Presentation one Volatility and its impact on Australian and international share markets

1. 5 Presentation three A look at the year’s big 6 rules Live by the Resources for you and your clients Presentation one Volatility and its impact on Australian and international share markets Presentation two Anatomy of a downturn: a closer look at the global ‘credit crunch’ Presentation four

2. Market volatility and its impact on Australian and international share markets Prepared by BT Financial Group for the adviser market Updated to 30 September 2008

3. 1. What’s contributing to current market volatility? 2. How has volatility affected the Australian market? 3. A quick look at international markets 4. What this means for Australian investors 5. Volatility in perspective 6. BT’s approach to managing volatility

4. Marketvolatility Many factors contributing to ongoing volatility High inflation A worsening of the global ‘credit crunch’ Increasing fears of a global recession Deterioration of US & global financial systems 4

5. The global ‘credit crunch’ takes hold The global ‘credit crunch’ has worsened, with some major US and global financial institutions faltering • The outlook for global growth has deteriorated and there are now genuine fears the global economy is headed for a recession • High inflation is still a concern for the world’s central banks, particularly as they struggle to stimulate economic growth.

6. 1. What’s contributing to current market volatility? 2. How has volatility affected the Australian market? 3. A quick look at international markets 4. What this means for Australian investors 5. Volatility in perspective 6. BT’s approach to managing volatility

7. Rising market volatility has seen the Australian share market fall 33% in the past year S&P/ASX 300 Accumulation Index – 12 months to 30 September 2008 Series rebased: 30 September 2007 = 100 Series Rebased: 30th September 2007 = 100 Source: BT Financial Group, Bloomberg 7

8. …but it remains at elevated levels over the long-term, up 174% over the last 10 years! S&P/ASX 300 Accumulation Index – 10 years to 30 September 2008 Series rebased: 30 September 1998 = 100 Series Rebased: 30th September 1998 = 100 Source: BT Financial Group, Bloomberg 8

9. 1. What’s contributing to current market volatility? 2. How has volatility affected the Australian market? 3. A quick look at international markets 4. What this means for Australian investors 5. Volatility in perspective 6. BT’s approach to managing volatility

10. Market volatility has affected all markets, not just our own… Major international markets – 12 months to 30 September 2008 S&P500 (US) (-23.6%) FTSE 100 (UK) (-24.2%) DJ Euro Stoxx 50 (Europe) (-30.7%) Nikkei 225 (Japan) (-32.9%) Series rebased: 30 September 2007 = 100 Series Rebased: 30th September 2007 = 100 Source: BT Financial Group, Bloomberg 10

11. The global share market has fallen over 19% in the past year… Global share markets – 12 months to 30 September 2008 MSCI World (ex Australia) Index Series rebased: 30 September 2007 = 100 Series Rebased: 30th September 2007 = 100 Source: BT Financial Group, Bloomberg 11

12. 1. What’s contributing to current market volatility? 2. How has volatility affected the Australian market? 3. A quick look at international markets 4. What does this means for Australian investors? 5. Volatility in perspective 6. BT’s approach to managing volatility

13. What does all this mean for Australian investors? Market volatility is expected to continue. Most asset classes other than cash look set to post a negative return this year From a valuation perspective, recent market declines are bringing some asset classes back to attractive levels We could begin to see signs of better market performance early in 2009 The Australian economy is likely to slow, reflecting conditions in the US and Europe. It has, however, held up well compared to its global counterparts

14. What about the longer-term outlook? Global economic outlook remains uncertain Global growth will continue to slow with the possibility of a lengthy recession Outlook for Australian economy is a little better, supported by a healthy government surplus, ongoing commodities demand from China and India, RBA’s move to lower interest rates

15. 1. What’s contributing to current market volatility? 2. How has volatility affected the Australian market? 3. A quick look at international markets 4. What this means for Australian investors 5. Volatility in perspective 6. BT’s approach to managing volatility

16. to 30 Sep 2007 to 30 Sep 2008 Growth assets delivered strong returns last year, however, most affected by volatility this year… Source: Bloomberg market benchmark returns

17. Annual returns of Australian shares (%) – All Ords / ASX S&P Accumulation Index (since 1956) 70 60 50 40 30 20 10 0 -10 -20 -30 1974 1977 1980 1983 1986 1989 1992 2004 2007 1956 1959 1962 1965 1968 1971 1995 1998 2001 Volatility can hurt returns in the short term… Source: Standard & Poor’s 17

18. Rolling 5 year returns of Australian shares (% annualised) – All Ords / ASX S&P Accumulation Index (since 1960) 35 30 25 20 15 10 5 0 -5 -10 1975 1978 1981 1984 1987 1990 1993 2005 1960 1963 1966 1969 1972 1996 1999 2002 …but it’s a different picture over the longer term Source: Standard & Poor’s 18

19. Rolling 10 year returns of Australian shares (% annualised) – All Ords / S&P Accumulation Index (since 1965) 30 25 20 15 10 5 0 -5 -10 1980 1983 1986 1989 1992 1995 2004 2007 1965 1968 1971 1974 1977 1998 2001 And the longer the better! Source: Standard & Poor’s 19

20. 1. What’s contributing to current market volatility? 2. How has volatility affected the Australian market? 3. A quick look at international markets 4. What this means for Australian investors 5. Volatility in perspective 6. BT’s approach to managing volatility

21. Our investment philosophy? At BT, we always focus on the right levels of diversification and risk within our portfolios By doing this, we reduce excessive damage to BT’s portfolios in market downturns We continue to benefit from sidestepping some of the events that have triggered downturns We’re focused on companies with secure cash flows, strong leaders and realistic outlooks Helps us ensure we have the right valued stocks in our portfolios

22. This presentation has been prepared by BT Financial Group Limited (ABN 63 002 916 458) ‘BT’ and is for general information only.  Every effort has been made to ensure that it is accurate, however it is not intended to be a complete description of the matters described.  The presentation has been prepared without taking into account any personal objectives, financial situation or needs.  It does not contain and is not to be taken as containing any securities advice or securities recommendation.  Furthermore, it is not intended that it be relied on by recipients for the purpose of making investment decisions and is not a replacement of the requirement for individual research or professional tax advice.  BT does not give any warranty as to the accuracy, reliability or completeness of information which is contained in this presentation.  Except insofar as liability under any statute cannot be excluded, BT and its directors, employees and consultants do not accept any liability for any error or omission in this presentation or for any resulting loss or damage suffered by the recipient or any other person.  Unless otherwise noted, BT is the source of all charts; and all performance figures are calculated using exit to exit prices and assume reinvestment of income, take into account all fees and charges but exclude the entry fee.  It is important to note that past performance is not a reliable indicator of future performance. This document was accompanied by an oral presentation, and is not a complete record of the discussion held. No part of this presentation should be used elsewhere without prior consent from the author. For more information, please call BT Customer Relations on 132 135 8:00am to 6:30pm (Sydney time) 22

23. Anatomy of a downturn A closer look at the global ‘credit crunch’

24. Credit crunch not just a US problem Governments in Great Britain, Belgium, the Netherlands and even Iceland have been forced to bail out some of their biggest banks The Rudd Government has moved to protect bank deposits for the next 3 years The ‘credit crunch’ may have its roots in the US, but it’s now a global problem Importantly, the Australian banking system, which is more regulated than that in the US, has held up very well

25. Anatomy of a downturna closer look at the global ‘credit crunch’ October 2007 December 2007 US officials announce plans to help homeowners struggling to make mortgage repayments Five of the world’s central banks, provide billions of dollars in loans to commercial banks to free up market liquidity Investment banks UBS, Citigroup and Merrill Lynch announce multi-billion dollar losses linked to the US sub-prime mortgage market

26. Anatomy of a downturna closer look at the global ‘credit crunch’ January 2008 March 2007 JP Morgan buys US investment bank Bear Stearns in an ‘emergency’ rescue deal US Federal Reserve provides US$200 billion to commercial banks in another bid to free up market liquidity US Federal Reserve cuts interest rates by 0.75% amid fears the US economy could fall into recession

27. Anatomy of a downturna closer look at the global ‘credit crunch’ April 2008 September 2008 7 September 2008 US government seizes control of mortgage lenders Fannie Mae and Freddie Mac 15 September 2008 Lehman Brothers files for bankruptcy. Merrill Lynch is bought by Bank of America for US$50 billion 16 September 2008 American International Group (AIG), the US’s biggest insurer, receives an US$85 billion loan from the US Federal Reserve to stave off bankruptcy 28 September 2008 US bank, Washington Mutual, is seized by US regulators in the biggest US bank failure in history International Monetary Fund warns losses related to the ‘credit crunch’ could top US$1 trillion

28. Anatomy of a downturna closer look at the global ‘credit crunch’ September 2008 28 September 2008 Britain, Belgium and the Netherlands are forced to bail out several major banks. US government announces US$700 billion plan to rescue Wall Street 29 September 2008 Citigroup bids for US bank Wachovia in a deal backed by US authorities US House of Representatives narrowly rejects the US$700 billion bailout plan by a vote of 228-205, sending global share markets tumbling 30 September 2008 $55 billion dollars is wiped off the Australian share market in a single day One day later, the market recovers by more than 4%

29. Anatomy of a downturna closer look at the global ‘credit crunch’ October 2008 3 October 2008 After a second vote, the US House of Representatives passes the US$700 billion bailout plan 6 - 10 October 2008 Concerns that bailout plan won’t prevent a global recession sends global shares sliding: Japan -24.3% Europe -22.2% UK - 21.0% US -18.2% Australia -15.6%

30. The list of casualties keeps growing … Sourced from BBC World News: http://news.bbc.co.uk/1/hi/business/7644238.stm

31. This presentation has been prepared by BT Financial Group Limited (ABN 63 002 916 458) ‘BT’ and is for general information only.  Every effort has been made to ensure that it is accurate, however it is not intended to be a complete description of the matters described.  The presentation has been prepared without taking into account any personal objectives, financial situation or needs.  It does not contain and is not to be taken as containing any securities advice or securities recommendation.  Furthermore, it is not intended that it be relied on by recipients for the purpose of making investment decisions and is not a replacement of the requirement for individual research or professional tax advice.  BT does not give any warranty as to the accuracy, reliability or completeness of information which is contained in this presentation.  Except insofar as liability under any statute cannot be excluded, BT and its directors, employees and consultants do not accept any liability for any error or omission in this presentation or for any resulting loss or damage suffered by the recipient or any other person.  Unless otherwise noted, BT is the source of all charts; and all performance figures are calculated using exit to exit prices and assume reinvestment of income, take into account all fees and charges but exclude the entry fee.  It is important to note that past performance is not a reliable indicator of future performance. This document was accompanied by an oral presentation, and is not a complete record of the discussion held. No part of this presentation should be used elsewhere without prior consent from the author. For more information, please call BT Customer Relations on 132 135 8:00am to 6:30pm (Sydney time) 31

32. 5 A look at the year’s big

33. 1 The global ‘credit crunch’ • Undoubtedly the biggest influence on global markets in the past 12 months • Banks forced to write off billions of dollars in bad debts related to the US housing market, causing a major rethink on money lending (credit) • This caused borrowing costs to soar, making it difficult for many companies to refinance, and underpinned much of the market volatility in the last year • We haven’t seen the end of the credit crunch just yet, which will mean a rougher ride for banking and other financial stocks in the near-term

34. 2 Australian interest rates • Australian interest rates moved steadily higher for most of 2007 as RBA tried to cool our economy and control rising inflation • In September 2008, RBA was forced to cut interest rates amid concerns the global credit crunch would hurt economic growth in Australia • As the global credit crunch intensified through September and October, the RBA slashed interest rates by 1.00%, taking the official cash rate down to just 6.00% • If the economy continues to slow as expected, then we’ll likely see further rate cuts in the near-term

35. 3 The Australian Dollar • The Aussie soared against the US$ for much of the past year, peaking at US$0.9849 cents in July • Underpinning the rise were: - a widening gap between Australian and US interest rates - higher commodity prices, which help boost our terms of trade - general US dollar weakness • The Aussie dollar has since fallen sharply against the US$ as fears of a global recession intensify • Importantly, a weaker Aussie helps Australians invested overseas by enhancing returns when they’re converted back into our own currency

36. 4 Oil prices • Oil prices soared to US$147 a barrel in July this year, contributing greatly to global inflation • Arguably two main reasons for the rise in prices: - supply struggled to keep up with demand from China and India - speculative investors taking big risks by trying to predict future price movements in the hope of making quick gains, which helped to inflate prices • Prices have since plummeted from their July highs to as low as US$75 a barrel as fears of an economic downturn hurt demand • Oil prices could fall even further if a global recession does eventuate

37. 5 China • Back in February 2007, China had a major impact on the direction of global share markets. In the last year, the Chinese share market appears to have fallen off the radar • Three main reasons for the fall: - higher interest rates - a slowdown in the Chinese export sector - general global share market weakness • China’s economy looks set to slow in 2009 amid weaker exports and further interest rate hikes but growth should nonetheless remain relatively strong

38. This presentation has been prepared by BT Financial Group Limited (ABN 63 002 916 458) ‘BT’ and is for general information only.  Every effort has been made to ensure that it is accurate, however it is not intended to be a complete description of the matters described.  The presentation has been prepared without taking into account any personal objectives, financial situation or needs.  It does not contain and is not to be taken as containing any securities advice or securities recommendation.  Furthermore, it is not intended that it be relied on by recipients for the purpose of making investment decisions and is not a replacement of the requirement for individual research or professional tax advice.  BT does not give any warranty as to the accuracy, reliability or completeness of information which is contained in this presentation.  Except insofar as liability under any statute cannot be excluded, BT and its directors, employees and consultants do not accept any liability for any error or omission in this presentation or for any resulting loss or damage suffered by the recipient or any other person.  Unless otherwise noted, BT is the source of all charts; and all performance figures are calculated using exit to exit prices and assume reinvestment of income, take into account all fees and charges but exclude the entry fee.  It is important to note that past performance is not a reliable indicator of future performance. This document was accompanied by an oral presentation, and is not a complete record of the discussion held. No part of this presentation should be used elsewhere without prior consent from the author. For more information, please call BT Customer Relations on 132 135 8:00am to 6:30pm (Sydney time) 38

40. 6 rules Live by the 1 Take comfort from history – the long-term trend is up Over 20 years, at least 10 major events have impacted the Australian share market, including 1987 Wall Street Crash. Despite this, the market has always recovered. Australian shares continue to perform well, up around 174%1 in the last 10 years. 1_Australian shares measured by the S&P/ASX 300 Accumulation Index to 30 September 2008.

41. 6 rules Live by the 2 Stick to your original investment plan The longer your investment timeframe, the more likely you’ll experience some form of short-term market volatility. Understand what you’re trying to achieve and how long you’re prepared to invest. Understand how much risk you’re comfortable with and make sure it’s reflected in your investment plan.

42. 6 rules Live by the 3 Don’t react to short-term market movements Investment markets move in cycles, so it’s difficult to forecast when they’ll rise or fall. Moving your money in and out of the market during a downturn means you could potentially miss out on any positive bounce gained in a strong market recovery.

43. 6 rules Live by the 4 Diversify your investments to spread risk Diversification — or spreading your investment portfolio over a range of asset classes such as shares, property, fixed interest and cash — can help you spread your exposure to risk. So, if one investment or asset class loses ground, it’s likely that your other investments may offset the loss. You can diversify your investment across different asset classes, regions and investment managers or styles.

44. 6 rules Live by the 5 Get advice from a qualified source A financial adviser can help you decide what you want to achieve with your money and how to meet your goals, while taking into account your needs, objectives and your attitude to risk.

45. 6 rules Live by the 6 Stay informed It pays to stay informed about your investments and what’s happening in the market. For the latest on what’s driving the market and tips for investing during uncertain times, visit www.bt.com.au/volatility.

46. This presentation has been prepared by BT Financial Group Limited (ABN 63 002 916 458) ‘BT’ and is for general information only.  Every effort has been made to ensure that it is accurate, however it is not intended to be a complete description of the matters described.  The presentation has been prepared without taking into account any personal objectives, financial situation or needs.  It does not contain and is not to be taken as containing any securities advice or securities recommendation.  Furthermore, it is not intended that it be relied on by recipients for the purpose of making investment decisions and is not a replacement of the requirement for individual research or professional tax advice.  BT does not give any warranty as to the accuracy, reliability or completeness of information which is contained in this presentation.  Except insofar as liability under any statute cannot be excluded, BT and its directors, employees and consultants do not accept any liability for any error or omission in this presentation or for any resulting loss or damage suffered by the recipient or any other person.  Unless otherwise noted, BT is the source of all charts; and all performance figures are calculated using exit to exit prices and assume reinvestment of income, take into account all fees and charges but exclude the entry fee.  It is important to note that past performance is not a reliable indicator of future performance. This document was accompanied by an oral presentation, and is not a complete record of the discussion held. No part of this presentation should be used elsewhere without prior consent from the author. For more information, please call BT Customer Relations on 132 135 8:00am to 6:30pm (Sydney time)