RNS Number:4609U
National Australia Bank Ld
21 January 2004


                                                             National Australia
                                                             Bank Limited
                                                             ABN 12004044937

                                                             DCK Allen AO
                                                             Chairman

                                                             500 Bourke Street
                                                             Melbourne
                                                             Victoria 3000
                                                             Australia





21 January 2004


Dear Shareholder

I am writing on behalf of the Board of Directors to provide you with a direct
explanation about unauthorised foreign currency options trading within the 
National and what we are doing to ensure it does not happen again.

Since we made an announcement about this matter last week there has been a
considerable amount of ill-informed comment and speculation. Your Directors are 
keen to ensure you have all the facts currently available.

The key developments in this matter are:

-       foreign currency traders incurred losses in their options portfolio and
        sought to hide such losses by recording fictitious trades in our 
        systems.  We believe this element of the problem has been fully 
        identified.  The losses incurred by the traders have been identified at 
        A$185 million.

-       having identified the fictitious trades and removed them from our
        systems, we considered it would be prudent to undertake a complete 
        revaluation of the remaining foreign currency portfolio
        to ensure it is appropriately and conservatively valued.  This involves 
        a careful examination of thousands of transactions.

-       we have identified that some additional losses will arise but the full
        extent of such additional losses will not be known for several days. 
        Based on our work to date, we caution shareholders against
        acting on any media speculation about this matter. We will advise 
        shareholders as soon as the full extent of the revaluation is known.

The Directors and executive management are extremely disappointed by the news of
this breach of internal policies and procedures. We have established a 
structured process to review and resolve all of the issues arising from this 
matter.

The Australian Stock Exchange and all relevant regulatory authorities were
advised. We also sent a formal reference to the Australian Federal Police so 
that they could evaluate whether any criminal charges should be brought against 
those involved.

Four members of the foreign currency options trading desk involved in this
matter were suspended pending the outcome of the internal investigation and 
external inquiries and we took appropriate steps to manage the options trading 
position.

An independent investigation by PricewaterhouseCoopers has been commissioned to
determine what happened and how it occurred.

The Board will closely monitor the internal and external investigations, and the
Risk Committee, chaired by Mr Graham Kraehe, will receive regular management 
updates and reports from the independent investigator, PricewaterhouseCoopers.
The results of this independent investigation will be made public.

We will continue to update you and the broader community as developments arise.
At this early stage, we expect to release the outcomes of the investigation by 
the end of February.

In the interim, copies of the National's announcements on this matter are
available to you on the National's website www.nabgroup.com or can be obtained 
from the Office of the Company Secretary by telephoning (from outside Australia 
613) (from outside Victoria 03) 8641 4170.

In conclusion, I can assure shareholders that this matter is confined to a small
part of the National's operations and that it will not affect our overall 
business nor our customers.

I can also assure shareholders that the Board will take whatever action is
necessary to ensure that you, our shareholders, customers and staff can have 
full confidence in the National.


Yours sincerely


DCK ALLEN
Chairman


                      This information is provided by RNS
            The company news service from the London Stock Exchange
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