns - Datastream Australian Market Index

Source: Thomson Financial Datastream

MLC’s approach to sensible wealth creation

1. The best way to grow wealth is to use exceptional investment managers

2. Deep research is the only reliable way to identify exceptional investment managers. Brand and past performance are unreliable predictors of future performance

3. Diversification leads to more consistent investment outcomes

4. Be patient - A long-term (strategic) approach should be used if your financial goals are long term

5. Efficient implementation reduces the costs of running a portfolio

Investing does not need to be complex, opaque, and dangerous, but too many people in recent years have made it that way!

The problem isn’t ‘P’

Source: Thomson Financial Datastream

..it’s ‘E’

PE ratio close to its lowest since 1991 suggests local market is cheap...

0

5

10

15

20

25

30

Jan-80 Jan-84 Jan-88 Jan-92 Jan-96 Jan-00 Jan-04 Jan-08

Trailing PE ratio

..as long as you think these earnings are sustainable!

0

10

20

30

40

50

60

70

80

90

100

Q4 1979 Q4 1984 Q4 1989 Q4 1994 Q4 1999 Q4 2004

Real Earnings per share (Index)

Your portfolio in review:

MLC Horizon 4Balanced Portfolio

Contribution to performanceMLC Horizon 4 Balanced Portfolio

Contribution from each asset class for the periods ending 31 March 2008Returns are gross of all fees and taxes

Contribution from each asset class= strategic asset allocation weighting x total return for the asset class

Data source: MLC Investment Management

Portfolio ReturnsMLC Horizon 4 Balanced Portfolio – Personal Super

Absolute Rolling Period Return ( March 1988 – March 2008)Returns are gross of all fees and taxes

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

Twelve Month Return (%pa) Three Year Return (%pa) Five Year Return (%pa)

Source: Mercers Investment Consulting (MPA Retail Software Kit)

• Maximise after-tax real returns over the long term with

lower than average absolute risk

• Provide consistent added value across market cycles (good and bad)

• Provide consistently above median (ie competitors) returns over the long-term

• Likely to outperform peers in adverse environments (capital protection)

MLC Horizon Fund expected outcomes for investors

Performance compared to:

Key messages:

Absolute returns 1. Returns have been very strong over the medium and long term, although the 1 year returns are now negative.

2. Clients need to focus on the longer term returns as they are less volatile.

Competitors 1. Since markets turned bearish in the last year, MLC performance has been strong relative to competitors.

2. Returns were helped by relatively high allocations to hedged global shares, private markets and good relative performance in debt assets.

3. MLC almost always outperforms median manager over 5 year periods

4. Risk is lower than median manager.

Market indices 1. Performance of the active managers has picked up over the last year as markets have been bearish. There are not many periods where our strategies are underperforming (gross of fees).

2. Fundamental equity managers like MLC’s tend to find more opportunities in volatile markets.

Reasons for Horizon’s recent performance

Sample of Projected Scenario Real Returns: Horizon 4 versus Mercer Average (over 5 year horizons, post superannuation tax, fees and alpha)

-15%

-10%

-5%

0%

5%

10%

15%

20%

Global depression orstagnation (1930s)

Bubble bursts (econom

y okay)

Aus econom

ic crisis (reversalscen 8) W

orld weak

Credit/ m

onetary contraction

Investor Pessim

ism - rise in

risk premium

s

Global P

andemic

Aus only bust (w

orld econ notw

eak)

Steady S

tate

Global C

atasptrophe

Debt driven grow

th

Deflation - productivity driven

boom

Disinflation

Australian boom

Benign A

ust inflation

Speculative B

ubble

Generalised global grow

thboom

– investor optimism

Prolonged global grow

th &productivity boom

/BR

ICs R

esboom

Rea

l Ret

urns

(%pa

)

Horizon 4's Excess Return vs Mercer Median

Horizon 4's Real Return

MLC likely to outperform peers in adverse scenarios

Current environment similar to

We believe our asset allocation will outperform in most risk scenarios, particularly adverse scenarios

vs competitors

The Investors’ Experience with MLC

Value of investing $100 on 31 March 1993(net of super tax and fees)

$100

$150

$200

$250

$300

$350

Mar

-93

Sep

-93

Mar

-94

Sep

-94

Mar

-95

Sep

-95

Mar

-96

Sep

-96

Mar

-97

Sep

-97

Mar

-98

Sep

-98

Mar

-99

Sep

-99

Mar

-00

Sep

-00

Mar

-01

Sep

-01

Mar

-02

Sep

-02

Mar

-03

Sep

-03

Mar

-04

Sep

-04

Mar

-05

Sep

-05

Mar

-06

Sep

-06

Mar

-07

Sep

-07

Mar

-08

Inflation (CPI) MLC Super H4 Balanced fund

Source: Mercers Retail software Kit, Super Multi-Sector Balanced Growth universe

Protecting & growing real wealth

MLC Moderate OptionComparison with the Mercer Pooled Fund Survey Universe

Annualised Risk and Return for 20 years ended March 2008(after tax and after fees) - - - - Median

9.8

9.6

9.4AnnualReturn(% pa)

9.2

9.0

8.8

8.6

8.46.0 6.3 6.6 6.9 7.2 7.5

Annualised Standard Deviation (% pa) calculated monthly MLC

MLC’s process delivers

MLC Balanced Fund

32 funds started this race in May 1985.Where the lines intersect shows themedian risk and return result of the 12 managers who survived the 22 year period

Share manager performance31 March 2007 – 31 March 2008

Returns are gross of fees and taxes

Australian shares

Maple-Brown Abbott -6.5%Dimensional -5.6%Lazard Asset Management -13.0%Contango -4.3%Concord Capital -4.2%Wallara Asset Management -7.2%JF Capital Partners -2.2%Balanced Equity Management -10.4%Northcape -5.3%

Total -6.9%

Global shares

Capital International -6.0%Alliance Growth Equites -14.2%Dimensional - Global -18.8%Dimensional - Emerging Mkts 7.4%Fortis Investments N/Ap*Bernstein Value Equities -18.4%Walter Scott & Partners -7.6%Wellington -12.1%

Total hedged -5.9% Total unhedged -12.1%

*Returns for this manager are not applicable, because the manager was not appointed to the fund for this period of time

Data: MLC Investments Limited

Top Ten Australian Stocks – MLC Horizon 4 - Balanced Portfolio

Company Industry Sector Portfolio (%)

BHP Billiton Materials 7.6

National Australia Bank Financials Excluding Property Trusts 6.6

ANZ Bank Financials Excluding Property Trusts 6.1

Rio Tinto Materials 4.5

Westpac Financials Excluding Property Trusts 4.3

Telstra Telecommunication Services 3.8

Brambles Industrials 2.5

Woolworths Consumer Staples 2.4

Suncorp Metway Financials Excluding Property Trusts 2.3

News Corp Consumer Discretionary 2.2

Top 10 Australian Sharesas at 31 March 2008

Top 10 Global Shares (Hedged and Unhedged)as at 31 March 2008

Top Ten Global Stocks – MLC Horizon 4 - Balanced Portfolio

Company Industry Sector Portfolio (%)

Credit Suisse Financials 1.3

Potash Corp of Saskatche Materials 1.3

Rio Tinto Materials 1.0

Barrick Gold Materials 1.0

America Movil Telecommunication Services 1.0

JP Morgan Financials 1.0

Monsanto Materials 0.9

Nintendo Consumer Discretionary 0.9

Nestle Consumer Staples 0.9

Abbott Labs Health Care 0.9

Data: MLC Investments Limited

Investment ProcessThe Process is monitored by a cycle of

ongoing reviews

Daily: Monitor compliance and manage cash flow / rebalancing

Monthly: Review investment manager portfolio strategies and performance

Six monthly: Pre-briefs, formal investment manager reviews, debriefs and marketing updates

Annually+: Asset class reviews (Australian share, global share and property securities strategies refined)

Ad hoc: Overseas research trips

Outlook & Conclusion

Periods to end March 2008 5yr 10yrMLC's Long-term

expectation?#

Cash 5.9 5.6 5.0Australian bonds 4.7 5.6 5.8Aust'n List Prop 9.5 9.6 6.4Global equities (unhedged) 8.4 2.3 8.4Australian shares 18.0 11.2 8.4

Source: Thomson Financial Datastream, MLC Investment Management# MLC base case equilibrium assumptions for asset class returns over the next 10 years,

assuming that markets are fairly valued at the commencement of the period, that the

global and domestic economies grow at around a trend-like pace, and inflation outcomes

are in line with central bank targets. Estimates are subject to change without notice.

Let’s be realistic about the kind of returns that are achievable and sustainable over time

Conclusion

• Investment solutions have to be appropriate for good and bad times.

• Its better to outperform in negative return environments than vice versa.

• We are committed to providing and maintaining investment solutions that are both sensible and help clients achieve their goals.

Questions?Comments.Statements!