National Australia Trustees Limitedcapital.nab.com.au/docs/NCI_AUD.pdf · 2013-06-19 · National...

National Australia Trustees Limited(ABN 8000'7 350405 and Australian Financial Services Licence No. 230703)

(incorpomaxl with limited liability in Australia)in its capacity as trustee of National Capital Trust III

A$400,000,000Floating Rate National Capital Instruments

bane Price 100 per cent.

National Australia Bank Limited(ABN 12 004 044 937)

(incorporated with limited liability in Australia)

The AS400,000,000 Floating Rate National Capital Instruments (the "NCIs") are expected to be issued on 18 September 2006 (the "IssueDate"). The NCIs will entitle holders, subject to the conditions described in this Information Memorandum, to receive non-cumulativedistributions ("Distributions") quarterly in arrears on each 31 March, 30 June, 30 September and 31 December, commencing on 31December 2006 (each, a "Distribution Payment Date").

Distributions on the NCIs will accrue from (but not including) the Issue Date at a rate equal to the Bank Bill Rate (as defined in clause 3.1("Distributions") of the tams of issue of the NCIs (the "NCI Terms") (see Terms and Concktions of the NCIs below) plus a margin of 0.95per cent. per =MUM (the -Initial Margin") up to (aid including) 30 September 2016 (the "Step-Up Date') and, from (but not including) theStep-Up Date at a rate equal to the Bank Bill Rate plus a margin of 1.95 per cent per annum (the "Distribution Rate") (see further Termsand Conditions of the NCIs - Distributions below).

Payment of any Distribution on the NCIs is subject to the Trust (as defined below) having sufficient funds to pay that Distribution. Thefunds available to the Trust in respect of any Distribution Payment Date will be limited to the funds it receives in respect of the securitiesissued by National Capital htstruments (AM] LLC 2 ("National LLC 2") and held by the Trust (the "LLC 2 Securities"). The fundsavailable to National LLC 2 to make a payment on the LLC 2 Securities will, in turn, be limited to the interest received from the notes issuedby National Capital Instruments [AM) LLC 1 ("National LLC 1") and held by National LLC 2 (the "LLC Notes"). Payments of intereston the LLC Notes are limited to payments received by National LLC 1 on the subordinated debentures issued by National Australia BankLimited ("National") acting through its New York Branch and held by National LLC 1 (the "Subordinated Debentures"). In addition,interest on the LLC Notes and the Subordinated Debentures is subject to the payment tests and conditions contained in the terms of the LLCNotes and Subordinated Debentures (see Summary of Prinipal Documents - Terms of the LLC Notes and Summary of Principal Documents -Terms of the Subortfinated Debentures below). Distributions are non-cumulative and holders of NCIs ("NCI Holders") will not be entitledto recover my Distributions which are not paid because those tests have not been met.

The NCIs are perpetual instruments with no set maturity date. However, the NCIs may be redeemed or converted into preference shares ofNational (the "Preference Shares") in the circumstances described in this Information Memorandum. NCI Holders will have no right torequire the NCIs be redeemed or converted into Preference Shares.

The NCIs are expected to be assigned on issue a rating of "A2" by Moody's Investor Services Pty Ltd ("Moody's"), "A-" by Standard &Poor's Rating Services, a division of the McGraw Hill Companies Inc. ("S&P") and an "A+" rating by Fitch Ratings Limited ("Fitch"). Acredit rating is not a recoinmendatica to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time bythe relevant rating agency.

See Risk Factors bedew tor a &scission of certain factors that should be considered by prospective iavestors.

The NCIs are not guaranteed by and do not represent deposits or other liabilities of National sr any related parties or associates ofNational

Joint Lead Managers

DEUTSCHE BANK NATIONAL AUSTRALIA BANK LIMITED

The date of this Information Memorandum is 12 September 2006

8578329 11.doc

IMPORTANT NOTICE

This Information Memorandum relates solely to a proposed issue of units (the "NCIs") inNational Capital Trust III, a wait trust established under the laws of Victoria (the "Trust"), byNational Australia Trustees Limited (ABN 80 007 350 405 and Australian Financial ServicesLicence No. 230703) ("NATL") in its capacity as trustee (the "Trustee") of the Trust (the"Issuer").

This Information Memorandum does not relate to, and is not relevant for, any other purpose thanto assist the recipient to decide whether to proceed with a further investigation of the NCIs. It isonly a summary of the terms and conditions of the NCIs and does not purport to contain all theinformation a person considering investing in the NCIs may require. The definitive terms andconditions of the NCIs and the Trust are contained in the Transaction Documents, which shouldbe reviewed by any intending purchaser. If there is any inconsistency between this InformationMemorandum and the Transaction Documents, the Transaction Documents should be regarded ascontaining the definitive information. A copy of the Transaction Documents may be viewed byintending purchasers at the office of the Trustee referred to in the Directory at the back of thisInformation Memorandum.

This Information Memorandum is not, and should not be construed as, an offer or invitation toany person to subscribe for or purchase or otherwise deal in any NCIs, and must not be reliedupon by intending purchasers of the NCIs.

Definitions

All defined terms used in this Information Memorandum are indexed in the Index of DefinedTerms appearing at the end of this Information Memorandum.

Unless otherwise stated, references in this Information Memorandum to "AS", "S", "Australiandollars" or "dollars" are to the lawful currency of Australia.

Documents Incorporated by Reference

This Information Memorandum is to be read in conjunction with all of the documents that areincorporated by reference (see Documents Incorporated by Reference below).

Responsibility for Information

The Issuer and National (each a "Primary Party") have prepared this Information Memorandumand have requested and authorised the distribution of this Information Memorandum and havesole responsibility for its accuracy.

None of the Joint Lead Managers, the Initial Subscriber, NATL (in any capacity other than as theIssuer), National LLC 1, National LLC 2, the LLC Manager, the Registrar, the Issuing and PayingAgent, any other party named or referred to in this Information Memorandum (other than thePrimary Parties) or any of their respective "Related Parties" or "Associates" (each as defined inthe Corporations Act 2001 of Australia (the "Corporations Act")), or any external adviser to thePrimary Parties or any of the foregoing (each, an "Other Party") makes any representation orwarranty, express or implied, as to, nor assumes any responsibility or liability for, the authenticity,origin, validity, accuracy or completeness of, or any errors or omissions in, any information,statement, opinion or forecast contained in this Information Memorandum or any previous,accompanying or subsequent material or presentation. The Other Parties and the Primary Partiesare together referred to in this Information Memorandum as the "Parties".

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Except for having checked their respective names and addresses in the Directory at the back ofthis InformMien Memorandum, no person listed in the Directory other than the Primary Partieshas authorised, caused the issue of, or have any responsibility for, any part of this InformationMemorandum.

No recipient of this Information Memorandum can assume that any person referred to in it hasconducted any investigation or due diligence concerning, or has carried out or will carry out anyindependent audit of, or has independently verified or will verify, the information contained inthis Information Memorandum.

Preparation Date

This Information Memorandum has been prepared based on information available and facts andcircumstances known to the Issuer and National as at 12 September 2006 (the "PreparationDate").

The delivery of this Information Memorandum, or any offer or issue of NCIs, at any time after thePreparation Date does not imply, nor should it be relied upon as a representation or warranty, that:

(a) there has been no change since the Preparation Date in the affairs or financial condition ofthe Issuer, the Trust, the Trustee, National LLC 1, National LLC 2, National or any otherparty named in this Information Memorandum; or

(b) the information contained in this Information Memorandum is correct at such later time.

No one undertakes to review the financial condition or affairs of the Issuer, the Trust, the Trustee,National LLC 1, National LLC 2, National or any other party named in this InformationMemorandum at any time or to keep a recipient of this Information Memorandum or a holder ofNCIs (a "NCI Holder") or a holder of Preference Shares (if issued) informed of changes in, ormatters arising or coming to their attention which may affect, anything referred to in thisInformation Memorandum.

Neither the Primary Parties nor any other person (including any Other Party) accepts anyresponsibility to purchasers of the NCIs or intending purchasers of the NCIs to update thisInformation Memorandum after the Preparation Date with regard to information or circumstanceswhich come to its attention after the Preparation Date.

It should not be assumed that the information contained in this Information Memorandum isnecessarily accurate or complete in the context of any offer to subscribe for or an invitation tosubscribe for or buy any of the NCIs at any time after the Preparation Date, even if thisInformation Memorandum is circulated in conjunction with the offer or invitation.

Authorised Material

No person is authorised to give any information or to make any representation which is notexpressly contained in or consistent with this Information Memorandum and any information orrepresentation not contained in or consistent with this Information Memorandum must not berelied upon as having been authorised by or on behalf of the Primary Parties.

Intending Purchasers to make Independent Investment Decision

This Information Memorandum is not intended to be, and does not constitute, a recommendationby any Party that any person subscribe for or purchase any NCIs. Accordingly, any personcontemplating the subscription or purchase of the NCIs must:

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(a) make their own independent investigation of:

() the terms of the NCIs, including reviewing the Transaction Documents; and

(ii) the financial condition, affairs and creditworthiness of the Issuer and the otherParties,

after taking all appropriate advice from qualified professional persons; and

(b) base any investment decision on the investigation and advice referred to in paragraph (a)and not on this Information Memorandum.

Offering restrictions

This Information Memorandum is not a Product Disclosure Statement for the purposes ofChapter 7 of the Corporations Act or a prospectus for the purposes of Chapter 6D of theCorporations Act and is not required to be lodged with the Australian Securities and InvestmentsCommission ("ASIC") under the Corporations Act as each offer for the issue, and invitation toapply for the issue, and any offer for sale of, and any invitation for offers to purchase:

(i) NCIs must not be made to a person who is a retail client for the purposes of Chapter 7 ofthe Corporations Act; or

(ii) Preference Shares, if issued, must not be made to a person for which disclosure is requiredunder Part 6D.2 of the Corporations Act.

The distribution of this Information Memorandum and the offer or sale of NCIs and PreferenceShares (if issued) may be restricted by law in certain jurisdictions. No Party represents that thisdocument may be lawfully distributed, or that any NCIs or Preference Shares (if issued) may belawfully offered, in compliance with any application, registration or other requirements in anysuch jurisdiction, or pursuant to an exemption available thereunder, or assume any responsibilityfor facilitating any such distribution or offering. In particular, no action has been taken by anyParty which would permit a public offering of any NCIs or Preference Shares (if issued) ordistribution of this Information Memorandum in any jurisdiction where action for that purpose isrequired. Accordingly, no NCIs or Preference Shares (if issued) may be offered or sold, directlyor indirectly, and neither this Information Memorandum nor any advertisement or other offeringmaterial may be distributed or published in any jurisdiction, except under circumstances that willresult in compliance with any applicable laws and regulations. Persons into whose possession thisInformation Memorandum or any NCIs or Preference Shares (if issued) come must informthemselves about, and observe, any such restrictions. In particular, there are restrictions on thedistribution of this Information Memorandum and the offer and sale of NCIs in Australia, theUnited Kingdom, the European Economic Area, Hong Kong, Singapore, Japan and the UnitedStates of America (see Subscription and Sale below).

Limited Liability of the Issuer

The liability of the Trustee as the Issuer to make payments in respect of the NCIs is limited to theassets of the Trust. The personal assets of the Trustee are not available to meet payments inrespect of the NCIs except to the extent of the Trustee's fraud, negligence or wilful default.

See further Description of the Issuer below.

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Disclosure of Interest

Each of the Joint Lead Managers and the Initial Subscriber discloses that it and its respectiveRelated Parties or Associates and their respective directors and employees:

(a) may have a pecuniary or other interest in the NCIs; and

(b) will receive fees, brokerage and commissions, and may act as principal, in any dealings inthe Wis.

References to credit ratings

There are references in this Information Memorandum to credit ratings. A credit rating is not arecommendation to buy, sell or hold securities and does not comment on the adequacy of marketprice or the suitability of any security for a particular investor. A credit rating may be subject torevision, suspension, withdrawal or placed on ratings watch at any time by the relevant ratingagency. Each rating should be evaluated independently of any other rating.

No rating agency has been involved in the preparation of this Information Memorandum.

References in this Information Memorandum to:

(a) "S&P" are to Standard & Poor's Rating Services, a division of the McGraw HillCompanies Inc. or any of its subsidiaries or successors;

(a) "Moody's" are to Moody's Investor Services Pty Ltd or any of its subsidiaries orsuccessors; and

(b) "Fitch" are to Fitch Ratings Limited or any of its subsidiaries or successors.

Disclaimers

The NCIs do not represent deposits or other liabilities of National or any Related Parties orAssociates of National.

No Party in any way:

(a) stands behind the NCIs, the Trust or the Preference Shares (if issued), except to the extentof their specific obligations under the Transaction Documents;

(b) makes any representation about the value or performance of the NCIs, the Trust or thePreference Shares (if issued);

(c) makes any representation with respect to income tax or other taxation consequences ofany investment in or holding of NCIs or the Preference Shares (if issued); or

(d) guarantees the distributions or return of investment in respect of the NCIs or thePreference Shares (if issued).

The holding of the NCIs is subject to investment risk, including possible delays in repayment andloss of distributions or return of investment in respect of the NCIs (see Risk Factors below).

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U.S. INFORMATION

NEITHER THE NCIS NOR THE PREFERENCE SHARES HAVE BEEN OR WILL BEREGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE"SECURITIES ACT"), OR WITH ANY SECURITIES REGULATORY AUTHORITY OFANY STATE OR OTHER JURISDICTION OF THE UNITED STATES. NEITHER THENCIS NOR THE PREFERENCE SHARES (IF ISSUED) MAY BE OFFERED OR SOLDWITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF,U.S. PERSONS (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT)UNLESS THE NCIS OR THE PREFERENCE SHARES (AS THE CASE MAY BE) AREREGISTERED UNDER THE SECURITIES ACT OR OFFERED AND SOLD INCOMPLIANCE WITH AN EXEMPTION FROM THE REGISTRATIONREQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATESECURITIES LAWS. NEITHER THE NCIS NOR THE PREFERENCE SHARES HAVEBEEN APPROVED OR DISAPPROVED BY THE UNITED STATES SECURITIES ANDEXCHANGE COMMISSION OR ANY OTHER SECURITIES COMMISSION OROTHER REGULATORY AUTHORITY IN THE UNITED STATES, NOR HAVE THEFOREGOING AUTHORITIES APPROVED THIS INFORMATION MEMORANDUMOR CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THEINFORMATION CONTAINED IN THIS INFORMATION MEMORANDUM. ANYREPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE IN THEUNITED STATES.

NO PARTY MAKES ANY REPRESENTATION TO ANY INVESTOR IN THE NCIS ORTHE PREFERENCE SHARES (IF ISSUED) REGARDING THE LEGALITY OF ITSINVESTMENT UNDER ANY APPLICABLE LAWS. ANY INVESTOR IN THE NCIS ORTHE PREFERENCE SHARES (IF ISSUED) SHOULD BE ABLE TO BEAR THEECONOMIC RISK OF AN INVESTMENT IN THE NCIS OR THE PREFERENCESHARES (AS THE CASE MAY BE) FOR AN INDEFINITE PERIOD OF TIME.

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TABLE OF CONTENTS

TRANSACTION DIAGRAM -... 8

TRANSACTION SUMMARY.-- 9

RISK FACTORS.---- 15

DOCUMENTS INCORPORATED BY REFERENCE ....... ...... ........ 24

DESCRIPTION OF THE ISSUER-. 26

DESCRIPTION OF NATIONAL LLC 2.. 32

DESCRIPTION OF NATIONAL LLC 1 35

DESCRIPTION OF NATIONAL .... 37

TERMS AND CONDITIONS OF THE NCIS 44

SUMMARY OF PRINCIPAL DOCUMENTS 66

USE OF PROCEEDS .... 87

TAXATION. . 88

SUBSCRIPTION AND SALE-- ----------.---.... 92

GENERAL INFORMATION 97

INDEX OF DEFINED TERMS•.....•..•.. 100

DIRECTORY - . - - -----.---- 103

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LLCNotes

TRANSACTION DIAGRAM

The diagram below setts out a simplified form of the structure of the transaction and of theexpected periotrtc cash flows in the structure. This diagram is qualified in its entirety by the moredetailed information contained elsewhere in this Information Memorandum.

ConvertibleDebentures

NationalHead Office

Non-interestbearing

Nationallegalentity

National LLC 2

LLC 2 DistributionsLLC 2Seenriti

NationalCapital Trust III

National CapitalInstruments(NCIs)

Distributions

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TRANSACTION SUMMARY

These tables provide a sinmnary of certain principal parties and of certain principal terms of theNat This summary is qualed in its entirety by the more detailed information containedelsewhere in this Information Memorandum.

Key parties

Issuer National Australia Trustees Limited (ABN 80 007 350 405and Australian Financial Services Licence No. 230703) in itscapacity as trustee (the "Trustee") of the Trust. See furtherDescription of the Issuer below.

Trust A Victorian law governed special purpose trust (the "Trust").See further Description of the Issuer below.

National LLC 2 National Capital Instruments [AUD] LLC 2, a limited liabilitycompany established under the laws of Delaware. Asubsidiary of National will be the manager of National LLC 2under Delaware law but neither it, nor National, will hold anyequity interest in National LLC 2. See further Description ofNational LLC 2 below.

National LLC 1 National Capital Instruments [AUD] LLC 1, a limited liabilitycompany established under the laws of Delaware. Asubsidiary of National will be the manager of National LLC 1under Delaware law and a subsidiary of National ("NationalSub") will hold all memberships interests in National LLC 1.See further Description of National LLC 1 below.

National National Australia Bank Limited (ABN 12 004 044 937), alimited liability company established under the laws ofAustralia. National is the holding company of the Nationalgroup, which consists of National and its consolidatedsubsidiaries (the "National Group"). See further Descriptionof National below.

National New York Branch National acting through its office at Level 28, 245 ParkAvenue, New York, New York, United States of America10167 ("National New York Branch").

National Head Office National acting through its head office at Level 13, 140William Street, Melbourne, Victoria 3000, Australia("National Head Office").

Initial Subscriber Deutsche New Zealand Limited, a limited liability companyestablished under the laws of New Zealand, with its registeredoffice at Level 6, 66 Wyndham Street, Auckland, NewZealand.

Registrar The Issuer or any other person appointed by the Issuer tomaintain the register of NCIs.

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ssuing and Paying Agent Austraclear Services Limited (ABN 80 007 350 405), alimited liability company incorporated under the laws ofAustralia, with its registered office at 30 Grosvenor Street,Sydney, New South Wales, Australia 2000 (the "Issuing andPaying Agent").

Summary of the Offering. .Issue The Issuer will issue A$400,000,000 Floating Rate National

Capital Instruments (the "NCIs") to investors.

Each NCI is a unit in the Trust conferring an undivided sharein the beneficial interest in the assets of the Trust.

NCIs do not represent deposits or securities of National, arenot guaranteed by National and a NCI Holder has no claim onNational for payment of any amount in respect of the NCIs.

Issue Date The NCIs are expected to be issued on 18 September 2006(the "Issue Date").

Maturity Date The NCIs are perpetual instruments with no set maturity date.However, a NCI is redeemable for cash (subject to APRA'sprior written approval) and in certain circumstances will beautomatically converted into a preference share of National("Preference Share") according to the terms of issue of theNCIs (the "NCI Terms").

Use of Proceeds The proceeds of issue of the NCIs will be used to purchase theLLC 2 Securities the proceeds which will be used, in turn, topurchase other Component Instruments as described underSubscription and Sale - Subscription, Assignment and Sale ofthe Relevant Instruments below.

National New York Branch will use the ultimate proceeds ofissue for its general business purposes including on-lending(see further Use of Proceeds below).

Distributions on the NCIs NCIs will pay distributions ("Distributions") at a floatingrate.

Distributions on the NCIs will be paid quarterly in arrears on31 March, 30 June, 30 September and 31 December of eachyear commencing on 31 December 2006 (each a"Distribution Payment Date").

The amount of each Distribution will be calculated inaccordance with the relevant formula set out in the terms andconditions of the NCIs (the "NCI Terms") (see Terms andConditions of the NCIs - Distributions below).

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Distranstion Limitations Distributions on the NCIs are limited to the distributionsreceived from National LLC 2 on the LLC 2 Securities anddistributions on the LLC 2 Securities are limited to interestreceived by National LLC 2 from National LLC 1 on the LLCNotes. Payment of interest on the LLC Notes is subject to thetests and conditions set out in the terms of the LLC Notes (seeSummary of Principal Documents - Terms of the LLC Notesbelow). In turn, interest on the LLC Notes is limited tointerest received by National LLC I from National New YorkBranch in respect of the Subordinated Debentures. Paymentof interest on the Subordinated Debentures is also subject tosimilar tests and conditions as set out in the terms of theSubordinated Debentures (see Summary of PrincipalDocuments - Terms of the Subordinated Debentures below).

Distributions are non-cumulative and the holders of the NCIs(the "NCI Holders") will have no claim for any Distributionnot paid, or for any part of any Distribution not paid pursuantto the limitations discussed above.

Consequences of Non-Payment Failure to pay in full, for any reason, Distributions on orof Distributions within seven Business Days of the scheduled Distribution

Payment Date, will trigger the Conversion Event (see Termsand Conditions of the NCIs - Conversion), but will notconstitute an event of default and will not otherwise entitle theNCI Holder to a return of its investment.

Failure to pay in full, for any reason, Distributions on thescheduled Distribution Payment Date, will also immediatelytrigger distribution restrictions for National as described in theTerms and Conditions of the NCIs - Distributions -Restrictions in the case of non-payment and, when thePreference Shares are issued, substantially in the formdescribed in Summary of Principal Documents - Terms of thePreference Shares - Dividends - Distribution Restrictionsbelow.

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Withholding Tax andAdditional Amounts

The Issuer will make all payments of Distributions withoutdeduction or withholding for, or on account of, tax unless thatdeduction or withholding is required by law. If any deductionis required, the Issuer must pay the full amount required to bededucted to the relevant revenue authority and, subject to:

(a) certain exceptions (see Terms and Conditions of theNCIs - Payments to NCI Holders - Gross-up below);and

(b) having received sufficient amounts from NationalLLC 2 in respect of the LLC 2 Securities or fromNational under the NCI Gross-up Indemnity (asdefined below),

an additional amount ("Additional Amount") to the NCIHolders so that the NCI Holders receive the same amount inrespect of that payment as if no such deduction had been madefrom the payment.

National will covenant in a deed of covenant entered intobetween National, National LLC 1, National LLC 2 and theIssuer (the "Deed of Covenant") to indemnify the Issuer forthe payment of any Additional Amounts (See Summary ofPrincipal Documents - Terms of the Deed of Covenant -Undertakings by National below) (the "NCI Gross-upIndemnity"), subject to the same tests and conditions thatapply to payment of interest on the Subordinated Debentures(see Summary of Principal Documents - Terms of theSubordinated Debentures - Interest below).

Conversion Events In certain circumstances the Conversion Event (as defined inthe NCI Terms (see Terms and Conditions of the NCIs -Conversion below)) will occur with respect to the NCIs. ANCI Holder may not initiate the Conversion Event.

Conversion Mechanics Upon the occurrence of the Conversion Event, each NCI willbe redeemed in consideration for the delivery of a PreferenceShare in accordance with the steps set out under Summary ofPrincipal Documents - Terms of the Convertible Debentures -Conversion below. In certain circumstances National may beprevented by law from issuing the Preference Shares (seeSummary of Principal Documents - Terms of the ConvertibleDebentures - Failure to Issue Preference Shares below).

Optional Redemption Subject to APRA's prior written approval, National has theoption to redeem for cash:

(a) all (but not some) of the Convertible Debentures onthe occurrence of a Regulatory Event, a Tax Event oran Acquisition Event (each as defined in the NCITerms (see Terms and Conditions of the NCIs -Interpretation and Definitions - Definitions below));

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and

(b) some or all of the Convertible Debentures on the Step-Up Date or any subsequent date which is aDistribution Payment Date in respect of the NCIs.

A redemption of the Convertible Debentures will, in turn,trigger a redemption of the NCIs for cash (see Terms andConditions of the NCIs - Redemption below).

Redemption Price Where the NCIs are redeemed as provided under "OptionalRedemption" above, they will be redeemed in consideration ofthe payment of the Redemption Price. This will generally bean amount equal to the Liquidation Amount of the NCIs plusany accrued but unpaid Distribution for the then currentDistribution Period.

See further - Terms and Conditions of the NCI's - Redemption -Redemption Price below.

Voting and Other Rights The Trust Deed contains provisions for convening meetings ofthe NCI Holders to consider any matter affecting theirinterests, including any variation of the NCI Terms whichrequires the consent of NCI Holders.

Subject as provided above, NCI Holders will have no votingrights in respect of National Head Office, National New YorkBranch, National LLC 1, National LLC 2, the LLC Manager,National Sub or the Trustee (each a "National Entity") unlessand until the Preference Shares are issued (see furtherSummary of Principal Documents - Terms of the PreferenceShares - Voting and Other Rights below).

No Set-Off A NCI Holder has no right to set off any amounts owing by itto any National Entity against any claims owing by anyNational Entity and no offsetting rights or claims on anyNational Entity if a National Entity does not pay a Distributionor interest when scheduled under any Component Instrument.

No Guarantee Payments on the NCIs are not guaranteed by National or anyRelated Parties or Associates of National.

Not Deposit Liabilities The NCIs do not represent deposits or other liabilities ofNational or any Related Parties or Associates of National.

Rating It is expected that the NCIs, when issued, will be assigned an"A2" rating by Moody's, on "A-" rating by S&P and in "A+"rating by Fitch.

Listing Neither the NCIs nor the Preference Shares (if issued) will belisted on any stock exchange.

Clearing and Settlement It is expected that the NCIs will be eligible to be lodged into

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Austraclear. If issued, it is expected that the PreferenceShares will also be eligible to be lodged into Austraclear. Seefurther General information - Clearing Systems below.

Risk Factors An investment in the NCIs is subject to investment risks,including possible delays in repayment and loss ofdistributions and the amount invested in respect of the NCIs.See Risk Factors below.

Selling Restrictions The NCIs are not to be offered and sold in Australia to anyperson who is a retail client for the purposes of Chapter 7 ofthe Corporations Act and the Preference Shares, if issued,must not be offered or sold in Australia to a person for whichdisclosure is required under Part 6D.2 of the Corporations Actand, in each case, only in circumstances which otherwisecomply with laws and restrictions or any applicablejurisdiction. There are also specific restrictions on offering orselling the NCIs in the United Kingdom, the EuropeanEconomic Area, Hong Kong, Singapore, Japan and the UnitedStates. See Subscription and Sale below.

Governing Law The LLC 2 Securities, the LLC 2 Security Terms, the LLC 2Agreement, the LLC 1 Agreement, the LLC 2 ManagementAgreement, the LLC 1 Management Agreement and theLLC I Common Securities are governed by the laws of theState of Delaware, United States of America.

The Preference Shares (if issued), the Preference Share Termsand each of the other Component instruments and TransactionDocuments will be governed by the laws of Victoria, Australiaother than the Agency Agreement, which will be governed bythe laws of New South Wales, Australia.

Transaction Documents means:

(a) each Component Instrument (including, in each case,the terms of such Component Instrument);

(b) each document constituting a Component Instrument;

(c) the Agency Agreement, the NCI SubscriptionAgreement and the Subscription, Sale and AssignmentAgreement;

(d) the LLC 1 Agreement, LLC 1 ManagementAgreement and the LLC 2 Management Agreement;and

(e) any other document agreed by the parties to be aTransaction Document,

(the "Transaction Documents").

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RISK FACTORS

Prospective isvestors should consider carefully the risks set forth below and the other informationcontained in this Information Memorandum prior to making any investment decision with respectto the NCIs.

Each of the risks highlighted below as being risks relating to National and its business could havea material adverse effect on National's business, operations, financial condition or prospects,which, in turn, could have a material adverse effect on the amount which investors will receive inrespect of the NCIs. In addition, each of the risks highlighted below as being risks relating to theNas could adversely affect the trading price of the NCIs or the rights of investors under the NCIsand, as a result, investors could lose some or all of their investment.

Praspective investors should note that the risks described below are not the only risks faced bythe Issuer and National. The Issuer and National have described only those risks relating to theiroperations that they consider to be material. There may be additional risks that the Issuer orNational currently considers not to be material or of which it is not currently aware, and any ofthese risks could have the effects set forth above.

Risks relating to the Issuer

Payments on the NCIs will only be made from the assets of the TrustThe Trustee will issue the NCIs in its capacity as trustee of the Trust.

A NCI Holder's claim against the Trustee with respect to the NCIs is limited to and can beenforced only to the extent to which the claim can be satisfied out of the assets of the Trust.Except in the case of fraud, wilful default or negligence of the Trustee, the assets of the Trustee inits personal capacity are not available to meet payments of Distributions or repayments of theamount invested in respect of the NCIs.

The assets of the Trust are limitedThe assets of the Trust consist only of the LLC 2 Securities and the rights of the Issuer under theTransaction Documents.

If the assets of the Trust are not sufficient to make payments of Distributions or repayments of theamount invested in respect of the NCIs, then payments to NCI Holders will be reduced.

Risks relating to National and its business

General Economic ActivityThe business activities of National are dependent on the level of banking, fmance and financialservices required by its customers. In particular, levels of borrowing are heavily dependent oncustomer confidence, employment trends, the state of the economy and market interest rates at thetime. As National conducts its business in various locations, including Australia, the UnitedKingdom and New Zealand, its performance is influenced by the level and cyclical nature ofbusiness activity in those locations, which is, in turn, affected by both domestic and internationaleconomic and political events. There can be no assurance that a weakening in the economies inwhich National operates will not have a material effect on its future results.

Risks relating to the business of National

As a result of its business activities, National is exposed to a variety of risks, the most significantof which are credit risk, market risk, operational risk and liquidity risk. Failure to control these

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risks could result in material adverse effects on the financial performance and reputation ofNational.

Credit RiskRisks arising from changes in credit quality and the recoverability of loans and amounts due fromcounterparties are inherent in a wide range of the businesses of National. Adverse changes in thecredit quality of its borrowers and counterparties or a general deterioration in the economicconditions in the locations in which it operates or globally, or arising from systemic risks in thefinancial systems, could affect the recoverability and value of its assets and require an increase inthe provision for bad and doubtful debts and other provisions of National.

Market RiskThe most significant market risks National faces are interest rate, foreign exchange and bond andequity price risks. Changes in interest rate levels, yield curves and spreads may affect the interestrate margin realised between lending and borrowing costs. Changes in currency rates affect thevalue of assets and liabilities dominated in foreign currencies and may affect income from foreignexchange dealing. The performance of financial markets may cause changes in the value of theinvestment and trading portfolios of National. National has implemented risk managementmethods to mitigate and control these and other market risks to which it is exposed and exposuresare constantly measured and monitored. However, it is difficult to predict with accuracy changesin economic or market conditions and to anticipate the effects that such changes could have on thefinancial performance and business operations of National.

Operational RiskOperational risk is the risk of loss resulting from inadequate or failed internal processes, peopleand systems or from external events. Losses can result from fraud, errors by employees, failure todocument transactions properly or to obtain proper internal authorisation, failure to comply withregulatory requirements and conduct of business rules, equipment failures, natural disasters or thefailure of external systems, for example, those of suppliers or counterparties. Although Nationalhas implemented risk controls and loss mitigation actions and substantial resources are devoted todeveloping efficient procedures and to staff training, there are always elements of residualoperational risk which cannot be entirely mitigated.

Liquidity RiskThe inability of any bank, including National, to anticipate and provide for unforeseen decreasesor changes in funding sources could have consequences on such bank's ability to meet itsobligations when they fall due.

Impact of Regulatory ChangesNational is subject to financial services laws, regulations, administrative actions and policies inthe locations in which it operates. Changes in supervision and regulation, in particular inAustralia, could materially affect the business of National, the products and services offered or thevalue of its assets. Although National works closely with its regulators and continually monitorsthe situation, future changes in regulation, fiscal or other policies can be unpredictable and arebeyond the control of National.

National is subject to capital requirements that could limit its operationsNational is subject to capital adequacy guidelines adopted by the Australian Prudential RegulationAuthority ("APRA") for a bank or a bank holding company, which provide for a minimum ratioof total capital to risk-adjusted assets both on a solo basis and on a consolidated basis. National's

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failure to maintain its ratios may result in administrative actions or sanctions against it which mayimpact its ability to fulfil its obligations under the Subordinated Debentures (with the effect thatthe Issuer would not be able to make scheduled payments on the NCIs) or the Preference Shares(if issued)). APRA has recently revised its capital adequacy regime following the introduction ofAustralian equivalent International Financial Reporting Standards. This revised regime becameeffective on 1 July 2006 and the NCIs are being issued under this regime. The revised regimealso provides for transition arrangements and National is working in conjunction with APRA as tothe application of transition provisions to it.

In addition, the risk-adjusted capital guidelines (the "Basel Accord") promulgated by the BaselCommittee on Banking Supervision (the "Basel Committee"), which form the basis for APRA' scapital adequacy guidelines, have recently been revised. In June 2004, the Basel Committeepublished International Convergence of Capital Measurement and Capital Standards, a RevisedFramework ("Basel II"). APRA currently expects to implement Basel II on a common startingdate of I January 2008. The principal changes effected by the revised guidelines include theapplication of risk-weighting (depending upon the credit status of certain customers, using an"internal ratings-based" approach to credit risk, and subject to approval of supervisingauthorities), allocation of risk assets in relation to operational risk and supervisory review of theprocess of evaluating risk measurement and capital ratios. At this time, National is unable topredict how the revised guidelines will affect its calculations of capital and the impact of theserevisions on other aspects of its operations.

Risks relating to the NCIs

NCIs may not be a suitable investment for all investors

Each potential investor in any NCIs must determine the suitability of that investment in light of itsown circumstances. In particular, each potential investor should:

(a) have sufficient knowledge and experience to make a meaningful evaluation of the NCIs,the merits and risks of investing in the NCIs and the information contained orincorporated by reference in this Information Memorandum;

(b) have access to, and knowledge of, appropriate analytical tools to evaluate, in the contextof its particular financial situation, an investment in the NCIs and the impact suchinvestment will have on its overall investment portfolio;

(c) have sufficient financial resources and liquidity to bear all of the risks of an investment inthe NCIs, including where the currency for payments in respect of the NCIs is differentfrom the potential investor's currency;

(d) understand thoroughly the terms of the NCIs; and

(e) be able to evaluate (either alone or with the help of a financial adviser) possible scenariosfor economic, interest rate and other factors that may affect its investment and its abilityto bear the applicable risks.

The NCIs are complex financial instruments. A potential investor should not invest in NCIsunless it has the expertise (either alone or with a financial adviser) to evaluate how the NCIs willperform under changing conditions, the resulting effects on the value of the NCIs and the impactthis investment will have on the potential investor's overall investment portfolio.

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If National's financial condition were to deteriorate, holders could lose all or a part of theirinvestmentIf National's financial condition were to deteriorate, payments of distributions or other paymentson the Subordinated Debentures (and, therefore, the NCIs) or the Preference Shares (if issued)could be suspended and holders would not receive any distributions or other payments. Potentialinvestors should not assume that unfavourable market or other conditions or events will not harmNational's financial condition. If National liquidates, dissolves or winds up, NCI Holders andholders of the Preference Shares (if issued) could lose all or a part of their investment. NoComponent Instrument is a deposit liability of National for the purposes of the Banking Act orany other similar law of any jurisdiction and no Component Instrument will be insured by anygovernmental agency or compensation scheme of Australia or any other jurisdiction.

If National does not issue the Preference Shares pursuant to the terms of the ConvertibleDebentures following the occurrence of the Conversion Event, NCI Holders will not receive themand will continue to hold the NCIs and the LLC Notes will automatically vest in National HeadOffice as assignee (see further Summary of Principal Documents - Terms of the LLC Notes -

Assignment below). In addition, in the event of the liquidation or dissolution of the Trust incircumstances where National has not issued the Preference Shares in redemption of the NCIs,NCI Holders may not receive the full liquidation amount per NCI and the accrued and unpaiddistribution for the then current Distribution Period if the Trust does not have sufficient fundsafter it pays its (.3 editors.

Distributions on the NCIs are subject to payment and other restrictions and are non-cumulative

A Distribution on the NCIs will only be payable if and to the extent that the Trust has sufficientfunds to make the payment of that Distribution. The funds available to the Trust in respect of anyDistribution Payment Date will be limited to the funds it receives in respect of the LLC 2Securities. The funds available to National LLC 2 to make a payment on the LLC 2 Securitieswill, in turn, be limited to the interest received from National LLC I on the LLC Notes. Paymentsof interest on the LLC Notes are limited to payments received by National LLC 1 on theSubordinated Debentures. In addition, interest on the LLC Notes and the SubordinatedDebentures is subject to the payment tests and conditions described in the LLC Notes andSubordinated Debentures (see Summary of Principal Documents - Terms of the LLC Notes andSummary of Principal Documents - Terms of the Subordinated Debentures for details of thesetests and conditions). These conditions include the exercise of the sole discretion of:

(a) in the case of the LLC Notes, the LLC Manager as manager of National LLC I; and

(b) in the case of the Subordinated Debentures, the directors of National.

Distributions will only be paid when so determined and applicable law so permits, if sufficientresources exist and if all the conditions to payment are satisfied. NCI Holders will not be entitledto recover missed Distributions because they are non-cumulative. Accordingly, if Distributionson the NCIs for any Distribution Period are not paid, the NCI Holders will not be entitled toreceive such Distributions (or any payment in respect of such Distributions) whether or not fundsare, or subsequently become, available.

Upon the occurrence of the Conversion Event (see further Summary of Principal Documents -Terms of the Convertible Debentures - Conversion below), unless National is legally unable orotherwise fails to issue the Preference Shares on the scheduled Conversion Date, the NCIs will beredeemed for Preference Shares. Dividends on the Preference Shares are also non-cumulative andsubject to payment tests and conditions (See Summary of Principal Documents - Terms of thePreference Shares below). If the Conversion Event is the failure of the Issuer to pay a

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Distribution in MI on the Nis, holders of the Preference Shares issued as a result of thatConversion Event will also not receive any Dividends on those Preference Shares for thecorresponding Dividend period, unless National pays an Optional Dividend in its absolutediscretion and with the consent of APRA. National will pay Dividends on the Preference Sharesonly if and when declared by the directors. If the directors do not declare all or any part of aDividend payable on any Dividend Payment Date, then holders will have no right to receive thatDividend at any time, even if National pays other Dividends in the future.

Distributions on the NCIs may be restricted by the terms of other similar instruments

The terms of certain of National's outstanding instruments could limit National's ability to makepayments on the Subordinated Debentures, the Convertible Debentures or the Preference Shares(if issued). If the Issuer does not make payments on the NCIs, distributions may not be permittedto be made in respect of other capital instruments National has previously issued having similareconomic rights and benefits as the NCIs (such as certain other Tier 1 capital instruments issuedby National, directly or indirectly). If a scheduled payment is not made in full on those capitalinstruments, Distributions will not be permitted to be made in respect of the NCIs.

Perpetual nature of the NCIs and the Preference Shares

Neither the NCIs nor the Preference Shares (if issued) have a fixed final maturity date and holdershave no rights to call for the redemption of the NCIs or the Preference Shares. Although the NCIsor the Preference Shares (if issued) may be redeemed (subject to APRA's prior written approval)in certain circumstances (including at National's option on the Step-Up Date or on anyDistribution Payment Date thereafter or following the occurrence of a Tax Event, a RegulatoryEvent or an Acquisition Event through the redemption of the Convertible Debentures which will,in turn, trigger a redemption of the NCIs), there are limitations on National's ability to do so.Therefore, holders should be aware that they may be required to bear the financial risks of aninvestment in the NCIs for an indefinite period of time.

If a holder wishes to obtain the cash value of its investment, that holder will have to sell the NCIsor the Preference Shares (if issued). Neither the Distribution rate on the NCIs nor the Dividendrate on the Preference Shares will be adjusted to reflect subsequent changes in interest rates orother market conditions, National's results of operations or financial condition or any decline inthe market price of National's ordinary shares. As a result, a holder may not be able to sell theNCIs or the Preference Shares (if issued) for the amount of that holder's original investment.

NCIs may be redeemed at the option of NationalNational's ability to cause the NCIs to be redeemed may limit the market value of the NCIs (seeSummary of Principal Documents - Terms of the Convertible Debentures and Terms andConditions of the NCIs - Redemption for the circumstances in which this optional redemptionright may be exercised by National). During any period when National may elect to cause theNCIs to be redeemed, the market value of the NCIs generally will not rise substantially above theprice at which they can be redeemed. This also may be true prior to any redemption period. ThePreference Shares (if issued) will be subject to similar redemption rights and, accordingly, theirmarket value may be similarly limited.

In the period post the Step-Up Date, National may be expected to bring about the redemption ofthe NCIs or the Preference Shares (if issued) when its cost of borrowing is lower than thedistribution rate on the NCIs or the Preference Shares (as the case may be). At those times, aninvestor generally would not be able to reinvest the redemption proceeds at an effective rate ashigh as the rate of Distribution on the NCIs or the rate of Dividend on the Preference Shares (asthe case may be) being redeemed and may only be able to do so at a significantly lower rate.

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Potential investors should consider reinvestment risk in light of other investments available at thattime.

NCIs may he converted into Preference Shares

Because NCI Holders will receive Preference Shares when the Conversion Event occurs (unlessNational is legally 'pubic or otherwise fails to issue the Preference Shares at that time), inconnection with any investment decision with regard to the NCIs, investors are also making aninvestment decision with regard to the Preference Shares. Prospective investors should carefullyreview all the information regarding the Preferences Shares contained in this InformationMemorandum.

If NCI Holders receive Preference Shares following the Conversion Event, the trading value ofthose Preference Shares may be lower than the trading value of the NCIs, which may result in alower return upon a sale of those Preference Shares.

SubordinationNational's obligations under the Subordinated Debentures and the Convertible Debentures areunsecured and will rank subordinate and junior in right of payment to National's obligations to itsdepositors and other creditors, including other subordinated creditors, other than subordinatedcreditors holding subordinated indebtedness that by its terms ranks equally with, or junior to, theholders of the Subordinated Debentures and the Convertible Debentures. Accordingly, National'sobligations under the Subordinated Debentures and the Convertible Debentures will not besatisfied unless it can satisfy in full all of its other obligations ranking senior to the SubordinatedDebentures and the Convertible Debentures.

Further, in the event that National is wound-up, liquidated or dissolved, the assets of Nationalwould be available to pay obligations under the Subordinated Debentures only after all paymentshave been made on such senior liabilities and claims.

There are no terms in the NCis, the LLC 2 Securities, the LLC Notes, the SubordinatedDebentures, the Convertible Debentures or the Preference Shares (if issued) that limit National'sability to incur additional indebtedness, including indebtedness that ranks senior to or equallywith the Subordinated Debentures, the Convertible Debentures or the Preference Shares (if issued)or to issue other instruments which rank senior to or equally with the Subordinated Debentures,the Convertible Debentures or the Preference Shares (if issued) (including other Tier 1 capitalsecurities). In addition to the issue of the NCIs, National may issue further Tier I capitalsecurities which are similar to the NCIs in other capital markets. As part of its ongoing capitalmanagement programme, National is currently considering a further Tier I capital issue in theoffshore markets. Whether such an issue proceeds is dependent on market conditions, necessaryapprovals and other factors. if such an issue proceeds, it will be announced to ASX.

Although the NCIs may pay a higher rate of interest than comparable instruments which are notsubordinated, there is a real risk that an investor in NCIs will lose all or some of his investmentshould National become insolvent.

The NCIs and the Preference Shares have limited voting rights

A NCI Holder has limited voting rights (see Terms and Conditions of the NCIs below) at ameeting of NCI Holders. A holder of Preference Shares after the Conversion Date will also havelimited voting rights as a shareholder of National (see Summary of Principal Documents - Termsof the Preference Shares - Voting and Other Rights below). This limits the rights of holders totake action with respect to the NCIs or the Preference Shares (as the case may be).

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In addition, holders acknowledge in the terms of the NC's and in the terms of the PreferenceShares (if issued) that they have no right to apply for the winding-up or administration of anyNational Entity, or k cause a receiver, or a receiver and manager, to be appointed in respect of aNational Entity merely on the grounds that the National Entity does not make a scheduledpayment of Distributions or iterest.

NCI Holders will not receive Preference Shares on the Conversion Date if National is legallyanable or otherwise fails to issue the Preference Shares

If on the Conversion Date National is prohibited by law from issuing the Preference Shares,National will issue the Preference Shares if and when it is no longer prohibited from doing so.

Under current Australian law, National may be prevented from issuing the Preference Shares onthe Conversion Date if:

• National is in liquidation;

• APRA has assumed control of National under the Banking Act 1959 of Australia (the"Banking Act") and APRA does not cause National to issue the Preference Shares; or

• APRA has appointed a statutory manager under the Banking Act to take control ofNational's business and the statutory manager does not cause National to issue thePreference Shares.

See further Summary of Principal Documents - Terms of the Convertible Debentures - Failure toIssue Preference Shares below.

A holder of NC's has no rights as a shareholder of National

A holder of NCIs, will not have any rights conferred on holders of the Preference Shares,including rights to receive any Dividends or other distributions in respect of the Preference Sharesor to vote as a holder of the Preference Shares, until the Preference Shares are issued on theConversion Date.

There is no prior market for NCIs or the Preference SharesThe NCIs and the Preference Shares (if issued) each constitute new issues of securities with noestablished trading market. National cannot predict whether an active or liquid trading market forthe NCIs or the Preference Shares (if issued) will develop or be sustained.

Therefore, investors may not be able to sell their NCIs or their Preference Shares (if issued) easilyor at prices that will provide them with a yield comparable to similar investments that have adeveloped secondary market. Illiquidity may have a severely adverse effect on the market valueof the NCIs or the Preference Shares (if issued).

Modification, waivers and substitutionProvisions in the Trust Deed permit defined majorities to bind all NCI Holders including NCIHolders who did not attend and vote at the relevant meeting and NCI Holders who voted in amanner contrary to the majority.

The Trust Deed also provides that:

(a) the Trustee may, without the consent of the NCI Holders, agree to certain additions andamendments to the Trust Deed (including the NCI Terms) without the consent of NCIHolders; and

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each Component Instrument (other than the NCIs and the Preference Shares (if issued) butinchmfmg the Preference Share Terms prior to the issue of the Preference Shares) may beadded to or amended in certain circumstances without the consent of NCI Holders.

See further Description of the issuer - The Trust - Amendments and Modifications below.

Similar provisions are contained in the terms of the Preference Shares (if issued).

Change of lawThe terms of each instrument (other than the LLC 2 Securities and the LLC 1 Common Securities)are based on Australian law in effect as at the Preparation Date. The terms of the LLC 2Securities and the LLC I Common Securities are based on Delaware law at that date. National,NATL and the Trust are formed under and subject to the laws in force in Australia and NationalLLC 1 and National LLC 2 are formed under and subject to the laws in force in Delaware. Noassurance can be given as to the impact of any possible change to Australian or Delaware law,judicial decision or administrative practice after the Preparation Date.

Exchange rate risks and exchange controls

Distributions and repayments of amounts invested in respect of the NCIs and the PreferenceShares (if issued) will be made in Australian dollars. This presents certain risks relating tocurrency conversions if an investor's financial activities are denominated principally in a currencyor currency unit (the "Investor's Currency") other than Australian dollars. These include therisk that exchange rates may significantly change (including changes due to devaluation ofAustralian dollars or revaluation of the Investor's Currency) and the risk that authorities withjurisdiction over the Investor's Currency may impose or modify exchange controls. Anappreciation in the value of the Investor's Currency relative to Australian dollars would decrease(a) the Investor's Currency-equivalent yield on the NCIs or the Preference Shares (if issued), (b)the Investor's Currency-equivalent value of any repayments of amounts invested in respect of theNCIs or the Preference Shares (if issued) and (c) the Investor's Currency-equivalent market valueof the NCIs or the Preference Shares (if issued).

Government and monetary authorities may impose (as some have done in the past) exchangecontrols that could adversely affect an applicable exchange rate. As a result, investors mayreceive lesser amounts in respect of the NCIs or the Preference Shares (if issued) than expected,or no amounts.

Credit ratings may not reflect all risks

One or more independent credit rating agencies may assign credit ratings to the NCIs. The ratingsmay not reflect the potential impact of all risks related to structure, market, additional factorsdiscussed above, and other factors that may affect the value of the NCIs. A credit rating is not arecommendation to buy, sell or hold securities and may be revised or withdrawn by the ratingagency at any time.

Legal investment considerations may restrict certain investments

The investment activities of certain investors are subject to legal investment laws and regulations,or review or regulation by certain authorities. Each potential investor should consult its legaladvisers to determine whether and to what extent (a) NCIs or, if issued, the Preference Shares, arelegal investments for it, (b) NCIs or, if issued, the Preference Shares, can be used as collateral forvarious types of borrowing and (c) other restrictions apply to its purchase or pledge of any NCIsor, if issued, the Preference Shares. Financial institutions should consult their legal advisors or

(b)

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the appropriate regulators to determine the appropriate treatment of NCIs under any applicablerisk-based capital or similar rules.

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DOCUMENTS INCORPORATED BY REFERENCE

The lb lowing documents are incorporated in, and form part of, this Information Memorandum:

(a) National's Annual Reports on Form 20-F for the financial years ended 30 September 2004and 30 September 2905 (including the audit report and the consolidated audited financialstatements of the National Group and the non-consolidated audited financial statements ofNational for the financial years ended 30 September 2004 and 30 September 2005respectively);

(b) National's Half Year Consolidated Report on Appendix 4D for the six months ended 31March 2006 (including the consolidated unaudited financial statements of the NationalGroup for the six months ended 31 March 2006); and

(c) the statutory documents of National.

Copies of documents incorporated by reference in this Information Memorandum can be obtainedfrom the registered office of National. Requests for such documents should be directed toNational at its offices set out in the Directory at the end of this Information Memorandum.

The documents listed at (a) and (b) above contain financial information on National, as describedin the table below. Other information contained in such documents is incorporated by referenceinto this Information Memorandum for information purposes only.

Balance sheet

Income statement

Cash flow statement

Accounting policies andexplanatory notes

2004 Page 101Form 20-F


2006 Page 20Appendix 4D



2006 Page 19Appendix 4D


2005 Page 1/6Form 20-F

2006 Page 22-23Appendix 4D

2004 Page 103-226Form 20-F

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Review report

Audit reports

Legal and arbitrationproceedings

2005Form 20-F

2006Appendix 4D

2006Appendix 4D

2004Form 20-F

2005Form 20-F

2006Appendix 4D

2005Form 20-F

2006Appendix 4D

Page 117-249

Page 24-80

Page 82

Page 228

1-252

Page 82

Note 44 at page 201-204

Note 16 at page 77-78

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DESCRIPTION OF THE ISSUER

The Trustee

incorporationNational Australia Trustees Limited ("NATL") was incorporated as a public limited companyunder the laws of Australia on 29 December 1989. The ABN of NATL is 80 007 350 405. Itsregistered office is at 105-153 Miller Street, North Sydney, New South Wales 2060, Australia.

NATL will issue the NCIs in its capacity as trustee of the Trust and will acquire and hold theLLC 2 Securities in accordance with the terms of the Transaction Documents. Details of the Trustare set out under Description of the Issuer - The Trust below.

Share Capital

NATL has 5 million fully paid ordinary shares on issue with a paid amount of A$2.5 million. Allof the shares are held by National.

Ownership StructureNATL is a wholly owned direct subsidiary of National.

BusinessThe principal activities of NATL are the provision of trustee, manager, executor, agent,succession and other associated commercial services. NATL is an authorised trustee corporationand holds an Australian Financial Services License under Part 7.6 of the Corporations Act(Australian Financial Services License No. 230703).

ExperienceNATL provides a range of services including custodial and administrative arrangements to thefunds management, superannuation, property, infrastructure and capital markets sectors.

Directors

The directors of NATL are as follows:

Name Business Address Principal Activities

Michael John Sharpe 105-153 Miller Street Non-Executive DirectorNorth SydneyNew South Wales 2060Australia

Robin Edward Clements 105-153 Miller Street Non-Executive DirectorNorth SydneyNew South Wales 2060Australia

Richard Louis Morath 105-153 Miller Street Executive DirectorNorth SydneyNew South Wales 2060Australia

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Neil James McKissock 105-153 Miller Street Non-Executive DirectorNorth SydneyNew South Wales 2060Australia

Powers of the TrusteeThe Trustee has all the powers in respect of the Trust that it is legally possible for a natural personor corporation to have and as though it were the absolute owner of the assets of the Trust andacting in its personal capacity. However, the Trust is a special purpose trust as described underDescription of the Issuer - The Trust - Purpose of the Trust below and, accordingly, specificrestrictions on the activities of the Trustee are included in the Trust Deed to reflect that specialpurpose (see further Description of the Issuer - The Trust - Purpose of the Trust and Descriptionof the Issuer - The Trust - Assets of the Trust below).

Fees and Expenses of the Trustee

Fees

The Trustee is not entitled to a management fee out of the assets of the Trust. However, while theTrustee is a member of the National Group, the Trustee has the benefit of an agreement fromNational in the Deed of Covenant under which the Trustee is entitled to be paid fees by National(see further Summary of Principal Documents - Terms of the Deed of Covenant below). Thisagreement does not apply if the Trustee is not a member of the National Group.

Expenses

While the Trustee is a member of the National Group, the Trustee has the benefit of anundertaking from National in the Deed of Covenant which entitles the Trustee to recover expensesfrom National (see further Summary of Principal Documents - Terms of the Deed of Covenantbelow). This undertaking does not apply if the Trustee is not a member of the National Group.The Trustee is only entitled to make a claim against the assets of the Trust for expenses to theextent that National fails to honour this undertaking or the undertaking does not apply.

Delegation by the TrusteeThe Trustee may authorise any person to act as its agent or delegate to hold title to any Asset,perform any act or exercise any discretion within the Trustee's power, including the power toappoint in turn its own agent or delegate. An agent or delegate may be an associate of the Trusteeor a member of the National Group.

Limitation of liabilityNATL enters into the Transaction Documents and issues the NCIs only in its capacity as trusteeof the Trust and in no other capacity. A liability arising under or in connection with theTransaction Documents or the Trust or in respect of the NCIs is limited to and can be enforcedagainst NATL only to the extent of the Assets of the Trust. This limitation of NATL's liabilityapplies despite any other provision of the Transaction Documents and extends to all liabilities andobligations of NATL in any way connected with any representation, warranty, conduct, omission,agreement or transaction related to the Transaction Documents or the Trust, however, thelimitation will not apply if under a Transaction Document or by operation of law there is a

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reduction in the limitation of NATL's liability as a result of NATL's fraud, negligence or wilfuldefault.

Removal or Retirement of the Trustee

Vohmkny retirementThe Trustee may retire as the trustee of the Trust by giving 30 days' notice to National and theNCI Holders.

Mandatory retirement

The Trustee must retire as trustee if:

(a) the Trustee becomes "insolvent" within the meaning of section 95A of the CorporationsAct;

(b) required by law; or

(e) the Trustee ceases to carry on business as a professional trustee.

When retirement or removal takes effect

The retirement or removal of the Trustee as trustee takes effect when:

(a) a successor trustee is appointed; and

(b) the successor trustee obtains title to, or obtains the benefit of, the Assets, the Trust Deedand each other Component Instrument to which the Trustee is a party in its capacity astrustee.

The successor trustee and each other party to the Transaction Documents will have the samerights and obligations among themselves as they would have had if the successor trustee had beenparty to them at the dates of those documents.

Appointment of successor trusteeIf the Trustee retires or is removed as trustee, the Trustee agrees to use its best endeavours toensure that a successor trustee is appointed as soon as possible. Any successor trustee appointedunder the Trust Deed must be acceptable to National (acting reasonably).

The Trust

The Trust DeedThe Trust was established in and subject to the laws of Victoria, Australia, on 12 September 2006(being the date on which the Trust Deed was executed (the "Pre-Issue Date")), by National or anominee of National (the "Initial NCI Holder") paying an initial settlement amount (the "InitialSettlement Amount") to subscribe for one partly paid NCI (the "Initial NCI") in settlement ofthe Trust. The Initial NCI is to be fully paid when all other NCIs are issued and from that timehave the same rights as the other NCIs.

The detailed terms of the Trust are set out in the Trust Deed.

The Trust will terminate on the earliest of:

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(a) the date specified by the Trustee as the date of termination of the Trust in a notice given toNCI Holders, (which notice the Trustee must give (unless National consents otherwise) ifall the NCIs have been converted into Preference Shares);

(b) the date of the final distribution on dissolution of National; and

(c) the date on which the Trust otherwise terminates in accordance with the Trust Deed or bylaw.

If the law allows, the Trustee may extend the life of the Trust beyond the date set for terminationif in the Trustee's opinion it is in the interests of NCI Holders to do so. However, no NCIs maybe redeemed after the 80th anniversary of the day preceding the day the Trust commenced, unlessthat redemption would not offend the rule against perpetuities, or any other rule of law or equity.

Purpose of the Trust

The Trust has been established as a special purpose entity for the sole purpose of issuing theNCIs, acquiring the LLC 2 Securities and entering into the transactions and associated activitiescontemplated by the Transaction Documents. The terms of the Trust Deed restrict the ability ofthe Trustee to borrow money, grant security and dispose of the LLC 2 Securities in a manner nototherwise contemplated by the Transaction Documents.

As at the Preparation Date, and prior to the issue of the NCIs, the Trust has not commencedoperations (save for the issue of the Initial NCIs) and the Trust will, following the PreparationDate, undertake no activities other than those contemplated by the Transaction Documents.

Capital

The beneficial interest in the Trust will be represented by the NCIs. There will be no ordinaryunits in the Trust and the Trustee will not be permitted to issue any NCIs after the issue Date.

OfficeAll communications in respect of the Trust must flow through the Trustee. The Trust does nothave, nor is it required under Australian law to have, a separate registered office.

Securities

The Trustee (in its capacity as trustee of the Trust) will not issue any units other than the NCIsand will not issue any other securities.

Assets of the Trust

The Trustee is prevented by the terms of the Trust Deed from acquiring an interest in any assetother than:

• the LLC 2 Securities;

• the Preference Shares to be issued to NCI Holders on a conversion;

• interests in bank accounts in which income or capital of the Trust is invested;

• cash, rights and benefits under the Deed of Covenant;

• cash, rights and benefits under the NCI Subscription Agreement;

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• cash, rights and benefits under the Subscription, Sale and Assignment Agreement;

• cash, rights and benefits under the Agency Agreement; and

• income or other rights arising in connection with those assets.

Amendments and Modifications

Each NCI Holder will acknowledge and agree in the Trust Deed that the Trust Deed (including theNCI Terms) may be amended without the consent or approval of NCI Holders, but with theapproval of National in writing and with the approval of APRA (if required), if the Trustee is ofthe opinion that the amendment:

• is of a formal, minor or technical nature;

• is made to cure any ambiguity or correct any manifest error;

• is expedient for the purpose of enabling NCIs to be lodged in the Austraclear System or toremain lodged in the Austraclear System or to be offered for sale or for subscription underthe laws for the time being in force in any place and it is otherwise not considered by theTrustee to be materially prejudicial to the interests of NCI Holders as a whole;

• is necessary to comply with the provisions of any statute or the requirements of anystatutory authority; or

• in any other case, will not materially adversely affect the NCI Holders' rights.

If the Trustee reasonably considers the amendment will materially adversely affect NCI Holders'rights, the amendment may only be made if it has been approved by a Special Resolution.

A "Special Resolution" is defined in the Trust Deed as a resolution passed:

(a) at a meeting of NCI Holders by a majority of at least 75% of the votes cast; or

(b) by NCI Holders representing at least 75% of the aggregate Liquidation Amount of theNCIs signing a document stating they are in favour of the resolution,

in each case as provided in the Trust Deed.

Each NCI Holder will acknowledge and agree in the Trust Deed that each of the ComponentInstruments (other than the NCIs and the Preference Shares (if issued) but including thePreference Share Terms prior to the issue of the Preference Shares) may be amended without theconsent or approval of NCI Holders, but with the approval of National in writing and with theapproval of APRA (if required), if the issuer of the Component Instrument (the "RelevantIssuer") (or, in the case of the Deed of Covenant, the Trustee) is of the opinion that theamendment:

• is of a formal, minor or technical nature;

• is made to cure any ambiguity or correct any manifest error;

• is expedient for the purpose of enabling NCIs to be lodged in the Austraclear System or toremain lodged in the Austraclear System or to be offered for sale or for subscription underthe laws for the time being in force in any place and it is otherwise not considered by the

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Relevant issuer (or, in the case of the Deed of Covenant, the Trustee) to be materiallyprejudicial to the interests of NCI Holders as a whole;

• is necessary to comply with the provisions of any statute or the requirements of anystatutory authority; or

• in any other case, will not materially adversely affect the NCI Holders' rights.

If the Relevant Issuer (or, in the case of the Deed of Covenant, the Trustee) reasonably considersthe amendment will materially adversely affect NCI Holders' rights, the amendment may only bemade if it has been approved by a Special Resolution.

In addition, the Convertible Debenture Terms may be amended without the consent of NCIHolders as described under Summary of Principal Documents - Terms of the Preference Shares -Redemption below.

In any other case, the terms of any Component Instrument (other than the NCIs and the PreferenceShares (if issued) but including the Preference Share Terms prior to the issue of the PreferenceShares) may be amended or added to if the amendment or addition has been approved by aSpecial Resolution.

Notices to NCI HoldersThe Trust Deed contains provisions for notices to NCI Holders to be:

(a) given in writing (which includes a fax or other electronic communication) or in such othermanner as the Trustee determines; and

(b) either:

(i) delivered or sent to the NCI Holder at the NCI Holder's fax number or physical,postal or (if acceptable to the Trustee) electronic address last advised to theTrustee or the Registrar for delivery of notices; or

(ii) given by an advertisement published in the Australian Financial Review or TheAustralian newspapers.

Meetings of NCI Holders

The Trust Deed contains provisions for convening meetings of the NCI Holders to consider anymatter affecting their interests, including any variation of the NCI Terms which requires theconsent of NCI Holders.

NCI Holders will have no voting rights in respect of National or any other National Entity.

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DESCIUPT1ON OF NATIONAL LLC 2

Introduction and Organisational Structure

National Capital instruments [AUDI LLC 2 ("National LLC 2") is a Delaware limited liabilitycompany that will be formed on or about 12 September 2006 under the Delaware LimitedLiability Company Act (the "LLC Act") by filing a certificate of formation with the Secretary ofthe State of Delaware in the United States pursuant to a limited liability company agreement (the"LLC 2 Agreement"). National Capital Holdings I Inc. will be the manager of National LLC 2(the "LLC Manager").

The LLC 2 Agreement provides, among other things, for the issuance by National LLC 2 of oneclass of limited liability company interests, the LLC 2 Securities, which are expected to be issuedconcurrently with this offering. Terms of the LLC 2 Securities are set forth in the LLC 2Agreement. National LLC 2 will not issue any other class of membership interest.

National LLC 2 has agreed to issue the LLC 2 Securities to the Initial Subscriber in considerationfor the transfer by the Initial Subscriber of the LLC Notes and the Convertible Debentures toNational LLC 2.

See further Description of National LLC 2 - Administration below.

The registered Delaware office of National LLC 2 is c/o The Corporation Trust Company,Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware, United States of America,telephone number +1 212 986 9518.

All correspondence in respect of National LLC 2 should be directed to the LLC Manager (seeDescription of National LLC 2 - Administration below).

Sole Activity

National LLC 2 was established for the sole purpose of:

• issuing the LLC 2 Securities to be held by the Issuer;

• using the proceeds of the LLC 2 Securities to acquire the LLC Notes and the ConvertibleDebentures from the Initial Subscriber as provided under Subscription and Sale -Subscription, Assignment and Sale of the Relevant Instruments below; and

• engaging in any related or incidental activities.

National LLC 2 has carried out no operations since its registration other than in relation to thecreation of the LLC 2 Securities and the other transactions contemplated by the TransactionDocuments to which it is a party, including holding the LLC Notes and the ConvertibleDebentures.

Under the Deed of Covenant, National will agree to pay or reimburse National LLC 2 on aquarterly basis for all expenses incurred in connection with the Tier 1 Capital Instrument.However, National will not guarantee any payments under the LLC 2 Securities and no NCIHolder will be permitted to take action against National to enforce the Deed of Covenant.

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LLC 2 Distrilmtions

National LLC 2 expects to pay distributions on the LLC 2 Securities as described under Summaryof Principal Documents - Terms of the LLC 2 Securities - Distributions below. Under applicableDelaware law, National LLC 2 cannot make a Distribution on the LLC 2 Securities to the extentthat at the time of the Distribution, after giving effect to the Distribution, all liabilities of NationalLLC 2 (other than liabilities to the Issuer on account of the LLC 2 Securities) exceed the fairvalue of its assets.

It is expected that the aggregate periodic interest payments on the LLC Notes held by NationalLLC 2 will equal or exceed the aggregate periodic Distribution payments on the LLC 2 Securities.

Administration

National LLC 2 will be solely managed and administrated by the LLC Manager, a wholly-ownedsubsidiary of, and fully controlled by, National, pursuant to and on the terms of a managementagreement to be entered into between National LLC 2 and the LLC Manager (the "LLC 2Management Agreement").

No NCI Holder may participate in the management or administration of National LLC 2.

The registered office of the LLC Manager is do Corporation Service Company, 2711 CentrevilleRoad, Suite 400, Wilmington, Delaware 19808, United States of America, telephone number +1212 986 9518. The business address of the LLC Manager (to which all correspondence should beaddressed) is do National Australia Bank Limited, Level 28, 245 Park Avenue, New York, NewYork 10167, United States of America (attention: Senior Counsel).

The Directors of the LLC Manager are as follows:


Rick Sawers Level 13, 140 William Street,Melbourne, Victoria 3000,Australia

Group Treasurer, NationalAustralia Bank Limited

Bruce Richards 245 Park Avenue, New York,New York, United States of

General Manager - Americas,National Australia Bank

America Limited

Mark Cahaney 245 Park Avenue, New York,New York, United States of

Head of Legal & Risk -Americas, National Australia

America Bank Limited

Dwayne McCallum 245 Park Avenue, New York,New York, United States ofAmerica

Senior Vice President & Headof Finance - Americas,National Australia BankLimited

Thomas DeMaio 245 Park Avenue, New York,New York, United States of

Senior Vice President, MarketsDivision - Americas, National

America Australia Bank Limited

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Under the terms of the LLC 2 Management Agreement, the LLC Manager may appoint asuccessor LLC Manager, which must be a wholly-owned direct or indirect subsidiary of National.National will also undertake I the Deed of Covenant to procure that the LLC Manager will at alltimes be a directly or indirectly wholly-owned subsidiary of National.

The LLC Manager is also the manager of National LLC 1, which is separately established andwhose assets are segregated from those of National LLC 2.

Capitalisation and Indebtedness

Capitalisation

As at the Issue Date, the capitalisation of National LLC 2 will consist of A$400,000,000 inaggregate liquidation amount of LLC 2 Securities.

Indebtedness

Since the date of its registration, National LLC 2 has not had any loan capital outstanding, has notincurred any borrowings, has had no contingent liabilities, has not granted any guarantees anddoes not intend to have outstanding any such loan capital, incur any such borrowings, have anysuch contingent liabilities or grant any such guarantees other than in connection with theTransaction Documents.

Legal and arbitration proceedings

Since the date of its formation, National LLC 2 has not been involved in or threatened with anygovernmental, legal or arbitration proceedings which may have, or have had in the recent past,significant effects on National LLC 2's and/or the National Group's position or profitability.

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DESCRIPTION OF NATIONAL LLC 1

Introduction and Organisational Structure

National Capital Instruments [AUDI LLC I ("National LLC 1") is a Delaware limited liabilitycompany that will be formed on or about 12 September 2006 under the LLC Act by filing acertificate of formation with the Secretary of the State of Delaware in the United States pursuantto a limited liability company agreement (the "LLC 1 Agreement"). The LLC Manager will bethe manager of National LLC I.

The LLC 1 Agreement provides, among other things, for the issuance by National LLC 1 of oneclass of limited liability company interests in the form of common securities (the "LLC 1Common Securities"), which are expected to be issued concurrently with this offering and willbe held by National Capital Holdings I Inc. Terms of the LLC 1 Common Securities are set forthin the LLC 1 Agreement.

See further Description of National LLC 2 - Administration below.

National LLC 1 has agreed to issue the LLC Notes to the Initial Subscriber and to subscribe forthe Subordinated Debentures from National New York Branch.

The registered office of National LLC 1 is c/o The Corporation Trust Company, CorporationTrust Center, 1209 Orange Street, Wilmington, Delaware, United States of America, telephonenumber +1 212 986 9518.

All correspondence in respect of National LLC 1 should be directed to the LLC Manager (seeDescription of National LLC 2 - Administration above).

Sole Activity

National LLC I was established for the sole purpose of:

• issuing the LLC 1 Common Securities to National Sub;

• issuing the LLC Notes as provided under Subscription and Sale - Subscription,Assignment and Sale of the Relevant Instruments below;

• investing the proceeds of the LLC Notes in the Subordinated Debentures;

• investing the proceeds of the LLC 1 Common Securities in a non-interest bearing accountwith National; and

• engaging in any related or incidental activities.

National LLC 1 has carried out no operations since its registration other than in relation to thecreation of the LLC 1 Common Securities and the LLC Notes and the other transactionscontemplated by the Transaction Documents to which it is a party, including holding theSubordinated Debentures.

Under the Deed of Covenant, National will agree to pay or reimburse National LLC 1 on aquarterly basis for all expenses incurred in connection with the Tier 1 Capital Instrument.However, National will not guarantee any payments under the LLC Notes and no NCI Holder willbe permitted to take action against National to enforce the Deed of Covenant.

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Dividends and LLC Note Interest

National LLC I expects to dividend any residual income after payments on the LLC Notes andoperating expenses to the holder of the LLC 1 Common Securities. Under applicable Delawarelaw, National LLC I cannot make a distribution on the LLC 1 Common Securities to the extentthat at the time of the distribution, after giving effect to the distribution, all liabilities of NationalLLC 1 (other than liabilities to National Capital Holdings I Inc. on account of the LLC 1 CommonSecurities) exceed the fair value of its assets.

It is expected that the aggregate periodic interest payments on the Subordinated Debentures heldby National LLC I will equal or exceed the aggregate periodic interest payments on the LLCNotes.

Administration

National LLC I will be solely managed and administered by the LLC Manager pursuant to and onthe terms of a management agreement to be entered into between National LLC 1 and the LLCManager (the -LLC 1 Management Agreement").

No NCI Holder may participate in the management or administration of National LLC 1.

The registered office of the LLC Manager and the Directors of the LLC Manager are as set outunder Description of National LLC 2 - Administration above.

Under the terms of the LLC I Management Agreement, the LLC Manager may appoint asuccessor LLC Manager, which must be a wholly-owned direct or indirect subsidiary of National.National will also undertake in the Deed of Covenant to procure that the LLC Manager will at alltimes be a directly or indirectly wholly-owned subsidiary of National.

The LLC Manager is also the manager of National LLC 2, which is separately established andwhose assets are segregated from those of National LLC 1.

Capitalisation and Indebtedness

CapitalisationAs at the Issue Date, the capitalisation of National LLC I will consist of A$400,000,000 inaggregate liquidation amount of LLC I Common Securities.

IndebtednessSince the date of its registration, National LLC 1 has not had any loan capital outstanding, has notincurred any borrowings, has had no contingent liabilities, has not granted any guarantees anddoes not intend to have outstanding any such loan capital, incur any such borrowings, have anysuch contingent liabilities or grant any such guarantees other than in connection with theTransaction Documents.


Since the date of its formation, National LLC 1 has not been involved in or threatened with anygovernmental, legal or arbitration proceedings which may have, or have had in the recent past,significant effects on National LLC l's and/or the National Group's position or profitability.

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DESCRIPTION OF NATIONAL

Information about National

History and development of National

The legal name of National is "National Australia Bank Limited" and it trades commercially as"National Australia Bank" and, particularly within Australia, as "National" or "nab".

National was incorporated on 23rd June, 1893.

National is a public limited company incorporated in the Commonwealth of Australia and itoperates under Australian legislation including the Corporations Act 2001 of Australia (the"Corporations Act"). Its registered office is Level 13, 140 William Street, Melbourne,Victoria 3000, Australia (telephone number +61 3 8641 3500) and its Australian BusinessNumber ("ABN") is 12 004 044 937.

Business Overview

Principal activities

The National Group is an international financial services group, providing a comprehensive andintegrated range of financial products and services. Globally, as at 31 March 2006, the NationalGroup had:

• total assets of A$459 billion;

• A$96 billion in funds under management and administration; and

• A$442 billion in assets under custody and administration.

The principal activities of the National Group are banking services, credit and access cardfacilities, leasing, housing and general finance, international banking, investment banking, wealthmanagement, funds management, life insurance, and custodian, trustee and nominee services.

The National Group business operating model runs along regional lines for Australia, Europe andNew Zealand, together with Institutional Markets & Services, which operates on a global basis.This operating model is a change to the model that operated before 2005_

Total Australia

The Australian and Asian-based businesses are managed as one regional operation. This hasresulted in the former operations of Financial Services Australia, the Australian components ofCorporate & Institutional Banking's Corporate Banking, National Custodian Services andTransactional Solutions units, the Asian component of Corporate & Institutional CorporateBanking, and the Australian components of Wealth Management, being managed as TotalAustralia.

As at 31 March 2006, Total Australia had 22,871 full-time equivalent employees.

Total UK

The National Group's UK businesses are now managed as one regional operation. This hasresulted in the former operations of Financial Services Europe, the European component ofCorporate & Institutional Banking's Corporate Banking unit, and the European components ofWealth Management, being managed as Total UK.

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As at 31 March 2006, Total UK bad 9,246 full-time equivalent employees.

Total New Zealand

The New Zealand-based businesses of the National Group are now managed as one regionaloperation. This has resulted in the former operations of Financial Services New Zealand, the NewZealand component of Corporate & Institutional Banking's Corporate Banking unit, and the NewZealand components of Wealth Management, being managed as Total New Zealand.

As at 31 March 2006, Total New Zealand had 4,628 full-time equivalent employees.

Institutional Markets & Services

Institutional Markets & Services ("IMS") is a global business with operations in Australia, theUnited Kingdom, New Zealand, Asia and the United States. Key business lines include GlobalMarkets, Corporate Finance, Structuring & Investments, and Institutional Banking - IMS'srelationship management unit in Australia incorporating blue chip corporate clients andorganisations served by National's Financial Institutions group globally. In Corporate Finance,IMS provides funding solutions via Project Finance, Leveraged Finance, Structured AssetFinance, Structured Property, Mezzanine Finance and non-quoted equity product. The Structuring& Investments group is responsible for managing the asset portfolio and structuring investmentproducts across such areas as Structured Finance, Alternative Investments, Capital MarketsSolutions, Securitisation and Strategic Transactions.

As at 31 March 2006, Institutional Markets & Services had 1,944 full-time equivalent employees.

Corporate Centre and Global Funding

The National Group's other services segment comprises Corporate Centre and Global Funding,which are not considered to be separate reportable operating segments. Corporate Centrecomprises Corporate Development, Financial Risk Management, People & Culture, Technology,and the office of the CEO.

As at 31 March 2006, these areas had 609 full-time equivalent employees.

Principal markets

The principal markets in which the National Group operates are banking services, credit andaccess card facilities, leasing, housing and general finance, international banking, wealthmanagement, funds management, life insurance and custodian, trustee and nominee services.

Organisational Structure

National is the holding company for the National Group, as well as being the main operatingcompany. As at the Preparation Date, National had four main operating subsidiaries: the Bank ofNew Zealand, MLC Limited, National Australia Financial Management Limited and ClydesdaleBank PLC (which includes the whole business and undertaking carried on under the YorkshireBank brand).

Trend Information

There has been no material adverse change in the prospects of National since 31 March 2006.

There are no known trends, uncertainties, demands, commitments or events that are reasonablylikely to have a material effect on National's prospects for at least the current financial year, otherthan as disclosed in the Financial Reports (as defined in Description of National - Financial

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Information concerning National's Assets and Liabilities, Financial Position and Profits andLasses - Historical financial in ton below) of National (as incorporated by reference in thisInformation Memorandinn) and the contingent liabilities described under Description of National- Legal and arbitration proceedings below.

Profit Forecasts or Estimates

National does not intend to make or imply any profit forecasts or profit estimates in thisInformation Memorandum. No statement contained in this Information Memorandum should beinterpreted as such a forecast or estimate.

Administrative, Management and Supervisory Bodies

The name and function of each of the Directors of National are listed below. The businessaddress of each Director is Level 13, 140 William Street, Melbourne, Victoria 3000, Australia.

John StewartManaging Director, Group Chief Executive Officer and an Executive Director of NationalEquities Limited.

Michael J MinerDirector, Finance & Risk, Group Chief Financial Officer and an Executive Director of NationalEquities Limited.

Ahmed FahourExecutive Director, Chief Executive Officer, Australia, and an Executive Director of NationalEquities Limited.

Michael A Chaney

Non-Executive Director, Chairman and a Non-Executive Director of National Equities Limited.

Peter J B DuncanNon-Executive Director, Chairman of the Remuneration Committee and a Non-ExecutiveDirector of National Equities Limited.

Daniel T GilbertNon-Executive Director, member of the Principal Board Audit Committee and a Non-ExecutiveDirector of National Equities Limited.

Paul J RizzoNon-Executive Director, member of the Principal Board Audit Committee, Chairman of thePrincipal Board Risk Committee and a Non-Executive Director of National Equities Limited.

Jillian S SegalNon-Executive Director, member of the Remuneration Committee, member of the PrincipalBoard Risk Committee and a Non-Executive Director of National Equities Limited.

John G Thorn

Non-Executive Director, Chairman of the Principal Board Audit Committee and a Non-ExecutiveDirector of National Equities Limited.

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Geoffrey A Tomarmson

Non-Executive Director, member of the Remuneration Committee and a Director of the followingNational Group companies: National Equities Limited, MLC Holdings Limited, MLC Limited,MLC Investments Limited, National Wealth Management Holdings Limited, Your ProsperityLimited, Heritage Management Limited, National Australia Financial Management Limited andNational Australia Fund Management Limited.

G Malcolm WilliamsonNon-Executive Director, Chairman of National Australia Group Europe Limited and a Non-Executive Director of National Equities Limited.

T Kerry McDonaldNon-Executive Director, Chairman of Bank of New Zealand, member of the Principal BoardAudit Committee and a Non-Executive Director of National Equities Limited.

Patricia A Cross

Non-Executive°Director, member of the Principal Board Risk Committee and a Non-ExecutiveDirector of National Equities Limited.

There are no conflicts of interest between any duties of these people to National and their privateinterests or their other duties.

Major Shareholders

National is a public limited company. As at 31 July 2006, the following shareholders each heldmore than 1% of the issued share capital of National:

• National Nominees Limited (13.13%)

• J.P. Morgan Nominees Australia Limited (10.96%)

• Westpac Custodian Nominees Limited (10.08%)

• Citicorp Nominees Pty Limited (3.11%)

• ANZ Nominees Limited (3.04%)

• Cogent Nominees Pty Limited (1.55%)

• Queensland Investment Corporation (1.12%)

• AMP Life Limited (1.08%)

There are several provisions of Australian law that are relevant to the ability of any person to gaincontrol of National.

Mergers, acquisitions and divestments of Australian public companies listed on the AustralianStock Exchange (such as National) are regulated by detailed and comprehensive legislation andthe rules and regulations of the Australian Stock Exchange.

In summary, under the Corporations Act, a person must not acquire a relevant interest in issuedvoting shares in an Australian listed company if, broadly, because of the transaction, that person's

40

or someone else's voting power in the company increases from 20% or below to more than 20%,or from a starting point that is above 20% and below 90%, unless those shares are acquired in amanner specifically permitted by law. This restriction also limits the options available to ashareholder wanting to sell a shareholding of more than 20% in an Australian listed company.

Australian law also regulates acquisitions which would have the effect, or be likely to have theeffect, of substantially lessening competition in a market in Australia, in a state or in a territory ofAustralia.

Acquisitions of certain interests in Australian listed companies by foreign interests are alsosubject to review and approval by the Treasurer of the Commonwealth of Australia ("AustralianTreasurer").

There are also specific limitations on the acquisition of a shareholding in a bank under theFinancial Sector (Shareholdings) Act 1998 of Australia (the "FSSA"). Under the FSSA, a person(including a company) must not acquire an interest in an Australian financial sector companywhere the acquisition would take that person's voting power (which includes the voting power ofthe person's associates) in the financial sector company to more than 15% of the voting power ofthe financial sector company without first obtaining the Australian Treasurer's approval. Even if aperson has less that 15% of the voting power, the Australian Treasurer has the power to declarethat a person has practical control of that company and, by applying for an order from the FederalCourt of Australia may require the person to relinquish that control. The definition of a financialsector company includes banks such as National.

Financial Information concerning National's Assets and Liabilities, Financial Position andProfits and Losses

Historical financial information

The following financial information in relation to National for its financial years ended30 September 2004 and 30 September 2005 is contained in its Annual Reports on Form 20-F forthe years ended 30 September 2004 and 30 September 2005 respectively (the "Full YearReports") and in its Half Year Consolidated Report on Appendix 4D for the six months ended 31March 2006 (the "2006 Half Year Report" and, together with the Full Year Reports, the"Financial Reports") (at the locations listed) which are incorporated by reference in thisInformation Memorandum:

• the balance sheet for each such year (at pages 101, 115 and 20 respectively, referred to asthe "Statement of Financial Position");

• the income statement for each such year (at pages 100, 114 and 19 respectively, referredto as the "Statement of Financial Performance");

• the cash flow statement for each such year (at pages 102, 116 and 22-23 respectively,referred to as the "Statement of Cash Flows"); and

• the accounting policies and explanatory notes (at pages 103-226, 117-249 and 24-80respectively, referred to as the "Notes to the financial statements").

The financial information relating to National in the Full Year Reports described above andincorporated by reference into this Information Memorandum has been prepared in accordancewith Australian generally accepted accounting principles ("AGAAP"). However, the financialinformation relating to National in the 2006 Half Year Report described above and incorporated

41

by reference into this Information Memorandum has been prepared in accordance with theAustralian equivalents to international financial reporting standards ("IFRS") ("MFRS").

There may have been material differences in the financial information had the same accountingstandards been applied to each of the Financial Reports.

The financial statements referred to above contain both National's own statements andconsolidated statements for the National Group.

See further Documents Incorporated by Reference above.

Auditing of historical annual financial informationThe historical annual financial information referred to above has been audited; please see theAuditors' Statements at page 228 of the Annual Report on Form 20-F for the year ended 30September 2004 and at pages 251 and 252 of the Annual Report on Form 20-F for the year ended30 September 2005 which are incorporated by reference in this Information Memorandum.


Except as listed below, there are no governmental, legal or arbitration proceedings (including anysuch proceedings which are pending or threatened of which National is aware) in the 12-monthperiod before the date of this Information Memorandum which may have, or have had in therecent past, significant effects on the financial position or profitability of National and/or that ofthe National Group.

On 29 August 2003, a civil class action complaint was filed in the US District Court, SouthernDistrict of New York, against the National Group and others for alleged violations of the USfederal securities law relating primarily to disclosure concerning the valuation of the mortgageservicing rights held by HomeSide US (sold in October 2002). The complaint failed to specifyany quantum of damages. The plaintiffs in the complaint filed their consolidated amended classaction complaint on 30 January 2004, and the National Group moved to dismiss the consolidatedamended class action complaint on 11 March 2004. It is anticipated that the court will rule on themotion to dismiss during the 2006 financial year.

On 26 February 2004, National announced that it had received a voluntary document request fromthe US Securities and Exchange Commission ("SEC") as part of an investigation into certainAustralian registrants and public accounting firms. The document request covers National andcontrolled entities and includes issues relating to audit independence. In addition, National hasprovided certain information to the SEC about the accounting and internal controls of Nationaland its controlled entities, including the foreign currency options trading matter and HomeSideUS.

For further information on contingent liabilities of the National Group, refer to note 44 in thefinancial report included in National's Annual Report on Form 20-F for the year ended30 September 2005 incorporated by reference into this Information Memorandum. Thesecontingent liabilities include amended assessments from the Australian Tax Office regardingExCaps and amended assessments from the New Zealand Inland Revenue Department.

Recent eventsNational continues to consider a range of options to optimise its corporate structure to bestsupport the bank's operations domestically and internationally.

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A non-operating hokfing company structure is one of the options being considered in response tothe changing regulatory environment and its impact on capital and for future flexibility to delivershareholder value.

Consideration of various structural options involves a range of complex issues and the analysis,and any subsequent decision on a particular path, are expected to take some time to complete.National is currently participating in industry-wide consultation with regulators in relation to thematter.

As part of any structural review process, National remains committed to retaining the existinglevel of credit ratings for the National Group.

Any non-operating holding company would continue to be regulated by APRA.

Once any proposal is sufficiently advanced stakeholders will be consulted.

There are no recent events particular to National that are, to a material extent, relevant to theevaluation of its solvency.

Significant change in the financial or trading position of National

There has been no significant change in the financial or trading position of the National Groupsince 31 March 2006.

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TERMS AND CONDITIONS OF THE NCIs

The following ore the terms end conditions of the NCIs in the form in which they will be set out inthe Trust Deed These terms and conditions are subject to the provisions of the Trust Deed.

1 Liquidation Amount

Each NCI will be issued with a Liquidation Amount of $50,000. Each NCI must be paidfor in full on application.

2 Form and ranking

2.1 Form

Each National Capital Instrument (NCI) is a unit in the Trust conferring an undividedshare in the beneficial interest in the assets of the Trust. A NCI is Redeemable for cashand Convertible into a Preference Share according to these NCI Terms. NCIs do notrepresent deposits or securities of National, are not guaranteed by National and a NCIHolder has no claim on National for payment of any amount in respect of the NCIs.

NCIs are issued according to the Trust Deed of which these NCI Terms form part.

2.2 Entries in the Register

NCIs are issued in registered form by entry in the Register.

2.3 No certificates

No certificates will be issued in respect of any NCIs unless the Trustee determines thatcertificates should be available or they are required by any applicable law.

2.4 Clearing system

NCIs may be held in the Austraclear System. If NCIs are held in the Austraclear System,the rights of the members of the Austraclear System and any person claiming through orunder a member holding an interest in those NCIs are subject to the AustraclearRegulations. The Trustee is not responsible for anything the Austraclear System does oromits to do.

2.5 Ranking

Subject to the Trust Deed, each NCI ranks equally with all other NCIs in all respects andsubordinate to all creditors of the Trust.

3 Distributions

3.1 Distributions

Subject to these NCI Terms, each NCI entitles the NCI Holder on a Record Date toreceive on the relevant Distribution Payment Date a distribution of the DistributableAmount for the Distribution Period ending on that Distribution Payment Date(Distribution) calculated according to the following formula:

44

Distribution Distribution Rate x Liquidation Amount x D365

where:

Distribution Rate (expressed as a percentage per annum) is calculated accordingto the following formula:

Distribution Rate = Bank Bill Rate + Margin

where:

Bank Bill Rate (expressed as a percentage per annum) means, for aDistribution Period, the average mid-rate for bills of a term of 90 dayswhich average rate is displayed on Reuters page BBSW (or any pagewhich replaces that page) on the first Business Day of that DistributionPeriod, or if there is a manifest error in the calculation of that average rateor that average rate is not displayed by 10:30am (Sydney time) on thatdate, the rate specified in good faith by National at or around that time onthat date having regard, to the extent possible, to:

(a) the rates otherwise bid and offered for bills of a term of 90 days orfor funds of that tenor displayed on Reuters page BBSW (or anypage which replaces that page) at that time on that date; and

(b) if bid and offer rates for bills of a term of 90 days are nototherwise available, the rates otherwise bid and offered for fundsof that tenor at or around that time on that date;

Margin (expressed as a percentage per annum) means, for a DistributionPeriod:

(a) up to (and including) the Step-Up Date, the Initial Margin; and

(b) from (but not including) the Step-Up Date, the Initial Margin plus1.00% per annum; and

D means in respect of:

(a) the first Distribution Payment Date, the number of days from (butnot including) the Issue Date to (and including) the firstDistribution Payment Date; and

(b) each subsequent Distribution Payment Date, the number of daysfrom (but not including) the preceding Distribution Payment Dateto (and including) that Distribution Payment Date.

3.2 Distribution Payment Dates

The Distribution Payment Dates are each 31 March, 30 June, 30 September and 31December, commencing on 31 December 2006, until the date on which the NCIs areRedeemed or Converted in accordance with these NCI Terms (and, if such date is also aDistribution Payment Pate, including such date).

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If aDistannion Payment Date is a day which is not a Business Day, then that dayremains the Distrintion Payment Date and the Distribution scheduled to be paid on thatday will be paid on the next day which is a Business Day without any adjustment of theamotmt of the Distribution or any other payment in respect of the delay in payment.

3.3 Distributions subject to the Trust having Distributable Amount

(a) The payment of a Distribution, including payment of any gross-up payable underclause 7.2 ("Gross-up"), is subject to the Trust having a sufficient DistributableAmount during the relevant Distribution Period.

(b) The Trust will not have a sufficient Distributable Amount in a Distribution Periodif, for any reason, (including because an APRA Condition has occurred) adistribution scheduled to be paid for that Distribution Period on any of theComponent Instruments has not been paid or has not been paid in full or is subjectto a withholding or deduction for which the issuer of that instrument is notrequired to gross up.

(c) If, in any Distribution Period, the Distributable Amount is less than or greater thanthe amount which is required to pay the scheduled Distribution in respect of eachNCI in full, the NCI Holder will receive its share of the Distributable Amount inaccordance with the Trust Deed.

3.4 Distributions are non-cumulative

Distributions are non-cumulative. If all or any part of a Distribution is not paid (anUnpaid Distribution) on or within seven days after the relevant Distribution PaymentDate because of the restrictions in clause 3.3 ("Distributions subject to the Trust havingDistributable Amount"), the Trustee has no liability to pay the Unpaid Distribution and,notwithstanding the ability of the Issuer to make an Optional Distribution, the NCI Holderhas no claim in respect of such Unpaid Distribution. No interest accrues on any unpaidDistribution or Optional Distribution and the NCI Holder has no claim or entitlement inrespect of interest on any Unpaid Distribution or Optional Distribution.

3.5 Restrictions in the case of non-payment

Subject to clause 3.6 ("Exceptions to restrictions"), if:

(a) a Distribution (including any gross-up on that Distribution payable underclause 7.2 ("Gross-up")) has not been paid in full on the Distribution PaymentDate because of the restrictions in clause 3.3 ("Distributions subject to the Trusthaving Distributable Amount"); or

(b) a Conversion Event has occurred as a result of the Trustee for any reason notpaying in full the Distribution payable on the NCIs on any Distribution PaymentDate,

National must not without approval of an Ordinary Resolution passed by NCI Holders:

(i) pay any interest, dividends or similar distributions on any other capital

instruments of National which rank for dividends equal with or junior tothe Preference Shares (as if such Preference Shares were issued); or

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(ii) redeem, buy-back or reduce capital on any other capital instruments ofNational which rank for return of capital in a winding up equal with orjunior to the Preference Shares (as if such Preference Shares were issued),

in each case other than by way of pro rata payments on the NCIs and the other capitalinstruments of National which rank for distributions or return of capital in a winding up(as the case may be) equal with the Preference Shares and unless and until, since the dateof the failure to pay a Distribution as stated in clause 3.5(a) or the occurrence of aConversion Event as stated in clause 3.5(b):

(A) National shall have paid in full, either:

(I) consecutive Distributions on the NC's on each

Distribution Payment Date during the 12 month periodfollowing the non-payment of the Distribution; or

(2) with APRA's prior written approval, an optionalDistribution equal to the unpaid amount of the scheduledDistributions for the period of 12 months prior to the dateof payment of the optional Distribution (OptionalDistribution); or

(B) all NCIs have been:

(1) Redeemed; or

(2) Converted and National is permitted to do so inaccordance with the Preference Share Terms.

3.6 Exceptions to restrictions

The foregoing restrictions do not apply to:

(a) a redemption, buy-back or return of capital in connection with:

(i) any employment contract, benefit plan or other similar arrangement;

(ii) any dividend reinvestment plan or shareholder share purchase plan; or

(iii) the issuance of National's shares, or securities convertible into orexercisable for such shares, as consideration in an acquisition entered intoprior to the occurrence of the Unpaid Distribution or the ConversionEvent;

(b) an exchange, redemption or conversion of any class of National's shares, or any

shares of a subsidiary of National, for any class of National's shares, or any classof National's indebtedness for any class of National's shares;

(c)

the purchase of fractional interests in National's shares under the conversion orexchange provisions of the shares or the security being converted or exchanged;

(d)

any payment or declaration of a dividend in connection with any shareholder'srights plan or the redemption or repurchase of rights pursuant to the plan;

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(c) any dividend in the form of shares, warrants, options or other rights where the

dividend shares or the shares issuable upon exercise of such warrants, options orother rights are the same class of shares as those on which the dividend is beingpaid or rank equal or junior to those shares; or

(f) any capital raising through a rights issue.

4 Redemption

4.1 Redemption

If NCIs are to be Redeemed, on the Redemption Date the Trustee must pay to the NCIHolder the Redemption Price in respect of each NCI which is Redeemed (Redemption).

4.2 Redemption by Trustee

If National redeems:

(a) some or all of the Convertible Debentures on the Step-Up Date;

(b) some or all of the Convertible Debentures on a Distribution Payment Date afterthe Step-Up Date; or

(c) all (but not some) of the Convertible Debentures on or following the occurrenceof a Tax Event, an Acquisition Event or a Regulatory Event,

and National LLC 2 accordingly redeems the LLC 2 Securities, the Trustee must Redeema corresponding number of NCIs upon receipt of the proceeds of redemption of the LLC 2Securities.

4.3 Redemption Price

The Redemption Price is equal to the Par Redemption Amount.

The Redemption Price comprises a repayment of the NCI Holder's capital investment inthe NCIs to the extent of the Liquidation Amount and an amount of income to the extentthat the Redemption Price exceeds the Liquidation Amount.

4.4 Redemption Notice

Before it Redeems, the Trustee must give a Redemption Notice which must state:

(a) the Redemption Date, being a date no less than 20 Business Days after the date ofthe Redemption Notice; and

(b) if less than all NC1s are being Redeemed on the Redemption Date, state theproportion of NCIs to be Redeemed on that Redemption Date.

A Redemption Notice is irrevocable once given and constitutes a promise by the Trustee,subject to receipt of the proceeds of the redemption of a corresponding number of theLLC 2 Securities, to Redeem the NCIs specified in the Redemption Notice on theRedemption Date.

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4.5 Partial Redemption

If some bet not all NCIs are Redeemed the Trustee must, in each case, endeavour to treatall NCI Holders on an approximately proportionate basis but may discriminate to takeaccount of the effect on marketable parcels and other logistical considerations.

5 Conversion

5.1 Meaning of Conversion

Conversion of a NCI means that the NCI is redeemed by the Trustee either delivering, ordirecting National to issue, the Preference Share to the NCI Holder on the ConversionDate.

5.2 Conversion

The NCIs are to be Converted when the first of the following events occurs (theConversion Event):

(a) the Business Day prior to 30 September 2055;

(b) National Head Office gives a National Conversion Notice (which National HeadOffice may do in its absolute discretion);

(c) a scheduled Distribution is not paid in full for any reason on or within sevenBusiness Days after any Distribution Payment Date;

(d) National LLC I or National LLC 2:

(i) ceases to be managed by a wholly-owned subsidiary of National ; or

(ii) is wound up or dissolved;

(e) an order is made or effective resolution is passed for the winding up of National;

(f) an APRA Capital Event; or

(g) the Redemption Price is not paid in full for any reason on or within sevenBusiness Days of a Redemption Date.

5.3 Conversion Dates

The Conversion Date will be, if the Conversion Date occurs under:

(a) clause 5.2(a), 5.2(d) or 5.2(e) ("Conversion"), the date of the Conversion Event;

(b) clause 5.2(b) ("Conversion"), the date specified in National Conversion Notice(which must be no later than 20 Business Days after the date of NationalConversion Notice); or

(c) clause 5.2(c), 5.2(0 or 5.2(g) ("Conversion"), the date which is 10 Business Daysafter the date the Conversion Event occurs.

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5.4 Conversion Notice

Except where clause 5.2(a) ("Conversion") applies, the Trustee must give a ConversionNotice stating the Conversion Date in accordance with clause 5.3 ("Conversion Dates"):

(a) where clause 5.2(b) applies, immediately on receipt of a National ConversionNotice; and

(b) in any other case within 3 Business Days of the Conversion Event.

A Conversion Notice is irrevocable once given. Failure to give a Conversion Noticewhen required by this clause 5.4 ("Conversion Notice") does not affect the obligation ofNational to Convert.

5.5 Failure to Convert

If on a Conversion Date, a Preference Share is not issued or delivered in respect of a NCI,that NCI remains on issue until the Preference Share is issued or delivered to the NCIHolder or the NCI Holder receives the Redemption Price in accordance with clause 4("Redemption"). This clause 5.5 ("Failure to Convert") does not affect the obligation ofNational to issue the Preference Share.

6 Redemption and Conversion common provisions

6.1 Effect of Redemption or Conversion

Upon Redemption or Conversion of a NCI, and payment of the Redemption Price or theissue of the Preference Share and payment of any amount due and payable on theConversion Date, in both cases, in respect of that NCI, all other rights conferred, orrestrictions imposed, by that NCI will no longer have effect.

6.2 NCI Holder acknowledgements

Each NCI Holder irrevocably:

(a) upon a Conversion, consents to becoming a member of National and agrees to bebound by the Preference Share Terms;

(b) agrees it is obliged to accept the Preference Shares upon a Conversion

notwithstanding anything which might otherwise affect Conversion including:

(i) any change in the financial position of National since the Issue Date;

(ii) any disruption to the market or potential market for the Preference Sharesor to capital markets generally;

(iii) any breach by any National Entity of any obligation in connection withthe Tier I Capital Instrument; or

(iv) it being impossible or impracticable to sell or otherwise dispose ofPreference Shares;

(c) agrees to provide to the Trustee any information the Trustee considers necessaryor desirable to give effect to a Redemption or a Conversion;

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(d) appoints the Trustee as its agent and attorney with power in the name and on

behalf of the NCI Holder to do all things necessary to give effect to a Redemptionor a Conversion, including:

(i) completing and executing such instruments for and on the NCI Holder'sbehalf as the Trustee considers necessary or desirable to give effect to aRedemption or a Conversion; and

(ii) appointing in turn its own agent or delegate;

(e) acknowledges and agrees that a NCI Holder has no right to request a Redemption

or a Conversion;

(f) acknowledges and agrees that a NCI Holder has no right to apply for any NationalEntity to be wound up, or placed in administration, or to cause a receiver, or areceiver and manager, to be appointed in respect of a National Entity merely onthe grounds that a National Entity does not pay a Distribution or interest whenscheduled under any Component Instrument; and

(g) acknowledges and agrees that these NCI Terms contain no events of default.Accordingly (but without limitation) failure to pay in full, for any reason, aDistribution on the scheduled Payment Date will not constitute an event ofdefault.

7 Payments to NCI Holders

7.1 Calculation of payments

All calculations of payments will be rounded to four decimal places. For the purposes ofmaking any payment in respect of a NCI Holder's aggregate holding of NCIs, any fractionof a cent will be disregarded.

7.2 Gross-up

The Trustee may deduct from any payment payable to a NCI Holder the amount of anywithholding or other tax, duty or levy required by law to be deducted in respect of suchpayment.

If any deduction is required the Trustee must pay:

(a) the full amount required to be deducted to the relevant revenue authority withinthe time allowed for such payment without incurring penalty under the applicablelaw; and

(b) subject to clause 3.3 ("Distributions subject to the Trust having DistributableAmount"), an additional amount (Additional Amount) to the NCI Holder so thatthe NCI Holder receives the same amount in respect of that payment as if no suchdeduction had been made from the payment, except that no Additional Amount ispayable:

(i)

if the deduction is required on account of a NCI Holder being a non-taxresident of Australia or a tax resident of Australia acting through apermanent establishment outside of Australia;

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(ii) if the deduction is required on account of a NCI Holder having failed tocomply with statutory requirements or make a declaration or claim; or

(iii) where a NCI Holder is entitled to a credit, refund or offset against the NCIHolder's Australian income tax liability on account of a withholding,deduction, duty or levy made or imposed under Australian tax law.

7.3 No set-off or offsetting rights

A NCI Holder has:

(a) no right to set off any amounts owing by it to any National Entity against anyclaims owing by any National Entity to it in respect of any ComponentInstrument; and

(b) no offsetting rights or claims on any National Entity if a National Entity does notpay a Distribution or interest when scheduled under any Component Instrument.

7.4 Payments to accounts

Payments in respect of NCIs will be made:

(a) if the NCIs are held in the Austraclear System, by crediting on the Payment Date,the amount due to:

(i) the Australian dollar account of Austraclear (as the NCI Holder)previously notified to the Trustee and the Registrar; or

(ii) if requested by Austraclear, the accounts of the persons in whose SecurityRecord (as defined in the Austraclear Regulations) a NCI is recorded,being accounts in Australia previously notified by Austraclear to theTrustee and the Registrar in accordance with the Austraclear Regulations;and

(b)

if the NCIs are not held in the Austraclear System, by crediting on the PaymentDate, the amount then due under each NCI to an Australian dollar accountpreviously notified by the NCI Holder to the Trustee and the Registrar.

7.5 Payments by cheque

If the NCIs are not held in the Austraclear System and the NCI Holder has not notified theRegistrar of an Australian dollar account to which payments to it must be made by theclose of business on the Record Date, payments in respect of the NCI will be made bycheque sent by prepaid post on the Business Day immediately before the Payment Date, atthe risk of the registered NCI Holder, to the NCI Holder (or to the first named joint NCIHolder of the NCI) at its address appearing in the Register at the close of business on theRecord Date. Cheques sent to the nominated address of a NCI Holder are taken to havebeen received by the NCI Holder on the relevant Payment Date and, no further amount ispayable by the Trustee in respect of the NCIs as a result of the NCI Holder not receivingpayment on the relevant Payment Date.

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7.6 Unpresented cheques

Cheques issued by the Trustee that are not presented within six months of being issued orsuch lesser period as determined by the Trustee may be cancelled. Where a cheque whichis cancelled was drawn in favour of a NCI Holder, the moneys are to be held by theTrustee for the NCI Holder as a non-interest bearing deposit until the NCI Holder or anylegal personal representative of the NCI Holder claims the amount or the amount is paidby the Trustee according to the legislation relating to unclaimed moneys.

7.7 Unsuccessful attempts to pay

Subject to applicable law, where the Trustee:

(a) decides that an amount is to be paid to a NCI Holder by a method of direct creditand the NCI Holder has not given a direction as to where amounts are to be paidby that method; or

(b) attempts to pay an amount to a NCI Holder by direct credit, electronic transfer offunds or any other means and the transfer is unsuccessful; or

(c) has made reasonable efforts to locate a NCI Holder but is unable to do so,

the amount is to be held by the Trustee for the NCI Holder in a non-interest bearingdeposit with a bank selected by the Trustee until the NCI Holder or any legal personalrepresentative of the NCI Holder claims the amount or the amount is paid by the Trusteeaccording to the legislation relating to unclaimed moneys.

7.8 Payment to joint NCI Holders

A payment to any one of joint NCI Holders will discharge the Trustee's liability in respectof the payment.

7.9 Time limit for claims

A claim against the Trustee for a payment under a NCI is void unless made within 10years from the date on which payment first became due.

8 Title and transfer of NCIs

8.1 Title

Title to a NCI passes when details of the transfer are entered in the Register.

8.2 Effect of entries in Register

Each entry in the Register for a NCI constitutes an entitlement to the benefits given to theNCI Holder under these NCI Terms and the Trust Deed in respect of the NCI.

8.3 Register conclusive as to ownership

Entries in the Register in relation to a NCI constitute conclusive evidence that the personso entered is the absolute owner of the NCI subject to correction for fraud or error.

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8.4 Non-recognition of interests

Except as required by law, the Trustee and the Registrar must treat the person whosename is entered in the Register as the NCI Holder as the absolute owner of that NCI.

No notice of any trust or other interest in, or claim to, any NCI will be entered in theRegister. Neither the Trustee nor the Registrar need take notice of any trust or otherinterest in, or claim to, any NCI, except as ordered by a court of competent jurisdiction orrequired by law.

This clause 8.4 ("Non-recognition of interests") applies whether or not a payment hasbeen made when scheduled on a NCI and despite any notice of ownership, trust or interestin the NCI_

8.5 Joint holders

Where two or more persons are entered in the Register as the joint NCI Holders then theyare taken to hold the NCI as joint tenants, but the Registrar is not bound to register morethan three persons as joint holders of a NCI.

8.6 Transfers in whole

NCIs may be transferred in whole but not in part in accordance with these NCI Terms andthe Trust Deed.

8.7 Compliance with law

A NCI may only be transferred if:

(a) the offer or invitation giving rise to the transfer does not constitute an offer orinvitation for which disclosure is required to be made to investors under Part 7.9of the Corporations Act;

(b) the offer is not to a person who is a "retail client" for the purposes of Chapter 7 ofthe Corporations Act;

(c) the transfer complies with any applicable law or directive of the jurisdictionwhere the transfer takes place and the transfer would not impose or give rise toany duty of disclosure on any National Entity under any applicable law ordirective of the jurisdiction where the transfer takes place; and

(d) the transfer is in accordance with the provisions of the Trust Deed.

The Registrar may decline to register a transfer if it is not satisfied that the transfer wouldcomply with this clause 8.7 ("Compliance with law").

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8.8 Transfer procedures

Interests in NCIs held in the Austraclear System may only be transferred in accordancewith the Austraclear Regulations.

Application for the transfer of NCIs not held in the Austraclear System must be made bythe lodgment of a transfer form with the Registrar at its registered office. To be valid, atransfer form must be:

(a) in the form provided by the Registrar;

(b) duly completed and signed by, or on behalf of, the transferor and the transferee;and

(c) accompanied by any evidence the Registrar may require to establish that thetransfer form has been duly signed.

No fee is payable to register a transfer provided that, if required by the Registrar a transferform must be presented for registration duly stamped.

8.9 Effect of transfer

Upon registration and entry of the transferee in the Register the transferor ceases to beentitled to future benefits under these NCI Terms and the Trust Deed in respect of thetransferred NCIs and the transferee becomes so entitled in accordance with clause 8.2("Effect of entries in Register").

8.10 Estates

A person becoming entitled to a NCI as a consequence of the death or bankruptcy of aNCI Holder or of a vesting order or a person administering the estate of a NCI Holdermay, upon producing such evidence as to that entitlement or status as the Registrarconsiders sufficient, transfer the NCIs or, if so entitled, become registered as the holder ofthe NCIs.

8.11 Unincorporated associations

A transfer to an unincorporated association is not permitted.

8.12 Transfer of unidentified NCIs

Where the transferor executes a transfer of less than all NCIs registered in its name, andthe specific NCIs to be transferred are not identified, the Registrar may (subject to thelimit on minimum holdings) register the transfer in respect of such of the NCIs registeredin the name of the transferor as the Registrar thinks fit, provided the aggregateLiquidation Amount of the NCIs registered as having been transferred equals theaggregate Liquidation Amount of the NCIs expressed to be transferred in the transfer.

8.13 Austraclear System

If the NCIs are lodged in the Austraclear System, despite any other provision of these NCITerms, the NCIs are not transferable on the Register, and the Trustee may not, and mustprocure that the Registrar does not, register any transfer of the NCIs and no member of

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the Austraclear System has the right to request the registration of any transfer of any NCI,except:

(a) kg any repurchase, redemption or cancellation (whether on or before theredemption of the NCIs) of the NCIs, a transfer from Austraclear to the Trusteemay be entered in the Register; and

(b) if Austraclear exercises any power it may have under the Austraclear Regulationsor these NCI Terms to require any NCIs to be transferred on the Register to amember of the Austraclear System, the relevant NCIs may be transferred on theRegister from Austraclear to the member of the Austraclear System.

In either ease, the NCIs will cease to be held in the Austraclear System.

9 Foreign NCI Holders

Where NCIs held by a Foreign NCI Holder are to be Converted, unless National issatisfied that the laws of the Foreign NCI Holder's country of residence permit the issueof Preference Shares to the Foreign NCI Holder (but as to which National is not bound toenquire), either unconditionally or after compliance with conditions which National in itsabsolute discretion regards as acceptable and not unduly onerous, the Preference Shareswhich the Foreign NCI Holder is obliged to accept will be issued to a nominee who willsell those Preference Shares and pay a cash amount equal to the net proceeds received,after deducting any applicable brokerage, stamp duty and other taxes and charges, to theTrustee to hold on trust for that Foreign NCI Holder and distribute to the Foreign NCIHolder accordingly.

For so long as the NCIs are held in the Austraclear System, National may (but is notbound to) consider the residence of the persons in whose account a NCI is recorded indetermining whether Preference Shares will be sold under this clause 9 ("Foreign NCIHolders") if National or the Trustee has been previously notified of such residence byAustraclear or if National otherwise believes the ultimate holder of a NCI to be a ForeignNCI Holder_

10 General provisions

10.1 Issues of National shares

Except as set out in these NCI Terms, the NCIs carry no right to participate in anyoffering of securities by any National Entity or other member of the National Group.

10.2 Variation

The Trust Deed contains provisions for amending the Trust Deed (including these NCITerms) with the consent of NCI Holders and, in certain circumstances, without theconsent of NCI Holders.

10.3 Voting

The Trust Deed contains provisions for convening meetings of the NCI Holders toconsider any matter affecting their interests, including any variation of these NCI Termswhich requires the consent of NCI Holders.

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NCI Holders will have no voting rights in respect of National or any other NationalEntity.

10.4 Provision of information

Subject to applicable law, NCI Holders are not entitled to be provided with copies of:

(a) any notices of general meeting of National; or

(b) other documents (including annual reports and financial statements) sent byNational to holders of ordinary shares in National.

11 Interpretation and Definitions

11.1 Interpretation

(a) Unless otherwise specified in these NCI Terms, a reference to a clause orparagraph is a reference to a clause or paragraph of these NCI Terms.

(b) If a calculation is required under these NCI Terms, unless the contrary intention isexpressed, the calculation will be rounded to four decimal places.

(c) Headings and boldings are for convenience only and do not affect theinterpretation of these NCI Terms.

(d) The singular includes the plural and vice versa.

(e) A reference to a statute, ordinance, code or other law includes regulations andother instruments under it and consolidations, amendments, re-enactments orreplacements of any of them.

Unless otherwise specified in these NCI Terms, if an event under these NCITerms must occur on a stipulated day which is not a Business Day, then thestipulated day will be taken to be the next Business Day.

A reference to dollars, A$, $ or cents is a reference to the lawful currency ofAustralia.

Calculations, elections and determinations made by the Trustee, National orNational directors under these NCI Terms are binding on NCI Holders in theabsence of manifest error.

Any provisions which refer to the requirements of APRA or any other prudentialregulatory requirements will apply only if National is an entity, or the holdingcompany of an entity, subject to regulation and supervision by APRA at therelevant time.

Any provisions in these NCI Terms requiring the prior approval of APRA for aparticular course of action to be taken do not imply that APRA has given itsconsent or approval to the particular action as of the Issue Date.

The terms "takeover bid", "related body corporate", "relevant interest", "holdingcompany", "wholly-owned subsidiary" and "subsidiary", when used in these NCITerms have the meaning given in the Corporations Act.

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(I) A reference to a party to an agreement or deed includes a reference to areplacement or substitute of the party according to that agreement or deed.

(m) A reference to an agreement or deed includes a reference to that agreement ordeed as amended, added to or restated from time to time.

(n) The words "includes" or "including", "for example" or "such as" do not exclude areference to other items, whether of the same class or genus or not.

11.2 Definitions

The following words have these meanings in these NCI Terms unless the contraryintention appears:

Acquisition Event means:

(a) a takeover bid is made to acquire all or some of the ordinary shares in Nationaland the offer is, or becomes, unconditional; and

(i) the bidder has at any time during the offer period, a relevant interest inmore than 50% of the ordinary shares in National on issue; or

(ii) directors of National, acting as a board, issue a statement recommendingacceptance of the offer; or

(b) a court orders the holding of meetings to approve a scheme of arrangement underPart 5.1 of the Corporations Act which scheme would result in a person having arelevant interest in more than 50'!. % of the ordinary shares in National that will beon issue after the scheme is implemented and either:

the holders of National's ordinary shares pass a resolution approving thescheme; or

an independent expert issues a report that the proposals in connection withthe scheme are in the best interests of the holders of ordinary shares inNational,

in each case other than where such event is initiated by the directors of National, acting asa board, and the bidder or the person having a relevant interest in the ordinary shares inNational after the scheme is implemented is a non-operating holding company within themeaning of the Banking Act 1959 of Australia.

Additional Amount has the meaning given in clause 7.2 ("Gross-up").

APRA means the Australian Prudential Regulation Authority or any authority succeedingto its powers and responsibilities.

APRA Capital Event means, unless APRA otherwise approves:

(a) APRA determines in writing that National has a Tier 1 Capital Ratio of less than5% (or such other percentage as may be required from time to time by APRA) ora Total Capital Adequacy Ratio of less than 8% (or such other percentage as maybe required from time to time by APRA) at either or both of Level 1 or Level 2;

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(b) APRA issues a written directive to National under section 11 CA of the BankingAct 1959 of Australia for National to increase its capital;

(c) APRA appoints a statutory manager to National under subsection 13A(1) of theBanking Act 1959 or the assumption by APRA of control under Australianbanking law or proceedings are commenced for the winding up of National (otherthan solvent reconstructions approved by APRA, including in relation to forminga holding company); or

(d) the retained earnings of National have become negative.

APRA Condition means:

(a) unless APRA otherwise agrees:

(i) the payment of the Distribution (including any gross-up in connectionwith the Tier 1 Capital Instrument) will result in the Total CapitalAdequacy Ratio or the Tier I Capital Ratio of National (on a Level Ibasis) or of National Group (on a Level 2 or, if applicable, Level 3 basis)not complying with APRA's then current capital adequacy guidelines asthey are applied to National or National Group (as the case may be) at thetime;

(ii) the payment of the Distribution (or any corresponding payment on aComponent Instrument) would result in a National Entity becoming, orbeing likely to become, insolvent; or

(iii) the payment of the Distribution (including any gross-up in connectionwith the Tier 1 Capital Instrument) will exceed Distributable Profits as atthe Distribution Payment Date for that Distribution; or

(b) APRA otherwise objects to the payment of the Distribution.

Austraclear means Austraclear Limited (ABN 94 002 060 773) or any successor operatorof the Austraclear System.

Austraclear Regulations means the regulations known as "Austraclear SystemRegulations" established by Austraclear to govern the use of the Austraclear System.

Austraclear System means the system operated by Austraclear in Australia for holdingsecurities and electronic recording and settling of transactions in those securities betweenmembers of the system.

Bank Bill Rate has the meaning given in clause 3.1 ("Distributions").

Business Day means any day on which banking institutions are open for business inSydney, Australia, Melbourne, Australia and New York, United States of America.

Component Instruments means each of the NCIs, the Subordinated Debentures, theConvertible Debentures, the Preference Shares (if issued), the LLC Notes, the LLC 2Securities and the Deed of Covenant.

Conversion has the meaning given in clause 5.1 ("Meaning of Conversion"), andConvert, Convertible and Converted have a corresponding meaning.

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Conversion Date means the date determined according to clause 5.3 ("ConversionDates").

Conversion Event has the meaning given in clause 5.2 ("Conversion").

Conversion Notice means a notice given by the Trustee according to clause 5.4("Conversion Notice").

Convertible Debenture Deed Poll means the convertible debenture deed poll made byNational on or about 15 September 2006.

Convertible Debentures means the convertible debentures issued by National HeadOffice to National LLC 2 on the Issue Date on the Convertible Debenture Terms andconvertible into Preference Shares on the occurrence of the Conversion Event.

Convertible Debenture Terms means the terms of the Convertible Debentures set out inthe schedule to the Convertible Debenture Deed Poll.

Corporations Act means the Corporations Act 2001 (Cwlth).

D has the meaning given in clause 3.1 ("Distributions").

Deed of Covenant means the deed so named to be dated on or about 15 September 2006between the Trustee, National, National LLC 1 and National LLC 2.

Distributable Amount has the meaning given in the Trust Deed.

Distributable Profits means an amount calculated in accordance with the followingformula:

Distributable Profits = A – B

where:

A is the consolidated net profit after income tax of National (determined before anyinterest, dividends or distributions paid or payable by a member of NationalGroup on its Upper Tier 2 Capital and Tier 1 Capital) for the immediatelypreceding two six-monthly financial periods for which results have been publiclyannounced by National (or such other amount as determined by APRA in itsdiscretion to be appropriate in National's circumstances for the purposes ofpaying dividends or distributions on National Group's Upper Tier 2 Capital andTier I Capital); and

B is the aggregate amount of any dividends or distributions paid or payable by amember of National Group before the relevant Distribution Payment Date on itsUpper Tier 2 Capital and Tier 1 Capital in relation to the 12 month period prior tothe most recent Distribution Payment Date, but not including any dividend ordistribution paid or payable to a member of National Group by another member ofNational Group.

Distribution has the meaning given in clause 3.1 ("Distributions").

Distribution Payment Date has the meaning given in clause 3.2 ("Distribution PaymentDates").

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Distranition Period means, in respect of a NCI:

(a) for the first Distninnion Period, the period from (and including) the Issue Date to(mid including) the first Distribution Payment Date; and

(b) each subsequent period &nil (but not including) a Distribution Payment Date to(and including) the next Distribution Payment Date.

Distribution Rate has the meaning given in clause 3.1 ("Distributions").

Foreign NCI Holder means a NCI Holder whose address in the Register is a placeoutside Australia or who National otherwise believes may be a Foreign NCI Holder.

Initial Margin means 0.95% per annum.

Issue Date means the date on which the NCIs are issued.

Level 1, Level 2 and Level 3 means, in respect of the Total Capital Adequacy Ratio, theTier I Capital Ratio or Tier I Capital, those terms as defined by APRA from time to time.

Liquidation Amount has the meaning given in clause 1 ("Liquidation Amount").

LLC Manager means National Capital Holdings I Inc.

LLC Note Deed means the deed to be entered into between National, National LLC 1 andNational LLC 2 in relation to the LLC Notes.

LLC Notes means the subordinated notes issued by National LLC I to National LLC 2 onthe LLC Note Terms.

LLC Note Terms means the terms of the LLC Notes set out in the schedule to the LLCNote Deed.

LLC 2 Agreement has the meaning given in the LLC 2 Security Terms.

LLC 2 Securities means the membership interests in National LLC 2 issued by NationalLLC 2 to the Trustee on the LLC 2 Security Terms.

LLC 2 Security Terms means the terms of the LLC 2 Securities set out in the Scheduleto the LLC 2 Agreement.

Margin has the meaning given in clause 3.1 ("Distributions").

National means National Australia Bank Limited (ABN 12 004 044 937).

National Capital Instruments or NCIs means the $400,000,000 floating rate units in theTrust and issued by the Trustee according to the Trust Deed including these NCI Terms.

National Conversion Notice means a conversion notice given by National underclause 5.2(b) ("Conversion") of the Convertible Debenture Terms.

National Entity means each of the Trustee, National Head Office, National New YorkBranch, National LLC 1 and National LLC 2, the LLC Manager and National Sub.

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National Group means National and its controlled entities.

National Head Mice means National acting through its head office at Level 13, 140William Street, Melbourne, Victoria, Australia 3000.

National Sub means National Capital Holdings I Inc.

National LLC I means National Capital Instruments [AUD] LLC 1, a limited liabilitycompany established under the laws of Delaware, United States of America.

National LLC 2 means National Capital Instruments [AUD] LLC 2, a limited liabilitycompany established under the laws of Delaware, United States of America.

National New York Branch means National acting through its branch office located at245 Park Avenue, New York, New York, United States of America.

NCI Holder means a person Registered as the holder of a NCI (including persons jointlyRegistered) as the context may require. If a NCI is held in the Austraclear System,references to the NCI Holder of that NCI are to Austraclear as operator of the AustraclearSystem.

NCI Terms means these terms and conditions.

Optional Distribution has the meaning given in clause 3.5(b) ("Restrictions in the caseof non-payment").

Ordinary Resolution means a Resolution for the purposes of the Trust Deed where therequired majority is 50%.

Par Redemption Amount means, in respect of a NCI, the Liquidation Amount togetherwith:

(a) if the Redemption Date is also a Distribution Payment Date, any accrued butunpaid Distribution for the then current Distribution Period; or

(b) if the Redemption Date is not also a Distribution Payment Date, any accrued butunpaid Distribution for the then current Distribution Period to the RedemptionDate calculated as if the Redemption Date were a Distribution Payment Date.

Payment Date means a Distribution Payment Date, the Redemption Date or any otherdate on which the Trustee is to make a payment in respect of a NCI.

Preference Share means a fully paid preference share in the capital of National issued onConversion on the Preference Share Terms.

Preference Share Terms means the terms of issue of the Preference Shares annexed tothe terms of issue of the Convertible Debentures.

Record Date means:

(a) in respect of any Distribution to be made by the Trustee under these NCI Termson a Distribution Payment Date, the date which is 8 Business Days before theDistribution Payment Date or such other date as may be approved by the Trustee;or

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(b) in respect of any Optional Distribution, the Business Day prior to the date ofpayment of the Optional Distribution that is determined by the Trustee.

Redemption has the meaning given in clause 4.1 ("Redemption") and Redeem,Redeemable and Redeemed have the corresponding meaning.

Redemption Date means the date specified according to clause 4.4 ("RedemptionNotice") or, if NCIs are not redeemed on that day, the date on which the NCIs areredeemed.

Redemption Notice means a notice given by the Trustee according to clause 4.4("Redemption Notice").

Redemption Price has the meaning given in clause 4.3 ("Redemption Price").

Register means the register, including any branch register, of holders of NCIs establishedand maintained by, or on behalf of, the Trustee.

Registered means recorded in the Register.

Registrar means the Issuer or any other person appointed by the Trustee to maintain theRegister.

Regulatory Event means:

(a) there is an introduction of, an amendment or clarification to or change in (orannouncement of a prospective introduction of, amendment or clarification to orchange in) a law or regulation of the Commonwealth of Australia or any State orTerritory thereof or any directive, order, standard, requirement, guideline orstatement of APRA (whether or not having the force of law) (a Change in Law);

(b) National receives an opinion of nationally recognised legal counsel in Australiaexperienced in such matters as to the effect of a Change in Law; or

(c) there is any statement, notification, or advice by APRA or a decision by any courtor other authority interpreting, applying or administering any law, regulation,directive, order, standard, requirement, guideline or statement,

in each case on or after the Issue Date to the effect that the Tier l Capital Instrument isnot, or will not within 90 days be, eligible (in whole or in part) for inclusion in National'sTier 1 Capital on a Level 1, Level 2 or Level 3 (if applicable) basis.

Step-Up Date means 30 September 2016, being the first Distribution Payment Dateimmediately following the tenth anniversary of the Issue Date.

Subordinated Debenture Deed Poll means the subordinated debenture deed poll to bemade by National New York Branch on or about 15 September 2006.

Subordinated Debentures means the subordinated debentures issued by National NewYork Branch to National LLC 1 in accordance with the Subordinated Debenture Terms.

Subordinated Debenture Terms means the terms of the Subordinated Debentures set outin the schedule to the Subordinated Debenture Deed Poll.

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Tax Act means the Income Tax Assessment Act 1936 (1936 Act), the Income TaxAssessment Act 1997 (1997 Act) or both the 1936 Act and the 1997 Act, as appropriate.

Tax Event means that, after the Issue Date, National receives an opinion from a reputablelegal counsel or other tax adviser in Australia, the United States, the United Kingdom orNew Zealand or any other jurisdiction (each a Relevant Jurisdiction), experienced insuch matters that there is more than an insubstantial risk that, as a result of a Tax LawChange:

(a) there is a requirement to gross-up any Distribution, interest payment or dividendon the Tier 1 Capital Instrument or any Component Instrument;

(b) the rights entitling National to have transferred to it the LLC Notes upon theoccurrence of a Conversion Event are, or will be, treated as controlled foreignentity equity for the purposes of Subdivision 820-D of the Tax Act;

(c) a payment in connection with the Tier 1 Capital Instrument or any ComponentInstrument (except the Preference Shares) would be a frankable dividend orfrankable distribution for Australian income tax purposes, other than by reason ofa Regulatory Event

(d) income of National LLC 1, National LLC 2, National Sub, the LLC Manager orthe Trust would be subject to United States federal income tax or Australianincome tax;

(e) one or more National Entity would be exposed to more than a de minimis amountof other taxes, assessments or other governmental charges in connection with theTier 1 Capital Instrument;

(1) the Subordinated Debentures would cease to be treated as equity of National for

United States tax purposes;

(g) National New York Branch would suffer a material adverse change to itsassessment to United States federal income tax in connection with its deploymentof Subordinated Debentures issue proceeds; or

(h) taxes, duties or government charges would be imposed on the Trustee inconnection with the NCIs.

Tax Law Change means:

(a) an amendment to, change in or announced prospective change in any laws orregulations under those laws;

(b) a judicial decision interpreting, applying or clarifying those laws or regulations;

(c) an administrative pronouncement or action that represents an official position,including a clarification of an official position of the governmental authority orregulatory body making the administrative pronouncement or taking any action;or

(d) a challenge asserted or threatened in connection with an audit of any NationalEntity or any member of the National Group, or a challenge asserted or threatenedin writing against any other taxpayer that has raised capital through the issuance

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of securities that are substantially similar to the Tier 1 Capital Instruments or anyof its Component Instruments,

which amendment or change is announced or which action or clarification or challengeoccurs on or after the Issue Date.

Tier I Capital means tier 1 capital as defined by APRA from time to time.

Tier I Capital Instrument means the Tier 1 Capital Instrument comprising each of theComponent Instruments.

Tier I Capital Ratio means at any time the ratio as defmed by APRA.

Total Capital Adequacy Ratio means at any time the ratio as defmed by APRA.

Trust means National Capital Trust III, established under the Trust Deed.

Trust Deed means the trust deed constituting the Trust dated 12 September 2006 ofwhich these NCI Terms form part.

Trustee means National Australia Trustees Limited (ABN 80 007 350 405) or such othertrustee as is appointed in accordance with the Trust Deed.

Upper Tier 2 Capital means upper tier 2 capital as defined by APRA from time to time.

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SUMMARY OF PRINCIPAL DOCUMENTS

The following is a mammy of certain provisions of the principal documents relating to thetransactions described in this Information Memorandum and is qualified in its entirety byreference to the detailed provisions of the Transaction Documents.

Terms of the LLC 2 Securities

GeneralNational LLC 2 will issue the LLC 2 Securities to the Initial Subscriber in consideration for thetransfer by the Initial Subscriber of the LLC Notes and the Convertible Debentures to NationalLLC 2. The Initial Subscriber will then sell the LLC 2 Securities to the Issuer (see furtherSubscription and Sale - Subscription, Assignment and Sale of the Relevant Instruments below).

Each LLC 2 Security ("LLC 2 Security") will be in registered form, denominated in Australiandollars and will represent a fully paid membership interest in National LLC 2 with a liquidationamount of $50,000 ("Liquidation Amount"). The LLC 2 Securities will rank pari passu amongthemselves in all respects.

The terms of the LLC 2 Securities will be annexed to the LLC 2 Agreement (the "LLC 2 SecurityTerms").

DistributionsLLC 2 DistributionsLLC 2 Securities will pay distributions ("LLC 2 Distributions") at a floating rate.

LLC 2 Distributions will be paid quarterly in arrears on 31 March, 30 June, 30 September and 31December of each year commencing on 31 December 2006 (each a "LLC 2 DistributionPayment Date"). The LLC 2 Distribution Payment Dates will match the Distribution PaymentDates in respect of the NCIs.

The amount of each LLC 2 Distribution will be calculated in accordance with the relevant formulaset out in the LLC 2 Security Terms, which will equal the calculation of the Distributions on theNCIs (see Terms and Conditions of the NCIs - Distributions above).

LLC 2 Distributions on the LLC 2 Securities are limited to the interest received by NationalLLC 2 from National LLC 1 on the LLC Notes. Payment of interest on the LLC Notes is subjectto the tests and conditions set out in the terms of the LLC Notes (see Summary of PrincipalDocuments - Terms of the LLC Notes below). In turn, payment of interest on the LLC Notes islimited to interest received by National LLC 1 from National New York Branch in respect of theSubordinated Debentures. Payment of interest on the Subordinated Debentures is also subject totests and conditions (see Summary of Principal Documents - Terms of the SubordinatedDebentures below).

LLC 2 Distributions will not be cumulative and the Issuer (as holder of the LLC 2 Securities) willhave no claim for any Distribution not paid, or for the portion of any LLC 2 Distribution not paid,because of the limitations on LLC 2 Distributions discussed above.

Failure to pay in full, for any reason, LLC 2 Distributions on or within seven Business Day of thescheduled LLC 2 Distribution Payment Date, will result in the Issuer having insufficient funds topay, in full, the corresponding Distribution scheduled to be paid on the corresponding DistributionPayment Date and, accordingly, will trigger the Conversion Event (see Terms and Conditions of

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the NCLs - Conversion). Failure to pay will also immediately trigger distribution restrictions forNational as described under Terms and Conditions of the NCIs - Distributions - Restrictions in thecase of non-payment and, when the Preference Shares are issued, substantially in the formdescribed in Smeary of Principal Documents - Terms of the Preference Shares - Dividends -Distribution Restrictions below but it will not constitute an event of default and it will not entitlethe holder of the LLC 2 Securities to take any other action, including, for example, to require thatthe LLC 2 Securities be redeemed.

Additional AmountsNational LLC 2 will make all payments of LLC 2 Distributions without deduction or withholdingfor, or on account of, tax unless that deduction or withholding is required by law. If anydeduction is required, National LLC 2 must pay the full amount required to be deducted to therelevant revenue authority and, subject to:

(a) a demand being made for that amount by the Issuer (as holder of the LLC 2 Securities);and

(b) having received sufficient amounts from National LLC 1 in respect of the LLC Notes orfrom National under the LLC 2 Gross-up Indemnity (as defined below),

an additional amount ("Additional Amount") to the Issuer (as holder of the LLC 2 Securities) sothat the Issuer receives the same amount in respect of that payment as if no such deduction hadbeen made from the payment.

National will covenant in the Deed of Covenant to indemnify National LLC 2 for the payment ofany Additional Amounts (See Summary of Principal Documents - Terms of the Deed of Covenant- Undertakings by National below) (the "LLC 2 Gross-up Indemnity"), subject to the same testsand conditions that apply to payment of interest on the Subordinated Debentures.

Redemption

RedemptionThe Issuer (as holder of the LLC 2 Securities) has no right to require the LLC 2 Securities beredeemed.

Where National elects, subject to APRA's prior written approval, to redeem the ConvertibleDebentures, National LLC 2 will, upon receiving the proceeds of the redemption of theConvertible Debentures, redeem the LLC 2 Securities for the Redemption Price on theRedemption Date. The Redemption Price at any time in respect of the LLC 2 Securities will equalthe Redemption Price on the NCIs at that time (see further Terms and Conditions of the NCIs -Redemption Price above).

ConversionFollowing a Conversion Event, the LLC 2 Securities will be redeemed in connection with theconversion by National LLC 2 delivering or directing delivery of the Preference Shares to theIssuer (see further Summary of Principal Documents - Terms of the Convertible Debentures -Conversion below).

LiquidationIn the event of the dissolution, liquidation, termination or winding up of National LLC 2, whethervoluntary or involuntary, the Issuer is entitled to claim the Liquidation Amount of the LLC 2Securities and any accrued Distribution for the Distribution Period in which the winding up

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commenced. However, if a Conversion Event occurs, but National fails to issue the PreferenceShares, National LLC 2 will outlaw to hold the Convertible Debentures and, accordingly, willbe entitled to the rights attached to the Convertible Debentures. In these circumstances, the rightsto payment attached to the Convertible Debentures will become substantially the same as therights to payment that would have attached to the Preference Shares had they been issued (seefurther Summary of Principal Documents - Terms of the Convertible Debentures - Failure to IssuePreference Shares).

Any claim by the Issuer (as holder of the LLC 2 Securities) in a winding up of National LLC 2will rank subordinate to all creditors and other indebtedness of National LLC 2.

Voting and Other RightsThe issuer (as holder of the LLC 2 Securities) has no right to vote as a shareholder of National,nor any right to vote on the management of National, National LLC 2 or any other NationalEntity.

The Issuer (as holder of the LLC 2 Securities) will acknowledge in the LLC 2 Security Terms thata holder has no right to apply for any National Entity to be wound up, or placed in administration,or to cause a receiver, or a receiver and manager, to be appointed in respect of a National Entitymerely on the grounds that a National Entity does not pay a distribution or interest whenscheduled under any Component Instrument.

For the purposes of this Information Memorandum, "Component Instruments" means each ofthe NCIs, the Subordinated Debentures, the Convertible Debentures, the Preference Shares (ifissued), the LLC Notes, the LLC 2 Securities and the Deed of Covenant.

Amendments and ModificationsThe LLC 2 Security Terms can be amended with the prior written approval of APRA (if required)but, in certain circumstances (see Description of the Issuer - The Trust - Amendments andModifications above), without the consent of NCI Holders or the Issuer (as holder of the LLC 2Securities). Any other amendment to the LLC 2 Security Terms will require a Special Resolutionof NCI Holders and the approval of the Issuer (as holder of the LLC 2 Securities).

No Set-Off or Offsetting RightsThe Issuer (as holder of the LLC 2 Securities) has no right to set off any amounts owing by it toany National Entity against any claims owing to it by any National Entity. The Issuer also has nooffsetting rights or claims on any National Entity if a National Entity does not pay a distributionor interest when scheduled under any Component Instrument.

Governing LawThe LLC 2 Security Terms and the LLC 2 Securities will be governed by, and construed inaccordance with, the laws of the State of Delaware.

Terms of the LLC Notes

GeneralNational LLC I will issue the LLC Notes to the Initial Subscriber, who will then transfer theLLC Notes (together with the Convertible Debentures) to National LLC 2 in consideration forNational LLC 2 issuing the LLC 2 Securities to the Initial Subscriber, as more fully describedunder Subscription and Sale - Subscription, Assignment and Sale of the Relevant Instrumentsbelow.

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Each LLC Note ("LLC Note") will be a fully paid subordinated note, in registered form,denominated in Australian dollars, with a face value and principal amount of A$50,000 ("FaceValue"). The LLC Notes will rank pari passu among themselves in all respects.

The terms of the LLC Notes (the "LLC Note Terms") will be set out in a tripartite deed betweenNational, National LLC 1 and National LLC 2 (the "LLC Note Deed").

Interest

LLC Note Interest

LLC Notes will pay interest ("LLC Note Interest") at a floating rate.

LLC Note Interest will be paid quarterly in arrears on 31 March, 30 June, 30 September and 31December of each year commencing on 31 December 2006 (each a "LLC Note InterestPayment Date"). The LLC Note Interest Payment Dates will match the LLC 2 DistributionPayment Dates in respect of the LLC 2 Securities.

The amount of each payment of LLC Note Interest will be calculated in accordance with therelevant formula set out in the LLC Note Terms, which will equal the calculation of the LLC 2Distributions on the LLC 2 Securities (see Summary of Principal Documents - Terms of the LLC 2Securities - Distributions above).

LLC Note Interest limitations, tests and conditions

Payment of LLC Note Interest on the LLC Notes is subject and limited to the interest received byNational LLC 1 from National New York Branch on the Subordinated Debentures. Payment ofinterest on the Subordinated Debentures is subject to tests and conditions (see Summary ofPrincipal Documents - Terms of the Subordinated Debentures below).

Further, a payment of LLC Note interest is subject to the LLC Manager resolving to pay the LLCNote Interest and the specific condition that no APRA Condition exists. The circumstances inwhich an "APRA Condition" will exist are set out in the NCI Terms (see Terms and Conditionsof the NCIs - Interpretation and Definitions - Definitions above).

LLC Note Interest will be cumulative and, accordingly, any unpaid LLC Note interest willaccumulate. However:

(a) interest will not accrue on any unpaid amount of LLC Note Interest ("Accumulated LLCNote Interest");

(b) National LLC 1 is not permitted (unless approved by APRA) to pay any AccumulatedLLC Note Interest until the first LLC Note Interest Payment Date thereafter on which noAPRA Condition exists and the other interest payment tests are met; and

(c) National LLC 2 (as holder of the LLC Notes) will have no claim for any AccumulatedLLC Note Interest, or for any part of any Accumulated LLC Note Interest, because, uponthe occurrence of a Conversion Date or Redemption Date, the Assignment will occur and,accordingly, the rights to such Accumulated LLC Note Interest will vest in National HeadOffice pursuant to the Assignment (see further Summary of Principal Documents - Termsof the LLC Notes - Assignment below).

Failure to pay in full, for any reason, LLC Note Interest on or within seven Business Days of thescheduled LLC Note Interest Payment Date, will result in the Issuer having insufficient funds topay, in full, the corresponding Distribution scheduled to be paid on the corresponding Distribution

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Payment Date and, accordingly, will trigger the Conversion Event (see Terms and Conditions ofthe NCIs - Conversion). Fail= to pay the corresponding Distribution in respect of the NCIs willalso immediately trigger distribution restrictions for National as described in the Terms andConditions of the NCIs - Distributions - Restrictions in the case of non-payment above and, whenthe Preference Shares are issued, substantially in the form described in Summary of PrincipalDocuments - Terms of the Preference Shares - Dividends - Distribution Restrictions below but itwill not constitute an event of default and it will not entitle the holder of the LLC Notes to takeany other action, including, for example, to require that the LLC Notes be redeemed.

On and from the Assignment but prior to the LLC Notes being redeemed, National LLC 'sobligation to pay LLC Note Interest may be satisfied by National New York Branch paying allinterest (if any) payable on the Subordinated Debentures to National Head Office (see furtherSummary of Principal Documents - Terms of the LLC Notes - Assignment below).

Additional AmountsNational LLC I will make all payments of LLC Note Interest without deduction or withholdingfor, or on account of, tax unless that deduction or withholding is required by law. If anydeduction is required, National LLC I must pay the full amount required to be deducted to therelevant revenue authority and, subject to:

(a) a demand being made for that amount by National LLC 2 (as holder of the LLC Notes);and

(b) having received sufficient amounts from National New York Branch in respect of theSubordinated Debentures or from National under the LLC I Gross-up Indemnity (asdefined below),

an additional amount ("Additional Amount") to National LLC 2 (as holder of the LLC Notes) sothat National LLC 2 receives the same amount in respect of that payment as if no such deductionhad been made from the payment.

National will covenant in the Deed of Covenant to indemnify National LLC I for the payment ofany Additional Amounts (See Summary of Principal Documents - Terms of the Deed of Covenant- Undertakings of National below) (the "LLC 1 Gross-up Indemnity"), subject to the same testsand conditions that apply to payment of interest on the Subordinated Debentures.

Assignment

On the Issue Date, National Head Office (the "Assignee") will pay the Initial Subscriber theAssignment Payment (as defined in Subscription and Sale below) in consideration for the rights inconnection with the Assignment (as defined below). Payment of the Assignment Payment willentitle the Assignee to receive on a Conversion Date or a Redemption Date (an "AssignmentDate"), LLC Note Interest and the Face Value on that number of LLC Notes which equals thenumber of Convertible Debentures being converted or redeemed on the relevant Assignment Date.Specifically:

(a) until an Assignment Date, all rights to principal and interest on the LLC Notes vest inNational LLC 2 (as holder of the LLC Notes prior to the Assignment); but

(b) on and from an Assignment Date:

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(ii) all rights to principal and interest payable on LLC Notes in number equal to thenumber of Convertible Debentures being redeemed or converted on that date willautomatically vest in the Assignee; and

(ii) that number of LLC Notes will be automatically transferred to the Assignee,

(together the "Assignment"), but without affecting the obligation to pay to National LLC 2 (asholder of the LLC Notes prior to the Assignment) any Excluded Interest Amounts (as definedbelow).

An "Excluded Interest Amount" is, in respect of an Assignment Date:

(a) if the Assignment Date is also a LLC Note Interest Payment Date, any accrued but unpaidLLC Note Interest for the then current LLC Note Interest Period; or

(b) if the Assignment Date is not also a LLC Note Interest Payment Date and the AssignmentDate occurs in connection with a redemption of the NCIs, any amount of LLC NoteInterest payable on that date in accordance with the LLC Note Terms in respect of theperiod since the immediately preceding LLC Note Interest Payment Date (or the IssueDate if there has been no preceding LLC Note Interest Payment Date).

For the avoidance of doubt, "Excluded Interest Amounts" do not include any other amounts ofinterest (including any Accumulated LLC Note Interest).

Notwithstanding the Assignment, any Excluded Interest Amount will be paid by National LLC 1to National LLC 2 (as holder of the LLC Notes prior to the Assignment).

The Assignment will occur even if National fails to, or is unable on account of applicable law, toissue the Preference Shares on the Conversion Date.

Redemption

Redemption by holdersExcept for National Head Office (as Assignee), a holder of the LLC Notes has no right to requirethe LLC Notes be redeemed.

Redemption after AssignmentAt any time after the Assignment occurs (with APRA's prior written approval), the LLC Notesmay be redeemed by National LLC 1, in its sole discretion, at their Face Value together withaccrued interest (if any). The LLC Notes must be redeemed if National New York Branch electsto redeem the Subordinated Debentures.

On and from the Assignment occurring, National LLC 1 's obligation to pay to National HeadOffice (as Assignee) the Face Value and accrued interest on redemption of the LLC Notes will besatisfied by National New York Branch paying the Face Value and all accrued interest (if any)payable on the Subordinated Debenture to National Head Office. On the Issue Date, NationalLLC 1 will irrevocably direct National New York Branch to make those payments, without anyfurther act or direction on the part of National LLC 1.

Liquidation

In the event of the dissolution, liquidation, termination or winding up of National LLC 1, whethervoluntary or involuntary, the Assignee is entitled to claim the Face Value and all accumulated andaccrued and unpaid LLC Note Interest on the LLC Notes. Any such claim will rank subordinate

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to all creditors and other indebtedness of National LLC I and senior to the LLC 1 CommonSecurities.

Voting and Other RightsNational LLC 2 (as holder of the LLC Notes) has no right to vote as a shareholder of the National,nor any right to vote on the management of National, National LLC 1 or any other NationalEntity.

National LLC 2 (as holder of the LLC Notes) will acknowledge in the LLC Note Terms that aholder has no right to apply for any National Entity to be wound up, or placed in administration,or to cause a receiver, or a receiver and manager, to be appointed in respect of a National Entitymerely on the grounds that a National Entity does not pay a distribution or interest whenscheduled under any Component Instrument.

Amendments and ModificationsThe LLC Note Terms can be amended with the prior written approval of APRA (if required) but,in certain circumstances (see Description of the Issuer - The Trust - Amendments andModifications above), without the consent of the NCI Holders or National LLC 2 (as holder of theLLC Notes). Any other amendment to the LLC Note Terms will require a Special Resolution ofNCI Holders and the approval of National LLC 2 (as holder of the LLC Notes).

No Set-Off or Offsetting RightsNational LLC 2 (as holder of the LLC Notes) has no right to set off any amounts owing by it toany National Entity against any claims owing to it by any National Entity. National LLC 2 alsohas no offsetting rights or claims on any National Entity if a National Entity does not pay adistribution or interest when scheduled under any Component Instrument.

Governing LawThe LLC Note Deed, the LLC Note Terms and the LLC Notes will be governed by, and construedin accordance with, the laws of the State of Victoria.

Terms of the Subordinated Debentures

GeneralNational New York Branch will issue the Subordinated Debentures to National LLC I, as morefully described under Subscription and Sale - Subscription, Assignment and Sale of the RelevantInstruments below.

Each Subordinated Debenture ("Subordinated Debenture") will be a fully paid subordinatednote, in registered form, denominated in Australian dollars, with a face value of $50,000 ("FaceValue"). The Subordinated Debentures will rank pari passu among themselves in all respects.

The Subordinated Debentures will be constituted under a deed poll (the "SubordinatedDebenture Deed Poll") and the terms of the Subordinated Debentures (the "SubordinatedDebenture Terms") will be scheduled to the Subordinated Debenture Deed Poll.

Interest

Subordinated Debenture Interest

Subordinated Debentures will pay interest ("Subordinated Debenture Interest") at a floatingrate.

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Subordinated Debenture Interest will be paid quarterly in arrears on 31 March, 30 June, 30September and 31 December of each year commencing on 31 December 2006 (each a"Subordinated Debenture Interest Payment Date"). The Subordinated Debenture InterestPayment Dates will match the LLC Note Interest Payment Dates in respect of the LLC Notes (solong as the NCIs are on issue).

The amount of each payment of Subordinated Debenture Interest will be calculated in accordancewith the relevant formula set out in the Subordinated Debenture Terms, which will equal thecalculation of the LLC Note Interest on the LLC Notes (see Summary of Principal Documents -Terms of the LLC Notes - Interest above).

Subordinated Debenture Interest limitations, tests and conditions

A payment of Subordinated Debenture Interest is subject to the directors of National resolving topay that Subordinated Debenture Interest and the specific condition that no APRA Conditionexists. The circumstances in which an "APRA Condition" will exist are set out in the NCITerms (see Terms and Conditions of the NCIs - Interpretation and Definitions - Definitionsabove). The APRA Conditions in respect of the Subordinated Debentures will mirror the APRAConditions in respect of the LLC Notes.

Subordinated Debenture Interest will be cumulative and, accordingly, any unpaid SubordinatedDebenture Interest will accumulate. However:

(a) interest will not accrue on any unpaid amount of Subordinated Debenture Interest("Accumulated Subordinated Debenture Interest");

(b) National New York Branch is not permitted (unless approved by APRA) to pay anyAccumulated Subordinated Debenture Interest until the first Subordinated DebentureInterest Payment Date thereafter on which no APRA Condition exists and the otherinterest payment tests are met; and

(c) any Accumulated Subordinated Debenture Interest can never be distributed to NCIHolders, because, if the Assignment has occurred, National Head Office will be the holderof the LLC Notes and if the Subordinated Debentures are to be redeemed, National LLC 1has irrevocably directed National New York Branch to pay the redemption amount toNational Head Office (see further Summary of Principal Documents - Terms of the LLCNotes - Assignment and Summary of Principal Documents - Terms of the LLC Notes -Redemption above).

Failure to pay in full, for any reason, Subordinated Debenture Interest on or within seven BusinessDays of the scheduled Subordinated Debenture Interest Payment Date, will ultimately result in theIssuer having insufficient funds to pay, in full, the corresponding Distribution scheduled to bepaid on the corresponding Distribution Payment Date in respect of the NCIs and, accordingly, willtrigger the Conversion Event (see Terms and Conditions of the NCIs - Conversion). Failure topay that corresponding Distribution in respect of the NCIs will also immediately triggerdistribution restrictions for National as described in the Terms and Conditions of the NCIs -Distributions - Restrictions in the case of non-payment and, when the Preference Shares areissued, substantially in the form described in Summary of Principal Documents - Terms of thePreference Shares - Dividends - Distribution Restrictions below but it will not constitute an eventof default and it will not entitle the holder of the Subordinated Debentures to take any otheraction, including, for example, to require that the Subordinated Debentures be redeemed.

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Payment of accrued interest on redemption of the NCIs

If an Assignment occurs at the time of the Assignment, National New York Branch is required topay to National LLC I (as holder of the Subordinated Debentures) an amount of interestequivalent to any corresponding Excluded Interest Amount (as described under Summary ofPrincipal Documents - Terms of the LLC Notes - Assignment above).

Additional Amounts

National New York Branch will make all payments of Subordinated Debenture Interest withoutdeduction or withholding for, or on account of, tax unless that deduction or withholding isrequired by law. If any deduction is required, National New York Branch must pay the fullamount required to be deducted to the relevant revenue authority and, subject to:

(a) a demand being made for that amount by National LLC 1 (as holder of the SubordinatedDebentures); and

(b) the same tests and conditions that apply to payment of Subordinated Debenture Interest,

an additional amount ("Additional Amount") to National LLC 1 (as holder of the SubordinatedDebentures) so that National LLC 1 receives the same amount in respect of that payment as if nosuch deduction had been made from the payment.

RedemptionThe holder of the Subordinated Debentures has no right to require the Subordinated Debentures beredeemed.

At any time after the occurrence of the Assignment, the Subordinated Debentures may, subject toAPRA's prior written approval, be redeemed by National New York Branch, in its sole discretion,at their Face Value together with accrued interest (if any).

If the Subordinated Debentures are redeemed at any time after the Assignment, National LLC 1'sobligation to pay to National Head Office (as Assignee) the Face Value and accrued interest onredemption of the LLC Notes will be satisfied by National New York Branch paying the FaceValue and all accrued interest (if any) payable on the Subordinated Debentures to National HeadOffice. On the Issue Date, National LLC I will irrevocably direct National New York Branch tomake those payments, without any further act or direction on the part of National LLC I.

Voting and Other RightsNational LLC 1 (as holder of the Subordinated Debentures) has no right to vote as a shareholderof National, nor any right to vote on the management of National or any other National Entity.

National LLC 1 (as holder of the Subordinated Debentures) will acknowledge in the SubordinatedDebenture Terms that a holder has no right to apply for any National Entity to be wound up, orplaced in administration, or to cause a receiver, or a receiver and manager, to be appointed inrespect of a National Entity merely on the grounds that a National Entity does not pay adistribution or interest when scheduled under any Component Instrument.

LiquidationIn the event of the dissolution, liquidation, termination or winding up of National, whethervoluntary or involuntary, the holder of the Subordinated Debentures will be entitled to claim theFace Value plus any accumulated and accrued interest on the Subordinated Debentures. Any suchclaim will rank senior to the claims of the ordinary shares of National and pan passu with the

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claims of the holders of the Convertible Debentures and the Preference Shares (if they wereissued) and junior to the claims of all depositors and other creditors of National, other thancreditors expressed to rank equally with, or junior to, the Subordinated Debentures.

Amendments and ModificationsThe Subordinated Debenture Terms can be amended with the prior written approval of APRA (ifrequired) but, in certain circumstances (see Description of the Issuer - The Trust - Amendmentsand Modifications above), without the consent of the NCI Holders or National LLC 1 (as holderof the Subordinated Debentures). Any other amendment to the Subordinated Debenture Termswill require a Special Resolution of NCI Holders and the approval of National LLC 1 (as holderof the Subordinated Debentures).

No Set-Off or Offsetting Rights

National LLC I (as holder of the Subordinated Debentures) has no right to set off any amountsowing by it to any National Entity against any claims owing to it by any National Entity. NationalLLC I also has no offsetting rights or claims on any National Entity if a National Entity does notpay a distribution or interest when scheduled under any Component Instrument.

Governing Law

The Subordinated Debenture Deed Poll, the Subordinated Debenture Terms and the SubordinatedDebentures will be governed by, and construed in accordance with, the laws of the State ofVictoria.

Terms of the Convertible Debentures

General

National Head Office will issue the Convertible Debentures to the Initial Subscriber. The InitialSubscriber will then transfer the Convertible Debentures (and the LLC Notes) to National LLC 2in consideration for National LLC 2 issuing the LLC 2 Securities to the Initial Subscriber, as morefully described under Subscription and Sale - Subscription Assignment and Sale of the RelevantInstruments below.

Each Convertible Debenture ("Convertible Debenture") will be a fully paid subordinatedconvertible note, in registered form, denominated in Australian dollars, with a face value ofA$50,000 ("Face Value"). Each Convertible Debenture will rank pan passe among themselvesin all respects.

The Convertible Debentures will be constituted under a deed poll (the "Convertible DebentureDeed Poll") and the terms of the Convertible Debentures (the "Convertible Debenture Terms")will be scheduled to the Convertible Debenture Deed Poll.

Interest

The Convertible Debentures will not bear interest unless National fails to issue Preference Shareson the occurrence of a Conversion Event (see further Summary of Principal Documents - Terms ofthe Convertible Debentures - Failure to Issue Preference Shares below).

Redemption

National LLC 2 (as holder of the Convertible Debentures) has no right to require the ConvertibleDebentures be redeemed.

Subject to APRA's prior written approval, National has the option to redeem:

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• all (but not some) of the Convertible Debentures on the occurrence of a Regulatory Event,a Tax Event or an Acquisition Event, and

• some or all of the Convertible Debentures on the Step-Up Date or any subsequent datewhich is a Distribution Payment Date in respect of the NCIs,

provided that where a Convertible Debenture remains on issue after the Conversion Date, theIssuer may redeem the Convertible Debenture in the circumstances in which it would have beenentitled to redeem the Preference Shares had those Preference Shares been issued to or as directedby the holder of the Convertible Debentures on the Conversion Date.

"Regulatory Event", "Tax Event" and "Acquisition Event" are defined above in the definitionsof the NCI Terms (see Terms and Conditions of the NCIs - Interpretation and Definitions -Definitions above).

Where National elects to redeem the Convertible Debentures, the following events will occurautomatically on the date for redemption provided in the Convertible Debenture Terms("Redemption Date"):

• the Assignment will occur (see Summary of Principal Documents - Terms of the IJ.0Notes - Assignment above);

• National will redeem the Convertible Debentures for cash at their Face Value;

• National LLC 2 will, upon receiving the proceeds of the Convertible Debentures and anyExcluded Interest Amounts, redeem the LLC 2 Securities for cash at the RedemptionPrice;

• the Issuer will, upon receiving the proceeds of the LLC 2 Securities, redeem the NCIs forcash at the Redemption Price; and

• National LLC 2 and the Issuer will be wound up.

ConversionNational LLC 2 (as holder of the Convertible Debentures) has no right to require conversion.

Following the occurrence of the Conversion Event, the following events will automatically occuron the date for conversion (the "Conversion Date") provided in the Convertible DebentureTerms:

• the Assignment will occur (see Summary of Principal Documents - Terms of the LLCNotes - Assignment above);

• each Convertible Debenture will convert into one Preference Share;

• the LLC 2 Securities will be redeemed by National LLC 2 in consideration for Nationaldelivering the Preference Shares to, or as directed by, the Issuer;

• the NCIs will be redeemed by the Issuer delivering or directing National to issue thePreference Shares to, or as directed by, the NCI Holders;

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• the Preference Shares will accrue dividends, subject to the applicable payment tests andconditions (see Summary of Principal Documents - Terms of the Preference Shares -Dividends below); and

• National LLC 2 and the Issuer will be wound up.

"Conversion Event" is defined above in clause 5.2 ("Conversion") of the Terms and Conditionsof the NCIs (see Terms and Conditions of the NCls - Conversion above).

Failure to issue Preference SharesLimitations on Issue of Preference SharesIf on the Conversion Date National is prohibited by law from issuing the Preference Shares,National will issue the Preference Shares if and when it is no longer prohibited from doing so.

Under current Australian law, National may be prevented from issuing the Preference Shares onthe Conversion Date if:

• National is in liquidation;

• APRA has assumed control of National under the Banking Act 1959 of Australia (the"Banking Act") and APRA does not cause National to issue the Preference Shares; or

• APRA has appointed a statutory manager under the Banking Act to take control ofNational's business and the statutory manager does not cause National to issue thePreference Shares.

Consequences of a failure to Issue Preference Shares

In the event that National fails to issue the Preference Shares when required to do so:

• the Assignment will still occur (see Summary of Principal Documents - Terms of the LLCNotes - Assignment above); and

• National LLC 2 will continue to hold the Convertible Debentures until National is nolonger prevented from issuing the Preference Shares.

However, on and from the occurrence of the Conversion Event and for so long as National LLC 2continues to hold the Convertible Debentures, National LLC 2 will be entitled, as holder of theConvertible Debentures:

• prior to the commencement of the winding up of National, to interest on the ConvertibleDebentures calculated in the same manner and subject to the same tests and conditions asthe payment of dividends on the Preference Shares (see Summary of PrincipalDocuments - Terms of the Preference Shares - Dividends below), had they been issued;and

• on a winding up of National, to claim an amount in respect of the ConvertibleDebentures such that National LLC 2 recovers the same amount as it would havereceived if the Preference Shares had been issued and were held by it.

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Voting and Other Rights

National LLC 2 (as holder of the Convertible Debentures) has no right to vote as a shareholder ofthe National unless and Instil the Preference Shares are issued, nor any right to vote on themanagement of National or any other National Entity.

National LLC 2 (as holder of the Convertible Debentures) will acknowledge in the ConvertibleDebenture Terms that a holder has no right to apply for any National Entity to be wound up, orplaced in administration, or to cause a receiver, or a receiver and manager, to be appointed inrespect of a National Entity merely on the grounds that a National Entity does not pay adistribution or interest when scheduled under any Component Instrument.

LiquidationIn the event of the dissolution, liquidation, termination or winding up of National, whethervoluntary or involuntary, the Convertible Debentures will rank, without any preference amongstthemselves, senior to the claims of the ordinary shares of National and pari passu with the claimsof the holders of the Preference Shares which would have been issued if the ConvertibleDebentures had converted into Preference Shares and the Subordinated Debentures and junior tothe claims of all depositors and other creditors of National, other than creditors expressed to rankequally with, or junior to, the Convertible Debentures.

Amendments and ModificationsThe Convertible Debenture Terms can be amended with the prior written approval of APRA (ifrequired) but, in certain circumstances (see Description of the Issuer - The Trust - Amendmentsand Modifications above), without the consent of the NCI Holders or National LLC 2 (as holderof the Convertible Debentures). Any other amendment to the Convertible Debenture Terms willrequire a Special Resolution of NCI Holders and the approval of National LLC 2 (as holder of theConvertible Debentures).

Without the consent of NCI Holders or National LLC 2 (as holder of the Convertible Debenture),National may, prior to the Conversion Date, amend the Convertible Debenture Terms to providefor the issue of Preference Shares on the terms described in the last paragraph of Summary ofPrincipal Documents - Terms of the Preference Shares - Redemption below.

No Set-Off or Offsetting Rights

National LLC 2 (as holder of the Convertible Debentures) has no right to set off any amountsowing by it to any National Entity against any claims owing to it by any National Entity. NationalLLC 2 also has no offsetting rights or claims on any National Entity if a National Entity does notpay a distribution or interest when scheduled under any Component Instrument.

Governing Law

The Convertible Debenture Deed Poll, the Convertible Debenture Terms and the ConvertibleDebentures will be governed by, and construed in accordance with, the laws of the State ofVictoria.

Terms of the Preference Shares

General

The Preference Shares ( "Preference Share") will be issued on the occurrence of the ConversionEvent, and will be fully paid preference shares in National, denominated in Australian dollars,with a liquidation amount of A$50,000 ("Liquidation Amount"), corresponding to the NCIs

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being converted into the Preference Shares through the conversion (see Summary of PrincipalDocuments - Terms of the Convertible Debentures - Conversion above). The Preference Shareswill rank pan pawn among themselves in all respects and with all Equal Ranking Instruments.

The National will bear the cost of any stamp duty on the issue of the Preference Shares.

"Equal Ranking Instruments" means:

(a) the NIS preference shares;

(b) the ExCap preference shares (if issued);

(c) the 2003 trust preferred preference shares (if issued);

(d) the 2005 trust preferred preference shares (if issued);

(e) each other preference share that National may issue that is expressed to rank equally withthe foregoing for returns of capital in a winding-up of National; and

(0 any securities or other instruments that are expressed to rank in a winding-up equally withthose preference shares.

"NIS" means the income securities issued by National in 1999 comprising fully paid notes issuedby National through National New York Branch stapled to unpaid preference shares issued byNational.

"NIS preference shares" means the preference shares issued by National in connection with theNIS which, if paid up in accordance with the terms of the NIS, will be outstanding in an aggregateliquidation amount of up to A$2.0 billion.

"ExCap preference shares" means the preference shares which may be issued by National in anaggregate liquidation amount of up to US$1.0 billion by National in connection with the ExCaps.

"ExCaps" means the exchangeable capital securities issued by National in 1997, each consistingof a capital security exchangeable in certain circumstances into ExCap preference shares orordinary shares of National.

"2003 trust preferred securities" means the trust preferred securities issued by National CapitalTrust I in 2003 which are exchangeable for global depositary receipts, or "GDRs", eachevidenced by a global depositary share, or "GDS", representing one 2003 trust preferredpreference share.

"2003 trust preferred preference shares" means the preference shares which may be issued byNational in an aggregate liquidation amount of up to £400 million by National in connection withthe 2003 trust preferred securities.

"2005 trust preferred securities" means the trust preferred securities issued by National CapitalTrust II in 2005 which are exchangeable for 2005 trust preferred preference shares.

"2005 trust preferred preference shares" means the preference shares which may be issued byNational in an aggregate liquidation amount of up to US$800 million by National in connectionwith the 2005 trust preferred securities.

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The terms of the Preference Shares will be approved by the directors of National (the "PreferenceShare Terms") (see further General Information - Authorisation below).

DividendsDividendsPreference Shares will pay dividends ("Dividends") at a floating rate.

Dividends will be paid quarterly in arrears on 31 March, 30 June, 30 September and 31 Decemberof each year commencing on 31 December 2006 (each a "Dividend Payment Date"). TheDividend Payment Dates will match the Distribution Payment Dates in respect of the NCIs.

The amount of each Dividend will be calculated in accordance with the relevant formula set out inthe Preference Share Terms, which will substantially mirror the calculation of the Distributions onthe NCIs (see Terms and Conditions of the NCIs - Distributions above). Where the ConversionEvent occurs on a date that is not a Dividend Payment Date, the Dividend for the first DividendPeriod will be calculated from the Distribution Payment Date in respect of the NCIs immediatelypreceding the Conversion Date (or, if the Conversion Date occurs before the first scheduledDistribution Payment Date in respect of the NCIs, the issue date in respect of the NCIs).

Payment of a Dividend on the Preference Shares is subject to the directors of National resolving topay the Dividend and the specific condition that no APRA Condition exists. The APRAConditions in respect of the Preference Shares will substantially mirror the APRA Conditions inrespect of the NCIs (see Terms and Conditions of the NCIs - Interpretation and Definitions -Definitions above).

Dividends will not be cumulative and the holder of a Preference Share (the "PreferenceShareholder") will have no claim for any Dividend not paid, or for any part of any Dividend notpaid, pursuant to the limitations on Dividends discussed above. Failure to pay in full, for anyreason, Dividends on the scheduled Dividend Payment Date, will trigger distribution restrictionsfor National (see Summary of Principal Documents - Terms of the Preference Shares - Dividends- Distribution Restrictions below) but it will not constitute an event of default and it will notentitle the Preference Shareholders to take any other action, including, for example, to require thatthe Preference Shares be redeemed.

Additional AmountsNational will make all payments of Dividends without deduction or withholding for, or onaccount of, tax unless that deduction or withholding is required by law. If any deduction isrequired, National must pay the full amount required to be deducted to the relevant revenueauthority and, subject to certain exceptions (which will substantially mirror the exceptions in theNCI Terms (see Terms and Conditions of the NCIs - Payments to NCI Holders - Gross-upabove)), an additional amount ("Additional Amount") to Preference Shareholders so that eachPreference Shareholder receives the same amount in respect of that payment as if no suchdeduction had been made from the payment.

Distribution RestrictionsNational's ability to pay distributions will be restricted if:

• National fails to pay in full, on any Dividend Payment Date, the accrued dividends on thePreference Shares for the relevant Dividend Period; or

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• a Conversion Event has wowed as a result of any failure by the Issuer to pay in full thedistrbution payable on the NCIs on any Distribution Payment Date;

then, unless approved by the Preference Shareholders by ordinary resolution, National may not:

(a) pay any interest, dividends or similar distributions on any other capital instruments ofNational which rank for dividends equal with, or junior to, the Preference Shares; or

(b) redeem, buy-back or reduce capital on any other capital instruments of National whichrank for return of capital in a winding up, equal with, or junior to, the Preference Shares,

subject to certain limited exceptions (which will substantially mirror the exceptions to thedistribution restriction in the NCI Terms (see Terms and Conditions of the NCIs - Distributions -Exceptions to restrictions above)).

The distribution restrictions will remain in force until National has paid in full:

(a) consecutive dividends on the Preference Shares on each Dividend Payment Date duringthe 12 month period following the non-payment of the Dividend; or

(b) with APRA's prior written approval, an optional dividend equal to the unpaid amount ofthe scheduled dividends, or distributions on the Preference Shares or NCIs, for the periodof 12 months prior to the date of payment of the optional dividend ("OptionalDividend").

Redemption

A Preference Shareholder has no right to require a redemption or buy-back of or reduction ofcapital on the Preference Shares.

Subject to APRA's prior written approval, National has the option to redeem, buy-back or reducecapital (in such combination as National may determine) on:

• all (but not some) of the Preference Shares on the occurrence of a Preference ShareEvent (as defined below) or the issuance of Preference Shares (provided that theConversion Event giving rise to the issue of the Preference Shares did not result fromNational exercising its discretionary right to cause the Conversion Event to occur); or

• some or all of the Preference Shares on the Step-Up Date or any subsequent DividendPayment Date.

Pursuant to the Convertible Debenture Terms (as described in Summary of Principal Documents -Terms of the Convertible Debentures - Amendment and Modification) National may, prior to theissue of the Preference Shares, elect that it issue Preference Shares on terms that it does not havethe option to redeem those Preference Shares (but without limiting its rights to buy-back or reducecapital on such Preference Shares, in such combination as it may determine and otherwise on thesame terms as the Preference Shares described in Summary of Principal Documents - Terms of thePreference Shares below).

A "Preference Share Event", occurs in circumstances where an Acquisition Event, a RegulatoryEvent or a Tax Event occurs.

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For these purposes, "Acquisition Event" and "Regulatory Event" will have a substantiallysimilar definition to those defined above in the Definitions of the Terms and Conditions of theNCIs (see Terms row/ Conditions of the NCIs - Interpretation and Definitions - Definitions above).

"Tax Event" means that, on or after the Issue Date of the NCIs, National receives an opinionfrom a reputable legal counsel or other tax adviser in Australia, the United States, the UnitedKingdom or New Zealand or any other jurisdiction (each a "Relevant Jurisdiction"), experiencedin such matters, that there is more than an insubstantial risk that, as a result of a Tax Law Change:

(a) there is a requirement to gross-up any Dividend on the Preference Shares; or

(b) National would be exposed to more than a de minimis amount of other taxes, assessmentsor other governmental charges in connection with the Preference Shares.

"Tax Law Change" will have a substantially identical definition to that set out under the Termsand Conditions of NCls - Interpretation and Definitions - Definitions above.

The Redemption Price payable on each Preference Share redeemed will equal the RedemptionPrice that would have been payable on the redemption of the corresponding NCI (see Terms andConditions of the NCIs - Redemption - Redemption Price above).

Voting and Other RightsVotingGenerally, the Preference Shareholders will not be entitled to vote at a general meeting ofNational. However, they may vote together with holders of ordinary shares in National:

• on any resolution to wind up National, or during the winding up of National;

• on any resolution to reduce National's share capital (except a reduction of capital inaccordance with the Preference Share Terms);

• on any resolution to approve the terms of a buy-back agreement (except a buy-back inaccordance with the Preference Share Terms);

• on any resolution that National dispose of all of its business, property and undertaking;

• during a Special Voting Period (as defined below), with respect to all matters on whichthe holders of ordinary shares are entitled to vote, other than on a resolution to approve aRedemption; and

Preference shareholders may also vote as a class on any resolution to vary the rights attaching tothe Preference Shares.

In any such case Preference Shareholders will have one vote per Preference Share.

"Special Voting Period" means the period from and including:

(a) any Dividend Payment Date on which National does not pay in full the Dividendscalculated in respect of the Preference Shares for the immediately preceding DividendPeriod; or

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(b) the 22nd Businest Day after the Conversion Event occurs if the Conversion Eventoccurred as a result of non-payment of a Distribution on the NCIs unless prior to suchdate National has paid in full an Optional Dividend,

in each case to but excluding the first Dividend Payment Date after that date on which Nationalhas paid an Optional Dividend in accordance with the provisions of Preference Share Terms orhas paid in full the Dividends scheduled to be payable on the Preference Shares during a period of12 consecutive calendar months.

Preference Shareholders will acknowledge in the Preference Share Terms that a PreferenceShareholder has no right to apply for National to be wound up, or placed in administration, or tocause a receiver, or a receiver and manager, to be appointed in respect of National merely on thegrounds that National does not pay a Dividend when scheduled under the Preference Shares.

Restrictions on Ownership and TransferThe acquisition of shares in Australian public companies listed on the Australian Stock Exchange("ASX") is regulated by detailed and comprehensive legislation and the rules of the ASX.Legislation also affects the offer of shares for sale in certain circumstances.

One of the most common manners in which a controlling shareholding is acquired in anAustralian listed company is by a takeover bid. The form and content of the bid documentation isregulated by law. Australian takeover law purports to have extra-territorial force. Australian lawmay therefore apply to a transaction outside Australia with respect to a non-Australian company ifthe transaction affects the control of voting power in an Australian publicly listed company.

Australian law also regulates the acquisition of shares in Australian corporations by foreignpersons under the Foreign Acquisitions and Takeovers Act 1975 ("Takeovers Act"). TheTakeovers Act empowers the Australian Treasurer to prohibit a proposed acquisition of shares inan Australian corporation where the result of the acquisition will be that a foreign person (togetherwith its associates) would have an interest of not less than 15% of the issued shares of acorporation, or two or more foreign persons (together with their associates) would in aggregatehave an interest in 40% of the issued shares of the corporation that has total assets valued atA$50,000,000 or more, such as National. In addition, the Takeovers Act requires foreign personswho propose to make such acquisitions to first notify the Australian Treasurer of their intention todo so. Failure to notify the Treasurer of a proposed acquisition is an offence under the TakeoversAct. Where such an acquisition has already occurred without notice having been given, theAustralian Treasurer has the power to order a person that acquired the shares to dispose of them.The concepts of acquisition, interest, associate and foreign person are very widely defined in theTakeovers Act and investors should seek their own advice on the application of the Takeovers Actto them.

Australian law also regulates acquisitions of shares in Australian companies which would havethe effect, or be likely to have the effect, of substantially lessening competition in a market inAustralia, or in a state or territory thereof, under the Trade Practices Act 1974. Investors shouldseek their own advice on the application of the Trade Practices Act 1974.

There are also restrictions placed upon shareholdings in Australian banks generally under theFinancial (Shareholdings) Act 1998 (the "FSSA"). Under the FSSA, the Australian Treasurer'sprior approval is required before any person may acquire shares in an authorised deposit-takinginstitution, of which the National is one, in Australia where the acquisition would take thatperson's stake in that institution to more than 15% (see Description of National - MajorShareholders above). A person's stake relates to the direct control interest of that person or itsassociates in the shares of a company. The concepts of "stake", "direct control interests", "voting

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power", "associates" and "shares" are broadly defined in the FSSA and investors should seek theirown advice on the application of the FSSA.

Takeover and Substantial Vtarehokkr Provisions

Generally, the Corporations Act prohibits a person from acquiring a "relevant interest" in thevoting shares in a listed company (such as National) if that person's or someone else's "votingpower" in the company increases from 20%, or from a starting point that is above 20% and below90%, unless those shares are acquired in a manner specifically permitted under an exception. Theexceptions in the Corporations Act are limited and include, for example, an acquisition previouslyconsented to by the shareholders of the company, or an acquisition made under a court-approvedscheme. Generally, the concept of a voting share does not include certain types of preferenceshares with limited voting rights. However, because Preference Shareholders have been conferreda right to vote following the failure to pay a Dividend (see Summary of Principal Documents -Terms of the Preference Shares - Voting and Other Rights - Voting above), the Preference Shareswill be treated as voting shares under the Corporations Act. Therefore any person considering theacquisition of the NCIs should consider the effect on their or someone else's "voting power"which will arise upon the issue to them of Preference Shares following the Conversion Event andshould seek appropriate advice in the context of the regulatory thresholds summarized under thissection.

The concepts of "relevant interest", and "associates" and "acquire" are very broadly defined andinvestors should seek their own advice on the application of the Corporations Act. In very generalterms:

• a person's voting power ("voting power") equals the total number of votes attached to thevoting shares in which the person and their associates have a relevant interest ("relevantinterest") (which is basically where they hold, or have or control the exercise, of the rightor power to vote or dispose of the shares), expressed as a percentage of all the votingshares in the company, but there are additional inclusions and certain exceptions;

• a person acquires ("acquires") shares in a company if, as a direct or indirect result of atransaction in relation to securities of any body corporate, that person acquires a relevantinterest in those shares and, as a result of extensive tracing provisions concerning relevantinterest, a person may be taken to have acquired the National's shares for example as aresult of the purchase of securities in another body corporate if that body corporate holds,or acquires, a relevant interest in National's shares; and

• an associate ("associate") (the "second person") of the primary person is widely definedin Division 2 of Part 1.2 of the Corporations Act and includes, among other, a bodycorporate the primary person controls, a body corporate that controls the primary person,or a body corporate that is controlled by an entity that controls the primary person as wellas persons acting, or agreeing or proposing to agree, to act in concert in relation to thelisted company's affairs.

The Corporations Act also obliges persons who begin to have, or cease to have a substantialholding in a listed company (being a relevant interest of that person, or their associates, in 5% ormore of the voting shares of the company), or whose substantial holding moved at least 1%, togive notice to the company and to the ASX of their substantial shareholdings and suchmovements.

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Amendments andModifitst►ons

The Preference Share Tams and the rights attaching to the Preference Shares may be amended ormodified with the sanction of a Special Resolution passed at a meeting of the PreferenceSharehokka.

The Preference Share Terms can also be amended or modified with the prior written approval ofAPRA (if required) but without the consent of Preference Shareholders in certain circumstances(which substantially mirror the circumstances in which the NCI Terms may be amended ormodified without the consent of NC/ Holders (see Description of the Issuer - The Trust -Amendment and Modification)).

The rights attaching to the Preference Shares will not be deemed to be varied by the creation orissue of any further preference shares ranking equally with, junior to, or senior to, the PreferenceShares and the creation of such preference shares will be expressly permitted by the PreferenceShare Terms.

LiquidationIn the event of the dissolution, liquidation, termination or winding up of National, whethervoluntary or involuntary, the Preference Shares will rank:

• senior to the claims of the ordinary shares of National and pari passu with the claims ofthe holders of the classes of preference shares of National with the same rankingidentifying number as provided in National's constitution; and

• junior to all depositors and other creditors, other than creditors whose claims areexpressed to rank pari passu with the Preference Shares.

No Set-Off or Offsetting RightsA Preference Shareholder has no right to set off any amounts owing by it to National against anyclaims owing to it by National. The Preference Shareholder also has no offsetting rights or claimson National if National does not pay a Dividend when scheduled under the Preference Shares.

Governing LawThe Preference Share Terms and the Preference Shares will be governed by, and construed inaccordance with, the laws of the State of Victoria.

Terms of the Deed of Covenant

GeneralIn order to give effect to the terms of the NCIs, National, National LLC 1, National LLC 2 and theIssuer have entered into a deed of covenant (the "Deed of Covenant"), under which the partieshave agreed to give certain undertakings on the terms set out in the Deed of Covenant.

Undertakings by National

The National undertakes to, the Trustee, National LLC 1 and National LLC 2 (each a "RelevantParty") (among other things) to:

• meet the expenses of each Relevant Party (except where a new trustee has been appointedby NCI Holders without National's prior written approval);

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• pay, subject to the tests and conditions set out in the Subordinated Debenture Terms (seeSwonntoy of Principal Documents - Terms of the Subordinated Debentures - Interestabove), each other Relevant Party on demand for any Additional Amounts it is required topay in accordance with the terms of the relevant Component Instrument;

• indemnify each Relevant Party for any liabilities incurred in relation to the Tier 1 CapitalInstrument;

• comply with National's obligations with respect to distribution restrictions in the case ofnon-payment on the NCIs (see Terms and Conditions of the NCIs - Distributions -Restrictions in the case of nonpayment above);

• provide a copy of certain notices given under the Convertible Debentures to eachRelevant Party;

• comply with all other things which are specified in the Component Instruments to be doneor not done by National; and

• to do all other things which are necessary to be done by National to enable the RelevantParty to comply with its obligations under the Component Instruments to which it is aparty.

National's role under the Deed of Covenant

Notwithstanding the provisions described above:

• National's obligations to the Relevant Parties in connection with the Deed of Covenantare not and should not be construed as a guarantee by National of any obligations of aRelevant Party in relation to any Component Instrument or that any payment scheduled tobe made under a Component Instrument will be made; and

• the Deed of Covenant does not confer on any NCI Holder a right to take action againstany National Entity to enforce payment of any amounts payable by that entity under theDeed of Covenant or to claim damages for breach of any obligation under the Deed ofCovenant.

Governing Law

The Deed of Covenant will be governed by, and construed in accordance with, the laws of theState of Victoria.

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USE OF PROCEEDS

The proceeds of issue of the NCIs will be used to purchase the LLC 2 Securities from the InitialSubscriber.

The Initial Subscriber 'nil be issued with the LLC 2 Securities in exchange for transferring toNational LLC 2 the LLC Notes and the Convertible Debentures as described in Subscription andSale - Subscription, Assignment and Sale of the Relevant Instruments below. Prior to that, theInitial Subscriber will have subscribed for the LLC Notes and the Convertible Debentures and willhave received from National Head Office the Assignment Payment.

National LLC I will use the proceeds from the sale of the LLC Notes to subscribe for theSubordinated Debentures issued by National New York Branch. The proceeds of issue of theSubordinated Debentures will be used by National New York Branch for its general businesspurposes including the lending of the proceeds to branches or entities within the National Groupor the acquisition of debt securities issued by entities within the National Group.

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TAXATION

This section summarises the principal Australian taxation consequences arising from theacquisition, holding and disposal ofNCIs by NCI Holders who hold their NCIs on capital accountfor tax purposes.

The summary is based on tax law and practice in force as at the date of this InformationMemorandum, unless otherwise indicated. It is of a general nature only and is neither exhaustivenor definitive and it does not purport to be a complete analysis of all of the tax considerationsrelating to the NCIs or the Preference Shares (if issued). The summary does not apply to NCIHolders who hold NCIs on revenue account, as trading stock or as part of a securities tradingbusiness and may not apply to certain other classes of persons. It is not intended to be advice andshould not be relied upon as such.

Prospective holders of NCIs should seek independent taxation advice having regard to theirown particular circumstances before making a decision to invest in NCIs.

Position of the Trust

NCIs constitute units in the Trust. Where a unit trust satisfies the definition of a "public tradingtrust", tax legislation effectively treats the trust in the same manner as a company. On the basis ofthe Trust's intended investment activities, the Trust would not be a "public trading trust".Accordingly, the Trust should be subject to the ordinary "flow through" trust taxing provisions ofthe tax law.

Having regard to the terms of the Trust Deed and its intended distribution policy, the Trusteeshould not be subject to tax in respect of the Trust's net (ie taxable) income. Rather, the income ofthe Trust will be assessable in the hands of the NCI Holders.

Position of Australian tax resident NCI Holders

Treatment of DistributionsNCI Holders who are Australian residents for tax purposes will be required to include theirproportionate share of the net income of the Trust in their assessable income for each year ofincome ending 30 June. This will generally be equal to all of the Distributions to which a NCIHolder is entitled in respect of each year of income ending 30 June (even if a Distribution is notactually received until after year end).

Distributions from the Trust will not carry franking credits.

An annual tax statement will be provided by the Trustee to each NCI Holder setting out details oftheir proportionate share of the Trust's net income.

The rate of tax applied to NCI Holders will depend upon their particular tax profile.

In certain circumstances, the LLC 2 Securities held by the Trust may be redeemed for cash orconverted into Preference Shares by way of redemption in consideration for the delivery ofPreference Shares. The redemption or conversion of LLC 2 Securities into Preference Sharescould result in the inclusion of an amount in the net income of the Trust if the market value of theLLC 2 Securities (determined at the time of redemption or conversion) exceeds the Trust's costbase in the LLC 2 Securities.

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Where a NCI Holder borrows money to invest in NCIs, the NCI Holder may be entitled to adeduction for interest paid on such borrowings. Whether a deduction is in fact available willdepend upon a NCI Holder's own circumstances and specific advice should be sought by the NCIHolder.

Disposal, redemption or conversion of NCIs

Each NCI will constitute an asset for capital gains tax ("CGT") purposes. A disposal, redemptionor conversion of NCIs will constitute a CGT event that may result in the NCI Holder realising acapital gain or loss for CGT purposes, as explained in further detail below.

A NCI Holder's COT cost base in NCIs will be equal to the amount the NCI Holder paid toacquire the NCIs, plus any capital costs connected with the acquisition and/or disposal of theNCIs. A NCI Holder's CGT cost base may vary depending on whether the NCI Holder is aninitial subscriber or subsequent acquirer. Where a unitholder in a trust receives non-assessabledistributions, such amounts may reduce the unitholder's COT cost base in the units. Given thestructure of the Trust and the nature of its investments, NCI Holders are unlikely to receive non-assessable Distributions.

Any capital gain or loss in relation to NCIs will be aggregated with any other capital gains orlosses of the NCI Holder for the year of income in question. Any net capital gain will be includedin the NCI Holder's assessable income. In calculating any net capital gain, the NCI Holder maybe eligible for discount capital gains tax treatment (refer further below). A net capital loss is notdeductible against other income, but may be carried forward for offset against capital gains in alater year.

Redemption of NCIs

In certain circumstances, NCIs may be redeemed for an amount of cash equal to the RedemptionPrice.

For CGT purposes, a NCI Holder will be deemed to have received capital proceeds equal to themarket value of the NCIs determined at the time of redemption.

A capital gain or loss could arise on redemption, if the NCI Holder's CGT cost base in the NCIswas less than or greater than the market value of the NCIs at the time of redemption, respectively.

Conversion of NCIs

In certain circumstances, NCIs may be converted into Preference Shares by way of redemption inconsideration for the delivery of Preference Shares. The NCI Holder will be deemed to havereceived capital proceeds equal to the market value of the NCIs determined at the time ofconversion. The market value of the NCIs in such circumstances should generally reflect themarket value of the Preference Shares

Depending upon the market value of the NCIs relative to the NCI Holder's CGT cost base in theNCIs, a capital gain or loss may arise. A capital gain would arise if the market value of the NCIsat the time of the conversion exceeded the NCI Holder's CGT cost base in the NCIs. Conversely,a capital loss would arise if the NCI Holder's CGT cost base in the NCIs exceeded the marketvalue of the NCIs at the time of conversion.

Discount capital gains treatment

Where a NCI Holder is a complying superannuation entity, the capital gain to be included inassessable income upon the disposal, redemption or conversion of NCIs is reduced by one-third,

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provided that the NCIs have been held for a period of at least twelve months and were notdisposed of pursuant to an agreement entered into within one year of their acquisition.

For these purposes, the capital gain subject to reduction is calculated as the difference between theCGT cost base (adjusted for any non-assessable distributions but without indexation for inflation)and the capital proceeds on disposal, after offsetting any available capital losses.

Discount capital gains treatment is not available to NCI Holders that are companies.

Dividends paid on the Preference SharesWhere NCIs convert into Preference Shares, any dividends paid on the Preference Shares,together with any associated franking credits where the dividends are franked, will be included inthe assessable income of the (former) NCI Holder.

Subject to the non-application of certain anti-avoidance rules, a tax offset (ie rebate) equal to theamount of any franking credit should generally be available to the (former) NCI Holder.

No assurance can be given by National regarding the extent (if any) to which dividends on thePreference Shares may be franked.

Disposal of Preference SharesThe disposal of Preference Shares acquired upon conversion of NCIs will give rise to a CGTevent. The (former) NCI Holder may realise a capital gain or loss, if the capital proceeds upondisposal differ from the (former) NCI Holder's CGT cost base in the Preference Shares.

The CGT cost base of the Preference Shares in such a situation will be equal to the market valueof the NCIs that were the subject of the conversion (determined at that time), together with anycapital costs connected with the acquisition and/or disposal of the Preference Shares.

Discount capital gains treatment, as discussed above, may apply where the Preference Shares havebeen held for at least twelve months.

Pay-as-you-go withholding taxNCI Holders may choose to notify the Trustee of their tax file number ("TFN"), AustralianBusiness Number ("ABN") or a relevant exemption.

In the event that the Trustee is not so notified, tax will be automatically deducted fromDistributions to such NCI Holders, currently at the rate of 46.5% of the gross cash Distribution.

The requirement to withhold tax will continue until such time as the relevant TFN, ABN orexemption notification is given to the Trustee. NCI Holders will be entitled to claim an incometax credit/refund (as applicable) in respect of the tax withheld in their income tax returns.

The same requirements will apply to any unfranked dividends paid by the National on PreferenceShares acquired upon conversion of NCIs.

Position of non-resident NCI Holders

Treatment of DistributionsNCIs Holders that are not resident in Australia for Australian income tax purposes ("Non-resident NCI Holders") should only be subject to Australian tax on so much of theirproportionate share of the net income of the Trust as has an Australian source.

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Distributions from the Trust to Non-resident NCI Holders should be regarded as having a foreignsource. Accordingly, Non-resident NCI Holders should not be subject to Australian tax, norwould the Trustee generally be obliged to withhold any tax, on such Distributions.

Dim redemption or conversion ofNCIs

Under current law, Non-resident NCI Holders (who do not hold their NCIs through a permanentestablishment in Australia) should not be subject to Australian CGT on the disposal, redemptionor conversion of NCIs if, at the time of disposal, redemption or conversion, they, together withtheir associates, have not held at least 10% or more by value of the interests in the Trust at anytime during the preceding five years.

Recently released Tax Laws Amendment (2006 Measures No. 4) Bill 2006 proposes amendmentsto tax legislation, such that Australian CGT will no longer have application to non-residents inrespect of assets such as NCIs (that are not held through an Australian permanent establishment)under any circumstances. The amendments are proposed to take effect for CGT events occurringon or after the date of Royal Assent of the Bill.

Dividends paid on the Preference Shares

Where dividends are paid by National on Preference Shares acquired by a Non-resident (former)NCI Holder on conversion of NCIs, no dividend withholding tax will be applicable to the extentthat the dividends paid are franked. To the extent dividends are unfranked, dividend withholdingtax will be imposed at a rate of 30%, unless a double tax agreement between Australia and theparticular country in which the Non-resident NCI Holder resides reduces that rate.

Disposal of Preference Shares

Under current law, Non-resident (former) NCI Holders (who do not hold Preference Sharesthrough a permanent establishment in Australia) should not be subject to Australian CGT on adisposal of Preference Shares if, at the time of disposal, they, together with their associates, havenot held at least 10% or more by value of the ordinary shares in National at any time during thepreceding five years.

Recently released Tax Laws Amendment (2006 Measures No. 4) Bill 2006 proposes amendmentsto tax legislation, such that Australian CGT will no longer have application to non-residents inrespect of assets such as the Preference Shares (that are not held through an Australian permanentestablishment) under any circumstances. The amendments are proposed to take effect for CGTevents occurring on or after the date of Royal Assent of the Bill.

Foreign tax implications

Non-resident NCI Holders should seek their own advice in relation to tax issues that may arise incountries other than Australia in relation to their acquisition, holding and disposal of NCIs.

GST and stamp duty

No GST or stamp duty should apply to the issue, disposal, redemption or conversion of NCIs orPreference Shares (as applicable).

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SUBSCRIPTION AND SALE

Subscription, Assignment and Sale of the Relevant Instruments

Pursuant to a subscription, sale and assignment agreement (the "Subscription, Sale andAssignment Agreement") between Deutsche New Zealand Limited (the "Initial Subscriber "),National Head Office, National New York Branch, National LLC 1, National LLC 2 and theIssuer to be dated on or about 15 September 2006:

(a) National LLC 1 will agree to issue to the Initial Subscriber, and the Initial Subscriber willagree to subscribe for, the LLC Notes in an aggregate principal amount of A$400,000,000for the price of 100% of their principal amount;

(b) National Head Office has will agree to pay the Initial Subscriber an amount ofA$400,000,000 (the "Assignment Payment ") in consideration of receiving the benefit ofthe assignment of the LLC Notes upon the Conversion Event or a redemption of the NCIs,as described under Summary of Principal Documents - Terms of the LLC Notes -Assignment above;

(c) National Head Office will agree to issue to the Initial Subscriber, and the InitialSubscriber will agree to subscribe for, the Convertible Debentures in an aggregateprincipal amount of A$400,000,000 for the price of 100% of their principal amount;

(d) National New York Branch will agreed to issue to National LLC 1, and National LLC 1will agree to subscribe for, the Subordinated Debentures in an aggregate principal amountof A$400,000,000 for the price of 100% of their principal amount;

(e) National LLC 2 will agree to issue to the Initial Subscriber A$400,00,000 in aggregateprincipal amount of LLC 2 Securities for the price of 100% of their principal amount to besatisfied by the transfer by the Initial Subscriber of the LLC Notes and the ConvertibleDebentures to National LLC 2; and

(1) the Initial Subscriber will agree to sell to the Trustee, and the Trustee will agree topurchase, the LLC 2 Securities for the price of 100% of their principal amount.

The cash payments described above may be subject to net settlement arrangements.

Subscription and Sale of the NCIs

Pursuant to a subscription agreement (the "NCI Subscription Agreement") between DeutscheBank AG, Sydney Branch ("Deutsche" and a "Joint Lead Manager"), National Australia BankLimited (a "Joint Lead Manager" and, together with Deutsche, the "Joint Lead Managers"),the Issuer and National dated 12 September 2006, Deutsche has agreed to subscribe for 8,000NCIs at a price of 100 per cent. of their Liquidation Amount on the terms and conditions set out inthe NCI Subscription Agreement.

The NCI Subscription Agreement is subject to a number of conditions and may be terminated bythe Joint Lead Managers in certain circumstances prior to payment for the NCIs to the Issuer.National has agreed to indemnify the Joint Lead Managers against certain liabilities in connectionwith the issue of the NCIs and the Joint Lead Managers will be reimbursed for certain of theirexpenses in connections with the issue and sale of the NCIs.

Deutsche will be paid a fee determined as an agreed percentage of the issue price of the NCIs.

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Selling Restrictions

Austria&

No prospectus, Product Disclosure Statement or other disclosure document (as defined in theCorporations Act) in relation to the NCIs or the Preference Shares has been lodged with theAustralian Securities and Investments Commission ("ASIC"). Each Joint Lead Managerrepresents and agrees that it:

(a) has not made or invited, and will not make or invite, an offer of any NCIs or thePreference Shares for issue or sale in Australia (including an offer or invitation which isreceived by a person in Australia); and

(b) has not distributed or published, and will not distribute or publish, any draft, preliminaryor definitive offering or information memorandum, advertisement or other offeringmaterial relating to the NCIs or the Preference Shares in Australia,

unless (i) the minimum aggregate consideration payable by each offeree or invitee is at leastA$500,000 (or its equivalent in other currencies, but disregarding moneys lent by the offeror or itsassociates) or the offer or invitation otherwise does not require disclosure to investors inaccordance with Part 6D.2 of the Corporations Act and is not an offer to a "retail client" underChapter 7 of the Corporations Act, and (ii) such action complies with all applicable laws anddirectives and does not require any document to be lodged with ASIC.

United Kingdom

Each Joint Lead Manager represents and agrees that:

(a) it has only communicated or caused to be communicated and will only communicate orcause to be communicated any invitation or inducement to engage in investment activity(within the meaning of Section 21 of the Financial Services and Markets Act 2000("FSMA")) received by it in connection with the issue or sale of any NCIs or PreferenceShares (if issued) in circumstances in which Section 21(1) of the FSMA does not apply tothe Issuer and National; and

(b) it has complied and will comply with all applicable provisions of the FSMA with respectto anything done by it in relation to the NCIs and the Preference Shares in, from orotherwise involving the United Kingdom.

United States

Each Joint Lead Manager understands that the NCIs and Preference Shares have not been and willnot be registered under the US Securities Act of 1933, as amended (the "Securities Act") andmay not be offered or sold within the United States or to, or for the account or benefit of,U.S. persons (as defined in Regulation S under the Securities Act) except in accordance withRegulation S under the Securities Act or pursuant to an exemption from the registrationrequirements of the Securities Act.

Each Joint Lead Manager has represented and agreed that it has offered and sold any NCIs orPreference Shares and will offer and sell any NCIs or Preference Shares (a) as part of itsdistribution at any time and (b) otherwise until 40 days after the completion of the distribution ofsuch tranche as determined and certified by the Joint Lead Manager (or other person performing asimilar function), only in accordance with Rule 903 of Regulation S under the Securities Act.Accordingly, none of the Joint Lead Managers, their respective affiliates or any persons acting onits or their behalf have engaged or will engage in any directed selling efforts with respect to the

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NCIs or Preference Shares, and each Joint Lead Manager, its affiliates and any person acting ontheir behalf have complied and will comply with the offering restriction requirements ofRegulation S.

Each Joint Lead Manager has agreed that, at or prior to confirmation of a sale of the NCIs orPreference Shares, it will have sent to each distributor, dealer or person receiving a sellingconcession, fee or other remuneration that purchases the NCIs or Preference Shares from it orthrough it daring the restricted period a confirmation or notice to substantially the followingeffect:

"The [NCIs/Preference Shares] covered hereby have not been registered under the UnitedStates Securities Act of 1933 ("Securities Act") and may not be offered or sold within theUnited States or to or for the account or benefit of U.S. persons (a) as part of theirdistribution at any time and (b) otherwise until forty days after the completion of thedistribution of the [NCIs/Preference Shares] as determined and certified by the Joint LeadManager (or other person performing a similar function), except in either case inaccordance with Regulation S under the Securities Act. Terms used above have themeaning given to them by the Securities Act or Regulation S thereunder."

Terms used in the above paragraph have the meanings given to them by Regulation S under theSecurities Act.

Hong Kong

Each Joint Lead Manager has represented and agreed that:

(a) it has not offered or sold and will not offer or sell in Hong Kong, by means of anydocument, any NCIs or Preference Shares other than (a) to "professional investors" asdefined in the Securities and Futures Ordinance (Cap.571) of Hong Kong and any rulesmade under that Ordinance; or (b) in other circumstances which do not result in thedocument being a "prospectus" as defined in the Companies Ordinance (Cap.32) of HongKong or which do not constitute an offer to the public within the meaning of thatOrdinance; and

(b) it has not issued or had in its possession for the purposes of issue, and will not issue orhave in its possession for the purposes of issue, whether in Hong Kong or elsewhere, anyadvertisement, invitation or document relating to the NCls or Preference Shares, which isdirected at, or the contents of which are likely to be accessed or read by, the public inHong Kong (except if permitted to do so under the securities laws of Hong Kong) otherthan with respect to NCIs or Preference Shares which are or are intended to be disposed ofonly to persons outside Hong Kong or only to "professional investors" as defined in theSecurities and Futures Ordinance and any rules made under that Ordinance.

Singapore

This Information Memorandum has not been registered as a prospectus with the MonetaryAuthority of Singapore (the "MAS") under the Securities and Futures Act, Chapter 289 ofSingapore (the "Securities and Futures Act"). Accordingly, each Joint Lead Manager agreesthat the NCIs and the Preference Shares have not been offered or sold and will not be offered orsold or made the subject of an invitation for subscription or purchase nor will this InformationMemorandum or any other document or material in connection with the offer or sale or invitationfor subscription or purchase of any NC1s or Preference Shares be circulated or distributed,whether directly or indirectly, to any person in Singapore other than (a) to an institutional investorpursuant to Section 274 of the Securities and Futures Act, (b) to a relevant person, or any person

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pursuant to Section 275(IA) of the Securities and Futures Act, and in accordance with theconditions specified in Section 275 of the Securities and Futures Act or (c) pursuant to, and inaccordance with, the conditions of, any other applicable provision of the Securities and FuturesAct.

Each of the following relevant persons specified in Section 275 of the Securities and Futures Act,which has subscribed or purchased NCIs or Preference Shares (if issued), namely a person who is:

(a) a corporation (which is not an accredited investor) the sole business of which is to holdinvestments and the entire share capital of which is owned by one or more individuals,each of whom is an accredited investor; or

(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to holdinvestments and each beneficiary is an accredited investor,

should note that shares, debentures and units of shares and debentures of that corporation or thebeneficiaries' rights and interest in that trust shall not be transferable for 6 months after thatcorporation or that trust has acquired the NCIs or Preference Shares under Section 275 of theSecurities and Futures Act except:

(i) to an institutional investor under Section 274 of the Securities and Futures Act orto a relevant person, or any person pursuant to Section 275(IA) of the Securitiesand Futures Act, and in accordance with the conditions, specified in Section 275of the Securities and Futures Act;

(ii) where no consideration is given for the transfer; or

(iii) by operation of law.

Japan

The NCIs and the Preference Shares have not been and will not be registered under the Securitiesand Exchange Law of Japan, as amended (the "Securities and Exchange Law") and each JointLead Manager has represented and agreed that it has not, directly or indirectly, offered or sold andwill not offer or sell any NCIs or Preference Shares, directly or indirectly, in Japan or to, or for thebenefit of, any resident of Japan (which term as used herein means any person having his place ofdomicile or residence in Japan, any corporation or other legal entity organised under the laws ofJapan except for its branches or other offices located outside Japan and, with respect to anycorporation or other legal entity organised under a law other than Japanese law, its branches andoffices located in Japan) , or to others for reoffering or resale, directly or indirectly, in Japan or to,or for the benefit of, a resident of Japan, except pursuant to an exemption from the registrationrequirements of, and otherwise in compliance with, the Securities and Exchange Law and anyother applicable laws, regulations and governmental guidelines of Japan.

General

No representation is made that any action has been taken in any country or jurisdiction by thePrimary Parties that would permit an offering of any NCIs or Preference Shares, or possession ordistribution of the Information Memorandum in relation thereto, in any country or jurisdictionwhere action for that purpose is required.

Each Joint Lead Manager has agreed to comply with all applicable laws and regulations in eachcountry or jurisdiction in or from which it purchases, offers, sells or delivers any NCIs or

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Preference Shares or has in its possession or distributes offering material in relation thereto, in allcases at its own expense, and no Primary Party shall have responsibility therefor.

No Primary Party represents that any NCIs or Preference Shares may at any time lawfully be soldin compliance with any applicable law or directive or any applicable registration or otherrequirements in any jurisdiction, or pursuant to any exemption available thereunder, or assumesany responsibility for facilitating such sale.

Persons into whose hands the Information Memorandum comes are required to comply with anyapplicable law and directive in each jurisdiction in which they purchase, offer, sell or deliverNCIs or Preference Shares or have in their possession or distribute or publish the InformationMemorandum or other offering material and to obtain any authorisation required by them for thepurchase, offer, sale or delivery by them of any NCIs or Preference Shares under any applicablelaw or directive in force in any jurisdiction to which they are subject or in which they make suchpurchases, offers, sales or deliveries, in all cases at their own expense, and neither the PrimaryParties nor any Joint Lead Manager has responsibility for such matters.

In these selling restrictions, "directive" includes a treaty, official directive, request, regulation,guideline or policy (whether or not having the force of law) with which responsible participants inthe relevant market generally comply.

Selling restrictions for the Relevant Instruments

The Initial Subscriber represents and agrees that it has not offered or sold any LLC 2 Securities,LLC Notes, Convertible Debentures or Subordinated Debentures (each a "Relevant Instrument")and will not offer or sell any Relevant Instrument except in accordance with the specificsubscriptions and sales set out under Subscription and Sale - Subscription, Assignment and Sale ofthe Relevant Instruments above.

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GENERAL INFORMATION

Authorisation

The issue of NCIs has been duly authorised by a resolution of the Board of Directors of theTrustee dated 15 August 2006 and by a resolution of a Committee of the Board of Directors of theTrustee dated 12 September 2006.

The issue of the LLC Notes by National LLC 1 will be duly authorised by a resolution of the LLCManager on or about 12 September 2006 and the issue of the LLC 2 Securities by National LLC 2will be duly authorised by a resolution of the LLC Manager on or about 12 September 2006.

The issue of the Subordinated Debentures, the Convertible Debentures and the Preference Shareshas been duly authorised by a resolution of the Board of Directors of National dated 13 June 2006and by a resolution of a Committee of the Board of Directors of National dated 25 August 2006.However, while the issue of the Preference Shares has been authorised by National, in order toissue the Preference Shares on the Preference Share Terms it will be necessary for National at thetime of issue to do all required by its constitution and the Corporations Act to issue those shares.

Listing

Neither the NCIs nor the Preference Shares (if issued) will be listed on any stock exchange.

Documents Available

In addition to the documents incorporated by reference described under Documents Incorporatedby Reference above, copies of the following documents (together, the "Available Documents")will be available from the registered office of National.

(a) the Subscription, Sale and Assignment Agreement;

(b) the NCI Subscription Agreement;

(c) the Trust Deed (including the NCI Terms);

(d) the LLC 2 Agreement (including the LLC 2 Security Terms);

the LLC 1 Agreement (including the terms of the LLC 1 Common Securities);

the LLC Note Deed (including the LLC Note Terms);

the Subordinated Debenture Deed Poll (including the Subordinated Debenture Terms);

the Convertible Debenture Deed Poll (including the Convertible Debenture Terms);

the Preference Share Terms;

the agency agreement dated on or about the Issue Date between the Trustee andAustraclear Services Limited (the "Agency Agreement"); and

(k)

the Deed of Covenant.

Requests for such documents should be directed to National at its offices set out in the Directoryat the end of this Information Memorandum. National will not be obliged to provide a copy of

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any Available Document unless it is satisfied that the person requesting the document is either acurrent NO Holder or Preference Shareholder (if the Preference Shares are issued) or a genuineprospective holder of NCIs or Preference Shares (if issued).

Clearing Systems

It is expected that the NCIs will be eligible to be lodged into Austraclear by registeringAustraclear Limited as the holder of record, for custody in accordance with the Austraclear rules.All payments in respect of the NCIs lodged into Austraclear will be made to Austraclear Limited,for transfer in accordance with the Austraclear rules. All notices to NCI Holders will be directedto Austraclear Limited.

In respect of each NCI that is lodged into the Austraclear system, Austraclear Limited willbecome the registered holder of that NCI in the Register. While that NCI remains in theAustraclear system:

(a) all payments and notices required of the Trustee in relation to that NCI will be directed toAustraclear Limited; and

(b) all dealings and payments in relation to that NCI within the Austraclear system will begoverned by the Austraclear System Regulations.

It is expected that the Preference Shares (if issued) will also be lodged into Austraclear. However,no representation or warranty can be made by the Primary Parties that Austraclear will accept thePreference Shares (if issued) for lodgment into Austraclear.

Approval by Austraclear to lodge the NCIs or the Preference Shares (if issued) in Austraclear isnot a recommendation or endorsement by Austraclear of the NCIs or the Preference Shares.

"Austraclear" means the system operated by Austraclear Limited (ABN 94 002 060 773) forholding certain Australian dollar securities and the electronic recording and settling oftransactions in those securities between members of that system in accordance with theRegulations and Operating Manual established by Austraclear Limited (as amended or replacedfrom time to time) to govern the use of that system and includes, as required, a reference toAustraclear Limited as operator of that system.

Relevant trading information is set out below:

ISIN: AU3FN0000121

Auditors

The auditors of National up to and including the year ended 30 September 2004 were KPMG,independent auditors, who had audited National's accounts, without qualification, in accordancewith generally accepted auditing standards in Australia for the financial year ended 30 September2004.

At the Annual General Meeting of National on 31 January 2005, it was resolved to replace KPMGwith Ernst & Young, independent auditors, who have audited National's accounts, withoutqualification, in accordance with generally accepted auditing standards in Australia for thefinancial year ended 30 September 2005.

The auditors of National have no material interest in National.

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Audit reports in respect of National are signed both in the name of the firm of Ernst & Young orKPMG, as the case may be, and by an individual partner. The partners of each firm are typicallymembers of the Institute of Chartered Accountants of Australia, but each firm itself is not amember.

The liability of National's auditors in respect of an audit of National may be subject to statutoryschemes in Australian jurisdictions that restrict the recovery of damages from accountants. Such ascheme is currently operative in the state of New South Wales, where it limits the recovery ofdamages from accountants to the lesser of ten times the fees charged for the relevant services andA$20 million. Similar limitations are expected to become operative in the other states ofAustralia in the near future after the recent passage of enabling legislation. The scope of thelimitations and their effect on the enforcement of foreign judgments in Australia are so faruntested.

Persons transacting with the Issuer and National

The Joint Lead Managers, the Initial Subscriber and their respective Related Parties andAssociates may have engaged, and may in the future engage, in investment banking and/orcommercial banking transactions with, and may perform services to, the Issuer and Nationaland/or their Related Parties or Associates in the ordinary course of business.

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INDEX OF DEFINED TERMS

2

I1936 Act 641997 Act 64

2

2003 trust preferred preference shares 792003 trust preferred securities 792005 trust preferred preference shares 792005 trust preferred securities 792006 Half Year Report 41

A

AS 2ABN 37, 90Accumulated LLC Note Interest 69Accumulated Subordinated Debenture Interest 73

acquires 84Acquisition Event 58, 76, 82Additional Amount 12, 51, 58, 67, 70, 74, 80AGAAP 41Agency Agreement 97AIFRS 42APRA 16, 58APRA Capital Event 58APRA Condition 59, 69, 73ASIC 4, 93Assignee 70Assignment. 71Assignment Date 70Assignment Payment 92associate 84Associates 2ASX 83Austraclear 59, 98Austraclear Regulations 59Austraclear System 59Australian dollars 2Australian Treasurer 41Available Documents 97

BBank Bill Rate 45, 59Banking Act 21, 77Basel Accord 17Basel Committee 17Basel II 17Business Day 59

C

CGT 89Change in Law 63Component Instruments 59, 68Conversion 59

Conversion Date 60, 76Conversion Event 49, 60, 77Conversion Notice 60Convertible Debenture 75Convertible Debenture Deed Poll 60, 75Convertible Debenture Terms 60, 75Convertible Debentures 60Corporations Act 2, 37, 60

D

D 60Deed of Covenant 12, 60, 85Deutsche 92directive 96Distributable Amount 60Distributable Profits 60Distribution 44, 60Distribution Payment Date 1, 10, 60Distribution Period 61Distribution Rate I , 61Distributions 1, 10Dividend Payment Date 80Dividends 80dollars 2

E

Equal Ranking Instruments 79ExCap preference shares 79ExCaps 79Excluded Interest Amount 71

F

Face Value 69, 72, 75Financial Reports 41Fitch I, 5Foreign NCI Holder 61FSMA 93FSSA 41, 83Full Year Reports 41

G

GDRs 79GDS 79

I

IFRS 42IMS 38Initial Margin 1, 61Initial NCI 28Initial NCI Holder 28Initial Settlement Amount 28Initial Subscriber 9, 92Investor's Currency 22Issue Date 1, 10, 61Issuer 2, 9Issuing and Paying Agent 10

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JJoist Lead Managers _

1, 92

LLevel 1, Level 2 and Leven 61Liquidation Amount 61, 66, 78LLC I Agreement 35LLC 1 Common Securities 35LLC I Gross-up Indemnity 70LLC 1 Management Agreement 36LLC 2 Agreement. 32, 61LLC 2 Distribution Payment Date 66LLC 2 DiStriltutions 66LLC 2 Gross-up Indemnity 67LLC 2 Management Agreement 33LLC 2 Securities I, 61LLC 2 Security 66LLC 2 Security Terms 61, 66LLC Act 32LLC Manager 32, 61LLC Note 69LLC Note Deed 61, 69LLC Note Interest 69LLC Note Interest Payment Date 69LLC Note Terms 61, 69LLC Notes 1, 61

M

Margin 45, 61MAS 94Moody's 1, 5

N

National 1, 9, 61National Capital Instruments 61National Conversion Notice 61National Entity 13, 61National Group 9, 62National Head Office 9, 62National LLC 1 1, 9, 35, 62National LLC 2 1, 9, 32, 62National New York Branch 9, 62National Sub 9, 62NATL 2, 26NCI 44NCI Gross-up Indemnity 12NCI Holder 3, 62NCI Holders 1, 11NCI Subscription Agreement 92NCI Terms 1, 10, 62NCIs 1,2,10, 61NIS 79NIS preference shares 79Non-resident NCI Holders 90

0Optional Distribution 47, 62Optional Dividend 81Ordinary Resolution 62Other Party 2

P

Par Redemption Amount 62Parties 2Payment Date 62Preference Share 78Preference Share 10, 62Preference Share Event 81Preference Share Terms 62, 80Preference Shareholder 80Preference Shares 1Pre-Issue Date 28Preparation Date 3Primary Party 2

R

Record Date 62Redemption 48, 63Redemption Date 63, 76Redemption Notice 63Redemption Price 63Register 63Registered 63Registrar 9, 63Regulatory Event 63, 76, 82Related Parties 2Relevant Instrument 96relevant interest 84Relevant Issuer 30Relevant Jurisdiction 64, 82Relevant Party 85

S

S&P 1, 5SEC 42second person 84Securities Act 93, 94Securities and Exchange Law 95Securities and Futures Act 94Special Resolution 30Special Voting Period 82Step-Up Date 1, 63Subordinated Debenture 72Subordinated Debenture Deed Poll ....... 63, 72Subordinated Debenture Interest 72Subordinated Debenture Interest Payment Date 73

Subordinated Debenture Terms 63, 72Subordinated Debentures I, 63Subscription Sale and Assignment Agreement 92

T

Takeovers Act 83Tax Act 64Tax Event 64, 76, 82Tax Law Change 64, 82TFN 90Tier 1 Capital 65Tier 1 Capital Instrument 65Tier 1 Capital Ratio 65Total Capital Adequacy Ratio 65

101

Transaction Doeureats 142, 9, 65

Trust Deed ....... 65Trustee .... 2, 9, 65

U

Unpaid Distribution 46Upper Tier 2 Capital 65

V

voting power 84

102

DIRECTORY

TRUSTEENational Australia Trustees Limited

105-153 Miller StreetNorth Sydney

New South Wales 2060Australia

REGISTERED OFFICE OFNATIONAL

Level 13140 William Street

MelbourneVictoria 3000

Australia

REGISTRAR AND AGENTS

REGISTRAR ISSUING AND PAYING AGENT

National Australia Trustees Limited105-153 Miller Street

North SydneyNew South Wales 2060

Australia

Austraclear Services Limited30 Grosvenor Street

SydneyNew South Wales 2000

Australia

To National as to the laws ofAustralia

Mallesons Stephen JaquesLevel 50

Bourke Place600 Bourke Street


Australia

LEGAL ADVISERS

To National as to Australiantaxation law

Greenwoods & FreehillsMLC CentreMartin Place

SydneyNew South Wales 2000

Australia

To National as to the laws ofthe United States

Sullivan & Cromwell101 Collins Street


Australia

AUDITORS

Ernst & YoungErnst & Young Building

8 Exhibition StreetMelbourne

Victoria 3000Australia

(auditors for the year ended30 September 2005,

appointed 31 January 2005)

KPMGKPMG House

161 Collins StreetMelbourne

Victoria 3000Australia

(auditors for the year ended30 September 2004,

resigned 31 January 2005)

103

National Australia Trustees Limitedcapital.nab.com.au/docs/NCI_AUD.pdf · 2013-06-19 · National...

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Transcript of National Australia Trustees Limitedcapital.nab.com.au/docs/NCI_AUD.pdf · 2013-06-19 · National...