-52.2% -47.9% -27.2% -25.8% -24.9% -24.8% -23.9% -23.2% -22.6% -21.9% www.dixon.com.au commentary LOSERS Ausenco Ltd Ltd Ausenco Blue Holdings Ltd Virgin Ltd Macarthur Ltd Coal Ltd Linc Energy Gunns Ltd Group Leisure Ardent Holdings Ltdl Emeco Macmahon Holdings Ltd Kagara Ltd market market 7.7% 4.5% 3.7% 3.7% 3.2% 21.6% 19.7% 12.7% 11.1% 10.8% monthly monthly WINNERS Lihir Gold Ltd Isoft Ltd Group Ltd Karoon Gas Australia Ltd Barbara St Ltd Pharmaceuticals Sigma Co Agricultural Australian Ltd Alumina Resmed Inc-Cdi Eldorado GoldEldorado Corporation Ltd

8 9 3 4 5 6 7 1 2 10

RANK MAY 2010 BIGGESTMAY WINNERS AND LOSERS Please see important disclosures at the end of this document this of end the at disclosures important see Please management group on foot. Speaking at AXA’s annual meeting in Melbourne, Chairman Rick Allert said the firm will Speakingon foot. management group at AXA’s endorsement the won hasn’t deal the if NAB from bid takeover billion $13.29 the support its for terminating consider Allert NAB advise how said he is still unable to (ACCC). Commission and Consumer Competition of the Australian AXA Asia Pacific Holdings (AXA) said it has held discussions with suitor (NAB) about potential said BankAustralia it (NAB) about has potential held discussions with National suitor (AXA) Holdings Pacific Asia AXA asset sales that may help satisfy the competition regulator, as the bank scrambles to keep its bid for the wealth consortium. The The identityconsortium.“The of the bidder board has has concluded not that, based been on revealed. their revised will consortium the of members the agreement, confidentiality appropriate an of negotiation to subject and proposal said in a statement. the company the opportunitybe granted conduct to due diligence,” Source: Iress Source: HSP said last week it had a received takeover proposal of $5.75 per which share, valued the company at about $1.82 billion, from a private equity consortium. The proposal was up from an earlier bid of $5.50 per share from the same Limited (HSP) following its takeover bids. bids. takeover its (HSP) following Limited suffered large losses for the month. for the month. losses large suffered were (-4.16%) A-REITs as well as (-4.1%), healthcare and (-1.1%) staples consumer of sectors defensive traditionally The relative outperformers. Healthcare was boosted by the 19.7% monthly increase in the share price of Healthscope investors and fears emerged investors that regulatory shifts, particularly in the US, could see increased banking funding costs. commodity markets softer global following lower significantly closed also (-6.2%) stocks resource and (-6.9%) Energy and uncertainty surrounding the proposed RSPT. Information technology stocks (-8.0%) and utilities (-7.8%) also despite Europe’s $1.1 trillion bail out package. The ASX 200 remains down some 9.0% for the year. the year. some 9.0% for down ASX 200 remains The $1.1 trillion bail out package. Europe’s despite All sectors were down for May. Financials were the worst performers (-10.4%) as the European debt crisis rattled 2008 and costing investors nearly $110 billion. The month saw extreme volatility in Australian equity and currency Super Resource proposed the and Review Tax Henrythe to response government’s the digested investors as markets countries other to over spill could crisis debt sovereign European the that concerns global as (RSPT)well Tax as Profits S&P/ASX 200 October since slump monthly biggest its representing May, in 7.3% dived 200) (ASX index 200 S&P/ASX benchmark The market review – may 2010

| monthlymarketcommentary | may 2010 |  www.dixon.com.au ), the RBA made modest upgrades to its growth click here for the full statement Please see important disclosures at the end of this document this of end the at disclosures important see Please domestic product (GDP) growth over the coming year to 3.75% from 3.5%. With the CPI bottoming at above the mid- the above at bottoming CPI the With 3.5%. from 3.75% to year coming the over growth (GDP) product domestic years. in the coming the RBA sees structurally mean that rates higher this could 2-3% band, of the RBA’s point later and situation debt European the from turmoil market rising the to prior released were estimates these However, In its Statement of Monetary Policy ( and inflation outlook, lifting end 2010 underlyingconsumer price index(CPI) growth to 2.75% from 2.5% and gross The The Reserve Bank of Australia (RBA) increased the cash rate by 25 basis points (bps) on in rates the RBA the 4 began sixthraising hike hike since is now The 25 bps rate 4.50%. to the rate raising expectations, May, in line with market the fourth quarter of last year. share to $15 a share after carrying $15 a share to share and factoring impact out due diligence in the potential of the RSPT. economic data Citic Citic Group, and was unlikely to be reasonably cannot succeed. “Theit that proposal, Macarthurthe of conditions board the and price has the on met based that view today the formed and and proposal considered Peabody’s further at $16 per MCC pitched its prior offer lowered Earlier Peabody this month, said. MCC shareholders,” to recommended Macarthur Coal Limited (MCC) shares plummeted 23.1% for the month as takeover offer from the Peabody EnergyCorp company (Peabody), which rejected it said the was opposedby $3.8 its biggest billion China’s shareholder, Smith commented that he believes that it is unlikely that the government’s proposed Resource Super Profits Tax will Smith that commented he believes that it is proposed Resource Super unlikely Profits that the government’s get through parliament in its current state. Importantly for LGL, the company can continue to hold talks with other 8 June 2010. until suitors potential Newcrest Limited (NCM) agreed to buy Lihir Gold Limited (LGL) after raising its cash and billion stock which bid will to result $9.5 in the two companies merging to create the world’s fifth-biggest producer ofgold. Buying will give NCM LGL mines in New Papua Guinea, Australia and Africa and boost sales by more than NCM half. CEO Ian for for financing both projectsFortescue has to waned Forrest. according Chief severely Executive (CEO) Officer Andrew 6.8% and 6.2% respectively. 11.8% with RIO and BHP closing down down closed the month FMG of the mining industry’s 160 big yield to names, slated mine, iron Solomon billion ore $10.5 giant producer the include Fortescue They Metals hold. on Group Australia (FMG), Western has in projects put expansion two of three major million tonnes of iron hub and ore Western project, a the planned year, The to enthusiasm produce lower grade ore. venture venture with Limited (RIO) worth US$116 billion. The proposed from joint regulators in Europe and venture Asia. The delay is of this venture also comes as resource many companies of awaiting put Australia’s approval Australian projects on hold due In to the its rationaleforRSPT. latest return thefireto tax, the another government’s higher for the month. higher for BHP Billiton Limited (BHP) announced it will not be able to meet the May 27 decision date on the proposed joint Australian Australian wine markets have performed poorly for FGL in recent years with production gluts, currency shifts increasing and competition from major retailers. The fall wine in businesses FGL’s has shadowed its prized Carlton and United beer business and now the conventional demerger is seen as a potential takeover target. FGL closed 2.6% there there was no reasonable closed prospect TCL down that 15.6% it for would declare the unacceptable. circumstances the month. businesses. wine and beer its demerge to going is it announced (FGL) Limited Group Foster’s producer wine and Beer members in the future. CP2 Limited, biggest TCL’s shareholder, capital raising applied TCL’s following the to toll road operator’s rejection Australia’s Takeovers of Panel the takeover offer. to However the scuttle applicationwas unsuccessful with the panel ruling that the rights issue would have no material impact on the control of TCL, and the capital raising continued, has also been rejected by its with the consortium board willing to “remains explore opportunities for said of constructive and it harmonious relationships,” directors. Despite the rejections, Board, Ontario Teachers’ Pension Plan and Board, Ontario CP2 Teachers’ Limited that it received wasn’t acceptable as it was conditional on it Sydney’s in Tunnel Cove Lane the acquire to funds raise to launched it raising capital million $542.3 the discontinuing assumed consortium,which the from security per $5.42 at secondaryproposal alternative an that said also TCL north. In other takeover news, Australian toll road operator Transurban Group (TCL) said that it has rejected two takeover proposals from a consortium of its major shareholders on the grounds that neither of them offered sufficient value or certainty for its security holders. TCL said the initial $5.57 per security bid from Canada Pension Plan Investment may respond to the ACCC’s April 19 decision to oppose its bid. NAB, AMP and AXA closed the -12.0%, month -10.7%, and AMP AprilAXA 19 oppose decision NAB, its to bid. the ACCC’s to respond may -6.0% respectively.

| monthlymarketcommentary | may 2010 | 

). click www.dixon.com.au ). ). Unemployment held click here for full article full for here click click here for full article for click here ). Amidst all the commotion, the Thai stock market has market stock Thai the commotion, the all Amidst ). ). click here for full Australian Bureau of Statistics labour reportforce ). Consumer confidence is now down 10.1% sincewhile January. However, the falls have been click here for full article, subscription required subscription article, full for here click click here for full article for click here Please see important disclosures at the end of this document this of end the at disclosures important see Please Fitch downgrading Spain’s debt seizure of one notch the from AAA The followed Bank downgrade to AA+. of Spain’s Spain’s downgrading Fitch ( in Cordoba Church the Roman Catholic by bank controlled a savings CajaSur, sectors. sectors. And whilst the Greek debt problems have somewhat abated for with now, Greece drawing 5.5 billion euros from an emergency International Monetary Fund (IMF) loan during the month (and in firstcountry eurozone the to beforcedto resort to theprocess IMFfor aid),attention turned becoming towards Spain, withratings agency the government government has vowed a “stern and response” North Korea, in turn, has “all threatened out The war”. Korean won in stride. these events the market took but generally than its peers on the rising tensions more somewhat weakened their financial (-10.4%) performing (-9.2%)by and energy (-12.6%) again was the down worst dragged Europe region current current events are not so far outside the normal course of as events. However, one political crisis peters out in Asia, Korean South The warship. Korean a South sinking for blamed officially being NorthKorea with head its rears another been remarkably resilient, up 5.1% year to date in local currency and up Whilst 14.5% the in crisis AUD. is certainly a the context since into end of put to events the current absolute monarchy particularlyconcern, investors, foreign for in 1932 Thailand has been through 11 successful coups, 18 constitutions and 27 prime ministers. So for Thais, the The The political situation in Thailand appears to have somewhat normalised after the government sent in the army to quash protests in Bangkok. A night time curfew has been lifted, but Prime Ministercooled Vejjajiva hopes Abhisit of ( election early an Positive Positive growth data came out of India on the final day of May with GDPgrowing by 8.6% in the first three months of 2010. However, India faces even greater inflation pressure thanChina which mayforce ( tightening authoritiesto continue 8.9% fall even after reporting its economy grew by 13.3% year on year in the first quarter of 2010, a decade high. The in the first on quarteryear 13.3% year by after of8.9% 2010, fall areportinggrew even decade high. its economy (- Thailand and (-0.5%) Philippines the as such countries Asian peripheral more the and India(-4.0%) of markets stock orientation. domestic greater economies’ their given Europe, in events the from shield a of somewhat provided 1.7%) the Chinese domestic A-share market, down 9.7% for the month, continues to be the worst performing market Asia in in 2010. Chinese H-shares, down 5.6%, fared somewhat better whilst the more suffered a export-reliantTaiwan the effects of Chinese monetary tightening after the BankPeoples’ of China (PBoC)raised in 2010 in measure the this tightened reserve has PBoC the time requirement third the is This May. 10 effective points basis 50 another by ratio response to stronger than expected inflation data causedby a strong economy andrapid creditgrowth. As a result, and information and technology (-9.0%) information sectors led the declines consumer staples whilst (-4.1%) the and defensive more as much. though not by (-4.5%) sectors also fell telecommunications about concerns express to continue investors as USD) (in 8.4% by fell markets Japan ex Asia perspective, regional a From during the month. For the month, the MSCI All However, for Australians Country investing overseas, World there was Index some posted good (-9.8%) energy The news a dollars. as Australian in 0.5% the only 7.3% by falling falling Index World decline Australian MSCI the with dollar losses, market equity (in acted to hedge as local a currency). Global equity markets experienced their biggest monthly fall since February 2009 as markets continued to respond adversely to the sovereign debt issues in Europe, and this despite the 750 billion euro bailout package announced steady at 5.4%, as did the participation 5.4%, 65.2%. at at steady rate global equity markets On the jobs front, April was another good month for Australian workers, with employment rising a strong 33.7 thousand, thousand, 33.7 strong a rising employment with workers, Australian for month good another was April front, jobs the On since highest the – 2.2% to increased pace year on year the while thousand, 20 of consensus market above was which August 2008 – from 2.1% ( end, markets were pricing in a 14% probability of a 25 bps rate reduction (note: post month end, at its 2 June meeting, meeting, June 2 its at end, month post (note: reduction rate bps 25 a of probability 14% a in pricing were markets end, steady). the RBA held rates here here for press release average. its long run above as it is still 6.3% solid, relatively remains level index the overall sharp, quite Overall, market expectations for near term future rate rises been have significantlyIn downgraded. fact, asat month affecting nearly 40 per cent of those who have entered the property market since June 2008 ( 2008 June since market property the entered have who those of cent per 40 nearly affecting by falling Index Sentiment Consumer -Melbourne Institute the with soft, also was data confidence Consumer ( 2008 October in hold took (GFC) Crisis Financial Global the since fall month on month biggest the for May in 7% market data to indicate that the rate rises are starting to bite. Data from financial servicesconsultancyFujitsu shows that mortgage atdefined (generally to least asstress pay 30 having cent per of is on income repayments) home loan

| monthlymarketcommentary | may 2010 | 

). click www.dixon.com.au ). click here for full article for click here click here for full article for click here reported that “at the Rand refinery in RandSouth refinery in the “at that reported ) as well as a substantial increase in demand published an article Case “A for titled Gold at Financial Times Financial The New Times York click here for transcript ). click here for full article for click here ). However, major problems still remain in the US housing market, with housing prices falling again, falling prices housing with market, housing US the in remain still problems major However, ). Please see important disclosures at the end of this document this of end the at disclosures important see Please In a sign that the six RBA’s interest rate hikes are starting to take hold, home performance values the weakest were since the flatGFC, inaccording to RP April, Data-Rismark’s Home Value Index. with April auctionApril’s clearance a uranium mine the size of Ranger the size mine a uranium every years.” four residential real estate output of the Pilbara region of Australia every fiveyears, adding another aluminium productioncomplex the size of year. each Chile in Escondida of size the mine copper another developing and months, nine every Saguenay Canada’s plus year each created be to needs chain supply coal Valley Hunter entire an that such are requirements energy Future for energy:for “Let me put this in perspective. By 2030, the additional supply required will be equivalent to replicating the iron ore Elsewhere in the commodity space, Rio Tinto CEO Tom Albanese delivered a speech at the company’s annual general general annual company’s the at speech a delivered Albanese Tom CEO Tinto Rio commodityspace, the in Elsewhere ore, iron as such commodities for demand of doubling a be will there that view company’s the highlights that meeting aluminium, and copper over the next 15 years ( As As we highlighted last month, relief wells themselves are veryThen so tricky, the relief wells are no guarantee either. you can add to that the fact that hurricane season officially starts ( expect be one of the most turbulent seasons ever this season to forecasters in June and runs throughNovember, and that draw oil through tubing attached to a drilling ship, its not surprising that White House officials are preparing for oil to oil for preparing are officials House White that surprising not its ship, drilling a to attached tubing through oil draw ( be completed scheduled to are wells relief when two pouring August, out until continue The The next step in plugging the well is called the Lower Marine Riser Package. Given robots this to involves sever using a submarine pipe a mile below the ocean surface and then attach a giant funnel-like containment device to hat, top kill, junk shot – all failing. The oil well is now estimated to be spilling some 19,000 barrels per day of crude oil crude of day per barrels 19,000 some spilling be to estimated now is well oil The failing. all kill,– shot junk top hat, into the Gulf of Mexico, and possibly put To more. that into perspective, by our calculations, with the amount of oil – 4 times. the sun and back to a Holden Commodore drive could you spilled, now longer being considered as part of a resource complex that is outperforming the segment but is increasingly being as a currencyviewed of its own”. The Deepwater Horizon oil well continues to gush oil into the Gulf of with Mexico, all attempts to stop it so far – top $5,000 an Ounce” ( $5,000 an Ounce” As David Rosenberg, Chief Economist and Strategist at Canadian wealth manager Gluskin Sheff,“gold notes: is no demand. Swiss refiner Argor-Heraeus, for example, said that investor demand for small gold bars and minted products minted and bars gold small for demand investor that said example, for Argor-Heraeus, refiner Swiss demand. the while year, the of beginning the since tenfold up was Africa, the phone and has not stopped ringing,” dollar, commodities as a whole, as measured by the DJUBS Index, were up 1.9% in AUD. the DJUBS Index, by were as measured as a whole, commodities dollar, Gold was the outperformer in May, up 3% for the month in USD and up 12% in AUD, with the euro crisis driving falling by 6.9% in Oil USD. had a particularly steep fall, dropping from the high $80s per barrel early in the month to closing some down the at a one month at $74, $65 16% Industrialpoint below for before fall. metals sharply, also fell 11%, while agricultural commodities fell more modestly, down 5.3%. because However, of the fall in the Australian gold and commodities (DJUBS) Index Commodity UBS Jones Dow the with May, in lower markets equity followed overall markets Commodity prospects, prospects, whilst fans of 2006 champions Italy should be very nervous – Italy’s stock market Cup. has performingWorld worst participating of the 32 nations in the been the second On a lighter note, the World Cup, the most watched sporting event in the world, begins in South Africa on 11 June and could prove a positive distraction for investors. If stock market performance since the last World Cup in 2006 is any guide to team performance then supporters of Brazil, Chile and Mexico should be feeling upbeat about their US economy has now added jobs for the fifth consecutive month and unemployment is expected to fall to 9.8% ( 9.8% to fall to expected is unemployment and month consecutive fifth the for jobs added now has economy US articlefull for here activity and US business flat in spending remained pace May. slower-than-expected at a expanded while consumer Despite having its worst May since 1940, the US stock market (-8.2%) was a relative outperformer of the major markets. markets. major the of outperformer relative a was (-8.2%) market stock US the 1940, since May worst its having Despite Economic data continues to stabilise, with the latest encouraging numbers emanating from the labour market. The

| monthlymarketcommentary | may 2010 | 

click here www.dixon.com.au ). In fact the yen was the only major currency to currencyto major only the was yen Infactthe ). click here for full articlefull for here click ( Financial Times Financial ).

Please see important disclosures at the end of this document this of end the at disclosures important see Please Sachs, Sachs, JP Morgan, Bank of America-Merrill and all Lynch, Citigroup) made money trading every single day ( full articlefor Wall Street traders like to boast about their nerves of steel and rationalise their outsized bonuses as just compensation compensation just as bonuses outsized their rationalise and steel of nerves their about boast to like traders Street Wall for their taking big risks. After all, trading is a riskyapparently not, Well, it? business, that isn’t is if you are a trader at (Goldman banks largest four Street’s Wall quarter 2010, first of the During banks. Street Wall too-big-to-failthe of one Wall Street’s perfect game – goodit’s to be a banker market musings The The weakness in the Australian dollar brought Australian out the calling Were JB Sachs Goldman a and calls, highest-conviction their of one was position dollar Australian few Aussie bears, with Morgan Stanley saying that a shortdollar 20% overvalued. Australian dollar. But with May’s weak markets, this carry trade began unwinding, particularly yen-Aussie dollar trades, trades, dollar yen-Aussie particularly unwinding, began trade carry this markets, weak May’s with But dollar. Australian article the an in to according up 2.8%. the month, gain against the US dollar for RBA’s rate-hike cycle, which reduces the positive interest rate differential between the Australian and US dollar. As we As dollar. US and Australian the between differential rate interest positive the reduces which rate-hikecycle, RBA’s have noted in the past, the Australian dollar has become a favoured currency for carry-trade investors, who borrow in low yielding currencies like the Japanese yen or the US dollar and invest in higher yielding currencies like the the Norwegian krone fell more than the Aussie dollar, and only just, down 8.5%. down and only just, dollar, than the Aussie the Norwegian more krone fell the in pause expected an of perceptions market from suffered dollar Australian the quality, to flight the to addition In Australian dollar turmoil as dollar, US the against 8.5% losing Aussie the with dollar, Australian the for month poor particularly a was May only currencies, major of fact,In dollars. US for clamour a and assets risk from exodus an caused markets global the in BBBs tighter by 10 bps to 7.5%. Only As were essentially unchanged at 6.8%. unchanged at essentially were 7.5%. Only As 10 bps to by BBBs tighter were essentially on hold. essentially were with However, the rather significant tightening of interestrates, overall corporate bondrates tightened during the month. AAA three-year bonds were tighter by 40 bps to yield 5.48%, while AAs were tighter by 30 bps at 6.01% and grade scale. As measured by Bloomberg’s Australian 3-Year Corporate grade Bond scale. As Indices, Australian measured AAA 3-Year by spreads Bloomberg’s to swaps widened by 7 bps, while AAs widened by 15 bps, As by 43 bps, and BBBs by 32 bps. The widening of credit spreads and the instability in global markets during the month meant that new domestic non-government corporate bond issues Australian credit markets Australian corporate bond spreads also widened during the month, particularly at the lower end of the investment Swap Swap spreads with were marginally three-yearwider, spreads up by 8 bps and five- andten-year spreads widerby 5 unchanged. were One-year spreads bps. swap three-years tightened by 50 bps, five-yearsby 44 bps, andten-years by 29 bps.Five-year rates are now closeto 5% 5.5%. below dropped while ten-years interest rates The yield curve considerablyflattened during the month,fears as that the crisis incould the impact eurozone global growth pushed government bond yields One-year lower. Australian government bonds tightened by 20 bps, while borrowers to have realistic return expectations. return realistic have to borrowers monitoring monitoring growth in housing prices. Ellis Dr. told a property conference that while recent data does not suggest a credit-fuelled speculative boom in Australian housing, the RBA was on watch “it as: would not be desirable prospective and standards lending for their in prudent remain to lenders the warned She one”. into turn to situation current rates were weaker as were home loan approvals. home as were weaker were rates carefully still was RBA the indicated department, stability financial RBA the of head Ellis, Luci from comments However,

| monthlymarketcommentary | may 2010 | 

click here click here for here click www.dixon.com.au ). Combine low economic ), another opinion piece in in piece opinion another ), click here for full articlefull for here click click here for full article ). ). ) and Max’s recent pieces “Rudd’s State Capitalism” and “Rudder(less)” for “Rudder(less)” and State Capitalism” “Rudd’s ) and recent pieces Max’s ). click here for full article for click here click here for full article for click here ). However, implementation remains a risk with opinion polls following the passing of the of passing the following polls opinion with risk a remains implementation However, ). click here for full article click here for full article for click here and a previous Dixon Premium Seminar speaker ( speaker Seminar Premium Dixon previous a and from George an Fane, adjunct professor in the Arndt-Corden Division of Economics at the Australian ). Germany’s surprise unilateral ban on short-selling only increased market unease, as traders feared the feared traders as short-sellingon marketban unease, surpriseincreased only unilateral Germany’s ). ). click here for full article full for here click The Australian The attractive destination for investor money) looks challenged. investor for destination attractive document this of end the at disclosures important see Please demographics demographics as well as economics are working against Europe ( growth with low birth rates and longer life expectancies, and status Europe’s as “lifestylethe superpower” (and an for full articlefull for system. financial lurking European in the somewhere II’ ‘Lehman a of aware were mean officials could move For Europeans, the deficit crisis brings into question the sustainability of theEuropean model of socialwelfare, and With With all the turmoil, the cost of insuring the debt of European banks against the highest possibilitylevels since the height of the GFC of the following collapse of US bank investment Lehman default Brothers ( rose to the years ( years Hemisphere Northern the beyond survival for chances government’s Spanish current the showing measures austerity autumn look shaky ( many many that Budget AAA the Ministercredit French painted a target when on he France said that maintaining France’s ( objective” “tough be a would rating In response to the crisis, the Spanish parliament passed (by just one vote) the country’s deepest budget cuts in 30 the month – Spanish government debt levels look set this reinforce to point, To as rise. noted at previously, the end next? It to seemed Who’s AAA. from AA+ to rating credit Spain’s downgraded agency rating Fitch credit month the of size of the Greek economy), of which 45% is held by foreigners. of which 45% is held by economy), of the Greek size Spanish government debt relative to GDP is still modest at 54%, during out compared one to bailing and 120% mergers for bank three Greece. with However, forcing the government the – fragile very looking system banking Spanish Spain in particular was in the firing line in May. The Spanish economy is stagnant, its budget deficit last year was 11.2% was year last deficit budget its stagnant, is economy Spanish The May. in line firing the in was particular in Spain the about is (which debt denominated euro of billion 225 rollover to needs Spain and 20%, is unemployment GDP, of As As Mohamed El-Erian, CEO and co-Chief largest put bond it: fundInvestment Officer the manager, world’s of PIMCO, “the crisisGreek has shock.morphedalready a into (eurozone) regional It now stands on the of verge morphing into ( global phenomenon” a more European markets – the pain spreads to Spain The Greek debt crisis has been brewing for some time; in fact back in February we noted that things were getting in interesting late 2009. the But crisisin May, starting spreading in earnest to other countries in the Union. European opposite: high growth, greater openness, and strong balance sheets. Where would you rather invest? rather you would Where sheets. balance and strong openness, greater high growth, opposite: and only 1.6% of the workforce is perhaps to be expected, if unwelcome. be expected, is perhaps to and only 1.6% of the workforce facing are nations Western most While trend. global secular broader a of reflective also is RSPT the argue could one But essentially the nations face emerging many of and deleveraging, years regulation, increased of growth, a slow future The The RSPT is also reflective of what happens when governments are hungryfor money. In case,Australia’s with an aging population and a need for greater pension investments, picking on an industry that is both highly profitable investors. investors. Most directly, there is the concern that the RSPT could be a pre-cursor to a form of mining tax contagion ( RSPT the replicate to look may Brazil as such nations rich resource other as world, the around spreading full article National National University ( further reading. for trends broader few a highlights RSPT the sector, mining Australia’s impactson immediate the and politics Outside for for The Australian Resource Super Profits Tax – the bigger picture Super Profits Resource The unveiling of the Resource TaxSuper (RSPT) Profits sent shockwaves through local and global financial markets. Much has been written on the point tax; out, we’d amongst others, an insightful piece by Paul Kelly, editor-at-large simplification, not but far it’s off what is actually happening as the FedUS and central banksaround the world try to it. can get you Not a bad job if the banks. recapitalise How How is that possible? How about borrowing money at zero percent interest rates from the Federal Reserve, lending it back to the US government at 3 to 4 percent, and leveraging this position 10 times. Of course that’s a bit of a

| monthlymarketcommentary | may 2010 |  www.dixon.com.au ). Many of the key drivers drivers key the of Many ). ). In the immediate aftermath, many theories click here for extracts for here click ). click here to access audio file click here for full article for click here Please see important disclosures at the end of this document this of end the at disclosures important see Please want to lighten up on risk ( lighten to want That may be fine (and at Dixon Advisory we are more comfortable with valuation levels in the Australian market than market Australian the in levels valuation comfortable with more Advisory are we Dixon at (and fine be may That the US market), but the ride for investors will likely be bumpier going forward. So, first take a lookat whatyou own and determine what sort of downturn you think you can stomach another handle. If plunge, then you you may can’t So what is an investor to do? As Brett Arends of The Wall Street Journal puts it, “too many investors and advisors are still are advisors and investors many “too it, puts Journal Street Wall The of Arends Brett As do? to investor an is what So running with the bull-market playbook – take on risk, stay fully invested, buy the dips, equities always outperform”. for their FX for for in super-volatility forecast the coming decade unpredictable – policymakinguneven global recovery, and risk of uncertaintymajor policy around monetaryerror, and policy, uncertainty around fiscal policy –we believe equityequally apply to markets. will look more like the last 10 years than the previous 90. Stephen Roach, Chairman of US investment bank Morgan larger. and frequent more becoming crisesthat are also believes operations, Asian Stanley’s ( Super-Volatility 2010-2020: Mega-Trends FX titled piece a released UBS is already low and may get lower. At a recent been conference have there years, attended 100 last the in that out Garypointed by economist Shilling chief MerrillLynch former several Committee, members of the Dixon Investment future the unfortunately Shilling, to According years. 10 past the just in happened those of two – corrections 40% four terrorism. Whatever the cause (and it’s still not clear), the crash comes at a time when many confidenceinvestors’ in stocks market panic sounds like, now you know ( market history dubbed stock in now (and trading of minutes 30 crazed most the of one caused what for floated were cyber and hackers to losses stop cascading and glitches, computer traders, ‘fat-fingered’ from ranging crash), flash the On 6 May, the On US 6 markets May, witnessed a 1,000-point drop in the US Dow Jones duringIndustrials a Average 15 minute interval on the Thursday afternoon, followed by a 15 minute 600-point reversal. If you ever wanted to know what Equity markets - the flash crash, rising market volatility and reassessing risk tolerance

| monthlymarketcommentary | may 2010 |  89 291 365 757 149 549 146 1,239 5,002 3,471 8,357 4,066 6,332 1,531 5,825 1,217 2,530 4.50% 4.89% 5.85% 6.15% 6.37% 6.14% 6.46% 7.17% 8.37% 0.9369 0.7168 0.8754 0.6132 71,785 22,944 17,970 11,339 11,205 12,281 igh H www.dixon.com.au range

week 52 67 129 511 141 227 910 216 458 871 879 3,738 2,556 9,050 6,145 2,983 4,573 4,127 8,147 1,746 9,653 3.00% 3.11% 4.41% 5.13% 5.61% 5.02% 5.41% 6.25% 7.18% 0.7786 0.5584 0.7207 0.4793 48,873 17,255 13,400 ow L hange YTD C 9.8% 4.8% 4.7% 0.0% 3.5% -5.8% -7.5% -9.7% -0.5% -5.1% -6.2% -6.5% -5.1% -3.7% -3.4% -9.9% -7.6% -7.2% -8.5% -9.6% -3.4% -7.4% -0.2% -4.4% -4.1% -2.8% -2.3% -0.5% -0.6% 20.0% 15.9% 10.7% -15.5% -19.0% -10.9% -10.7% 71 go 124 500 142 250 979 220 717 919 A 3,818 2,633 9,523 6,890 3,278 4,941 1,123 4,418 8,500 1,774 3.00% 3.14% 4.25% 4.95% 5.68% 5.06% 5.39% 6.50% 7.23% 0.8011 0.5658 0.7635 0.4948 53,198 18,171 14,625 10,370 ear Y 88 H 270 335 503 142 545 146 2 1,179 5,553 1,187 2,461 4,807 2,871 8,004 3,817 6,136 1,436 4.25% 4.59% 5.55% 5.90% 6.12% 5.87% 6.31% 6.89% 7.60% go 11,009 12,211 67,530 21,109 17,559 11,057 0.9243 0.6953 0.8672 0.6051 ont A M 74 149 252 310 458 544 146 5,188 1,089 2,257 4,458 2,656 9,763 7,295 3,515 5,946 1,309 1,214 4.50% 4.80% 5.09% 5.48% 5.85% 5.48% 6.01% 6.89% 7.50% 10,137 11,671 61,947 19,767 16,863 0.8459 0.6874 0.7720 0.5819 lose C 1

ndex I Residential Property Indices (Local) Index (Aus) ABS Home Price S&P/TSX (Canada) S&P/TSX (Brazil) Bovespa Dow Jones IndustrialsDow (USA) S&P 500 (USA) (USA) NASDAQ MICEX (Russia) 100 (UK)FTSE Americas Europe 40 (France) CAC (Germany) DAX Nikkei 225 (Japan) (Taiwan) TAIEX Shanghai Composite (China) Shanghai Composite Hang Seng (Hong Kong) BSE Sensex (India) Major Country Indices (Local) Stock Asia-Pacific S&P/ASX 200 (Australia) British Pound US Dollar Euro Yen Japanese Wheat (USc/bushel) Wheat Exchange Foreign Crude Oil (US$/bbl) Crude Gold (US$/oz) (USc/lbs) Copper BBB Key Commodities DJ UBS Index (USD) AAA AA A 10 Year Swap Rate Swap Year 10 Year) Domestic Bond 3 Rates (Bloomberg Corporate Australian 3 Month Bills Rate Swap Year 3 Rate Swap Year 5 Case Shiller (USA) Case Rates Interest Australian Rate RBA Cash HBOS (UK) 2. Based on Bloomberg Fair Value AUD Australia Domestic 3 Year Index Series Index Year 3 Domestic Australia AUD Value Fair Bloomberg on Based 2. Source: Bloomberg Source: 2010 April at as data HBOS 2010, March at as data Shiller Case and ABS only; quarterly data ABS 1.

Please see important disclosures at the end of this document this of end the at disclosures important see Please market data – may 2010

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