Managed Accounts Share Trading Investment Update - April 2010

Good afternoon,

Good afternoon,

I am writing today to give you a quick update on two items of news out today that relate to NAB and HVN in our portfolio, and to let you know the progress on the quarterly reports.

The quarterly reports will be out to you in the post next Tuesday April 26, the delay caused by both of our accounting staff being on annual leave until today. For the quarter, our portfolios lost a couple of percentage points against a 1% gain in the market mainly due to a fall in the value of Quickstep holdings and the expiry of our put option protection. We certainly look forward to a much better April-June quarter.

As foreshadowed in our previous notes, the ACCC has prevented National Australia Bank from proceeding with a takeover of AXA. We assumed that some or most of the price pressure on NAB was being created by a perception that further stock would become available as NAB needed to raise capital for the takeover. This dissipated somewhat as analysts predicted the company could do the acquisition out of cash, and the share price rose to around $27.80.

Today however, there is no need to raise any further capital; in fact, dividends now have a distinct possibility of being raised sooner rather than later. The stock is currently up 2.7% at $28.84. Even at today's prices NAB continues to lag its local peers and as such we feel there is a strong chance of it continuing higher to around $31 in the coming weeks and with that in mind we will maintain that position in the portfolio.

Harvey Norman today announced third quarter sales numbers, at an increase of 2.2% over the nine months from April-June 20009, which has evidently disappointed the market somewhat. With the dividend in our pocket, the stock is down 4% from an adjusted entry price, and we will monitor it carefully for any signs that this flat trading update is something symptomatic of a slower overall domestic growth rate rather than a pause for breath in an overall recovery as we expect it to be. Our other positions are all either relatively unchanged or performing well thus far.

As always please call the desk if you have any questions about any of our current share trading positions.

by: Hayden Kerr

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