MYSTATE LIMITED - M&A Activity 2009

29 June 2009

THIS IS AN IMPORTANT DOCUMENT AND REQUIRES YOUR URGENT ATTENTION

If you are in any doubt as to how to deal with this Tasmanian Perpetual Trustees Limited (ASX:TPX) Explanatory Booklet, please consult your legal, financial, taxation or other professional adviser immediately.

If you have recently sold all of your TPX Shares, please disregard all enclosed documents.

TASMANIAN PERPETUAL TRUSTEES LIMITED ACN 009 475 629 TPX Explanatory Booklet

YOUR DIRECTORS UNANIMOUSLY RECOMMEND THAT YOU VOTE IN FAVOUR OF THE RESOLUTION REQUIRED TO APPROVE THE TPX SCHEME AND THE TRANSACTION IN THE ABSENCE OF A SUPERIOR PROPOSAL.

YOUR VOTE IS IMPORTANT IN DETERMINING WHETHER THE TPX SCHEME AND THE TRANSACTION PROCEED.

For a scheme of arrangement between Tasmanian Perpetual Trustees Limited ACN 009 475 629 and its shareholders in relation to the proposal to merge with MyState Financial Credit Union of Tasmania Limited ACN 067 729 195, with MyState Limited ACN 133 623 962 becoming the ultimate listed parent company.

Legal Adviser

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stronger together

Important Notices

General

You should read this TPX Explanatory Booklet in its entirety before making a decision on how to vote on the resolution to be considered at the TPX Scheme Meeting. The notice convening the TPX Scheme Meeting and a proxy form are enclosed with this TPX Explanatory Booklet.

Defined terms and interpretation

Capitalised terms in this TPX Explanatory Booklet are defined either in the Glossary in Section 13 of this TPX Explanatory Booklet or where the relevant term is first used. References to ‘dollars’ or ‘$’ in this Explanatory Booklet are to Australian dollars unless otherwise indicated. References to time in this Explanatory Booklet is to the time in Hobart, Tasmania unless otherwise indicated.

Purposes of this TPX Explanatory Booklet

The purposes of this TPX Explanatory Booklet are to:

(a) explain the terms and effect of the TPX Scheme and the Transaction;
(b) explain the manner in which the TPX Scheme and the Transaction will be considered and, if approved, implemented;
(c) state any material interests of the TPX Directors, whether as directors, members or creditors of TPX or otherwise and the effect of the TPX Scheme and the Transaction on those interests as far as that effect is different from the effect on similar interests of other persons; and
(d) provide such information as is prescribed by the Corporations Act and the regulations to that Act or as is otherwise material to the decision of TPX Shareholders whether to approve the TPX Scheme and the Transaction.

Status of TPX Explanatory Booklet

This TPX Explanatory Booklet is not a disclosure document required by Chapter 6D of the Corporations Act. Section 708(17) of the Corporations Act provides that Chapter 6D of the Corporations Act does not apply in relation to arrangements under Part 5.1 of the Corporations Act approved at a meeting held as a result of a Court order under section 411(1). Instead, TPX Shareholders asked to vote on an arrangement at such a meeting must be provided with an explanatory statement under section 412 of the Corporations Act.

This TPX Explanatory Booklet incorporates an ‘explanatory statement’ for the purposes of section 412 of the Corporations Act.

ASIC, ASX and the Court

A copy of this TPX Explanatory Booklet has been provided to ASIC for the purposes of section 411(2) of the Corporations Act and registered by ASIC for the purposes of section 412(6) of the Corporations Act. Registration of the TPX Explanatory Booklet does not mean that ASIC has considered whether the proposed TPX Scheme and Transaction are in the best interests of TPX Shareholders as a whole.

ASIC has examined a copy of this TPX Explanatory Booklet. ASIC has been requested to provide a statement, in accordance with section 411(17)(b) of the Corporations Act, that ASIC has no objection to the TPX Scheme. If ASIC provides that statement, it will be produced

to the Court at the time of the Court hearing to approve the TPX Scheme. The TPX Scheme has not been proposed by TPX for the purpose of enabling any person to avoid the operation of any of the provisions of Chapter 6 of the Corporations Act. Neither ASIC nor any of its officers takes any responsibility for the contents of this TPX Explanatory Booklet.

A copy of this TPX Explanatory Booklet has been lodged with ASX. Neither ASX nor any of its officers takes any responsibility for the contents of this TPX Explanatory Booklet.

The order of the Court directing the TPX Scheme Meeting to be convened is not and should not be treated as an endorsement of, or any other expression of opinion by the Court, on the TPX Scheme or the Transaction.

Input from other parties

The TPX Information contained in this TPX Explanatory Booklet has been prepared by and is the responsibility of TPX. TPX does not assume any responsibility for the accuracy or completeness of the MSF Information.

The MSF Information contained in this TPX Explanatory Booklet has been prepared by and is the responsibility of MSF. MSF does not assume any responsibility for the accuracy or completeness of any part of this TPX Explanatory Booklet other than the MSF Information and the Joint Information.

The Joint Information contained in this TPX Explanatory Booklet has been prepared by and is the joint responsibility of TPX and MSF.

Deloitte has prepared the TPX Independent Expert’s Report in relation to the TPX Scheme and the Transaction in Appendix 1 of this TPX Explanatory Booklet and takes responsibility for that Section.

KPMG has prepared the general outline of taxation implications of the TPX Scheme and the Transaction in Section 8 of this TPX Explanatory Booklet and takes responsibility for that Section.

Other than in respect of the information identified above, the information contained in the remainder of this TPX Explanatory Booklet has been prepared by TPX and its advisers and is the responsibility of TPX.

Investment decisions

This TPX Explanatory Booklet does not take into account the investment objectives, financial situation or particular needs of any TPX Shareholder or any other person. This TPX Explanatory Booklet should not be relied on as the sole basis for any investment decision in relation to TPX Shares. Independent financial and taxation advice should be sought before making any decision in relation to the TPX Scheme and the Transaction.

Forward looking statements

Certain statements in this TPX Explanatory Booklet relate to the future. Such statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of TPX to be materially different from expected future results, performance or achievements expressed or implied by such statements. Such risks, uncertainties and other important factors include among other things, general economic

TPX Explanatory Booklet

conditions, specific market conditions, exchange rates, interest rates and regulatory changes. These statements reflect the expectations of relevant parties’ views only as of the date of this TPX Explanatory Booklet. Subject to any legal obligations (including under the Corporations Act or the Listing Rules or by an order of the Court), each of TPX, MSF and MyState Limited have no obligation to disseminate after the date of this TPX Explanatory Booklet any updates or revisions to any such statements to reflect any change in expectations in relation to those statements or any change in events, conditions or circumstances on which any of those statements are based.

None of TPX, MSF or MyState Limited, any directors of those companies nor any other person gives any representation, assurance or guarantee that the events expressed or implied in any forward looking statements in this TPX Explanatory Booklet will actually occur and you are cautioned not to place undue reliance on such forward looking statements.

Privacy statement

TPX collects personal information about its TPX Shareholders’ holdings of TPX Shares in accordance with the Corporations Act. TPX will share that personal information with its advisers and service providers and with MyState Limited and its advisers and service providers in connection with the TPX Scheme and the Transaction. TPX Shareholders can contact the TPX Share Registry, Computershare Investor Services Pty Limited, on 1300 787 272 if they have questions about their personal information.

No internet site is part of this TPX Explanatory Booklet

TPX maintains an internet site at tasmanianperpetual.com.au. Any references in this TPX Explanatory Booklet to any internet site are textual references for information only and do not form part of this TPX Explanatory Booklet.

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Important Notices _________ 2
Important dates and times ________ 6
Letter from the Chairman of
Tasmanian Perpetual Trustees Limited ____ 7
Letter from the Chairman of
MyState Financial Credit Union of Tasmania Limited ____ 8
Key reasons to vote in favour of the
TPX Scheme and the Transaction ___ 9
Disadvantages of the TPX Scheme
and the Transaction_______ 11
Section 1 – Key features of the
TPX Scheme and the Transaction ___ 12
1.1 What you will receive _______ 12
1.2 TPX Directors’ recommendations and intentions ______ 12
1.3 Key conditions _______ 12
1.4 Implementation and timetable _______ 13
1.5 The TPX Scheme and the Transaction –
your questions answered ____ 13
1.6 Foreign Scheme Shareholders________ 16
Section 2 - How to vote on the
TPX Scheme and the Transaction ___ 17
2.1 TPX Scheme Meeting ________ 17
2.2 Summary of how to vote _____ 17
2.3 What to do next _____ 18
Section 3 - Important considerations
regarding the TPX Scheme and the Transaction ___ 19
3.1 TPX Directors’ recommendation and intentions _ 19
3.2 Key reasons for your Directors’
unanimous recommendation ________ 19
3.3 Possible disadvantages ______ 21
3.4 Risks associated with the TPX Scheme
and the Transaction _________ 21
3.5 Other relevant considerations ________ 21
3.6 What are your options and what should you do? _____ 23
Section 4 - Profile of TPX ___ 24
4.1 Overview of TPX _____ 24
4.2 Structure and staffing _______ 24
4.3 Key management personnel ___ 25
4.4 Tasmanian Banking Services ________ 25
4.5 Recent share price history ____ 26
4.6 TPX revenue ________ 26
4.7 TPX expenses _______ 27
4.8 TPX earnings per share and dividends _______ 27
4.9 TPX historical information ____ 28
4.10 Normalisation of historical earnings ___ 30

4.11	Management discussion of historical
	financial information ________ 31
4.12	Financial forecasts ____ 31
4.13	TPX Board of Directors ______ 31
4.14	TPX’s issued securities _______ 33
4.15	TPX – a disclosing entity _____ 34
4.16	Proposed National Trustee Legislation _______ 35

Section 5 - Profile of MSF ___ 36

5.1	Overview of MSF _____ 36
5.2	MSF revenue ________ 37
5.3	MSF lending portfolio _______ 38
5.4	MSF funding base ____ 38
5.5	MSF historical financial information ___ 39
5.6	Management discussion of historical
	financial information ________ 41
5.7	Financial forecasts ____ 41
5.8	MSF’s Board of Directors _____ 42
5.9	MSF’s Company Secretary ____ 42
Section 6 - Profile of the MyState Limited Group _ 43
6.1	Rationale: Stronger together ________ 43
6.2	Structure of the MyState Limited Group ______ 43
6.3	Intentions of MyState Limited _______ 44
6.4	Integration strategy _________ 45
6.5	Employee Share Plan ________ 45
6.6	Executive Long Term Incentive Plan ___ 46
6.7	Capital structure _____ 46
6.8	Dividend policy ______ 47
6.9	Corporate Governance _______ 47
6.10	MyState Limited Board remuneration __ 49
6.11	Prospects for the MyState Limited Group _____ 49
6.12	Pro forma financial information ______ 50
Section 7 - Risks ____ 57
7.1	Overview __________ 57
7.2	Merger specific risks ________ 57
7.3	General business risks _______ 58
Section 8 - Taxation implications ___ 61
8.1	Introduction ________ 61
8.2	Australian Tax Implications from disposal of
	TPX Scheme Shares by TPX Scheme Shareholders _____ 61
8.3	Cost base of existing TPX Scheme Shares
	held by TPX Scheme Shareholders ____ 63
8.4	Payment of dividends on new MyState Limited Shares __ 63
8.5	Disposal of the new MyState Limited Shares ___ 64
8.6	No Goods and Services Tax (GST) ____ 64
8.7	No Stamp Duty ______ 64

TPX Explanatory Booklet

Section 9 - Procedural aspects of the

TPX Scheme and the Transaction ___ 65

9.1	Introduction ________ 65
9.2	The TPX Scheme, MSF Scheme and the Transaction ___ 65
9.3	TPX Scheme Meeting ________ 65
9.4	The TPX Scheme and the Transaction -
	conditions and termination ___ 66
9.5	Representations and warranties ______ 67
9.6	No talk and no shop arrangements ___ 69
9.7	Status of conditions and termination rights ____ 69
9.8	Reimbursement Amount _____ 69
9.9	Joint Steering Committee _____ 71
9.10	TPX scheme document ______ 71
9.11	TPX Deed Poll _______ 72
Section 10 - Implementation procedures __ 73
10.1	Introduction ________ 73
10.2	Court approval of the TPX Scheme ____ 73
10.3	Receipt of Court orders ______ 73
10.4	Implementation ______ 73
10.5	Determination of TPX Scheme Shareholders ___ 74
10.6	Trading MyState Limited Shares on ASX ______ 74
10.7	Standing instructions held on TPX Shareholding ______ 74
Section 11 - Additional Information ______ 75
11.1	Introduction ________ 75
11.2	Rights attaching to MyState Limited Shares
	and Summary of MyState Limited Constitution _ 75
11.3	Substantial holders _________ 77
11.4	Directors _____ 77
11.5	Marketable securities of TPX held by
	or on behalf of TPX Directors ________ 77
11.6	Existing TPX executive long term incentive plan ______ 78
11.7	Marketable securities of MSF held by
	or on behalf of MSF Directors _______ 78
11.8	Relevant interests in marketable
	securities of MyState Limited ________ 78
11.9	TPX Directors’ interests in any contracts
	with MyState Limited ________ 78
11.10	TPX Directors’ interests in agreements connected
	with or conditional on the TPX Scheme ______ 78
11.11	Retirement benefits _________ 78
11.12	Material changes in the financial position of TPX _____ 78
11.13	Auditors _____ 78
11.14	Effect on TPX creditors ______ 78
11.15	Impact on material contracts of TPX ___ 79
11.16	TPX Directors’ intentions regarding the business,
	assets and employees of TPX _______ 79

11.17	Recent TPX Share price trading ______ 79
11.18	ASX waivers ________ 79
11.19	No unacceptable circumstances ______ 79
11.20	Quotation of MyState Limited Shares __ 79
11.21	Consents and disclaimers _____ 79
11.22	Independent advice _________ 80
11.23	Other material information____ 80
11.24	Privacy ______ 80
Section 12 – Notice of TPX Scheme Meeting _____ 81
Section 13 - Glossary _______ 83
Appendix 1: TPX Independent Expert’s Report ___90
Appendix 2: TPX Shares Cost Base Information __ 176

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Important dates and times

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Date of this TPX Explanatory Booklet 29 June 2009
Proxies to be received from TPX Shareholders not later than 11.00am (Tasmanian time) on Monday, 17 August 2009
Time and date for determining eligibility to vote at the TPX Scheme Meeting 7.00pm (Sydney time) on Monday, 17 August 2009
TPX Shareholders’ Meeting to approve the TPX Scheme and the Transaction 11.00am (Tasmanian time) on Wednesday, 19 August 2009
The meeting will be held at the Hotel Grand Chancellor Launceston, 29 Cameron Street, Launceston, Tasmania
The timetable below is indicative only. TPX has the right to vary any or all of these dates and times and will provide reasonable notice of
any such variation. Certain dates and times are conditional on the approval of the TPX Scheme and the Transaction by TPX Shareholders
and by the Court.
Court hearing to approve the TPX Scheme Thursday, 20 August 2009
Court order is lodged with ASIC and TPX Scheme takes effect ( Effective Friday, 21 August 2009
Date ) of the TPX Scheme
Suspension of TPX Shares from ASX trading 4.10pm (Sydney time) on Tuesday, 18 August 2009
Deferred settlement trading of MyState Limited Shares commences Monday, 24 August 2009
Date for determination of entitlements to TPX Scheme Consideration (MyState 7:00pm (Sydney time) on Friday, 28 August 2009
Limited Shares) ( TPX Record Date )
Allotment of MyState Limited Shares (Implementation Date ) Tuesday, 1 September 2009
Despatch of MyState Limited confirmation statements Friday, 4 September 2009
Normal trading of MyState Limited Shares commences on ASX Monday, 7 September 2009
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ENQUIRIES REGARDING THE TPX SCHEME OR THE TRANSACTION

If, after reading this TPX Explanatory Booklet, you have any questions in relation to the TPX Scheme and the Transaction, please call the Company Secretary of TPX on 03 6348 1111 between 9.00am and 5.00pm (Tasmanian time) from Monday to Friday.

Your Directors recommend that you consult your legal, financial, taxation or other professional adviser concerning the impact your decision may have on your own circumstances.

TPX Explanatory Booklet

Letter from the Chairman of Tasmanian Perpetual Trustees Limited

29 June 2009

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Dear Shareholder,

On 10 October 2008, Tasmanian Perpetual Trustees Limited ( TPX ) announced that it had signed an agreement with MyState Financial Credit Union of Tasmania Limited ( MSF ) under which it is proposed that the two companies will merge to create a leading Tasmanian based diversified financial services group. The terms of the merger were subsequently amended by the parties and announced on 21 January 2009 and was again amended on 22 June 2009. TPX and MSF will become wholly-owned subsidiaries of a newly-incorporated holding company, MyState Limited. The Board of Directors of MyState Limited will comprise representatives of both MSF and TPX.

The proposed merger will be implemented by two interdependent schemes of arrangement, one between TPX and its shareholders under which all TPX Shares will be transferred to MyState Limited in return for the issue of equivalent numbers of MyState Limited Shares ( TPX Scheme ), and one between MSF and its members under which all MSF Member Shares will be transferred to MyState Limited, also in return for the issue of MyState Limited Shares ( MSF Scheme ).

Your Directors (and the directors of MSF) believe that by merging, TPX and MSF will:

create a diversified financial services group with greater combined capacity to pursue growth opportunities;
deliver value to their shareholders by combining the balance sheet strength of both companies;
benefit from sharing considerable merger cost synergies and expected (but not guaranteed) distinct revenue synergies;
specifically benefit from increased revenue generation opportunities through cross selling to each company’s significant customer bases; and
provide increased scale that will deliver a greater range of products and services to existing and new customers as well as enhanced operational efficiencies.

Your Directors unanimously endorse the TPX Scheme and recommend that, in the absence of a Superior Proposal, TPX Shareholders support the proposed merger by voting in favour of the resolution at the TPX Scheme Meeting.

In forming this recommendation, your Directors have carefully considered:

the results of the company’s due diligence and analysis of MSF;
the analysis of the commercial advantages and disadvantages associated with the TPX Scheme and the Transaction;
the ongoing effects on TPX of the global financial crisis and the Federal Government Guarantee scheme, which has significantly impacted upon TPX funds under management and consequently revenues and profits;
the alternative strategies available to TPX in pursuing its corporate objectives; and
the opinion of the TPX Independent Expert which is that the TPX Scheme and the Transaction are both fair and reasonable and are in the best interests of TPX Shareholders.

Each of your Directors intends to vote in favour of the TPX Scheme and the Transaction with respect to all TPX Shares held by him or her or in which he or she otherwise has a relevant interest, in the absence of a Superior Proposal.

A meeting of TPX Shareholders to consider and vote on the TPX Scheme will be held on Wednesday, 19 August 2009 at the Hotel Grand Chancellor Launceston, 29 Cameron Street, Launceston, Tasmania.

This TPX Explanatory Booklet contains full details of the TPX Scheme and the Transaction and will assist you in making an informed decision on how to vote at the TPX Scheme Meeting. I encourage you to read this TPX Explanatory Booklet carefully.

On behalf of the TPX Board, I commend the TPX Scheme and the Transaction to you and would like to take this opportunity to thank you once again for your support of TPX.

Yours sincerely

Dr Michael Vertigan AC Chairman

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Letter from the Chairman of MyState Financial Credit Union of Tasmania Limited

29 June 2009

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Dear Shareholder

In October 2008, MyState Financial Credit Union of Tasmania Limited ( MSF ) and Tasmanian Perpetual Trustees Limited ( TPX ) announced a proposal to merge and create the MyState Limited Group – a Tasmanian based, diversified financial services group.

The MSF Board unanimously endorses the merger proposal because we believe the MyState Limited Group will have the scale required to deliver a greater range of services and products to customers and will also possess the balance sheet strength to grow shareholder returns over time.

MSF is Tasmania’s largest locally owned financial institution with approximately 117,000 members, branches in 12 locations, approximately 300 staff and total assets of more than $1.75 billion as at 31 December 2008.

MSF is an Authorised Deposit-taking Institution with Tasmanian origins dating back 50 years. Like TPX, MSF has a proud Tasmanian heritage and a strong record of customer service, with a loyal member base. These will be key features of the MyState Limited Group that we know we already share with TPX.

MSF and TPX have complementary service cultures and business growth objectives, which is a cornerstone in bringing the two organisations together for the benefit of shareholders of TPX and members of MSF.

Each of the MSF Directors intends to vote their share in MSF in favour of the transaction, in the absence of a Superior Proposal, when MSF Members meet to vote on the transaction.

I urge all TPX Shareholders to support the proposal when they meet to consider the TPX Scheme and the Transaction. On behalf of the MSF Board I recommend the proposal to you and encourage you to read the TPX Explanatory Booklet carefully.

We look forward to your support of the proposal to create the MyState Limited Group.

Yours sincerely

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Tony Reidy Chairman

MyState Financial Credit Union of Tasmania Limited

TPX Explanatory Booklet

Key reasons to vote in favour of the TPX Scheme and the Transaction

If you believe the TPX Scheme and the Transaction are in your best interests as a TPX Shareholder, you may choose to vote in favour of the resolution to approve the TPX Scheme and the Transaction. Some of the reasons that may lead you to support voting in favour of the resolutions are set out below.

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Opportunity to create a Tasmanian If the TPX Scheme and the Transaction are implemented, TPX and MSF will join forces to
based diversified financial services create a stronger Tasmanian based, diversified financial services group called the MyState
group Limited Group. MyState Limited will have additional strength and scale to compete in the
financial services sector and continue to provide the standard of products and services
customers have enjoyed.
Opportunity to join other TPX Scheme If the TPX Scheme and the Transaction are implemented, TPX Scheme Shareholders will
Shareholders in owning 32.5% of own 32.5% of MyState Limited’s issued shares immediately following implementation,
MyState Limited which your Directors consider is a fair and reasonable proportion, based on a number of
factors, including the net assets and historical normalised earnings of both TPX and MSF.
Potential for synergies to improve If the TPX Scheme and the Transaction are implemented, your Directors estimate cost
profits and earnings per share savings for the MyState Limited Group to be realised over a three year period will be
in the range of $3.5 million to $4.5 million per annum (before tax) in the final year. In
addition and separate to the estimated cost savings, revenue synergies are expected (but
not guaranteed) to arise in the future from cross selling and referral activities, where both
companies will leverage off the other’s existing client bases.
TPX will continue to offer the same TPX will become a 100% owned subsidiary of MyState Limited. As such, it will continue
products and services to provide the same products and services members have enjoyed under the “Tasmanian
Perpetual Trustees” brand.
Opportunity to improve products and The increased financial strength and the greater number of customers of the MyState
services Limited Group provides enhanced opportunities for other innovative products and services
to be developed and offered to TPX and MSF customers.
Opportunity to grow TPX has in recent times considered a number of opportunities to expand by way of
merger or acquisition, including into mainland Australia. None of these opportunities
have come to fruition, largely as a result of TPX’s lack of scale.
The MyState Limited Group will enjoy an enhanced ability to expand through further
acquisitions and improved attractiveness to potential joint venture partners, something
that neither TPX nor MSF has to date had the scale to achieve alone.
The MyState Limited Group will have an enhanced ability to expand into the mainland
Australian market as a result of this greater scale.
Reduced impact of the global financial TPX and MSF will be “Stronger Together” and together will be better positioned to
crisis and the Federal Government’s ADI weather the ongoing impact of the global financial crisis.
deposit guarantee By combining with MSF (which currently benefits from the Federal Government’s
Guarantee), TPX will be able to partially mitigate the impact on its earnings from being
excluded from the Government guarantee.
Head office will be retained in Tasmania If the TPX Scheme and the Transaction are implemented, TPX will retain its head office in
Tasmania. This will ensure management decisions continue to be made in Tasmania.
The ‘Tasmanian Perpetual Trustees’ If the TPX Scheme and the Transaction are implemented, the ‘Tasmanian Perpetual
brand will remain Trustees’ brand will remain. There will be no material rebranding costs.
Independence of MyState Limited If the TPX Scheme and the Transaction are implemented, any substantial acquisition of
shares in MyState Limited will be subject to a number of Federal and State approvals.
In particular, the Trustee Companies Act has been amended and will apply a 10%
shareholder cap to MyState Limited. This means that MyState Limited, and (as a
subsidiary) TPX, have a level of statutory protection from unrecommended takeover bids.
Refer also to Section 4.16 for a discussion of the proposed new federal legislation in
relation to trustee companies.
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Five TPX Board members on the MyState The MyState Limited Board will initially have equal representation from TPX and MSF.
Limited Board Five current TPX Directors and five current MSF Directors along with a Managing Director
(yet to be appointed), will form the MyState Limited Board.
Opportunity to increase your MyState If the TPX Scheme and the Transaction are implemented, each eligible TPX Shareholder
Limited shareholding will be able to acquire additional MyState Limited Shares on the ASX.
Your Directors’ unanimous Your Directors unanimously recommend that you vote in favour of the resolution required
recommendation to approve the TPX Scheme and the Transaction, in the absence of a Superior Proposal.
Each of your Directors who hold TPX Shares will vote those TPX Shares in favour of the
TPX Scheme and the Transaction, in the absence of a Superior Proposal.
TPX Independent Expert’s conclusion The TPX Independent Expert has valued TPX in the range of $3.10 to $3.55 per TPX Share
and has concluded that the TPX Scheme and the Transaction are in the best interest of
TPX Shareholders. The full report is contained in Appendix 1 of this TPX Explanatory
Booklet.
No Superior Proposal has been received Since TPX announced the TPX Scheme and the Transaction on 10 October 2008 and up
to the date of this TPX Explanatory Booklet, no Superior Proposal has been received.
TPX Share price may fall TPX’s share price may fall if the TPX Scheme and the Transaction is not approved and if
no Superior Proposal emerges.
No transfer costs You bear no direct outlay on the transfer of your TPX Shares under the TPX Scheme.
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TPX Explanatory Booklet

Disadvantages of the TPX Scheme and the Transaction

If you believe the TPX Scheme and the Transaction are not in your best interests as a TPX Shareholder, you may choose to vote against the resolutions to approve the TPX Scheme and the Transaction. Some of the reasons that may lead you to vote against the resolutions are set out below.

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The listing value of the MyState Limited The value of the TPX Scheme Consideration is dependent on the price at which MyState
Shares is still to be determined Limited Shares will trade on the ASX. No assurances can be given as to the price at
which MyState Limited Shares will trade on the ASX when it commences trading and
the price at which MyState Limited Shares will trade on the ASX will be determined by
MyState Limited’s performance, market and trading conditions, as well as other factors
(such as general economic conditions) at the time.
Taxation consequences If the TPX Scheme and the Transaction are approved and implemented, it will potentially
result in taxation consequences (potentially including capital gains tax) for TPX
Shareholders, which may not have arisen or will arise earlier than may otherwise have
been the case.
Section 8 of this TPX Explanatory Booklet provides a general outline of the likely taxation
consequences of the TPX Scheme and the Transaction for TPX Shareholders. TPX
Shareholders should obtain advice taking into account their own individual position.
Foreign Scheme Shareholders TPX Scheme Shareholders with their registered address overseas will have their MyState
Limited Shares sold by a Nominee and the funds remitted to them. Accordingly, while
they will be paid a cash sum for the net proceeds, they will not receive the ongoing
benefit of the rights that attach to MyState Limited Shares.
A Superior Proposal could potentially It is possible that a more attractive proposal for TPX Shareholders could materialise in the
emerge future.
However, no Superior Proposal has been received since the announcement of the TPX
Scheme and the Transaction and up to the date of this TPX Explanatory Booklet.
Loss of customers The TPX Scheme and the Transaction could cause some TPX and MSF customers to leave.
No direct continuing interest You will not have a direct continuing interest in TPX’s business although you will maintain
an indirect interest because TPX will become, if the TPX Scheme and the Transaction are
implemented, a subsidiary of MyState Limited. You will also acquire an indirect interest in
the business of MSF, which will also become a subsidiary of MyState Limited.
Risks TPX Scheme Shareholders will have direct exposure to the MyState Limited Group which
will be exposed to a number of risks which are different to the risks currently faced by
TPX.
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YOUR DIRECTORS BELIEVE THAT THE ADVANTAGES OF THE TPX SCHEME AND TRANSACTION OUTWEIGH THE DISADVANTAGES AND UNANIMOUSLY RECOMMEND THAT YOU VOTE IN FAVOUR OF THE RESOLUTION TO APPROVE THE TPX SCHEME AND THE TRANSACTION , IN THE ABSENCE OF A SUPERIOR PROPOSAL

You should read this TPX Explanatory Booklet in full before making any decision on the TPX Scheme and the Transaction. In particular, you should refer to Sections 3 and 7 for guidance on the expected advantages, possible disadvantages, risk factors and other considerations in respect of the TPX Scheme and the Transaction.

This TPX Explanatory Booklet does not take into account the financial situation, investment objectives and particular needs of any TPX Shareholder. You should consult your legal, financial, taxation or other professional adviser concerning the impact your decision may have on your own circumstances.

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Section 1: Key features of the TPX Scheme and the Transaction

On 10 October 2008, TPX announced that it had signed an agreement with MSF under which the two organisations proposed to merge. The terms of the merger were subsequently amended on 21 January 2009 and again on 22 June 2009. TPX and MSF will become wholly-owned subsidiaries of a newly-incorporated holding company, MyState Limited. Subject to all necessary approvals, this will be effected by a number of steps, including all of the TPX Shares being transferred to MyState Limited in return for the issue of equivalent numbers of MyState Limited Shares and all MSF Member Shares being transferred to MyState Limited in return for the issue of MyState Limited Shares.

If both the TPX Scheme and the MSF Scheme are approved by TPX Shareholders and MSF Members, respectively, and both schemes are approved by the Court, and if all other necessary approvals and conditions for both schemes are satisfied (see Section 1.3), both TPX and MSF will become wholly-owned subsidiaries of MyState Limited. TPX will be delisted from the ASX, MSF will be demutualised and MyState Limited will become an ASX-listed company.

This TPX Explanatory Booklet contains information that the TPX Board considers is material to TPX Shareholders in making a decision whether or not to vote in favour of the TPX Scheme and the Transaction. You should carefully read this TPX Explanatory Booklet as part of your consideration of the TPX Scheme and the Transaction.

1.1 What you will receive

Subject to the TPX Scheme becoming Effective, eligible TPX Shareholders will be issued one MyState Limited Share for each TPX Share they hold at the TPX Record Date.

You will be an eligible TPX Shareholder if you are registered as the holder of TPX Shares on the TPX Record Date (expected to be 7.00pm Sydney time on Friday, 28 August 2009).

If you are a Foreign Scheme Shareholder, however, the MyState Limited Shares that you are entitled to receive will be sold by a Nominee and the net proceeds remitted to you. See Sections 1.6 for more details about this.

1.2 TPX Directors’ recommendations and intentions

Your Directors unanimously believe that the TPX Scheme and the Transaction are in the best interests of TPX Shareholders and unanimously recommend that, in the absence of a Superior Proposal, TPX Shareholders vote in favour of the resolution for the approval of the TPX Scheme and the Transaction.

In the absence of a Superior Proposal, each TPX Director intends to vote in favour of the TPX Scheme and the Transaction, in respect of all TPX Shares held by him or her or in which he or she otherwise has a relevant interest.

In forming their unanimous recommendations, your Directors have carefully considered:

the results of TPX’s due diligence and analysis of MSF;
their analysis of the commercial advantages, disadvantages and risks associated with the TPX Scheme and the Transaction;
the alternative strategies available to TPX in pursuing its corporate objectives; and

1.3 Key conditions

The key conditions that must be satisfied or waived in order for the TPX Scheme and the Transaction to proceed are:

(Regulatory Approvals and approvals under applicable legislation) all regulatory consents or approvals which are necessary or desirable to implement the Transaction and all necessary approvals under applicable legislation, are obtained;
(Tasmanian State legislation) Ministerial approval under the Trustee Companies Act for MyState Limited to hold all of the issued share capital of TPX;
(No Material Adverse Change) no TPX or MSF Material Adverse Change occurs, being a single event, or collection of events, occurrences or matters which has, or have in aggregate, resulted in or could reasonably be expected to result in, an adverse effect on the net assets of TPX of $1.7 million or on MSF of $6 million or on the earnings or prospects of TPX in any financial year of $1.05 million or in the case of MSF, $2.4 million;
(No Prescribed Occurrences) no TPX or MSF Prescribed Occurrences occur (these occurrences include occurrences relating to the ongoing solvency of each company and not taking any action to distribute cash outside the company or reorganise the company’s capital structure);
(Representations and Warranties) the representations and warranties given by TPX and MSF to each other are (and remain) true and correct and all undertakings have been complied with;
(Inconsistent obligations) any material agreement binding TPX or MSF which contains obligations which are or may be materially adverse to the interests of the MyState Limited Group is novated, assigned, terminated or otherwise dealt with to the reasonable satisfaction of the parties;
(Listing of MyState Limited Shares) the MyState Limited Shares to be issued to TPX Scheme Shareholders under the TPX Scheme and to the MSF Scheme Participants under the MSF Scheme have been approved for official quotation on the ASX;
(Approval of the Schemes) TPX Shareholders approve the TPX Scheme and the Transaction in accordance with the Corporations Act, the Listing Rules and the TPX Constitution and MSF Members approve the Scheme, Demutualisation and Transaction in accordance the Corporations Act and the MSF Constitution;
(Court approval of the Schemes) the TPX Scheme and the MSF Scheme are approved by the Court in accordance with section 411(4)(b) of the Corporations Act;
(No litigation) any current, pending or threatened legal proceedings against MSF, TPX or MyState Limited, which may have a material impact on the MyState Limited ~~Group~~ after the Implementation Date, are resolved.
the opinion of the TPX Independent Expert.

TPX Explanatory Booklet

These conditions are discussed more fully in Section 9.4 of this TPX Explanatory Booklet and are set out in full in the Merger Implementation Agreement which is available upon request by contacting the Company Secretary of TPX on 03 6348 1111 between 9.00am and 5.00pm (Tasmanian time) from Monday to Friday or otherwise on TPX’s website at tasmanianperpetual.com.au.

As at the date of this TPX Explanatory Booklet, TPX is not aware of any circumstances which would cause any of the above conditions not to be satisfied or which could result in termination of the Merger Implementation Agreement. TPX will make a statement regarding the status of the conditions at the commencement of the TPX Scheme Meeting.

1.4 Implementation and timetable

If all necessary approvals and conditions for the TPX Scheme and the Transaction are satisfied or waived (as applicable), it is expected that the TPX Scheme and the Transaction will be fully implemented by early September 2009. The key dates and times in relation to the TPX Scheme and the Transaction are set out at the beginning of this TPX Explanatory Booklet. Section 9 and Section 10 of this TPX Explanatory Booklet describe in further detail the procedural aspects of the TPX Scheme and the Transaction and how they will be implemented.

1.5 The TPX Scheme and the Transaction – your questions answered

Set out below are summary answers to some questions that TPX Shareholders may have in relation to the TPX Scheme and the Transaction. This information should be read in conjunction with the remainder of this TPX Explanatory Booklet.

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What is the TPX Scheme and the The TPX Scheme is a scheme of arrangement under which it is proposed that MyState
Transaction? Limited will acquire all TPX Shares on issue in return for an issue of MyState Limited
Shares.
The Transaction is the proposed merger of MSF and TPX pursuant to the TPX Scheme
described above, as well as a similar scheme of arrangement under which MyState
Limited will acquire all MSF Shares on issue, MSF will be demutualised and MSF Scheme
Participants will become shareholders of MyState Limited.
What will I receive if the TPX If you are an eligible TPX Shareholder and the TPX Scheme and the Transaction are
Scheme and the Transaction are implemented, you will be issued one MyState Limited Share for each TPX Share you hold
implemented? at the TPX Record Date.
When will I receive my MyState If the TPX Scheme becomes Effective, you will be issued your MyState Limited Shares on
Limited Shares? or about 1 September 2009. This is referred to as the Implementation Date. MyState
Limited will send you a holding statement confirming the issue of those shares.
What happens if the MyState The number of MyState Limited Shares issued to you as TPX Scheme Consideration will
Limited Share price increases or not change as a result of any movement in the market price of MyState Limited Shares.
decreases? However, the value of your investment in MyState Limited may change depending on
movements in the market price of MyState Limited Shares as is currently the case with the
value of your TPX Shares.
Can I sell my MyState Limited Yes. You will be able to trade some or all of your MyState Limited Shares on the ASX
Shares after I receive them? once trading commences.
Can I buy more MyState Limited You will be able to trade MyState Limited Shares on the ASX once trading commences.
Shares? For more details about how to do this, visit asx.com.au
What do the TPX Directors Your Directors unanimously recommend that, in the absence of a Superior Proposal,
recommend? TPX Shareholders vote in favour of the resolution to approve the TPX Scheme and the
Transaction.
In the absence of a Superior Proposal, your Directors unanimously intend to vote all of the
TPX Shares held by them or in which they otherwise have a relevant interest in favour of
the TPX Scheme and the Transaction.
What does the TPX Independent Deloitte was appointed by the TPX Directors to undertake an independent assessment
Expert say? of the value of the TPX Scheme and the Transaction. Deloitte has valued TPX in the
range of $3.10 to $3.55 per TPX Share and has concluded that the TPX Scheme and the
Transaction are in the best interest of TPX Shareholders.
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What will be the effect of the If the TPX Scheme becomes Effective:
TPX Scheme? • You and all other TPX Scheme Shareholders will transfer all of your TPX Shares to
MyState Limited so that TPX becomes a wholly owned subsidiary of MyState Limited.
• In exchange for the transfer of your TPX Shares to MyState Limited, you will be issued
with one MyState Limited Share for each TPX Share registered in your name as at the
TPX Record Date.
• TPX will be delisted from ASX.
Will I continue to receive In the event that the TPX Scheme and the Transaction are implemented you will not
dividends from TPX? receive a final dividend from TPX. However, the Board of MyState Limited has resolved
that depending on the profitability of both TPX and MSF in the year to 30 June 2009 and
relevant economic and company circumstances at the time, the MyState Limited Board will
give consideration to paying a dividend to all shareholders of MyState Limited in September
2009. You must remain a MyState Limited shareholder to receive any future dividend.
The interim dividend paid to you on 31 March 2009 will be the final dividend that you will
be paid by TPX.
The Board of MyState Limited has established a dividend policy to, subject to prevailing
circumstances, generally pay ordinary dividends each year within the range of 70% to 90%
of net profit after tax. The level of dividends paid will depend on available profits and the
circumstances facing MyState Limited at the time.
What happens if the TPX Scheme If the TPX Scheme is not approved:
is not approved? • you will not receive MyState Limited Shares;
• MyState Limited will not become the holding company of TPX and MSF;
• you will retain your current holding of TPX Shares and continue to be exposed to
the benefits and risks presently associated with this investment. These risks include
general risks of holding TPX Shares and risks that are specific to TPX’s business;
• you may receive a final TPX dividend for the 2008/2009 financial year, although TPX’s
ability to pay a final dividend may be impacted by merger transaction costs associated
with the proposed TPX Scheme and the Transaction;
• the expected advantages of the TPX Scheme and the Transaction, as outlined in
Section 3.2 of this TPX Explanatory Booklet, will not be realised. However, some of the
possible disadvantages and risks of the TPX Scheme and the Transaction identified in
Sections 3.3 and 7 will not arise; and
• TPX will have incurred substantial costs and expended management time and resources
in pursuing the TPX Scheme and the Transaction.
What meeting is being held? The TPX Scheme Meeting will be held at Hotel Grand Chancellor Launceston, 29 Cameron
When and where is it being held? Street, Launceston, Tasmania, on Wednesday, 19 August 2009, commencing at 11.00am.
The TPX Scheme Meeting is a meeting that has been convened by the Court for the
purposes of TPX Shareholders voting on the TPX Scheme.
If I wish to support the TPX If you are a TPX Shareholder, you should vote in favour of the resolution to approve the
Scheme and the Transaction, TPX Scheme and the Transaction. You can vote in favour of the TPX Scheme and the
what should I do? Transaction by attending the Scheme Meeting to be held on Wednesday, 19 August 2009
and exercising your right to vote at the meeting.
TPX Shareholders who are unable or unwilling to attend the meeting may vote at the
meeting by proxy, attorney, or in the case of corporate TPX Shareholders or their proxies,
a natural person representative.
See Section 2 of this TPX Explanatory Booklet for a summary on how to vote.
Who is entitled to vote on the Each person who is registered on the TPX Share Register as a TPX Shareholder as at the
TPX Scheme? Voting Entitlement Time (7.00pm Sydney time) on Monday, 17 August 2009) is entitled to
attend and vote at the TPX Scheme Meeting.
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TPX Explanatory Booklet

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What Shareholder approvals are For the TPX Scheme and the Transaction to be approved, at the TPX Scheme Meeting,
required for the TPX Scheme and votes in favour of the TPX Scheme and the Transaction must be received from:
the Transaction to proceed? • a majority in number (more than 50%) of TPX Shareholders voting at the TPX Scheme
Meeting (whether in person, by proxy, by attorney or, in the case of corporate TPX
Shareholders, by corporate representative), although the Court has the power by order
to disregard this, see Section 2.1 for details; and
• TPX Shareholders who together hold at least 75% of the total number of TPX Shares
voted at the TPX Scheme Meeting.
Is voting compulsory at the Voting is not compulsory. However, the TPX Board believes that the TPX Scheme and
meeting? the Transaction are important to all TPX Shareholders and urges you to read this TPX
Explanatory Booklet and exercise your right to vote. Your vote is important and is
your opportunity to have your say on the success or failure of the TPX Scheme and the
Transaction.
What if I cannot or do not wish If you cannot or do not wish to attend the TPX Scheme Meeting, you may appoint a
to attend the meeting? proxy, attorney or representative to vote at the meeting on your behalf. Full details of
how these appointments may be made are contained in Section 2.2 and in the notes to
the notice convening the meeting, enclosed with this TPX Explanatory Booklet. A proxy
form is also enclosed with this TPX Explanatory Booklet.
What if I believe that TPX should You may believe that TPX should have pursued an alternative option to merging with
have pursued an alternative MSF.
option? TPX has in recent times considered a number of opportunities to expand by way of
merger or acquisition, including into mainland Australia. None of these opportunities have
come to fruition, largely as a result of TPX’s lack of scale.
However, the TPX Board believes the TPX Scheme and the Transaction deliver a superior
financial outcome to TPX Shareholders, compared with alternative options. The Board
also believes the TPX Scheme and the Transaction deliver other positive outcomes,
including retaining the ‘Tasmanian Perpetual Trustees’ brand and head office in Tasmania.
What happens if I vote against If you vote against the TPX Scheme but:
the TPX Scheme? • the TPX Scheme is approved by the requisite majorities at the TPX Scheme Meeting;
Can I be forced to sell my TPX and
Shares?
• the TPX Scheme is approved by the Court,
all TPX Scheme Shareholders will be bound by the Court approval, including those who
vote against it (or those who do not vote at all). In these circumstances, all TPX Shares
(if any) that you hold as at the TPX Record Date will be transferred to MyState Limited,
and you will be issued MyState Limited Shares as TPX Scheme Consideration.
Note that the Corporations Act and the Supreme Court (Corporations) Rules 2008 provide
a procedure for TPX Shareholders, if they wish to do so, to oppose the Court approving
the TPX Scheme and the Transaction. Please refer to Section 10.2 for further information.
When will the results of the The results of the votes to be cast at the TPX Scheme Meeting will be made publicly
voting be known? available during or shortly after the conclusion of that meeting.
What are the tax implications A guide to the general taxation implications of the TPX Scheme and the Transaction is set
of the TPX Scheme and the out in Section 8 of this TPX Explanatory Booklet.
Transaction?
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Are there any conditions that In addition to the approval of TPX Shareholders and the Court, implementation of the
need to be satisfied? TPX Scheme is subject to various conditions being satisfied or waived. These conditions
are summarised in Section 1.3 and are discussed more fully in Section 9.4 of this TPX
Explanatory Booklet. The conditions are set out in full in the Merger Implementation
Agreement which is available upon request from the Company Secretary of TPX on
03 6348 1111 or otherwise on TPX’s website at tasmanianperpetual.com.au.
TPX will make a statement regarding the status of these conditions at the commencement
of the TPX Scheme Meeting.
Can I continue to trade TPX Yes, broadly speaking you will be able to offer your TPX Shares for sale on the ASX until
Shares? a date to be fixed (likely to be the date the TPX Scheme becomes Effective) if the TPX
Scheme and the Transaction are approved. The Effective Date of the TPX Scheme is
expected to be on or about 21 August, 2009.
Note that there may be a period, not likely to exceed two weeks, between the ASX
ceasing to quote a market in TPX Shares and the commencement of quotation of MyState
Limited shares on the ASX.
What are my options? If you are a TPX Shareholder, your options are to:
• vote in favour of the resolution to approve the TPX Scheme and the Transaction at the
TPX Scheme Meeting to be held on Wednesday, 19 August 2009 (this being the course
of action unanimously recommended by your Directors);
• vote against the resolution to approve the TPX Scheme and the Transaction at the TPX
Scheme Meeting (despite the unanimous recommendation of your Directors);
• sell your TPX Shares prior to the meeting to be held on Wednesday, 19 August 2009
or prior to the TPX Record Date (scheduled to be 7.00pm Sydney time on 28 August
2009), although you will not be able to sell your TPX Shares on market from the date
when the ASX ceases to quote a market in TPX Shares (likely to be the Effective Date,
now scheduled to be 21 August 2009); or
• do nothing; i.e. neither vote in favour of or against the TPX Scheme and the Transaction
nor sell your TPX Shares.
Further Information The information in this table is a summary only. Full details of the TPX Scheme and the
Transaction are set out in the remainder of this TPX Explanatory Booklet. Please read it
carefully.
Your Directors recommend that you consult your legal, financial, taxation or other
professional adviser concerning the impact your decision may have on your own
circumstances.
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1.6 Foreign Scheme Shareholders

TPX Scheme Shareholders whose address in the TPX Share Register at the TPX Record Date is a place outside Australia or its external territories are Foreign Scheme Shareholders.

If you are a Foreign Scheme Shareholder the MyState Limited Shares that you would otherwise be entitled to receive will be sold by a Nominee and the net proceeds remitted to you. This is due to the fact that the laws relating to the offering of securities in other jurisdictions are different from the laws in Australia.

TPX Explanatory Booklet

Section 2: How to vote on the TPX Scheme and the Transaction

2.1 TPX Scheme Meeting

The TPX Scheme Meeting will be held at Hotel Grand Chancellor Launceston, 29 Cameron Street, Launceston, Tasmania, on Wednesday, 19 August 2009, commencing at 11.00am.

For the TPX Scheme and the Transaction to proceed:

unless the Court otherwise orders, a majority in number (more than 50%) of TPX Shareholders present and voting (in person, by proxy, by corporate representative or by attorney) at the TPX Scheme Meeting must be in favour of the TPX Scheme ( Headcount Test ); and
TPX Shareholders whose TPX Shares in aggregate account for at least 75% of the votes cast on the resolution must be in favour of the TPX Scheme.

The Court has the power to approve the TPX Scheme even if the Headcount Test has not been satisfied. The Court may do so if there is evidence that the result of the vote has been unfairly influenced by activities such as share splitting and other extraordinary circumstances.

2.2 Summary of how to vote

(a) Voting entitlements

If you are registered as a TPX Shareholder by the TPX Share Registry at the Voting Entitlement Time (7.00pm Sydney time, Monday, 17 August 2009), you will be entitled to vote at the TPX Scheme Meeting.

Voting at the meeting will be conducted by poll.

(b) Voting in person

TPX Shareholders wishing to vote in person should attend the TPX Scheme Meeting and bring a form of personal identification (such as their driver’s licence).

Please arrive at the venue 30 minutes prior to the time designated for the commencement of the TPX Scheme Meeting (being 11.00am (Tasmanian time)), if possible, so that your TPX Shareholding may be checked against the TPX Share Register and attendance noted.

Attorneys (see also paragraph (d) below) should bring with them the original or a certified copy of the power of attorney under which they have been authorised to attend and vote at the meeting.

Voting by proxy

(c)

TPX Shareholders wishing to vote by proxy at the TPX Scheme Meeting must complete and sign or validly authenticate the appropriate personalised proxy form which is enclosed with this TPX Explanatory Booklet.

By internet to Computershare:

Log on through www.investorvote.com.au using the control number noted on your proxy form

By post in the enclosed reply paid envelope provided to the TPX Share Registry:

The Registrar GPO Box 242 Melbourne, Victoria 3001

By hand delivery to the TPX Share Registry at: 452 Johnston Street, Abbotsford, Victoria 3067

By fax to the TPX Share Registry on: (if within Australia) 1800 783 447 (if outside Australia) +61 3 9473 2555

(d)

Voting by attorney

If a TPX Shareholder executes or proposes to execute any document, or do any act, by or through an attorney which is relevant to their TPX Shareholding in TPX, that TPX Shareholder must deliver the instrument appointing the attorney to the TPX Share Registry for notation.

TPX Shareholders wishing to vote by attorney at the meeting must, if they have not already presented an appropriate power of attorney to TPX for notation, deliver to the TPX Share Registry (at the address or facsimile number specified in this Section 2.2) the original instrument appointing the attorney or a certified copy of it by 11.00am on Monday, 17 August 2009.

(e) Voting by corporate representative

A TPX Shareholder or proxy which is a body corporate may appoint an individual to act as its representative at the TPX Scheme Meeting.

To vote by corporate representative at the TPX Scheme Meeting, a corporate TPX Shareholder or proxy should obtain a Certificate of Appointment of Corporate Representative form from the TPX Share Registry, and complete and sign the form in accordance with the instructions on it. The appointment form should be lodged at the registration desk on the day of the meeting.

(f) Further information

Please refer to the Notice of Scheme Meeting enclosed with this TPX Explanatory Booklet for further information on voting procedures and details of the resolution to be voted on at the meeting.

A person appointed as a proxy may be an individual or a body corporate.

Completed proxy forms must be delivered to TPX by 11.00am on Monday, 17 August 2009, in any of the following ways:

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2.3 What to do next

(a) Read the remainder of this TPX Explanatory Booklet

You should read and consider the remainder of this TPX Explanatory Booklet in full before making any decision on the TPX Scheme and the Transaction.

(b) Consider your options

TPX Shareholders should refer to Sections 3 and 7 of this TPX Explanatory Booklet for further guidance on the expected advantages, possible disadvantages and risk factors of the TPX Scheme and the Transaction. However, this TPX Explanatory Booklet does not take into account the financial situation, investment objectives and particular needs of any TPX Shareholder.

(c) Vote at the TPX Scheme Meeting

Your Directors urge all TPX Shareholders to vote on the resolution to approve the TPX Scheme and the Transaction. The TPX Scheme and the Transaction affect your TPX Shareholding and your vote at the TPX Scheme Meeting is important in determining whether the TPX Scheme and the Transaction proceed.

(d) External advice

Your Directors recommend you consult your legal, financial, taxation or other professional adviser.

TPX Explanatory Booklet

Section 3: Important considerations regarding the TPX Scheme and the Transaction

The purpose of this Section 3 is to identify significant issues for TPX Shareholders to consider in relation to the TPX Scheme and the Transaction.

Before deciding how to vote at the TPX Scheme Meeting, TPX Shareholders should carefully consider the factors discussed below, as well as the other information contained in this TPX Explanatory Booklet.

3.1 TPX Directors’ recommendation and intentions

Your Directors are Michael Vertigan AC, Mark Scanlon, Damian Bugg AM, Nicholas d’Antoine, Clyde Eastaugh, Miles Hampton, Ian Mansbridge and Sarah Merridew. Details about the interests of the TPX Directors in the TPX Scheme and the Transaction are disclosed in Section 11 of this TPX Explanatory Booklet.

Having regard to all of the considerations discussed in this Section 3, your Directors unanimously consider that the expected advantages of the TPX Scheme and the Transaction outweigh their potential disadvantages and risks.

This conclusion is supported by the TPX Independent Expert, Deloitte. The TPX Independent Expert has concluded that the TPX Scheme and the Transaction are in the best interest of TPX Shareholders.

Your Directors unanimously recommend that, in the absence of a Superior Proposal, TPX Shareholders vote in favour of the resolution to approve the TPX Scheme and the Transaction and, in the absence of a Superior Proposal, your Directors unanimously intend to vote all of the TPX Shares held by them or in which they otherwise have a relevant interest in favour of the TPX Scheme and the Transaction.

3.2 Key reasons for your Directors’ unanimous recommendation

(a) The merger will create a stronger Tasmanian based diversified financial services group

If the TPX Scheme and the Transaction are implemented, TPX and MSF will join forces to create a stronger Tasmanian based, diversified financial services group called the MyState Limited Group. MyState Limited will have additional strength and scale to compete in the financial services sector and continue to provide the high standard of products and services customers have enjoyed.

(b) Opportunity to join other TPX Scheme Shareholders in owning 32.5% of the MyState Limited Group

If the TPX Scheme and the Transaction are implemented, TPX Scheme Shareholders will own 32.5% of MyState Limited’s issued shares immediately following implementation, which your Directors consider is a fair and reasonable proportion, based on a number of factors, including the net assets and historical normalised earnings of both TPX and MSF.

(c) Potential for synergies to improve profits and earnings per share

If the TPX Scheme and the Transaction are implemented, your Directors estimate cost savings for the MyState Limited Group to be realised over a three year period will be in the range of $3.5 million to $4.5 million per annum (before tax) in the final year. In addition, distinct revenue synergies are expected to arise in the future from cross selling and referral activities, where both companies will leverage off the other’s existing client bases. These revenue synergies are expected but not guaranteed.

(d) Independent Expert’s conclusions

Deloitte has concluded that the proposed transaction is fair and reasonable and therefore in the best interests of TPX Scheme Shareholders. Deloitte’s estimated fair market value of a share in TPX is in the range of $3.10 to $3.55. By comparison, Deloitte’s estimated fair market value of a share in the proposed merged entity is in the range of $3.60 to $3.90.

Deloitte’s estimate of the value of the consideration offered under the proposed transaction is greater than the range of their estimate of the fair market value of a share in TPX. It is therefore Deloitte’s opinion that the proposed transaction is fair.

Deloitte has also considered the advantages and disadvantages of the proposed transaction, as set out in their Independent Experts Report at Appendix 1.

Deloitte has concluded that because the proposed transaction is fair, it is also reasonable.

(e) TPX will continue to offer the same products and services in the future

The TPX Scheme and the Transaction will not result in any adverse changes to the products and services that TPX currently offers. TPX will become a 100% owned subsidiary of MyState Limited and, as such, it will continue to provide the same products and services members have enjoyed under the “Tasmanian Perpetual Trustees” brand.

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(f) Opportunity to improve products and services

The increased financial strength and the greater number of customers of the MyState Limited Group provides enhanced opportunities for other innovative products and services to be developed and offered to TPX and MSF customers.

(g) Opportunity to grow

TPX has in recent times considered a number of opportunities to expand by way of merger or acquisition, including into mainland Australia. None of these opportunities have come to fruition, largely as a result of TPX’s lack of scale.

The MyState Limited Group will enjoy an enhanced ability to expand through further acquisitions and improved attractiveness to potential joint venture partners, something that neither TPX nor MSF has to date had the scale to achieve alone.

The MyState Limited Group will have an enhanced ability to expand into the mainland Australian market as a result of this greater scale.

(h) Reduced impact of the global financial crisis and also the Federal Government Guarantee

TPX and MSF will be “Stronger Together” and together will be better positioned to weather the ongoing impact of the global financial crisis.

By combining with MSF (which currently benefits from the Federal Government Guarantee), TPX will be able to partially mitigate the impact on its earnings from being excluded from the Government guarantee.

(i) Head office will be retained in Tasmania

If the TPX Scheme and the Transaction are implemented, TPX will retain its head office in Tasmania. This will ensure management decisions continue to be made in Tasmania.

(j) The ‘Tasmanian Perpetual Trustees’ brand will remain

If the TPX Scheme and the Transaction are implemented, the ‘Tasmanian Perpetual Trustees’ brand will remain. There will be no material rebranding costs.

(k) On-going statutory ownership protection

Any substantial acquisition of shares in MyState Limited will be subject to a number of regulatory hurdles including the approval of APRA and the Federal Treasurer. In addition, Ministerial (Tasmanian) approval under the Trustee Companies Act will be required.

The Tasmanian Trustee Companies Act has been amended and will apply a 10% shareholder cap (without appropriate approvals) to MyState Limited if the TPX Scheme and the Transaction are implemented.. This means that MyState Limited, and (as a subsidiary) TPX, have a level of statutory protection from unrecommended takeover bids. Refer also to Section 4.16 for a discussion of the proposed new federal legislation in relation to trustee companies.

(l) Five TPX Board members on the MyState Limited Board

The MyState Limited Board will initially have equal representation from TPX and MSF. Five current TPX Directors and five current MSF Directors along with a Managing Director (yet to be appointed), will form the MyState Limited Board.

(m) Opportunity to increase your MyState Limited shareholding

If the TPX Scheme and the Transaction are implemented, each eligible TPX Shareholder will be able to acquire additional MyState Limited Shares on the ASX.

(n) The TPX Independent Expert has concluded that the TPX Scheme and the Transaction are in the best interest of TPX Shareholders

The TPX Independent Expert has valued TPX in the range of $3.10 to $3.55 per TPX Share and has concluded that the TPX Scheme and the Transaction are in the best interest of TPX Shareholders. The full report is contained in Appendix 1 of this TPX Explanatory Booklet.

(o) No Superior Proposal has been received

Since the announcement of the Transaction on 10 October 2008 and up to the date of this TPX Explanatory Booklet, the TPX Board is not aware of any other bona fide proposal from a third party to merge with or acquire control of TPX.

As at the date of this TPX Explanatory Booklet, the TPX Board has no basis for believing that a Superior Proposal will emerge.

You should also note that the Merger Implementation Agreement has the effect of placing limits on the possibility of a Superior Proposal emerging, as set out in Section 3.5(c) of this TPX Explanatory Booklet.

Consistent with TPX’s growth strategy

(p)

TPX has grown substantially over the past few years following the merger between Tasmanian Trustees Limited and Perpetual Trustees Tasmania Limited in 2001. The TPX Board believes that all of the material merger synergies have been extracted and TPX has maximised the available opportunities through development of marketing, expansion of the branch network and introduction of new workflow, sales and customer management systems. In recent times growth has stalled reflecting the limitations of continued organic growth.

The TPX Board is of the view that TPX would be better placed to expand before looking for opportunities in mainland Australia and in this regard, the merger opportunity now presented with MSF is consistent with TPX’s strategic ambitions.

The proposed merger with MSF will provide TPX with the scale it needs to further develop and better leverage growth of its trustee, investment, financial planning and lending products.

20 TPX Explanatory Booklet

(q) The market price of TPX Shares may fall below their current levels if the TPX Scheme and the Transaction do not proceed

Considerable, but necessary costs have been incurred to bring the merger proposal to a vote of TPX Shareholders and in the event that the merger does not proceed, these costs will be written off and will impact on TPX’s profit. In addition, the strategic opportunities and operational efficiencies envisaged by the merger will be lost.

(r) No transaction costs on the disposal of your TPX Shares

TPX Scheme Shareholders will not be required to pay any brokerage or stamp duty on the disposal of their TPX Shares under the TPX Scheme or the acquisition of MyState Limited Shares received as TPX Scheme Consideration.

3.3 Possible disadvantages

There are factors which may lead you to vote against the TPX Scheme and the Transaction. Your Directors have identified and considered the following disadvantages of the TPX Scheme and the Transaction.

(a) The listing value of TPX Scheme Consideration is still to be determined by the market

The value of the TPX Scheme Consideration is dependent on the price at which MyState Limited Shares will trade on the ASX. No assurances can be given as to the price at which MyState Limited Shares will trade on the ASX as MyState Limited when it commences trading and the price at which MyState Limited Shares will trade on the ASX will be determined by MyState Limited’s performance, market and trading conditions, as well as other factors (such as general economic conditions) at the time.

(b) Taxation consequences

If the TPX Scheme and the Transaction are approved and implemented, it will potentially result in taxation consequences (potentially including capital gains tax) for TPX Shareholders, which may not have arisen or will arise earlier than may otherwise have been the case.

Section 8 of this TPX Explanatory Booklet provides a general outline of the likely taxation consequences of the TPX Scheme and the Transaction for TPX Shareholders. TPX Shareholders should obtain advice taking into account their own individual position.

(c) Foreign Scheme Shareholders

TPX Scheme Shareholders with their registered address overseas will have their MyState Limited Shares sold by a Nominee and the funds remitted to them. Accordingly, while they will be paid a cash sum for the net proceeds, they will not receive the ongoing benefit of the rights that attach to MyState Limited Shares.

(d) A Superior Proposal could potentially emerge

It is possible that a more attractive proposal for TPX could materialise in the future. However, since the announcement of the Transaction on 10 October 2008 and up to the date of this TPX Explanatory Booklet, the TPX Board is not aware of any other bona fide proposal from a third party to acquire control of TPX. Also, as at the date of this TPX Explanatory Booklet, the TPX Board has no basis for believing that a Superior Proposal will emerge.

Your Directors will inform you of any material developments in relation to any Superior Proposal that may emerge.

(e) Loss of customers

The TPX Scheme and the Transaction are not expected to have any material negative impact on the respective businesses of TPX or MSF. However, the TPX Scheme and the Transaction could cause some TPX and MSF customers to leave.

(f) No direct continuing interest

If the TPX Scheme and the Transaction are approved and implemented, you will cease to hold a direct interest in TPX. However, you will hold MyState Limited Shares, which will give you an indirect interest in the business of TPX, as it will become a subsidiary of MyState Limited. You will also acquire an indirect interest in the business of MSF. The financial performance and results of MyState Limited and any dividends that you receive as a result of holding shares in MyState Limited will be affected by the performance of the businesses of both TPX and MSF.

3.4 Risks associated with the TPX Scheme and the Transaction

A detailed discussion of the risks associated with the TPX Scheme and the Transaction is set out in Section 7 of this TPX Explanatory Booklet.

3.5 Other relevant considerations

(a) The TPX Scheme is conditional

The TPX Scheme and the Transaction are subject to various conditions. These conditions are summarised in Section 1.3 of this TPX Explanatory Booklet, with full details provided in Section 9.4.

As at the date of this TPX Explanatory Booklet, the TPX Directors are not aware of any matter which would result in a breach, or lead to non-performance, of any of those conditions.

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(b) All or nothing proposal

If all of the conditions and approvals for the TPX Scheme and the Transaction are satisfied or waived (as applicable) (see Section 9.4 of this TPX Explanatory Booklet):

the TPX Scheme will bind all persons registered as TPX Shareholders as at the TPX Record Date, including those who do not vote on the TPX Scheme and the Transaction and those who vote against it; and
TPX will become wholly-owned and controlled by MyState Limited.

Conversely, if any of the conditions and approvals for the TPX Scheme and the Transaction are not satisfied or waived (as applicable), TPX Shareholders will retain all of their TPX Shares and TPX will remain listed on the ASX (see paragraph (d), below, for further details of the implications if the TPX Scheme and the Transaction do not proceed).

(c) Likelihood of a Superior Proposal

The Merger Implementation Agreement prohibits TPX from taking any actions with a view to obtaining, or which may reasonably be expected to lead to the obtaining of, a Third Party Proposal or lead to the completion of a Third Party Proposal, whether such actions are solicited or encouraged by TPX or otherwise.

However, TPX may undertake any action with respect to a bona fide Third Party Proposal that would otherwise be prohibited provided that the TPX Board has determined, in good faith and acting reasonably, after having obtained written advice from its advisors, that:

the Third Party Proposal is, or would be if proposed, a Superior Proposal to the TPX Scheme and the Transaction; and
failing to respond to the Third Party Proposal would be likely to constitute a breach of the directors’ fiduciary or statutory obligations.

Section 9.6 of this TPX Explanatory Booklet provides more details about these exclusivity arrangements, including the qualifications and exceptions. Both TPX and MSF have agreed to pay $1.0 million (exclusive of GST) to the other if certain events occur, including in some cases, where a majority of the TPX Directors or MSF Directors (as applicable) recommend a Third Party Proposal. This amount equated to approximately 1% of TPX’s market value at the time of entry into the Merger Implementation Agreement and slightly less than 1% of MSF’s net assets as at 30 June 2008. This payment obligation may have the effect of reducing the capacity of TPX to attract a Superior Proposal to the TPX Scheme and the Transaction.

(d) Implications of not pursuing the TPX Scheme

If any of the conditions and approvals for the TPX Scheme and the Transaction are not satisfied or waived (as applicable) and if no Superior Proposal emerges:

TPX Shareholders will retain all of their TPX Shares and will not receive the TPX Scheme Consideration;
TPX Shareholders will retain their current investment in TPX and will continue to be exposed to the benefits and risks associated with that investment. These risks include general risks associated with any investment listed on the ASX, together with specific risks associated with TPX’s business; and
TPX will have incurred substantial costs and expended management time and resources in pursuing the TPX Scheme and Transaction.

The value of TPX Shares

(e)

The value of TPX Shares in the longer term may rise above or fall below the prevailing price of TPX Shares at the time of making your voting decision. Factors that could contribute to the change in the price of TPX Shares include (but are not limited to):

economic conditions in Australia and overseas;
investor sentiment in local and international stock markets;
competition in the markets in which TPX operates; and
whether TPX is subject to ongoing takeover speculation.

These factors will similarly impact the value of MyState Limited Shares, as will the performance of MSF within the MyState Limited Group.

(f) Transaction in the best interest of MSF Members

MSF appointed PKF Corporate Advisory (East Coast) Pty Limited ( PKF ), as an independent expert, to assess the MSF Scheme and the Transaction. PKF has concluded that the MSF Scheme and the Transaction are in the best interest of MSF Members.

Section 9.8 of this TPX Explanatory Booklet provides more details about this payment obligation, including the qualifications and exceptions.

TPX Explanatory Booklet

3.6 What are your options and what should you do?

The following principal options are available to TPX Shareholders in relation to their TPX Shares. TPX encourages you to consider your personal risk profile, portfolio strategy, tax position, financial circumstances and seek professional advice before making any decision in relation to your TPX Shares.

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Vote in favour of the TPX Scheme This is the course of action unanimously recommended by your Directors, in
and the Transaction the absence of a Superior Proposal.
The reasons for your Directors’ unanimous recommendation are set out earlier in this
Section 3.
To follow your Directors’ unanimous recommendation, you should vote in favour of the
resolution to approve the TPX Scheme and the Transaction. For a summary of how to
vote at the meeting, please refer to Section 2.2 of this TPX Explanatory Booklet.
Vote against the TPX Scheme and If, despite your Directors’ unanimous recommendation and the conclusion of the TPX
the Transaction Independent Expert, you do not support the TPX Scheme and the Transaction, you may
vote against the TPX Scheme and the Transaction at the TPX Scheme Meeting.
However, if all of the conditions and approvals for the TPX Scheme and the Transaction
are satisfied or waived (as applicable), the TPX Scheme will bind all TPX Shareholders,
including those who vote against the resolution at the meeting or those who do not vote
at all.
Sell your TPX Shares • The existence of the TPX Scheme and the Transaction does not preclude you from
selling your TPX Shares on market for cash, if you wish, provided you do so before close
of trading in TPX Shares on ASX from the date when the ASX ceases to quote a market
in TPX Shares (currently expected to be 18 August 2009).
You may also sell your TPX Shares off-market after that date, but your transfer of
ownership should settle before the TPX Record Date (currently expected to be
28 August 2009).
If you are considering selling your TPX Shares, you should have regard to the prevailing
trading prices of TPX Shares and compare those to the TPX Scheme Consideration being
offered under the TPX Scheme. You may ascertain current trading prices of TPX Shares
through the ASX website (asx.com.au) or by contacting your stockbroker.
TPX Shareholders who sell their TPX Shares on ASX:
• will be paid cash consideration for sale of their TPX Shares by their broker;
• may incur a brokerage charge; and
• will not be able to participate in the TPX Scheme and the Transaction or a Superior
Proposal, if one emerges.
Do nothing; i.e. neither vote in TPX Shareholders who do not elect to vote at the TPX Scheme Meeting or sell their TPX
favour of nor against the TPX Shares will:
Scheme and the Transaction nor • if the TPX Scheme and the Transaction are implemented - have their TPX Shares
sell your TPX Shares compulsorily transferred to MyState Limited, by operation of the TPX Scheme and be
issued one MyState Limited Share for each TPX Share they hold; and
• if the TPX Scheme and the Transaction are not implemented - retain their TPX Shares.
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Section 4: Profile of TPX

4.1 Overview of TPX

TPX is a major Tasmanian based provider of financial products and trustee services and was formed in December 2001 following the merger of Tasmanian Trustees Limited and Perpetual Trustees Tasmania Limited, both of which were established in 1887. TPX is publicly listed on the ASX and had a market capitalisation of $65.52 million as at 31 December 2008. TPX has a strong balance sheet position with a net asset position of over $33.07 million as at 31 December 2008.

TPX is a trustee company authorised under the Trustee Companies Act and is the only private trustee company currently authorised to operate in Tasmania. The Trustee Companies Act prohibits any individual shareholder from obtaining an interest of more than 10% of the shares in TPX. Refer also to Section 4.16 for a discussion of the proposed new federal legislation in relation to trustee companies.

TPX also holds a public offer Registered Superannuation Entity ( RSE ) Licence No. L0002943 issued by APRA, as well as an Australian Financial Services Licence ( AFSL ) No. 234630 issued by ASIC.

TPX manages over $1 billion in funds under management on behalf of personal, business and wholesale investors. In addition, TPX also has over $400 million of assets under administration or advice, through the Company’s role as financial adviser, attorney or trustee on behalf of various trusts, estates and other clients and is executor trustee of estates at any one time valued at approximately $80 million.

TPX was established to be an impartial and professional executor and trustee for Tasmanians and this remains a core part of its service and reputation supported by a long tradition of estate planning and will and power of attorney preparation.

TPX’s clients are also able to benefit from a workforce that is highly experienced and able to source a wide range of financial expertise, including the services of qualified financial planners, trust administrators and experienced lending managers.

TPX is also the product issuer and responsible entity for 12 managed investment schemes and directly manages six cash and income funds and indirectly manages six investment growth funds through external managers. These products are distributed on a “no advice”, “over the counter” basis throughout the branch network; and on an “advice” basis through TPX employed financial planners, located throughout the network. TPX managed funds have online access available to investors for deposits, transfers and withdrawals. The income (or mortgage) funds enable TPX to provide first mortgage finance for rural, commercial and business purposes.

In all, TPX currently services approximately 90,000 customer relationships, both personal and business, drawn from the following key business lines:

Wills and Powers of Attorney – approximately 63,000 clients
Investments, Financial Planning and Portfolio Management – approximately 20,000 clients
Lending – approximately 1,600 borrowers
Estates and Estate Beneficiaries – approximately 2,000 relationships (at any one time)
Trusts and Trust Beneficiaries – approximately 2,000 on-going relationships

Structure and staffing

4.2

TPX employs 92 full time equivalent staff located in ten branches or offices across Tasmania. These include Launceston, Kings Meadows, Hobart, Rosny, Glenorchy, Kingston, Burnie, Devonport and Ulverstone.

The organisation is structured around four functional areas, these being:

1. Distribution

This area operates the sales and service network and distributes estate planning, trustee services, managed investments and financial planning services.

2. Marketing

This area supports the Distribution Division and the Company through brand management, market and customer research, marketing strategy, product development, pricing, channel marketing, branch collateral, brand and product campaigns, media and customer communications, sponsorship and events.

3. Asset Management

This area manages and monitors all assets and investments including mortgage assets loan origination and administration.

4. Corporate Services

This area provides support services such as compliance and legal, taxation and accounting, finance, human resources and information technology.

TPX Explanatory Booklet

4.3 Key management personnel

In addition to the position of Managing Director / Chief Executive Officer (see Section 4.13), the following constitute the key senior management of TPX who are responsible for the four functional areas and who report to the Managing Director.

1. Distribution –

David Benbow FPNA, Dip SM, Dip FP, GAICD General Manager Distribution

Mr Benbow joined TPX in 1998 and held the role of General Manager - Asset Management until 2008 when he was appointed General Manager - Distribution. Previously, Mr Benbow was employed at AXA from 1986 to 1998 in Hobart and Melbourne in various accounting and superannuation management roles. His last role was as Business Development Manager – Adviser Services. Mr Benbow has over twenty years experience in the financial services industry including experience in superannuation, funds management and client management roles.

2. Marketing –

Colin Kent BA, Grad Dip Mgt., AMAMI

General Manager Marketing

Mr Kent was appointed General Manager Marketing in April 2003. Prior to joining TPX, Mr Kent was General Manager – Projects for the Telemedia Group based in Adelaide, Managing Director of TARP Australia in Melbourne 1994 to 1998, Deputy Australian Banking Industry Ombudsman 1991 to 1994, Special Adviser to the Chief General Manager Retail – Commonwealth Bank of Australia 1988 to 1991 and director of the Financial Counselling and Consumer Information Service – Geelong 1977 to 1988. He has had extensive financial services experience including four years as a part time member of the Victorian Credit Licensing Authority and is a Past Australian President of SOCAP (Society of Consumer Affairs Professional in Business). He is an author of several landmark publications and research studies in the fields of complaint handling and customer service.

4.4 Tasmanian Banking Services

In November 2000, TPX and Bendigo and Adelaide Bank Limited ( Bendigo ) established Tasmanian Banking Services ( TBS ), a joint venture operated through a single purpose public company owned by TPX and Bendigo in equal proportions. Through TBS, Bendigo offers banking and financial services to retail customers at nine branch locations around Tasmania, six of these locations are co-located with TPX.

The commercial rationale for the formation of TBS was to allow TPX customers access to a wider range of products and services more conveniently.

MSF offers similar products to Bendigo such as personal and business lending as well as savings, transaction and investment products. As at the date of this Explanatory Booklet, TPX is finalising negotiations with Bendigo in relation to its exit from the TBS joint venture. The TPX Directors anticipate that TPX will receive consideration in the range of $5 million to $7 million for its stake in the TBS joint venture. The form of the consideration may be in cash or in ordinary shares in Bendigo (Bendigo’s ordinary shares are listed on ASX). TPX Directors expect to be in a position to announce further information on the finalisation of the TBS joint venture prior to the date of the TPX Scheme Meeting.

3. Asset Management –

General Manager - Asset Management

Position Vacant (this area is currently being managed by the Managing Director).

4. Corporate Services –

Paul Viney B Bus (Bus Admin & Acc), FCPA, FCIS, CFTP, MAICD Chief Financial Officer and Company Secretary.

Mr Viney was appointed Company Secretary and Chief Financial Officer of the Company and Secretary of Tasmanian Banking Services Limited in July 2003. Prior to joining TPX, Mr Viney was General Manager Corporate, Chief Financial Officer and Company Secretary for Harris & Company Limited, a Director of The Examiner Newspaper Pty Ltd, Group Treasurer of the Australian Cement Group of Companies, Manager Corporate Banking for Tasmania Bank and Assistant Commissioner for Corporate Affairs in Tasmania. He has had extensive experience in finance, accounting and company secretarial roles.

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4.5 Recent share price history

The latest recorded price of TPX Shares on ASX on 9 October 2008 (being the last trading day before the proposed merger with MSF was announced) was $3.75.

The latest recorded share price of TPX Shares on ASX on 23 June 2009 was $2.70.

The highest and lowest recorded share prices of TPX Shares on ASX during the three months prior to 24 June 2009 were $3.00 on 22 May 2009 and $2.60 on 19 June 2009, respectively.

The three month volume weighted average price ( VWAP ) of TPX Shares (being the average price of TPX shares traded over a three month period calculated by taking into account the volume of shares traded at different prices) prior to 24 June 2009 was $2.83.

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Tasmanian Perpetual Trustees Limited Historic Share Price
$8.00
$7.00
$6.00
$5.00
$4.00
$3.00
$2.00
$1.00
Months
Mar-99Jun-99Sep-99Dec-99Mar-00Jun-00Sep-00Dec-00Mar-01Jun-01Sep-01Dec-01Mar-02Jun-02Sep-02Dec-02Mar-03Jun-03Sep-03Dec-03Mar-04Jun-04Sep-04Dec-04Mar-05Jun-05Sep-05Dec-05Mar-06Jun-06Sep-06Dec-06Mar-07Jun-07Sep-07Dec-07Mar-08Jun-08Sep-08Dec-08Mar-09
Monthly Closing Price (Last Sale)
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4.6 TPX revenue

TPX revenues have increased significantly in recent years to over $21 million in the financial year ended 30 June 2008. In the 2003 financial year management fees derived from TPX managed investment schemes accounted for 72.19% of total revenue, but by 2008 had fallen to 56.44% of revenue in line with TPX’s stated strategy to diversify sources of income.

In the current financial year TPX revenues are expected by the TPX Directors to come under pressure in line with the deteriorating global and domestic financial outlook and falls in asset values, however, income for the half year to 31 December 2008 held up well at $10.36 million.

TPX released profit guidance to the ASX on 9 April 2009 in respect of expectations for the year ending 30 June 2009. This disclosure announced that TPX Directors expect TPX profit after tax and before significant items to be in the range $5.2 million to $5.5 million for the full financial year ending 30 June 2009, highlighting the ongoing constraining impact of the global financial crisis on TPX revenues.

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Revenue
24 Management Fees
Commissions
21
Other Income
18
15
12
9
6
3
0
2003 2004 2005 2006 2007 2008
($ Millions)
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TPX Explanatory Booklet

4.7 TPX expenses

TPX operating expenses have fluctuated between 52% and 60% of income in the six financial years ended on 30 June 2008. After a period during which the synergies of the 2001 merger were extracted and the expense ratio declined, TPX has recently embarked upon a program of expansion and redevelopment which has resulted in the expense to income ratio rising to a level of 56% at the end of June 2008.

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Expense to Income Ratio
62%
60%
58%
56%
54%
52%
50%
48%
2003 2004 2005 2006 2007 2008
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The major areas of expenditure for TPX are shown in the graph below.

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Major Expenditure Areas
as at 30 June 2008
Other
Motor Vehicles 7%
External Professional 1%
Service Providers Employee Benefits
10% 63%
Directors Fees & Travel
4%
Computer &
Communications
4%
Property
7%
Depreciation
& Amortisation
4%
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4.8 TPX earnings per share and dividends

Following the previous merger in 2001, TPX experienced a period of sustained growth as the merger synergies were extracted and the business expanded through new branding, marketing and distribution strategies. The June 2008 results reflect the start of changing market and economic conditions, planned expansions and new developments, as well as the impacts of a non-cash impairment write down in relation to the Company’s equity linked investments.

While the 2008 earnings per share of 32.28 cents was a decline on the 2007 result, the graph below provides a longer term view of the growth in earnings adjusted for a share split in 2004 and changes in accounting standards in 2005.

The December 2008 half year result of 12.95 cents per share shows further softening in earnings per share consistent with expectations due to the challenging financial and economic environment, the costs of development and expansion as well as the impact of a further non-cash impairment write-down. As mentioned in Section 4.6, TPX released profit guidance to the ASX on 9 April 2009 in respect of expectations for the year ending 30 June 2009. This disclosure announced that TPX Directors expect TPX profit after tax and before significant items to be in the range $5.2 million to $5.5 million for the full financial year ending 30 June 2009. This translates into an earnings per share projection for the year ending 30 June 2009 of between 23.7 cents per share and 25.1 cents per share.

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Earnings Per Share
40
35
30
25
20
15
10
5
0
2003 2004 2005 2006 2007 2008
(Cents)
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4.9 TPX historical information

Income Statements

		Years ended		Half years ended	Half years ended
	30 Jun 08 $	30 Jun 07 $	30 Jun 06 $	31 Dec 08 $	31 Dec 07 $
Revenue Management fees Commissions Other fees Distributions from managed fund investments Interest Rent Other Income Total revenue and other income Expenses Employee benefts External professional service providers Depreciation and amortisation Property expenses Directors fees and travel Computer and communications Motor vehicles Loss on disposal of plant & equipment Impairment loss recognised on available for sale fnancial assets Other ordinary operating expenses Total Share of proft of Tasmanian Banking Services Ltd Proft before income tax Income tax expense Proft after income tax Earnings per share (cents per share) Dividends per share (cents per share): Interim Final Total	11,942,358 5,386,253 2,807,594 802,694 64,473 154,650 21,158,022 - 21,158,022 7,608,935 1,172,490 442,578 807,087 476,757 457,904 153,063 - 607,262 814,817 12,540,893 1,009,239 9,626,368 2,590,786 7,035,582 32.28 13.00 17.00 30.00	12,411,652 4,216,138 2,144,749 1,039,183 80,979 131,505 20,024,206 281,544 20,305,750 6,941,475 877,899 383,058 621,875 435,676 356,711 142,205 6,175 - 835,611 10,600,685 898,069 10,603,134 2,842,261 7,760,873 35.67 13.00 19.00 32.00	12,576,532 5,002,373 1,751,760 943,447 61,475 76,755 20,412,342 - 20,412,342 6,840,857 1,271,775 450,747 474,783 405,408 268,940 180,489 20,311 - 922,025 10,835,335 748,511 10,325,518 2,802,138 7,523,380 34.69 12.00 18.00 30.00








				10,361,737	10,345,923










				6,956,568 450,215 3,855,384 1,028,396 2,826,988 12.95	5,835,408 424,049 4,934,564 1,363,064 3,571,500 16.39

TPX Explanatory Booklet

Balance Sheets

		Years ended		Half years ended	Half years ended
	30 Jun 08 $	30 Jun 07 $	30 Jun 06 $	31 Dec 08 $	31 Dec 07 $
CURRENT ASSETS Cash and cash equivalents Trade and other receivables Total Current Assets NON-CURRENT ASSETS Investment in equity accounted investee Other fnancial assets Deferred tax assets Property, plant and equipment Goodwill Other intangible assets Total Non-Current Assets TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Current tax payable Provisions Total Current Liabilities NON-CURRENT LIABILITIES Deferred tax liabilities Provisions Total Non-Current Liabilities TOTAL LIABILITIES Net Assets EQUITY Equity attributable to equity holders of Tasmanian Perpetual Trustees Limited Share Capital Reserves Retained earnings TOTAL EQUITY	8,192,295 4,051,769 12,244,064 2,311,668 2,435,392 717,893 3,465,154 15,695,705 486,856 25,112,668 37,356,732 1,810,438 261,329 756,277 2,828,044 324,486 337,543 662,029 3,490,073 33,866,659 23,270,315 245,790 10,350,554 33,866,659	10,467,900 2,839,926 13,307,826 2,200,429 2,885,059 604,673 3,557,421 14,147,261 179,543 23,574,386 36,882,212 1,354,211 758,732 752,682 2,865,625 145,625 334,437 480,062 3,345,687 33,536,525 23,059,610 184,151 10,292,764 33,536,525	11,344,141 2,543,129 13,887,270 1,938,360 1,919,890 687,206 3,383,812 14,147,261 - 22,076,529 35,963,799 1,518,558 809,256 738,490 3,066,304 140,034 259,504 399,538 3,465,842 32,497,957 22,822,712 395,332 9,279,913 32,497,957	6,854,902 4,863,714 11,718,616 1,752,646 1,976,982 877,504 3,590,388 15,695,705 613,374 24,506,599 36,225,215 1,183,438 371,190 691,023 2,245,651 489,885 418,854 908,739 3,154,390 33,070,825 23,459,337 146,819 9,464,669 33,070,825	8,398,919 3,136,364 11,535,283 1,726,478 2,875,553 509,402 3,548,169 15,647,590 374,456 24,681,648 36,216,931 1,559,413 512,136 709,756 2,781,305 157,596 317,040 474,636 3,255,941 32,960,990 23,270,315 (30,525) 9,721,200 32,960,990

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4.10 Normalisation of historical earnings

The TPX Independent Expert has concluded that a number of items are either considered non-recurring or are related to surplus assets and hence do not form part of the trading operations of TPX. This is presented at Table 6 of the TPX Independent Expert’s Report (reproduced in full in Appendix 1). The TPX Directors agree that a number of items could be treated as non-recurring or surplus in nature and Table 6 has been reproduced below:Table 6: Adjusted financial performance

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Actual six
Actual Actual months ended
30 June 2006 30 June 2007 Actual 31 December
consolidated consolidated 30 June 2008 2008 reviewed
Reference ($’000) ($’000) ($’000) ($’000)
Reported EBITDA 9,966 10,007 8,995 n/a
Profit on disposal of managed fund investment a - (282) - -
Adjusted EBITDA 9,966 9,725 8,995 n/a
Adjusted margin (%) 49.0% 48.1% 42.6% n/a
Depreciation and amortisation (451) (383) (443) n/a
Adjusted EBIT 9,515 9,342 8,552 3,405
Adjusted margin (%) 46.8% 46.2% 40.5% 32.9%
Interest income 61 81 64 n/a
Impairment loss on available for sale financial assets b - - 607 471
Adjusted NPBT 9,576 9,423 9,224 3,876
Adjusted margin (%) 47.1% 46.6% 43.7% 37.4%
Income tax expense c (2,873) (2,827) (2,767) (1,163)
Change in accounting policy d - - (379) (391)
Adjusted NPAT 6,703 6,596 6,078 2,322
Adjusted margin (%) 32.9% 32.6% 28.8% 22.4%
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Source: Tasmanian Perpetual Trustees 2006, 2007, 2008 annual reports and financial results for the six months ended 31 December 2008

Notes:

The above figures do not include Tasmanian Perpetual Trustees’ share of profits relating to its interest in TBS.
Figures in the table above are subject to rounding.

The TPX Independent Expert describes each of the above adjustments below:

(a) Profit on disposal of managed fund investment has been removed because this is a non-recurring item and does not relate to the trading operations of TPX;
(b) Impairment loss on available for sale financial assets has been removed as this is a non-recurring item;
(c) Provision for income tax has been adjusted based on a corporate tax rate of 30% on adjusted net profit before tax; and
(d) As at 30 June 2008, the Company revised the method used to determine the value of corpus administration fees earned but not charged at the reporting date, on estates administered by TPX. The effect of this change increased net profit after tax by $379,000 for the year to 30 June 2008 and $391,000 for the six months to 31 December 2008. The effect of this change has been removed as this is a non-recurring item.

TPX Explanatory Booklet

4.11 Management discussion of historical financial information

Full year ended 30 June 2008 compared to the full year ended 30 June 2007

Significant factors arising out of a comparison between the financial years ended 30 June 2008 and 30 June 2007 include:

Net profit attributable to equity holders for the full year ended 30 June 2008 was $7.035 million a decrease of 9.34% compared to the previous year.
Revenues increased by 5.67% to $21.15 million. Expenses increased by 18.30% to $12.54 million driven by new branch investments and a non-cash impairment loss of $0.61 million recognised on an available for sale financial asset.
Funds under management declined by 6.70% which the TPX Board believes compared favourably with the extent of reported reduction in retail managed funds in the broader market.

Half year ended 31 December 2008 compared to the half year ended 31 December 2007

Significant factors arising out of a comparison between the half year ended 31 December 2008 and 31 December 2007 include:

Net profit attributable to equity holders for the half year ended 31 December 2008 was $2.83 million, a decrease of $0.74 million or 20.84 % compared to the prior half year.
Revenues were constant at $10.36 million. Expenses increased by 19.21 % and included an impairment loss of $0.47 million. The result also reflects increased expenditure over the previous corresponding period as a direct result of recent business expansion and growth initiatives consistent with the implementation of TPX’s strategic plan and budget expectations.
Funds under management reduced by 15% to $1.03 billion at 31 December 2008, primarily as a result of the introduction of the Federal Government Guarantee for ADIs, negative equity markets and changes in the competitive landscape. The TPX Board believes that this result compares favourably with industry trends and reflects the underlying strength of the company’s brand.

4.12 Financial forecasts

As outlined in Section 4.6, the TPX revenues are expected by the TPX Directors to come under pressure in the current financial year, in line with the deteriorating global and domestic financial outlook and falls in asset values.

The TPX Directors are of the view that the current economic environment creates significant uncertainty about TPX’s likely financial performance. Given this, the TPX Board believes that any attempt to provide forecast financial information beyond 30 June 2009 would be unduly speculative and potentially misleading as it would not be sufficiently reliable or based on sufficiently reasonable grounds to be useful to TPX Shareholders in making their decision as to how to vote at the TPX Scheme Meeting.

In addition TPX’s performance in the current uncertain economic environment will reflect a number of factors that cannot be predicted with a high degree of confidence and are outside its control.

TPX’s future performance is subject to the risk factors set out in Section 7 of this TPX Explanatory Booklet.

4.13 TPX Board of Directors

Michael J Vertigan AC, B Ec (Hons), PhD, Hon LLD, FAICD Chairman and independent non-executive Director

Dr Vertigan is currently Chair of the Tasmanian Polytechnic, a director of Eraring Energy and a Board Member of the Higher Education Endowment Fund. He was formerly Secretary of the Department of Treasury and Finance in both Tasmania and Victoria. For the past decade, he has had extensive involvement in the finance, investment, energy and utilities sectors. TPX Director since July 2004. Chairman since October 2004.

Mark E Scanlon MBA, B Bus, FCPA, FAICD Managing Director and non-independent Executive Director

Mr Scanlon was appointed Chief Executive Officer in 2000 and Managing Director in March 2004. He is also Managing Director of Tasmanian Banking Services Limited, a joint venture with Bendigo and Adelaide Bank Limited. He is a director of the Motor Accidents Insurance Board and the Heart Foundation Tasmania. He has held a number of senior executive positions in the financial services industry in Tasmania and Victoria. See section 11.10 for details about incentive arrangements relating to Mr Scanlon in connection with the TPX Scheme.

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Damian J Bugg AM, LLB, QC Independent non-executive Director

Mr Bugg was formerly a partner of Dobson Mitchell and Allport and was the first Director of Public Prosecutions for Tasmania from 1986 until 1999. He was appointed Commonwealth Director of Public Prosecutions in 1999 and retired from that position in 2007. He is past President of the Bar Association of Tasmania, past Chairman of the Southern Legal Assistance Scheme, a past member of the Council of the Law Society of Tasmania and a past member of the Council of the Australian Institute of Judicial Administration. He is a past President and now a Board Member of the International Society for the Reform of Criminal Law. Mr Bugg is a member of the Council of the University of Tasmania and was appointed Chancellor of the University of Tasmania in 2006. TPX Director since 1 February 2008.

Mr Bugg intends to resign if the TPX Scheme and the Transaction are implemented.

Nicholas L d’Antoine MAICD

Independent non-executive Director

Mr d’Antoine is a former grazier with extensive experience in agriculture. He is Chairman of Tasmanian Banking Services Limited and holds various private company directorships. TPX Director since 1983.

Clyde A Eastaugh LFAPI, IAMA, MAICD

Independent non-executive Director

Mr Eastaugh is a Town Planner and Certified Practicing Valuer. He is a past member of the Tasmanian Resource Management and Planning Appeals Tribunal, past Chairman of the Tasmanian Gaming Commission, past President of the Australian Property Institute and director of the Tasmanian Community Foundation and a director of other private companies. TPX Director since 2001.

Mr Eastaugh intends to resign if the TPX Scheme and the Transaction are implemented.

Miles L Hampton B Ec (Hons), FCIS, FCPA, FAICD Independent non-executive Director

Mr Hampton was appointed a TPX Director on 27 July 2006. Mr Hampton was Managing Director of agribusiness and real estate listed public company, Roberts Limited from 1987 until 29 July 2006.

He was Chief Financial Officer and Company Secretary of Roberts Limited from 1982 until July 1987.

Mr Hampton is currently Chairman of the Hobart Regional Water Authority and a director of Forestry Tasmania, Australian Pharmaceutical Industries Ltd, Impact Fertilisers Pty Ltd, Tasman Farms Limited, The Van Diemen’s Land Company and the Tasmanian Water and Sewerage Corporations (Southern, Northern & Northwest).

Mr Hampton was previously a director of public companies HMA Ltd, Gibsons Ltd, Wentworth Holdings Ltd and Ruralco Holdings Ltd.

Ian G Mansbridge CPA, FCIS, FCIM

Non-independent non-executive Director

Mr Mansbridge was appointed a TPX Director in March 2004. He has a number of other directorships including Australian Friendly Society Limited, National Stock Exchange of Australia Ltd, BSX Limited, Water Exchange Limited and Sandhurst Trustees Ltd and has been National President of the Trustee Corporations Association of Australia. He was formerly a director of Tasmanian Banking Services Limited and Elders Rural Bank Limited.

Sarah Merridew B Ec, FCA, FAICD

Independent non-executive Director

Mrs Merridew is a Chartered Accountant and a director of the Tasmanian Water and Sewerage Corporation (Northern Region) Pty Limited, Tasmanian Banking Services Limited and is Honorary Treasurer of the Royal Flying Doctor Service (Tasmanian Section) Inc. and actively involved with other community organisations. She was formerly a director of Tasmanian Public Finance Corporation from 1995-2008 and a partner of Deloitte Touche Tohmatsu from 1993 to 2003, including a period as Managing Partner for Tasmania. She has extensive experience in providing audit, risk management and business advisory services to the public and private sectors. TPX Director since 2001.

32 TPX Explanatory Booklet

4.14 TPX’s issued securities

As at the date of this TPX Explanatory Booklet, TPX had on issue 21,905,902 TPX Shares. All Shares are quoted on the ASX. At close of trading on 24 June 2009, the 20 largest TPX Shareholders held approximately 44.69% of TPX Shares.

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Rank Name Units % of Shares
1. TRUST COMPANY FIDUCIARY SERVICES LIMITED 2,093,344 9.570
2. SELECT MANAGED FUNDS LTD 1,225,960 5.600
3. COGENT NOMINEES PTY LIMITED 910,888 4.160
4. BENDIGO BANK LIMITED 886,490 4.050
5. MR BRIAN DAVID FAULKNER 678,000 3.100
6. UBS WEALTH MANAGEMENT AUSTRALIA NOMINEES PTY LTD 560,620 2.560
7. MILTON CORPORATION LIMITED 444,992 2.030
8. MRS WENDY JEAN FAULKNER 405,000 1.850
9. ANZ NOMINEES LIMITED 348,487 1.590
10. MRS JOAN E EVERSHED 312,160 1.430
11. J P MORGAN NOMINEES AUSTRALIA LIMITED 243,953 1.110
12. MR ANTHONY KEITH SHADFORTH + MR JULIAN DIGBY ABEY + MR KENNETH MURDOCH 240,000 1.100
DRAKE
13. SANDHURST TRUSTEES LTD 211,855 0.970
14. PRESTIGE FURNITURE PTY LTD 207,000 0.950
15. MR DAVID JOHN VAUTIN + MRS JACOBA MARIA VAUTIN 199,400 0.910
16. CHARMOF NOMINEES PTY LTD 185,706 0.850
17. MRS LORIS JESSIE MAY CRISP 171,796 0.790
18. TASMANIAN PERPETUAL TRUSTEES LIMITED 153,920 0.700
19. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 152,000 0.690
20. ID NOMS PTY LTD 149,153 0.680
Totals: Top 20 Holders of FULLY PAID ORDINARY SHARES (TOTAL) 9,780,724 44.693
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4.15 TPX – a disclosing entity

TPX as a listed company is subject to the reporting and disclosure obligations under the ASX Listing Rules and the Corporations Act. TPX has obligations to notify the ASX upon becoming aware of any information which a reasonable person would expect to have a material effect on the price or value of TPX shares. Any announcements made by TPX to the ASX are available on the ASX web site asx.com.au under the code TPX. These documents are also available on the TPX website at tasmanianperpetual.com.au.

The following announcements have been made since 10 October 2008 up to the date of this TPX Explanatory Booklet.

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Announcement date Brief description
24/06/2009 Change of Directors Interest Notice<br>02/06/2009 Tasmanian Perpetual and MyState Financial merger progress<br>25/05/2009 Appointment of new MyState Financial CEO<br>07/05/2009 Change of Directors Interest Notice
07/05/2009 Appendix 3B
30/04/2009 Change of Director`s Interest Notice
09/04/2009 Full Year Profit Guidance
17/03/2009 Broker presentation re proposed Merger
06/03/2009 SandP Announces March SP/ASX Index Rebalance
24/02/2009 Half Yearly Report and Accounts
21/01/2009 Tasmanian Perpetual and MyState agree to vary Merger terms
05/01/2009 Change of Director’s Interest Notice
05/01/2009 Change of Director’s Interest Notice
19/12/2008 Becoming a substantial holder
12/12/2008 Corporate Governance Award -third consecutive year
07/11/2008 Change of Director’s Interest Notice
06/11/2008 Change of Director’s Interest Notice
04/11/2008 Change of Director’s Interest Notice
28/10/2008 Results of Meeting
28/10/2008 Managing Directors AGM presentation 28 October 2008
28/10/2008 Chairman’s Address to Shareholders AGM 28 Oct 11.30 am
24/10/2008 Business as usual at Tasmanian Perpetual Trustees
10/10/2008 Merger Company profiles
10/10/2008 Key merger terms
10/10/2008 Chairmen’s Address regarding merger
10/10/2008 TPX and MyState Financial agree to merge
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TPX Explanatory Booklet

4.16 Proposed National Trustee Legislation

On 7 May 2009, the Federal Government released an exposure draft of the Corporations Legislation Amendment (Financial Services Modernisation) Bill 2009. Amongst other things, the exposure draft aims to create a national regulation regime for trustee companies. If enacted, the new legislation will see the regulation of trustee companies pass from the States and Territories to the Commonwealth. There is a present intention for the States and Territories to co-operate with this process, which would mean parts of the Trustee Companies Act would no longer be applicable.

ASIC is proposed to become the national regulator of trustee companies with a view to reducing the regulatory burden on trustee companies operating in multiple States or Territories. If enacted, the draft legislation will have the effect of creating a national market for trustee services, which should deliver competition benefits to consumers. The draft legislation includes restrictions on the control of voting power in trustee companies which are intended to maintain a broad spread of ownership and minimise the possibility that a single shareholder could gain control.

Current ownership restrictions exist in various State and Territory legislation to differing degrees. The Trustee Companies Act in Tasmania currently restricts a person from having an interest (which includes holding, controlling or having a beneficial interest in shares) in more than 10 per cent of the shares in a trustee company or its holding company. The draft National legislation would replace this 10 per cent restriction with a 15 per cent limit on voting power. The new legislation is more in line with the Financial Sector (Shareholdings) Act 1998 (Cth) which prevents shareholders of “financial sector companies” from holding a stake (which includes the interests of certain related persons or related entities in holding or controlling the relevant shares) of more than 15 per cent without the approval of the Treasurer.

Under the proposed legislation a person’s voting power would be calculated by reference to the voting power of that person and that person’s associates (as defined in the Corporations Act). The proposed legislation does not expressly state whether the restriction on voting power would apply to MyState Limited as well as TPX, however, draft regulations may clarify this issue. Subject to further clarification under draft regulations, due to the way in which the proposed legislation will interact with the current provisions of the Corporations Act, a shareholder of MyState Limited would require approval if its holding of (or ability to control) MyState Limited Shares reached 20 per cent.

Where trustee corporations provide services other than ‘traditional services’, such as acting as a superannuation trustee, acting as a responsible entity for managed funds, providing a custodial or depository service, or acting as a trustee for debenture holders, they must also comply with other relevant Commonwealth legislation, such as the Superannuation Industry (Supervision) Act 1993 (Cth), the Managed Investments Act 1998 (Cth) and the Corporations Act respectively.

As part of the proposed laws, trustee companies will also be subject to obligations covering financial product and fee disclosure, licensing, conduct and advice and will also be required to have in place internal and external dispute resolution mechanisms.

TPX Response

At the time of preparing this Explanatory Booklet, the exposure draft of the Corporations Legislation Amendment (Financial Services Modernisation) Bill 2009 (Cth) is yet to be finalised and face the scrutiny of the parliamentary process. Consequently, specific provisions may yet be amended, and TPX considers that any detailed comment by it on the proposals would not be of assistance to TPX Scheme Shareholders.

Despite this, TPX and MSF have reviewed the current legislative proposals and, as a matter of principle, broadly support the general intent of the legislation. As MSF is regulated at a Federal level, TPX considers a potential transfer of aspects of TPX’s regulation from a State to a Federal level as being beneficial in the context of the Transaction.

MSF and TPX acknowledge that the creation of a national market for trustee services may open up the possibility of new entrants into the Tasmanian market, however, the draft legislation would also create an opportunity for TPX and if the TPX Scheme, the MSF Scheme and the Transaction are implemented, the MyState Limited Group, to enter more easily the mainland market. This is consistent with MSF’s and TPX’s stated strategic intentions.

The move from State regulation to Federal regulation is not perceived negatively by TPX. TPX currently offers funds management and financial planning services which are also regulated by ASIC and require TPX to hold an AFSL and maintain the related compliance programs.

The new regime aims to give the Commonwealth exclusive responsibility for ‘entity level’ regulation of trustee companies’ traditional services such as estate management, will and attorney preparation and probate services. Trustee companies will be authorised under the Corporations Act to perform these traditional functions, and such services will be deemed to be “financial services” requiring the company to hold an Australian Financial Services Licence ( AFSL ).

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Section 5: Profile of MSF

The information in this Section 5 has been provided by MSF and MSF is responsible for its accuracy.

5.1 Overview of MSF

MSF is an authorised deposit-taking institution ( ADI ) operating predominantly in Tasmania. MSF provides the following products and services to approximately 117,000 members:

lending including mortgage, personal, overdraft, line of credit and commercial products;
transactional savings accounts and fixed term deposits;
wealth management and financial planning services;
insurance products (CGU General Insurance and Swann Consumer Credit Insurance); and
referral Health Insurance sales through an agreement with St. Lukes Health.

The MyState Financial Group also includes:

MyState Financial Foundation Limited, which provides annual grants to charities to educate and nurture the young people of Tasmania;
The Gourmet Club Pty Ltd – Tasmania’s largest loyalty card program, offering discounts to members at more than 150 establishments across the State; and
Connect Asset Management Pty Ltd, which manages two securitisation programs under the name of ConQuest: ConQuest Mortgage Trust and ConQuest 2007-1 Trust. These securitisation programs form part of MSF’s funding strategy. See section 5.4 for further details.

The MyState Limited Directors currently intend that the operations of MSF’s subsidiaries will continue as normal after the implementation of the TPX Scheme, the MSF Scheme and the Transaction, including the ConQuest securitisation program. As with all operations of the MyState Limited Group, the operations of the MSF subsidiaries will be subject to periodic ongoing review by MyState Limited management and the MyState Limited Directors. In addition, as with all operations of the MyState Limited Group, the operations of the MSF subsidiaries will be subject to review by the Management Integration Committee. See Section 6.4 for further details.

(a) Current Operations

MSF employs approximately 300 people, with 12 branches in locations across Tasmania and a head office in Hobart. It is the sixth largest credit union in Australia by total assets and the largest mutual credit union in Tasmania.

MSF has branches in the north-west at Burnie and Devonport, in the north at Kings Meadows, and Launceston and in the south of the State in Claremont, Glenorchy, Hobart, Kingston, New Norfolk, New Town, Rosny and Sandy Bay.

MSF provides internet banking and telephone banking through its Hobart-based service centre, and telephone and online lending and insurance sales through a remote distribution team also based in Hobart.

MSF provides members with direct charge-free ATM access on the rediATM network. More than 60 ATMs are available in Tasmania and more than 1,400 across Australia.

MSF is regulated by the APRA as an ADI and by ASIC as a holder of an Australian Financial Services Licence ( AFSL ) No. 240896 issued by ASIC.

(b)

Divisions

Divisions
Retail Banking	Insurance sales, financial planning, retail branch network, broker loans, remote distribution, service centre (call centre)
Brand, People & Strategy	Remuneration, recruitment, industrial relations, people & organisation development, training and development, marketing, communications, strategy and planning
Finance	Financial reporting, treasury, financial compliance, financial control, property and facilities management, business information and analysis, financial risk, securitisation, product development and management
Business Systems	Technology strategy, business systems, system integration, infrastructure, management, projects, loans processing and credit management
Company Secretarial & Risk	Policy, risk management framework, compliance, fraud, membership and shareholder register.

History

(c)

MSF has been operating as ‘MyState Financial’ since 1 July 2007, following the merger of Connect Credit Union of Tasmania Limited ( connectfinancial ) with Island State Credit Union Limited ( islandstate ). MSF is the culmination of 28 merged credit unions. islandstate was the result of the coming together of 22 credit unions from across Tasmania over more than 35 years. connectfinancial started with the formation of the Tasmanian Public Service Savings & Loans Co-operative Society in 1959.

(d) Key Management Personnel

John Gilbert B Comm, FAICD, Chief Executive

Mr Gilbert was appointed Chief Executive of MSF in May 2009, having retired as Chief Executive Officer and director of Cuscal Limited in December 2008. Mr Gilbert has extensive experience as a Chief Executive and as a director of a range of major commercial and regulatory organisations including three years as a director, World Council of Credit Unions, Chief Executive Officer of Members Australia Credit Union, and Chief Executive and director of the Victorian Financial Institutions Commission. Mr Gilbert is currently a director of QBE Lenders Mortgage Insurance Limited and a director of Cuesuper Pty Ltd.

TPX Explanatory Booklet

Nina Nelson BComm (Acc & Mgmt), CPA, Chief Financial Officer

Ms Nelson was appointed to the position of Chief Financial Officer of MyState Financial in July 2007, and concurrently holds the position of General Manager - Connect Asset Management Pty Ltd to which she was appointed in 2002. Ms Nelson joined the credit union in 1995 and has held the positions of Senior Finance Officer, Manager Treasury and Risk and Chief Risk Officer since that date. She has more than 13 years experience in financial institutions management in the areas of Treasury, Securitisation, Finance and Risk Management. Prior to joining MSF, Ms Nelson was involved in the administration and management of a number of small businesses in the United Kingdom and New Zealand. Ms Nelson was the Tasmanian Winner of the 2007 Telstra Business Women’s Awards in the Hudson Private and Corporate Sector.

Scott Lukianenko Grad Cert BA Adv Dip Bus Mgt MAICD, Company Secretary and General Manager Risk

Mr Lukianenko was appointed General Manager Risk and Company Secretary for the MyState Financial group of companies in July 2007. He joined islandstate in 1999 as Head of Internal Audit and later became General Manager Corporate Services and then General Manager Risk. Mr Lukianenko was appointed Company Secretary for the islandstate group of companies in 2000. Mr Lukianenko has more than 19 years experience in the financial services industry including roles in sales, lending, policy development and operational and executive management.

Darren Turner Grad Dip Bus Admin, Dip Bus,

General Manager Retail Banking

Mr Turner joined islandstate in 2004 and has held executive roles responsible for Member Services and Corporate Strategy and Development before his current role as General Manager Retail Banking. Prior to joining islandstate Mr Turner worked for ANZ Banking Group for 21 years, progressing through the company to hold Senior Management roles responsible for Mortgage Operations nationally, Strategy and National Franchising Manager. Mr Turner has 26 years experience in financial services including experience in sales, operational and strategic management.

Tim Rutherford BA (Hons), MA,

General Manager Business Systems

Mr Rutherford was appointed General Manager of Business Systems in November 2007 and director of Credit Union Financial Services Tasmania in March 2008. Prior to joining MyState Financial Mr Rutherford was Principal Adviser with Rio Tinto, Corporate Affairs Manager – Operations with National Australia Bank and Managing Consultant with IBM Business Consulting Services strategy practice. Mr Rutherford has extensive international experience in Asia, Europe and North America working on large organisational transformation projects covering operational strategy, large scale systems implementations, process management and organisational restructuring.

5.2 Marsha Cadman BA,

General Manager Brand, People & Strategy

Ms Cadman was appointed MSF’s General Manager Marketing and Communications in July 2007, having held the same role at islandstate since February 2006. Ms Cadman’s portfolio now also includes the People and Culture and Corporate Strategy and Development functions. Ms Cadman has worked in various industries in wide-ranging internal and external communication, government liaison, and change management roles and has extensive experience in marketing and brand management. Previous roles included state and local government, education and energy, as well as three years managing her own marketing communications consultancy business.

MSF revenue

MSF revenue has grown steadily over recent years, with the merger of islandstate and connectfinancial resulting in additional growth on the back of a strong property market in Tasmania. Against a combined revenue of $130.0 million in the financial year ended 30 June 2007 for islandstate and connectfinancial, revenue for MSF in the first year of combined operation increased 17% in the financial year ended 30 June 2008 to $152 million.

Following a sound performance in the first half of 2009, MSF Directors expect that revenues will slow through to the end of the financial year, constricted by the ongoing impact of the global financial crisis.

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Total Revenue 1
160 $152.0
$130.0
120 $111.9
$82.1
80
40
0
FY2006 [2] FY2007 [2] FY2008 1H2009
($ Millions)
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(1) Total revenue comprises interest income and non-interest income before expenses (including interest expense).
(2) The results for the financial years ended 30 June 2006 and 30 June 2007 have been prepared on a pro forma, unaudited basis as if connectfinancial and islandstate had been merged at those times. See also Section 5.6(a).

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5.3 MSF lending portfolio

More than 80% of MSF’s loan portfolio is residential mortgage lending, with an additional 10% in personal lending. The balance comprises revolving credit and commercial lending. The MSF Board believes the conservative lending policies throughout the history of the organisations which formed MSF have resulted in a low level of credit risk in the mortgage loan portfolio.

MSF Loan Book by Product Type as at 31 December 2008

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Revolving Credit
7%
Commercial
3% Residential
80%
Personal
10%
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5.4 MSF funding base

Historically, MSF has had a strong retail deposit portfolio which has supported its lending activities. With the introduction of the Federal Government Guarantee the retail deposit portfolio has grown strongly for the half year ended 31 December 2008. As at 31 December 2008, retail deposits represented 81% of MSF’s funding base, providing a solid platform for future growth. MSF has historically utilised funding from the wholesale and securitisation markets as required to supplement its funding base. ‘Borrowings’ for the group at 19% are predominantly asset backed commercial paper notes issued by the ConQuest Securitisation Trusts. These Trusts buy loans from MSF using investment funds from large Australian institutions including banks and investment companies. MSF continues to service the loans in the Trusts and MSF subsidiary entity, Connect Asset Management Pty Ltd is the Trust manager.

As outlined in section 5.1, there are two ConQuest Securitisation Trusts: ConQuest Mortgage Trust and ConQuest 2007-1 Trust. ConQuest Mortgage Trust includes only loans originated from MSF. ConQuest 2007-1 Trust also includes loans originated from Queenslanders Credit Union (approximately 25% of the total loans in that Trust). The loans securitised by MSF through the Trusts are included in the consolidated financial statements of MSF and its subsidiaries. They will also be included in the consolidated accounts of the MyState Limited Group.

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MSF Consolidated Funding Mix
as at 31 December 2008
Borrowings
Deposits 19%
At Call
35%
Deposits
Fixed Term
46%
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TPX Explanatory Booklet

5.5 MSF historical financial information

(a) Consolidated Income Statement

Consolidated Income Statement
	Consolidated
Note	Years ended		Half years ended
	30-Jun-08 $	30-Jun-07* $	31-Dec-08 $	31-Dec-07 $
Interest income Interest expense Net interest margin Other revenue Other expenses Proft before bad and doubtful debts and income tax Less bad and doubtful debts Income tax expense Net proft as reported Non-recurring items net of income tax 1 Net proft after adding back non-recurring items	132,036,858 76,771,968 55,264,890 20,002,853 55,156,503 20,111,240 3,442,163 4,518,423 12,150,654 1,610,000 13,760,654	109,806,557 58,568,246 51,238,311 21,177,503 61,577,518 10,838,296 1,367,205 2,726,475 6,744,616 5,236,570 11,981,186	72,333,037 45,032,298 27,300,739 9,798,756 29,731,081 7,368,414 1,246,321 1,839,954 4,282,139 1,083,000 5,365,139	62,518,290 35,341,386 27,176,904 10,594,779 29,904,283 7,867,400 920,912 2,073,849 4,872,639 - 4,872,639

See explanatory note at Section 5.6(a)

Note:

Non-recurring item classifications for the year ended 30 June 2008 and half year ended 31 December 2008 were not part of either the audit or the audit review respectively.

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(b) Consolidated Balance Sheet

	Years ended	Years ended	Half years ended	Half years ended
	30-Jun-08 $	30-Jun-07* $	31-Dec-08 $	31-Dec-07 $
ASSETS Cash and liquid assets Due from other fnancial institutions Receivables Loans Other investments Property, plant and equipment Tax assets Other assets Intangible assets and goodwill TOTAL ASSETS LIABILITIES Deposits Interest bearing loans and provisions Payables and other liabilities Tax liabilities Provisions TOTAL LIABILITIES NET ASSETS EQUITY Redeemable preference share capital General reserve Asset revaluation reserve Hedging reserve TOTAL EQUITY	8,485,146 184,323,964 5,609,441 1,482,013,037 3,378,961 12,200,741 4,080,754 908,178 5,694,482	14,770,687 144,992,123 12,234,466 1,362,889,856 3,481,958 9,658,753 3,913,745 56,432 6,439,961 1,558,437,981 1,036,121,584 393,760,648 18,313,494 (99,975) 2,911,807 1,451,007,558 107,430,423 311,590 104,622,450 2,496,383 - 107,430,423	9,685,340 237,415,817 3,817,547 1,468,526,898 4,130,224 14,379,428 7,656,494 2,236,071 2,945,652	7,607,015 159,331,926 5,341,047 1,420,346,225 3,481,957 13,473,258 3,491,099 8,572,106 3,417,109 1,625,061,742 1,151,863,719 330,626,505 25,994,561 459,102 2,066,236 1,511,010,123 114,051,619 311,590 111,243,646 2,496,383 - 114,051,619
	1,706,694,704		1,750,793,471
	1,217,602,763 323,445,023 41,306,332 1,314,730 2,827,926		1,305,522,786 296,564,226 22,667,746 371,056 4,986,040
	1,586,496,774		1,630,111,854

	120,197,930		120,681,617
	363,410 116,693,669 2,990,394 150,457		386,689 120,952,529 2,990,394 (3,647,995)
	120,197,930		120,681,617

See explanatory note at Section 5.6(a)

(c) Audit

The historical financial information included in the above sections was audited for the financial years ended 30 June 2007 and 30 June 2008. The audit for year ended 30 June 2008 did not include classification of non-recurring items for that period. The half year financial reports for the periods ended 31 December 2007 and 31 December 2008 were subject to reviews by MSF’s auditor. These reviews were not audits and also did not include the non-recurring item classification for the half year ended 31 December 2008.

TPX Explanatory Booklet

5.6 Management discussion of historical financial information

(a) Full year ended 30 June 2008 compared to full year ended 30 June 2007

The 30 June 2007 income statement and balance sheet figures included in Section 5.5 are the combined figures of connectfinancial and islandstate. These figures have not been prepared on a consolidated basis and have not been audited as the audited financial statements of only connectfinancial were used as the 2007 legal comparative for MSF’s 2008 financial statements. Therefore the 30 June 2007 figures should be used only as a very basic guide. They should not be relied upon as if they were audited accounts. Certain items of a non-recurring nature arose in the year ended 30 June 2007 and 30 June 2008. These amounted to $7,351,824 before tax in the year ended 30 June 2007 and $2,300,000 before tax for the year ended 30 June 2008. These items related to merger and redundancy costs as a result of the merger between connectfinancial and islandstate on 1 July 2007.

In addition, the MSF Board believe that a comparison of the financial performance of MSF in the financial year ended 30 June 2008 with the financial year ended 30 June 2007 does not give an accurate reflection of MSF, given the business was only established by the merger of connectfinancial and islandstate on 1 July 2007. Considerable differences between MSF and the two smaller entities in terms of operations, scale and market penetration exist and therefore simply combining the results of the two prior organisations for 30 June 2007 may provide a misleading indication of business trends and performance.

(b) Half year ended 31 December 2008 compared to the half year ended 31 December 2007

Significant factors arising out of a comparison between the half year ended 31 December 2008 and 31 December 2007 include:

Net interest margin for the half year ended 31 December 2008 was $27.3 million, an increase of less than $125,000 on the half year ended 31 December 2007. This result reflects the Reserve Bank of Australia’s significant reduction in interest rates between September 2008 and 31 December 2008 and the need to hold higher levels of liquidity from 1 July 2008 to 31 December 2008.
Expenses for the half year ended 31 December 2008 were in line with the prior period although these would have been significantly lower except for the following non-recurring items (before tax):
Redundancy costs of $320,000;
One-off strategic project costs of $297,000; and
Current merger proposal costs of $930,000.
As a result of these factors, net profit after tax for the half year ended 31 December 2008 was $4.3 million, a decrease of $590,500 compared to the prior half year.
Total assets for the half year ended 31 December 2008 were $1.75 billion, an increase on the result of $1.63 billion for the prior half year. This reflects careful management of the loan portfolio and total asset base.
Deposits increased to $1.3 billion for the half year ended 31 December 2008, an increase of 13.3% compared to the prior half year. This result reflects the increased focus on retail deposits as a key factor in managing MSF’s liquidity.

5.7 Financial forecasts

As outlined in Section 5.2, the MSF Directors expect that revenue growth will slow through to the end of the financial year ending on 30 June 2009, constricted by the ongoing impact of the global financial crisis.

The MSF Directors are of the view that the current economic environment creates significant uncertainty about MSF’s likely financial performance for the balance of the current financial year and the financial year ending on 30 June 2010. Given this, the MSF Board believes that any attempt to provide detailed forecast financial information would be unduly speculative and potentially misleading as it would not be sufficiently reliable or based on sufficiently reasonable grounds to be useful to TPX Shareholders in making their decision as to how to vote at the TPX Scheme Meeting. In addition:

MSF’s performance in the current uncertain economic environment will reflect a number of factors that cannot be predicted with a high degree of confidence and are outside its control; and
MSF’s future performance is subject to the risk factors set out in Section 7 of this TPX Explanatory Booklet.
Non interest income reduced by $796,000 for the half year ended 31 December 2008 compared to the prior half year. This result was primarily due to a reduction in commission income on funds under advice as a result of negative market conditions. The MSF Board believes that this result is comparable with industry trends during the same period.

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5.8 MSF’s Board of Directors

Tony Reidy FAICD FAMI MFIA JP

Chairman

Mr Reidy is Executive Director of the Royal Hobart Hospital Research Foundation, and has been a company director for more than 20 years. He was elected Chairman of connectfinancial and The Gourmet Club Pty Ltd in December 2006, and appointed Chairman of MSF on 1 July 2007. He is a Fellow of both the Australian Institute of Company Directors and the Australasian Mutuals’ Institute, and a Member of the Fundraising Institute of Australia, and holds qualifications in company direction and superannuation management.

Peter Armstrong BEc (Hons) Dip Ed Dip FP CPA FAICD FAMI

MSF Director

Mr Armstrong is Workforce Sector Leader for Business and ICT in the Tasmanian Polytechnic. He is an experienced company director and former Chairman of Teachers Police and Nurses Credit Union and connectfinancial. He is Chairman of MSF’s Audit and Risk Committee and is a director of The Gourmet Club Pty Ltd. He is a Fellow of both the Australian Institute of Company Directors and the Australasian Mutuals’ Institute.

Bob Gordon BSc MIFA MAICD AFAMI CPM FAMI MSF Director

Mr Gordon is the Managing Director of Forestry Tasmania. He has been a credit union director for fourteen years, including six years as Chairman of connectfinancial. He is a director of The Gourmet Club Pty Ltd and is currently a member of MSF’s Governance Committee and serves as a director of the MyState Financial Foundation.

Tim Gourlay DipTeach TTC Grad Cert Mgmt MAICD Dip MAMI MSF Director

Mr Gourlay is a Capital Works and Planning Consultant with the Tasmanian Catholic Education Office. He has been a director of a financial institution since 1986 and is a director of other private companies. He is currently Chairman of the MyState Financial Foundation, a director of The Gourmet Club Pty Ltd and a member of MSF’s Governance Committee. Mr Gourlay is a member of both the Australian Institute of Company Directors and the Australasian Mutuals’ Institute.

Colin Hollingsworth CPA FAMI MAICD MSF Director

Mr Hollingsworth was previously the General Manager, Corporate Services, TAFE Tasmania from 1998 to April 2008. He is a member of the Australian Institute of Company Directors and a Fellow of the Australasian Mutuals’ Institute. He is an experienced company director and former director and Chairman of both CPS and islandstate credit unions. He is a director of The Gourmet Club Pty Ltd and is currently the Chairman of MyState Financial’s Executive Committee and a member of MSF’s Audit and Risk Committee.

Dianne Bowerman GAICD MAMI MSF Director

Ms Bowerman was first elected to the MSF Board in 2002. She was formerly a senior manager with insurer AAMI for over 20 years and employed in a managerial position at islandstate for 11 years until retiring in 2000. Ms Bowerman was Vice Chair of islandstate and is currently Chair of the MSF Governance Committee, a director of The Gourmet Club Pty Ltd and a member of the Vic/Tas regional council of the Australasian Mutuals’ Institute.

Ms Bowerman intends to resign if the MSF Scheme and the Transaction are implemented.

Graeme Little BE GAICD MAMI FI Brew

MSF Director

Mr Little was elected to the Board of islandstate credit union in October 2002. He was previously a director on J. Boag and Son Ltd from 1997-2000, having spent 36 years in the brewing industry in Tasmania during which time he was Cascade brewery manager (1982-1986) and Manager of Boags Brewery (1988- 2000). Mr Little is a director of The Gourmet Club Pty Ltd and is currently a member of MSF’s Executive and Audit and Risk Committees.

Mr Little intends to resign if the MSF Scheme and the Transaction are implemented.

5.9 MSF’s Company Secretary

Scott Lukianenko Grad Cert BA Adv Dip Bus Mgt MAICD

TPX Explanatory Booklet

Section 6: Profile of the MyState Limited Group

6.1 Rationale: Stronger together

The merger of TPX, a trustee and wealth management company and MSF, an authorised deposit-taking institution, represents a strategy for the long term value creation for the TPX Scheme Shareholders and MSF Scheme Participants. The result of combining the operations of these two entities will be a diversified financial services company. TPX and MSF will become wholly-owned subsidiaries of MyState Limited, a newly incorporated non-operating holding company.

APRA requires that the parent entity of an ADI must be an authorised non-operating holding company. MyState Limited will be APRA regulated.

The TPX Board believes that the MyState Limited Group will create shareholder value through:

the ongoing development of the group by optimising the performance and improving productivity of MSF and TPX;
the stronger funding and capital position that is achieved with the greater scale of the combined businesses of MSF and TPX, which will support the growth strategies of the group;
maximising the financial strength and scale of the two complementary businesses to improve the competitiveness of each company in their respective markets;
increasing the strong brand affinity of MyState Financial and Tasmanian Perpetual Trustees through the improved ability to offer more products and services to their respective customers;
providing greater benefits for the existing customer base of more than 200,000 customers through the combination of the distribution networks of MSF and TPX; and
improving the capacity for MSF and TPX to pursue expansion in both existing and new market segments as well as new geographic markets to increase customer and product diversity.

6.2 Structure of the MyState Limited Group

MSF and TPX will be wholly owned subsidiaries of MyState Limited, a non-operating holding company.

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MyState Limited
Group Structure
100% owned subsidiary 100% owned subsidiary
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(a) Regulatory framework

Both MyState Limited and MSF will be regulated by APRA and MyState Limited will be enabled under Tasmanian legislation to own an authorised trustee company, i.e. TPX. TPX will continue to be regulated by APRA as a registered superannuation entity (RSE). Both MSF and TPX hold Australian Financial Services Licences issued by ASIC.

(b) Subsidiary operations

Key features of the operations of MSF and TPX are outlined below:

TPX: The trustee and wealth management company

TPX was established to be an impartial and professional executor and trustee for Tasmanians and this will remain a core part of the business if the TPX Scheme and the Transaction are implemented, supported by the existing estate planning, trustee and attorney services as well as a financial planning operation which provides financial advice and portfolio administration services. Further information about TPX is contained in Section 4.

MSF: the authorised deposit-taking institution

MSF is an ADI operating predominantly in Tasmania. MSF has approximately 117,000 members, branches in 12 locations and approximately 300 staff. Further information is contained in Section 5.

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6.3 Intentions of MyState Limited

If the TPX Scheme and the Transaction are implemented, the MyState Limited Board’s intention is to consolidate the merger, leverage the combined existing TPX and MSF customer base of more than 200,000 and secure growth opportunities both within and outside of Tasmania. This will include:

operating the businesses of TPX and MSF as separate subsidiaries;
identifying and realising cost and revenue synergies across the MyState Limited Group; and
initially continuing with the existing employment arrangements in place for MSF and TPX respectively.

If the TPX Scheme is successful and the Transaction is implemented, it is the current intention of the MyState Limited Directors to continue the employment of TPX’s and MSF’s key employees and, more broadly, continue the employment of all other employees, subject to the need to eliminate duplication of roles and responsibilities. The review of duplicated roles will be conducted on a merit basis.

The MyState Limited Board

(a)

Upon implementation of the Transaction, the Board of MyState Limited will initially comprise ten non-executive members and a Managing Director. At present MyState Limited has not appointed a Managing Director, although the Chief Executive of MSF and Managing Director of TPX remain in their respective roles. The MyState Limited Board intends to make a decision with respect to the appointment of a Managing Director for the MyState Limited Group after the TPX Scheme Meeting but prior to the Implementation Date. The appointee will need to meet appropriate standards for “fit and proper” under APRA’s Australian Prudential Standard 520. When appointed, the Managing Director’s role will include responsibility for the appointment of new senior executives.

MyState Limited Directors from TPX

Dr Michael J Vertigan AC, Chairman and independent non-executive MyState Limited Director
Mr Nicholas L d’Antoine, independent non-executive MyState Limited Director
Mr Miles L Hampton, independent non-executive MyState Limited Director
Mr Ian G Mansbridge, non-independent non-executive MyState Limited Director
Mrs Sarah Merridew, independent non-executive MyState Limited Director

MyState Limited Directors from MSF

Mr Peter D Armstrong, independent non-executive MyState Limited Director
Mr Bob L Gordon, independent non-executive MyState Limited Director
Mr Tim M Gourlay, independent non-executive MyState Limited Director
Mr Colin M Hollingsworth, independent non-executive MyState Limited Director
Mr Tony B Reidy, independent non-executive MyState Limited Director

Managing Director

To be appointed.
Both John Gilbert and Mark Scanlon will remain in their current roles until implementation of the TPX Scheme and the Transaction. See section 11.10 for details about incentive arrangements relating to Mr Scanlon in connection with the TPX Scheme.

Company Secretary

Mr Paul K M Viney was appointed Company Secretary of MyState Limited on 8 October 2008.

(b) Operational structure

MSF and TPX will initially operate as separate subsidiaries utilising their existing management and organisational structures. It is intended that the Board of MyState Limited will appoint a Managing Director for MyState Limited after the MSF General Meeting and MSF Scheme Meeting and the TPX Scheme Meeting, but prior to the Implementation Date. Duplication of corporate functions will be eliminated over time to ensure cost synergies are met, and the shared services model is achieved.

Within the first three years, it is envisaged that MyState Limited Group shared services will be incorporated into MyState Limited. This may include marketing, human resources, finance, information technology, strategy, company secretarial and risk services. MyState Limited will provide these services to MSF and TPX, as subsidiaries, on a cost recovery basis.

The MyState Limited Directors currently intend that the operations of all subsidiaries will continue as normal after the implementation of the TPX Scheme, the MSF Scheme and the Transaction. As with all operations of the MyState Limited Group, the operations of the subsidiaries will be subject to periodic ongoing review by MyState Limited management and the MyState Limited Directors. In addition, as with all operations of the MyState Limted Group, the operations of the subsidiaries will be subject to review by the Management Integration Committee. See Section 6.4 for further details.

TPX Explanatory Booklet

See also section 4.4 in relation to TBS. This Explanatory Booklet has been prepared on the basis that TPX will exit from TBS shortly after implementation of the TPX Scheme and the Transaction and that TBS will not form part of the operational structure of the MyState Limited Group.

(c) Registered office

The registered office for MyState Limited will be in Launceston, with the head office for TPX remaining in the same location in Launceston, and the head office for MSF remaining in Hobart.

(d) Growth

If the TPX Scheme and the Transaction are implemented, MyState Limited will seek to achieve growth within and outside Tasmania through a number of strategies, including by seeking to:

expand the service and product offering to the existing customer bases of TPX and MSF;
acquire aligned financial services businesses which are value-adding and enhance the client base of the companies including in other Australian States; and
expand the existing offerings to its customer base through alliances with other financial services providers to provide a diverse range of financial services which will expand the MyState Limited Group into new geographic markets or market segments within Tasmania.

6.4 Integration strategy

If the TPX Scheme and the Transaction are implemented, a management integration committee ( Management Integration Committee ) will be established to ensure a successful integration of the merger. The Management Integration Committee will report directly to the MyState Limited Board and will oversee the merger transition. The focus of the Management Integration Committee will be on integration of MSF and TPX, identifying and realising cost synergies, maximising revenue opportunities and managing the cultural integration of staff. Your TPX Directors believe that merger implementation and integration costs, whilst not insignificant, will not be material in comparison to the revenue and cost synergies outlined in Section 6.11. The Management Integration Committee will carefully consider the costs of pursuing any opportunities offered by the merger.

Having successfully merged connectfinancial and islandstate in 2007, MSF’s Directors and management team have extensive expertise and experience in merging businesses. Similarly, TPX is the product of a successful merger of two Tasmanian trustee companies in 2001. The Management Integration Committee will include both TPX and MSF employees.

6.5

As discussed further in Section 6.11, the MyState Limited Board is exploring opportunities for the realisation of certain synergies if the TPX Scheme and the Transaction are implemented. These synergies are likely to result, over time, in the elimination of a number of employment positions within the MyState Limited Group. The MyState Limited Board has indicated its intention to continue the operations and utilisation of the assets of both TPX and MSF while at the same time exploring opportunities offered by an expanded customer base. Additionally the MyState Limited Board believes that the MyState Limited Group will improve the capacity for TPX and MSF to pursue expansion in both existing and new market segments as well as new geographic markets and, accordingly, increase customer and product diversity.

Employee Share Plan

The Employee Share Plan ( ESP ) has been established by the MyState Limited Board pursuant to powers provided in the MyState Limited Constitution. Subject to an offer being made by MyState Limited or its subsidiaries, eligible employees can acquire shares up to a prescribed amount in respect of each financial year. There is no additional cost to MyState Limited or its subsidiaries for these issues as eligible employees who elect to participate agree to salary sacrifice the equivalent value of the shares they receive. The shares will be issued subsequent to the end of the financial year.

Eligible employees are those who meet certain service criteria determined by the MyState Limited Board. The price of the shares issued under the ESP will be determined by the weighted average price of the trades in MyState Limited Shares on the ASX in the week preceding the issue date. The shares will carry full voting rights and entitlement to dividends. The shares may not be disposed of by the employee until the earlier of three years from the issue date, or cessation of their employment with MyState Limited or its subsidiaries.

There may be occasions when the MyState Limited Board will determine to issue shares to employees under the ESP without requiring a contribution from those employees.

To the extent that the ESP does not meet the requirements of the relevant ASIC class orders in relation to employee share schemes and ASIC does not provide relief from those requirements, a prospectus relating to the ESP will be required for the offer of any shares under the ESP. As a consequence of proposed changes to the taxation rules relating to employee share schemes announced in the 2009 Federal Budget and subsequently, MyState Limited may suspend the ESP or propose changes to take into account the changed rules.

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Section 6: Profile of the MyState Limited Group continued

6.6 Executive Long Term Incentive Plan

The Executive Long Term Incentive Plan ( ELTIP ) has been established by the MyState Limited Board to encourage the executive management team to have a greater involvement in the achievement of the MyState Limited Group’s objectives. To achieve this aim, the ELTIP provides for the issue to the executive management team of MyState Limited and its subsidiaries fully paid ordinary shares in MyState Limited if performance criteria specified by the MyState Limited Board are satisfied in a set performance period.

Under the ELTIP an offer may be made to the eligible members of the executive management team every year as determined by the MyState Limited Board. The maximum value of the offer is determined as a percentage of the fixed annual remuneration of each member of the executive management team. The value of the offer will be converted into fully paid ordinary shares based upon the weighted average price of the MyState Limited’s shares over the twenty trading days prior to the offer date.

In order for the shares to vest in each eligible member of the executive management team certain performance criteria must be satisfied within a predetermined performance period. Both the performance criteria and the performance period will be set by the MyState Limited Board at its absolute discretion.

The ELTIP provides for an independent trustee to acquire and hold shares. The trustee will be funded by MyState Limited to acquire shares, as directed by the MyState Limited Board, either by way of purchase from other shareholders on market or issue by MyState Limited. At the completion of each performance period the trustee will allocate shares to each member of the executive management team in accordance with their entitlement under the ELTIP. The trustee will hold the shares which have been allocated on behalf of the executive team member. The executive team member cannot transfer or dispose of shares which have been allocated to them until the earlier of, the tenth anniversary of the original offer date of the grant, leaving the employment of the MyState Limited Group, the MyState Limited Board giving permission for a transfer or sale to occur, or a specified event occurring (such as a change in control of MyState Limited). All shares held by the trustee, whether allocated to an executive management team member or not, carry full entitlements to dividends and voting rights. During the period that allocated shares are held by the trustee, the executive management team member is entitled to receive the income arising from dividend payments on those shares and to have the trustee exercise the voting rights on those shares in accordance with their instructions.

To the extent that the ELTIP does not meet the requirements of the relevant ASIC class orders in relation to employee share schemes and ASIC does not provide relief from those requirements, a prospectus relating to the ELTIP may be required for the offer of any shares under the ELTIP. As a consequence of proposed changes to the taxation rules

relating to employee share schemes announced in the 2009 Federal Budget and subsequently, MyState Limited may suspend the ELTIP or propose changes to take into account the changed rules.

See Section 11.6 for details of the impact of the TPX Scheme and the Transaction on TPX’s current executive long term incentive plan.

6.7 Capital structure

(a) Shares on issue

The issued capital of MyState Limited will be 67,402,775 fully paid ordinary shares, immediately following implementation of the TPX Scheme and the Transaction.

TPX Scheme Shareholders and MSF Scheme Participants will respectively be entitled to the following proportions of the issued capital:

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----- Start of picture text -----

MyState Limited
Number %
MyState Limited Shares
available for TPX Scheme
Shareholders 21,905,902 32.5
MyState Limited Shares
available for MSF Scheme
Participants 45,496,873 67.5
Total Fully Paid Ordinary
Shares 67,402,775 100
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This table shows the capital structure immediately following implementation of the TPX Scheme and the Transaction. This is the position before any sales of MyState Limited Shares by MSF Scheme Participants under the Share Sale Facility.

The number of MyState Limited Shares available for MSF Scheme Participants includes approximately 500,000 shares to be vested in the trustee of the MSF Unverified Members Trust. The vested shares will be available for transfer to persons whose eligibility as an MSF Scheme Participant was not finalised at the MSF Record Date. Any person with disputed or unverified eligibility as a MSF Scheme Participant must lodge a claim by 30 April 2010 which will be determined by the MSF Board or its committee by 30 June 2010 on a ‘first come, first served’ basis. TPX understands the MSF Directors believe that the number of MyState Limited Shares allocated to the MSF Unverified Members Trust will be sufficient for approximately 1,300 successful claims, and do not reasonably expect the numbers of successful eligibility claims to exceed this number. Should there remain vested shares still held in trust and not distributed by 30 June 2010, the remaining MyState Limited Shares will be sold by the trustee and the proceeds paid to MyState Financial Foundation Limited, which provides annual grants to charities to educate and nurture the young people of Tasmania

TPX Explanatory Booklet

(b) Capital management

MyState Limited, the intended holding company of MSF which is an ADI will be required by APRA to ensure capital adequacy is maintained at both the MSF ADI subsidiary level (Level 1) and at the MyState Limited level (Level 2). Whilst the APRA minimum prudential capital ratio is 8%, all ADIs are required to have an Internal Capital Adequacy Assessment Process ( ICAAP ) to determine an appropriate capital adequacy ratio for the risks to which it is exposed. Currently, MSF’s ICAAP indicates that a minimum capital adequacy ratio of 12% is appropriate. MyState Limited anticipates that it will maintain this level of minimum capital adequacy.

In addition ADIs must also keep minimum levels of High Quality Liquid Assets ( HQLA ). The APRA minimum is 9% and MSF policy currently requires a margin above this to accommodate market volatility. The HQLA ratio is applicable only at the MSF subsidiary level, and will continue to be maintained at these levels to meet our prudential requirements.

6.8 Dividend policy

The Board of MyState Limited has established a policy of generally paying ordinary dividends each year within the range of 70% to 90% of net profit after tax.

This policy has been developed having regard to:

(i) the growth prospects for the MyState Limited Group and the continuing expectation of shareholders for a solid profit and dividend performance;
(ii) the need to safeguard the shareholders longer-term interests by adopting prudential targets that support the growth objectives of the business; and
(iii) the desirability for some flexibility in the payout ratio to take account of variability in profit from one year to the next.

The level of dividend paid year to year will depend on available profits and the circumstances facing MyState Limited at the time.

6.9 Corporate Governance

The MyState Limited Directors have adopted practices and procedures for the corporate governance of the MyState Limited Group. These establish the framework of how the MyState Limited Directors conduct the affairs of the MyState Limited Board on behalf of MyState Limited Shareholders.

The MyState Limited Board has established the following committees to assist it in carrying out its responsibilities and to consider certain issues and functions in detail:

Audit Committee
Business Risk and Compliance Committee
Corporate Governance and Nomination Committee

Audit Committee

Membership of the Audit Committee will comprise a minimum of three non-executive MyState Limited Directors appointed by the MyState Limited Board. Membership will be reviewed annually by the MyState Limited Board.

The role of the Audit Committee is to assist the MyState Limited Board to fulfil its responsibility to the shareholders and investment community by ensuring that MyState Limited’s accounting and reporting practices provide information of appropriate quality and integrity.

In particular, the Audit Committee will report to the MyState Limited Board and provide advice and recommendations in order to facilitate decision-making by the MyState Limited Board, in relation to the following areas:

(a) the quality and accuracy of published financial reports so they present a true and fair view of MyState Limited’s financial position;
(b) the quality and accuracy of published financial reports so they present a true and fair view of the financial position of the MyState Limited Group’s managed investment schemes and superannuation fund;
(c) adopting, maintaining and applying appropriate accounting policies and procedures;
(d) maintaining effective internal control and risk management systems;
(e) providing a formal forum for communication between the MyState Limited Board and senior management regarding financial and audit related issues;
(f) providing the external auditor with the opportunity to raise matters directly with the MyState Limited Board;
(g) assessing the external auditor’s independence by considering the relationships and services provided by the external auditors and others that may lead to an actual or perceived lack of independence;
(h) overseeing the external auditor rotation process;
(i) addressing issues arising from the external audit process;
(j) directing the internal audit function ensuring maximum value to MyState Limited;
(k) establishing and maintaining whistleblowing policies and procedures that enable employees of APRA regulated institutions to confidentially submit information on accounting, internal control, compliance, audit and other matters about which the employee may have concerns; and
(l) establishing processes for communicating these whistleblowing policies and procedures to employees and dealing with matters raised by those employees.
Human Resources and Remuneration Committee
Investment, Lending and Credit Committee

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Business Risk and Compliance Committee

Membership of the Business Risk and Compliance Committee will comprise a minimum of three MyState Limited Directors appointed by the MyState Limited Board.

The role of the Business Risk and Compliance Committee is to assist the MyState Limited Board in fulfilling its responsibilities in relation to:

(a) ensuring that the key business and financial risks and compliance requirements are identified both now and in the future; and
(b) the appropriate controls to effectively manage those risks and compliance requirements.

Corporate Governance and Nomination Committee

Membership of the Corporate Governance and Nomination Committee will comprise a minimum of three MyState Limited Directors appointed by the MyState Limited Board.

The role of the Corporate Governance and Nomination Committee is to strengthen the governance framework of the business through:

(a) ensuring the company has appropriate corporate governance policies and practices;
(b) an ongoing assessment of the composition and effectiveness of the Board as a whole;
(c) the establishment of a formal process for the selection and appointment of non-executive MyState Limited Directors; and
(d) issuing an annual corporate governance statement.

Human Resources and Remuneration Committee

Membership of the Human Resources and Remuneration Committee will comprise a minimum of three MyState Limited Directors appointed by the MyState Limited Board.

The role of the Human Resources and Remuneration Committee is to assist the MyState Limited Board in fulfilling its responsibilities in relation to Human Resource and Remuneration Policy. All such policy is to satisfy legal and regulatory requirements to protect the Company from liability, improve organisational effectiveness and assist in the attainment of business goals.

Investment, Lending and Credit Committee

Membership of the Investment, Lending and Credit Committee will comprise a minimum of three MyState Limited Directors appointed by the MyState Limited Board.

The role of the Investment, Lending and Credit Committee is to provide policy and operational oversight of the MSF Asset and Liability Committee and the TPX Investment and Mortgage Lending Committee and thereby assist the MyState Limited Board to fulfil its responsibility to the MyState Limited Shareholders and investment community in seeking to maximise returns from its investment and lending activities within acceptable levels of risk.

APRA requirements

In addition to MyState Limited’s other corporate governance policies, APRA requires MyState Limited as the non-operating holding company of MSF (as an ADI) to comply with the prudential obligations that apply directly to MSF. To this end, the MyState Limited Board has adopted a governance framework whereby the applicable Board policies of MSF apply to MyState Limited.

Other policies

The MyState Limited Directors have also established a strict delegation framework to regulate external communications and facilitate compliance with ASX Listing Rule disclosure requirements, as well as a securities trading policy regulating MyState Limited Directors and officers of MyState Limited dealing in MyState Limited Shares on the ASX.

ASX Corporate Governance Council

Under the Listing Rules, MyState Limited will be required to provide a statement in its annual report disclosing the extent to which it has followed in the relevant reporting period the Good Governance Principles and Recommendations published by the ASX Corporate Governance Council on 2 August 2007. The ASX Corporate Governance Council has recognised that the range in size and diversity of companies is significant and that it may not be commercially practicable for some companies to follow all of the recommendations. As at the date of this TPX Explanatory Booklet, MyState Limited complies with all of the recommendations.

48 TPX Explanatory Booklet

6.10 MyState Limited Board remuneration

The non-executive MyState Limited Directors on the MyState Limited Board will be subject to a total fee cap of $750,000 per annum, inclusive of statutory superannuation. This amount cannot be exceeded without the approval of the shareholders of MyState Limited. In addition, the following non-executive director remuneration caps (all inclusive of statutory superannuation) will apply:

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MyState Limited Director $65,000 per annum
Board Chairman Premium $60,000 per annum
Committee Chairman Premium $5,000 per annum
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MyState Limited Directors are also entitled to:

reasonable director information technology support; and
a professional development allowance of $7,500 per annum inclusive of GST, cumulative over the term of a MyState Limited Director’s appointment.

6.11 Prospects for the MyState Limited Group

No financial forecasts

In line with the decisions taken by the TPX Board not to provide detailed forecast financial information in relation to TPX (See Section 4.12) and by the MSF Board not to provide detailed forecast financial information in relation to MSF (See Section 5.7), the MyState Limited Board is not providing forecast financial information with respect to the MyState Limited Group. This is because the MyState Limited Board believes that it would be unduly speculative and not be sufficiently reliable to provide forecast financial information for the reasons outlined in Section 4.12 and Section 5.7.

The future performance of the MyState Limited Group is subject to the risk factors set out in Section 7 of this TPX Explanatory Booklet.

Synergies

The Management Integration Committee will be responsible for realising certain synergies. The MyState Limited Board believes the following cost synergies could, on an annualised basis, result in potential pre-tax cost synergies of $3.5 to $4.5 million per annum within a three year timeframe. The MyState Limited Board believes that the majority of the cost savings will be realised towards the later part of this 3 year period.

(a) Cost synergies

Administration expenses: there will be consolidation of duplicate internal management functions.
Corporate expenses: there will be a consolidation of corporate costs through the implementation of the shared services model.
Branch rationalisations: branches will continue to operate in all existing localities initially, with mergers over time where two or more outlets exist.
Staff and management overlap: rationalisation of staff at executive and management levels will occur as quickly as possible, and in order to develop and implement the shared services model.
Information technology integration: significant information technology cost and functionality benefits should be possible from the rationalisation of information technology platforms.

(b) Revenue synergies

The MyState Limited Board believes that there is potential for revenue synergies in the following areas to be realised as a result of the implementation of the MSF Scheme, the TPX Scheme and the Transaction. However, these revenue synergies are expected but not guaranteed.

Cross-selling: the merger of TPX and MSF should create numerous product cross-selling opportunities across TPX and MSF, allowing both companies to leverage off each other’s existing client base, without cannibalising existing service offerings.
Improved client services: existing product and service delivery should be enhanced through the development of integrated customer focused technologies, which are intended to deliver a streamlined customer interface, better serviceability of clients and improved identification of opportunities or new lines of business.
Information technology integration: revenue opportunities should develop through improved whole of customer understanding and segmentation capabilities.

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6.12 Pro forma financial information

This section contains pro forma financial information including the pro forma balance sheet for MyState Limited at 31 December 2008, assuming the TPX Scheme and the Transaction had been implemented at that date.

This should be read in conjunction with the risks described in Section 7 and other information contained within this TPX Explanatory Booklet. The information in this section is unaudited and has been presented in abbreviated form. It does not include all the disclosures usually provided in an annual report, prepared in accordance with the Corporations Act.

As such, the unaudited pro forma financial information in this section is for illustrative purposes only.

(a) Pro forma income statement

Pro forma income statement
	Consolidated December 2008 $	Consolidated June 2008 $	Consolidated December 2007 $
INCOME Total Interest Earned Total Interest Expense NET INTEREST MARGIN Non Interest Income Loan, Other and Management Fees Commissions Other Income Total Non-Interest Income Non Interest Expenses Marketing & Promotion Salaries and corporate costs Offce Occupancy & Associated Costs Bad Debts Written Off Doubtful Debts Other Expenditure Total Non-Interest Expenses OPERATING PROFIT BEFORE TAX Income Tax Expense OPERATING PROFIT AFTER TAX Non-recurring Item Adjustments OPERATING PROFIT AFTER TAX TPX (1) MSF (1) NORMALISED OPERATING PROFIT AFTER TAX	72,333,037 45,032,298 27,300,739 15,098,298 3,349,141 2,163,269 20,610,708 234,723 34,811,025 454,773 1,246,321 - 1,187,128 37,933,970 9,977,477 2,868,350 7,109,127 7,109,127 80,000 1,083,000 8,272,127	132,036,858 76,771,968 55,264,890 31,945,211 5,386,253 4,838,650 42,170,114 536,302 63,536,791 798,017 - 3,442,163 2,826,286 71,139,559 26,295,445 7,109,209 19,186,236 19,186,236 228,000 1,610,000 210,024,236	62,518,290 35,341,386 27,176,904 12,605,046 6,202,890 2,556,824 21,364,760 2,014,467 26,395,333 1,865,288 551,694 369,218 5,464,619 36,660,619 11,881,045 3,436,913 8,444,132 8,444,132 0 0 8,444,132

Non-recurring items adjustments – refer to Sections 4.10 and 5.5

TPX Explanatory Booklet

(b) Pro forma summary balance sheet

Pro forma summary balance sheet
	Consolidated December 2008 $	Consolidated June 2008 $	Consolidated December 2007 $
Net Loans Cash on Hand Special Service Providers - Current a/c Short Term Investments Prepayments Sundry Debtors Shares and SDDs in SSPs Goodwill & Intangibles Other Financial Assets Deferred Tax Asset Land & Buildings, equipment and l/hold improvements TOTAL ASSETS LIABILITIES Deposits At Call and fxed term ConQuest & RMBS Notes Total Deposits Creditors & Accruals and other liabilities Provision for Staff Entitlements Provision for Income tax Provision for Deferred Tax Liability TOTAL LIABILITIES NET ASSETS SHAREHOLDERS’ EQUITY Share Capital General & Capital Profts Reserves Retained profts/(Accumulated losses) TOTAL EQUITY	1,468,526,898 16,540,242 1,752,646 237,415,817 2,412,361 8,504,970 4,130,224 44,706,455 1,976,982 8,533,998 18,069,816 1,812,470,409 1,305,522,786 296,564,226 1,602,087,012 23,851,183 6,095,917 742,246 489,885 1,633,266,243 179,204,166 65,803,488 120,226,840 -6,826,162 179,204,166	1,482,013,037 16,667,441 2,311,668 184,323,964 1,167,606 9,401,782 3,378,961 47,328,767 2,435,392 4,798,647 15,665,895 1,769,503,160 1,217,602,763 323,445,023 1,541,047,786 43,116,770 3,921,746 1,576,059 324,486 1,589,986,847 179,516,313 65,591,187 119,865,403 -5,940,277 179,516,313	1,420,346,225 16,005,934 18,173,866 142,884,538 1,236,124 7,241,286 3,481,957 44,890,879 11,447,659 4,000,501 17,021,427 1,686,730,396 1,151,863,718 330,626,506 1,482,490,223 27,553,965 3,918,893 313,725 616,698 1,514,266,063 172,464,333 65,227,777 108,933,548 -1,696,992 172,464,333

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(c) Adjustments to the pro forma summary balance sheet

Under AASB 3 the value of the consideration for MyState Limited acquiring TPX and MSF is determined at the time the TPX and MSF Schemes and the Transaction becomes effective rather than at the date the terms of merger are agreed and announced to the market. Thus, the value of goodwill to be created from the merger reflects the market’s assessment of the value of the MyState Limited Group on the Implementation Date, rather than at the date the Merger Implementation Agreement was executed. The value of the MyState Limited Group, and thus the goodwill recognised under the accounting standard, at the time the TPX and MSF Schemes and the Transaction becomes effective may include, among other things:

share market investors’ views on the value of synergies available to the MyState Limited Group;
the impact of any company announcements post the announcement of the merger;
the performance of TPX and MSF post the announcement of the merger; and
general share market and economic conditions post the announcement of the merger.

The MyState Limited consolidated pro forma balance sheet has been prepared as if the following transactions, which are to take place on the Implementation Date, had occurred on 31 December 2008:

implied consideration being the issue of 21,905,902 MyState Limited Shares using the VWAP over 90 trading days for TPX Shares to 23 June 2009, of $2.83, representing the deemed consideration for acquiring TPX. This equates to total consideration in the form of equity instruments of $61,993,703. The actual cost of the acquisition will be based on the TPX share price at the Implementation Date; and
acquisition of TPX by MyState Limited at fair value resulting in goodwill and the capitalisation of merger costs as allowed under AASB 3 Business Combinations. The allocation of the acquisition cost of TPX has not been separated in the MyState Limited pro forma consolidated balance sheet between identifiable intangible assets and goodwill as a result of the reduction in goodwill and intangibles implied by the purchase consideration calculated above. This increase has been applied entirely to goodwill in the MyState Limited consolidated pro forma balance sheet. If the merger occurs, MyState Limited will conduct an assessment of the fair value of TPX’s net assets acquired at the Implementation Date. This assessment will separately determine the amounts of identifiable intangible assets and goodwill arising from the merger. The identifiable intangible assets will be classified as either finite life or indefinite life based

on their nature. The identifiable intangible assets and goodwill allocation in MSF will remain unchanged as a result of the merger in accordance with AASB 3.

The treatment of the adjustments in the MyState Limited pro forma balance sheet as at 31 December 2008 are based on preliminary analysis of relevant matters, and as such, may change in the future as more detailed analysis is performed. In particular, any deferred tax liability that may arise on the ultimate value of intangible assets has not been identified.

(d) Significant accounting policies

Set out below is a selection of the significant accounting policies applied to the MyState Limited Group in respect of the pro-forma income statement and pro forma summary balance sheet (assuming the MSF Scheme and the Transaction had been Implemented on 31 December 2008).

The accounting policies applicable to the MyState Limited Group and its accounts in the future will be adopted by the MyState Limited Directors and reflect relevant regulatory requirements from time to time.

Basis of consolidation

The merged entity comprises the new holding company, MyState Limited, MSF and its subsidiaries and TPX (together MyState Limited Group).

The pro forma MyState Limited Group financial information set out at (a) and (b) above incorporates the assets and liabilities and financial results of all subsidiaries.

Subsidiaries included are all those entities (including special purpose entities) over which MyState Limited has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights.

Subsidiaries are fully consolidated from the date on which control is transferred to MyState Limited. They are de-consolidated from the date that control ceases.

The purchase method of accounting was used to account for the acquisition of subsidiaries and businesses by MyState Limited in accordance with AASB 3 Business Combinations. In applying the purchase method it was determined that MSF, as the larger entity, be the deemed acquirer and as such, MSF is deemed to have acquired TPX. The cost of the acquisition is the fair value of the equity instruments issued to the former shareholders of TPX plus costs directly attributable to the acquisition.

All intercompany balances and transactions, including unrealised profits arising from intra MyState Limited Group transactions, have been eliminated in full. Unrealised losses are eliminated unless costs cannot be recovered.

TPX Explanatory Booklet

Accounts receivable

Accounts receivable represent accrued revenue for services rendered in the reporting period which will be received in subsequent reporting periods. They are recorded at the nominal amount due.

An estimate of doubtful debts is made when the collection of the amount is no longer probable. Bad debts are written off when identified.

Cash and cash equivalents

Cash in the balance sheet comprises cash on hand, cash at bank and short-term deposits with an original maturity of three months or less. Cash at bank and deposits at call are stated at nominal value.

Derecognition of financial instruments

The derecognition of a financial instrument takes place when a member of the MyState Limited Group no longer controls the contractual rights that comprise the financial instrument, which is normally the case when the instrument is sold, or all of the cash flows attributable to the instrument are passed through to an independent third party.

Derivative instruments and hedging

The MyState Limited Group is exposed to changes in interest rates. The only derivative instruments currently entered into are interest rate swaps which are used to mitigate the risks arising from the exposure to changes in interest rates. These derivative instruments are principally used for the risk management of existing financial liabilities.

All derivatives, including those used for balance sheet hedging purposes were recognised on the pro forma summary balance sheet and are disclosed as an asset where they have a positive fair value at the reporting date or as a liability where the fair value at the reporting date is negative.

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and subsequently remeasured to their fair value. Fair values are obtained from quoted market prices in active markets and valuation techniques where appropriate. Movements in the carrying amounts of derivatives were recognised in the pro forma income statement, unless the derivative met the requirements for cash-flow hedge accounting.

The relationship between the hedging instruments and hedged items are documented at the inception of the transaction, as well as the risk management and strategy for underlying various hedge transactions. Also documented is an assessment of whether the derivatives used in hedging transactions have been or will continue to be, highly effective in offsetting changes in the fair values or cash flows of hedged items. This assessment is carried out both at inception and on a monthly basis.

Accounting for hedges

Cash-flow hedges

For a derivative or financial instrument designated as hedging a cash-flow exposure arising from a recognised asset or liability (or a highly probable forecast transaction), the gain or loss on the derivative or financial instrument associated with the effective portion of the hedge is initially recognised in equity in the cash-flow hedge reserve and subsequently released to the income statement when the hedged item affects the income statement. The gain or loss relating to the ineffective portion of the hedge is recognised immediately in the income statement.

Derivatives that do not qualify for hedge accounting

Changes in the fair value of any derivative financial instrument that does not qualify for hedge accounting are recognised in the income statement in the period in which they arise.

Employee benefits

Liabilities for salaries, wages and annual leave are recognised in respect of the employee’s service up to the reporting date. Where settlement is expected to occur within twelve months of the reporting date, the liabilities are measured at their nominal amounts based on the remuneration rates which are expected to be paid when the liability is settled. Where settlement is expected to occur later than twelve months from reporting date, the liabilities are measured at the present value of payments which are expected to be paid when the liability is settled.

A liability for long service leave is recognised and measured at the present value of expected future payments to be made in respect of services provided up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service.

Goods and Services Tax

Revenues, expenses and assets are recognised net of the amount of goods and services tax ( GST ), except where the amount of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset, or as part of the expense.

Receivables and payables are stated with the amount of GST included. The net amount of GST payable to, or recoverable from, the taxation authority is included as a current liability or asset in the balance sheet.

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Goodwill

Goodwill on acquisition is initially measured at cost, being the excess of the cost of the business combination over the acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is not amortised. Goodwill is reviewed for impairment annually, or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. At the acquisition date, any goodwill acquired is allocated to each of the cashgenerating units expected to benefit from the combination’s synergies. Impairment is determined by assessing the recoverable amount of the cash-generating unit to which the goodwill relates. Where the recoverable amount of the cash-generating unit is less than the carrying amount an impairment loss is recognised.

Income Tax

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities based on the current period’s taxable income. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date.

Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognised for all taxable temporary differences:

except where the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect of taxable temporary differences associated with investments in subsidiaries and jointly controlled entities, except where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax assets and unused tax losses can be utilised:

except where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and,
in respect of deductible temporary differences associated with investments in subsidiaries and jointly controlled entities, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred income tax assets is reviewed at the reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

Where the amount that is deductible for income tax purposes in respect of share-based payments is or is expected to be different to the amount recognised as an expense, then the tax effected value of that difference is recognised directly in equity.

Investments

All investments are initially recognised at cost, being the fair value of the consideration given and including acquisition charges associated with the investment.

Non-derivative financial assets with fixed or determinable payments and fixed maturity are classified as held-tomaturity when the MyState Limited Group has the positive intention and ability to hold to maturity. Investments intended to be held for an undefined period are not included in this classification.

Other long-term investments that are intended to be heldto-maturity, such as bonds, are subsequently measured at amortised cost using the effective interest method.

Amortised cost is calculated by taking into account any discount or premium on acquisition, over the period to maturity.

54 TPX Explanatory Booklet

For investments carried at amortised cost, gains and losses are recognised in income when the investment is derecognised or impaired, as well as through the amortisation process.

Available for sale investments are those non-derivative financial assets that are designated as available for sale or are not classified as any of the three preceding categories. After initial recognition available for sale securities are measured at fair value with gains or losses being recognised as a separate component of equity until the investment is derecognised or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is recognised in the Income Statement.

Investments in a jointly controlled entity are carried at the lower of the equity-accounted amount and recoverable amount.

Interest recognition

Interest on loans is calculated daily on the outstanding balance and charged monthly in arrears. Future interest on long-term loans is not accounted for in advance.

Interest expense on deposits is calculated on the daily balance.

All borrowings are measured at the principal amount. Interest is charged as an expense as it accrues.

Loans and advances

Loans and advances are recognised at recoverable amount, after assessing required provisions for impairment.

Impairment of a loan is recognised when there is reasonable doubt that not all the principal and interest can be collected in accordance with the terms of the loan agreement. Impairment is assessed by specific identification in relation to individual loans and by estimation of expected losses in relation to loan portfolios where specific identification is impracticable.

The loan interest is calculated on the daily balance and is charged in arrears to a borrower’s account on the last day of each month.

All housing loans are secured by registered mortgages. The remaining loans are assessed on an individual basis.

Bad debts are written off when identified. If a provision for impairment has previously been recognised in relation to a loan, write-offs for bad debts are made against the provision. If no provision for impairment has previously been recognised, write-offs for bad debts are recognised as expenses in the Income Statement.

All loans and advances are reviewed and graded according to the anticipated level of credit risk. The classification adopted is described below:

Non-accrual loans, being loans classified as categories two, three and four under the APRA Prudential Standards APS 220 - Credit Quality, where statutory provisioning is required. Interest on these loans is not recognised as revenue. There is reasonable doubt about the ultimate collectability of principal and interest, and hence, provisions for impairment are recognised.
Restructured loans, consisting of all loans for which the original contractual terms have been revised to provide for concessions of interest, principal or repayment. Loans with revised terms are included in non-accrual loans when impairment provisions are required.
Other real estate and assets owned are assets acquired in full or partial settlement of loan or similar facility through enforcement of security arrangements.
Past due loans, consisting of loans classified as category one under APS 220 where payments of principal or interest are at least 90 days in arrears but the loans are well secured.

Payables

Liabilities for trade creditors and other amounts are carried at cost, which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the MyState Limited Group.

Property, plant and equipment

Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses.

Land and buildings are measured at fair value less accumulated depreciation.

Asset residual values, useful lives and amortisation methods are reviewed and adjusted if appropriate at each reporting date.

The carrying values of plant and equipment are reviewed for impairment at each reporting date, with recoverable amount being estimated when events or changes in circumstances indicate that the carrying value may be impaired.

The recoverable amount of plant and equipment is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessment of the time value of money and the risks specific to the asset.

For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cashgenerating unit to which the asset belongs.

Impairment exists when the carrying value is in excess of the estimated recoverable amount.

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Following initial recognition at cost, land and buildings are carried at revalued amount which is the fair value at the date of the revaluation less any subsequent accumulated depreciation on buildings and accumulated impairment losses.

Fair value is determined by reference to market-based evidence, which is the amount for which the assets could be exchanged between a knowledgeable willing buyer and a knowledgeable willing seller in an arm’s length transaction as at valuation date.

Any revaluation surplus is credited to the asset revaluation reserve included in the equity section of the balance sheet unless it reverses a revaluation decrease of the same asset class previously recognised in the income statement.

Any revaluation deficit is recognised in the income statement unless it directly offsets a previous surplus of the same asset class in the asset revaluation reserve.

With the exception of freehold land, property, plant and equipment is depreciated over the expected useful life of each asset using the diminishing value or prime cost basis as considered appropriate.

The depreciation useful lives used for each class of depreciable assets are:

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----- Start of picture text -----

Buildings 40 years
Leasehold improvements lease term
Plant and equipment between 2 and 20 years
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Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the MyState Limited Group and the revenue can be reliably measured.

Corpus administration fees are included as revenue progressively as the work is performed during the administration of the estates.

Management fee revenue is recognised as it accrues and is calculated in accordance with the Trustee Companies Act and the relevant funds’ constitutions.

Income commission is recognised as revenue as it accrues.

Revenue for other services is recognised as it accrues.

Dividends are recognised as revenue when control of the right to receive the dividend payment is obtained.

Rent revenue is recognised as it accrues.

Distributions from managed fund investments are recognised as revenue when the right to receive the distribution is obtained.

TPX Explanatory Booklet

Section 7: Risks

7.1 Overview

If the TPX Scheme and the Transaction are implemented, TPX will become a wholly owned subsidiary of MyState Limited and all TPX Scheme Shareholders will become MyState Limited Shareholders. This means that TPX Scheme Shareholders will continue to be exposed to the risks associated with having an interest in TPX’s business. If the TPX Scheme and the Transaction are implemented, there are also additional risks that TPX Scheme Shareholders will be exposed to as a result of holding MyState Limited Shares, transaction risks associated with the merger and general economic and investment risks.

The risks set out in this Section 7 should not be taken as exhaustive of the risks faced by the MyState Limited Group. Additional risks other than those specifically referred to may in the future materially adversely affect the business of the MyState Limited Group.

The TPX Board believe that the advantages of the TPX Scheme and the Transaction set out in Section 3.2 and elsewhere in this TPX Explanatory Booklet outweigh the potential risks associated with holding MyState Limited Shares.

7.2 Merger specific risks

The information below sets out the risks that relate specifically to the TPX Scheme and the Transaction.

(a) Court delays

There is a risk that the Court may not approve the TPX Scheme and the Transaction. There is also a risk that some or all of the aspects of the approvals required for the TPX Scheme and the Transaction to be implemented may be delayed or may not be granted.

(b) Listing of MyState Limited Shares

Although it is a condition to the TPX Scheme and the Transaction that the new MyState Limited Shares be granted official quotation on the financial market conducted by the ASX, if that condition is waived, there is a possibility that quotation of new MyState Limited Shares could be delayed. This could, in turn, cause delays in TPX Scheme Shareholders being able to trade their new MyState Limited Shares on the ASX.

(c) Issue of MyState Limited Shares

At the time of listing on the ASX, MyState Limited will issue a significant number of shares as consideration to both TPX Scheme Shareholders and MSF Scheme Participants. A risk in issuing such a large number of MyState Limited Shares is that the market price of MyState Limited may be affected if a significant number of MyState Limited Shareholders seek to sell their shares at commencement of trading or thereafter.

(d) Price of MyState Limited Shares

Once the TPX Scheme and the Transaction are implemented, the value of the MyState Limited Shares provided to TPX Scheme Shareholders will be affected by a number of factors which include the financial performance of MyState Limited once it commences trading. As MyState Limited is not currently listed on the ASX the price of these shares is yet to be determined by the market.

(e) Share market risks

The share price of TPX is not reflective of the value to MSF Members should the TPX Scheme and the Transaction be implemented although prior to implementation of the Transaction it may be considered, by some market participants, as a proxy for the value of the MyState Limited Group. However this is no assurance of the price at which MyState Limited shares will trade at on the ASX following the implementation of the TPX Scheme and the Transaction. The price of TPX Shares in the period up to the implementation of the TPX Scheme and the Transaction (including after any successful TPX Shareholder vote but prior to the delisting of TPX) will be subject to fluctuations which may reflect factors specific to TPX, its industry sector, the economy and equities markets as a whole.

(f)

Products and services

It is not anticipated that there will be any immediate effect on the range and quantity of products and services able to be offered to customers by TPX and MSF once MyState Limited is listed on the ASX. However, in the future the range of products and services may be altered.

(g) Integration risks

The Boards of both TPX and MSF expect that value can be added for Members and TPX Shareholders respectively, by the efficient and timely integration of the two companies. However, there are risks that any integration may take longer than expected or that efficiencies may be less than expected. These potential risks are outlined further in this Section. While the Management Integration Committee will be specifically focused on monitoring and managing integration, and extensive planning has and will continue to be devoted to avoiding and mitigating these integration risks, they cannot entirely be eliminated.

(h)

Synergies

While the synergies from the merger with MSF are expected to result in cost savings and revenue enhancement for the MyState Limited Group, the value and timing of these synergies is uncertain. Planning has commenced as to how the cost savings and revenue enhancements can be realised, however there is no guarantee that these measures will be successful.

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(i) Dependence on key personnel

MyState Limited’s performance is dependent on the talents and efforts of key senior executives and managers. MyState Limited’s continued ability to compete effectively depends on the capacity for it to retain and motivate existing employees as well as attract new employees. The loss of key executives or managers could cause material disruption to the activities and operations of TPX and MSF in the short to medium term. While TPX and MSF have historically enjoyed low turnover amongst their executives and managers, this does not provide a guarantee of their continued employment with MyState Limited.

At present MyState Limited has not appointed a Managing Director, although the Managing Director of TPX and Chief Executive of MSF remain in their roles. The MyState Limited Board intends to make a decision with respect to the appointment of a Managing Director of MyState Limited after the TPX Scheme Meeting but prior to the Implementation Date. The appointee will need to meet appropriate standards for “fit and proper” under APRA’s Australian Prudential Standard 520. Any delay in appointing a Managing Director may have an adverse impact on MyState Limited.

(j) Tasmanian Banking Services

As outlined in Section 4.4, TPX is currently making arrangements to exit from the TBS joint venture. If TPX does not finally agree the terms of its exit, it may have a material adverse impact on MyState Limited in both financial and operational terms.

(k) Effect of change in control on TPX contractual provisions

Some of the commercial agreements to which TPX is a party contain change of control clauses, which may enable the relevant counterparties to terminate the agreements upon implementation of the TPX Scheme and the Transaction. If a counterparty does terminate an agreement, TPX could lose the benefit of the agreement and additionally may not be able to obtain similarly favourable terms upon entry into replacement agreements (if at all). The TPX Directors believe that TPX will be in a position to either obtain the consent of the counterparties to all contracts which might be material to MSF’s ongoing operations or replace those contracts should they be terminated upon implementation of the TPX Scheme and the Transaction.

(l) Tax and stamp duty

Tax rules or their interpretation in relation to equity investments may change following implementation of the TPX Scheme and the Transaction. In particular, both the level and basis of taxation may change. In addition, an investment in MyState Limited Shares involves tax considerations which may differ for each TPX Scheme Shareholder. Each TPX Scheme Shareholder is encouraged to seek professional tax advice in connection with any investment in MyState Limited Shares.

(m) Capital needs of MSF

MyState Limited will become the sole provider of ordinary share capital for MSF. MSF may raise other capital, in accordance with APRA prudential standards, either from MyState Limited or from parties outside the MyState Limited Group.

(n) APRA prudential requirements

MSF is already prudentially supervised by APRA, as an ADI under the Banking Act. This supervision includes capital adequacy requirements which, prior to the Transaction being implemented, apply to the whole of MSF and its related entities (except as otherwise permitted by APRA). These requirements do not apply to TPX. If the Transaction is implemented, MSF will remain a regulated ADI for APRA purposes and subject to these capital adequacy requirements. However, other group entities in the MyState Limited Group (including TPX) will be subject to different regulatory requirements to the regulation applicable to MSF as an ADI.

MyState Limited will be regulated as an authorised Non Operating Holding Company ( NOHC ). Financial arrangements between MyState Limited as a NOHC and other members of the MyState Limited Group will generally be subject to arm’s length requirements.

TPX will continue as a licensed registrable superannuation entity ( RSE ) and be regulated by APRA under the requirements for an RSE.

The prudential supervisory arrangements that will apply, if the Transaction is implemented, to MyState Limited (as a NOHC), TPX (as an RSE) and MSF (as an ADI) are subject to changes in legislation and requirements imposed by APRA as regulator from time to time.

7.3 General business risks

The information below sets out general business risks, not specific to the TPX Scheme and the Transaction. They may affect the performance of the MyState Limited Group and the value of MyState Limited Shares. The factors raised below are not an exhaustive list, and there may be other matters which cannot now be foreseen that may, in the future, affect the performance of the MyState Limited Group and the value of the MyState Limited Shares.

(a) General share investment

There are various risks associated with investing in any form of business and with investing in listed entities generally. The value of MyState Limited Shares will depend upon general stock market and economic conditions as well as the specific performance of the MyState Limited Group. There is no guarantee of profitability, dividends, return of capital, or the price at which the MyState Limited Shares will trade on the ASX.

TPX Explanatory Booklet

(b) Impact of the global financial crisis

There have been significant and far-reaching changes to the global economic climate over the past twelve to eighteen months. These conditions cannot be controlled and further movements in the economic climate, which cannot be ruled out, will likely affect the financial performance of the MyState Limited Group in ways that cannot be precisely determined. Although TPX and MSF both monitor and manage business risks, the overall economic conditions will effect both companies in differing ways:

(i) the credit worthiness of borrowers and the quality of loan portfolios, the level of investment and economic output will have an effect on the performance of MSF and TPX; and
(ii) the level of funds under management and funds under advice will have an effect on the performance of TPX.

MSF is eligible for the current Australian Government guarantee scheme for large deposits and wholesale funding ( Guarantee Scheme ). The Guarantee Scheme, which formally commenced on 28 November 2008, provides eligible ADIs with guarantees for deposit balances totaling up to and including $1 million per customer. Separate arrangements apply for deposit balances over $1 million per customer per ADI. As an ADI, MSF’s eligibility for the Guarantee Scheme will continue if the TPX Scheme and the Transaction are implemented.

The Guarantee Scheme, has had a beneficial effect on ADIs, including MSF. Conversely it has had an adverse effect to varying degrees on other financial institutions not covered by the guarantee, including TPX. If the Guarantee Scheme is materially changed or ended, this may have an adverse impact on MSF.

There are also specific factors which will affect particular areas of the financial performance of the MyState Limited Group. Examples are interest rate changes which will affect the net interest margin achieved by the banking operations of the MyState Limited Group. This cannot be controlled by MyState Limited.

(c) Changes in investment markets

Changes in domestic and/or global investment market conditions could lead to a decline in the level of investment and customer interest in the MyState Limited Group financial products and services, adversely impacting the amount it earns in fees, commissions and charges.

(d)

Regulatory changes

The MyState Limited Group will be subject to substantial regulatory supervision under Federal and State laws.

APRA undertakes the prudential regulation of the banking operations of MSF. Other group entities in the MyState Limited Group will be subject to different regulatory requirements - MSF as an ADI. Following implementation of the TPX Scheme and the Transaction, within the MyState Limited Group, APRA will also undertake the prudential regulation of MyState Limited as an authorised Non Operating Holding Company ( NOHC ) and the regulation of TPX as a registrable superannuation entity ( RSE ).

ASIC already undertakes the regulation of financial services which MSF and TPX respectively provide, as each is the holder of an Australian financial services licence ( AFSL ). Following implementation of the TPX Scheme and the Transaction, that regulation of MSF and TPX will continue.

TPX is regulated under Tasmanian state law governing the registration and operations of trustee companies. Following implementation of the TPX Scheme and the Transaction, that regulation of TPX will continue. Additionally, there is a current proposal to create a national regulation regime for trustee companies (refer Section 4.16).

Changes in the regulatory regimes under which MyState Limited group entities will operate may have a significant effect on the financial performance and capital requirements of the MyState Limited Group and hence the share price of MyState Limited.

Changes in technology

(e)

The financial services industry is increasingly reliant upon technology in delivering financial services to customers in a cost-effective manner. MyState Limited’s ability to compete will depend on its ability to maintain an appropriate technology platform for the efficient delivery of its products and services.

(f) Competition in the financial services industry

The financial services sectors in which the MyState Limited Group will operate are highly competitive and subject to change. The MyState Limited Group will face significant competition from both traditional banks and non-bank financial institutions, who compete vigorously for customer investments and deposits, including the provision of lending and wealth management services.

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(g) Litigation

Legal proceedings arise from time to time in the course of the business of TPX and MSF. Neither TPX, MSF nor MyState Limited are currently a party to any material litigation and are not aware of any facts or circumstances that may give rise to any material litigation.

However, given the scope of the MyState Limited Group activities and the wide range of parties it deals with, the MyState Limited Group may be exposed to potential litigation from among others, customers, regulators, employees and business associates. To the extent that these risks are not covered by the MyState Limited Group’s insurance policies, litigation, and the costs of responding to the threats of legal action, could have a material adverse impact on the MyState Limited Group’s financial position, earnings and share price.

(h) Insurance

The MyState Limited Group will have insurance, including errors and omissions (professional indemnity) and directors’ and officers’ insurance, which it believes to be commensurate with industry standards, and adequate having regard to the business activities of the MyState Limited Group. However, there are risks that insurance coverage will be insufficient to meet a very large claim or a number of large claims, that the MyState Limited Group is unable to secure insurance to satisfactorily cover all anticipated risks, or that the cost of insurance will increase beyond anticipated levels.

Accordingly, the MyState Limited Group could be adversely impacted by increases in the cost of insurance premiums or an inability to access insurance coverage arising from circumstances that might or might not be related to the business of the MyState Limited Group.

(j) MyState Limited ownership

The information in this TPX Explanatory Booklet assumes that, after the implementation of the TPX Scheme and the Transaction, MyState Limited will be the holding company of MSF and TPX, with MyState Limited Shares listed on the ASX. If the TPX Scheme and the Transaction are implemented, any substantial acquisition of shares in MyState Limited will be subject to a number of Federal and State approvals. In particular, the Trustee Companies Act has been amended and will apply a 10% shareholder cap to MyState Limited if the TPX Scheme and the Transaction are implemented (refer also to Section 4.16 for a discussion of the proposed new federal legislation in relation to trustee companies). MyState Limited’s constitution also contains provision which permit the MyState Limited Board to take action against shareholders and associated persons they believe to be in breach of the Trustee Companies Act. Notwithstanding these ownership protections, the Trustee Companies Act can be amended or replaced, should the Tasmanian Parliament choose to do so, which may allow a third party to acquire all, or a controlling interest in, the issued shares in MyState Limited. Alternatively, if a third party is a company in which no person has an interest of more than 10% then the relevant Minister can approve the acquisition of the MyState Limited Shares. If a third party was able to gain a controlling interest in MyState Limited, the conduct of the business of MyState Limited would then be determined by that third party. A shareholding cap may adversely effect the price at which MyState Limited Shares trade on the ASX.

(i) Operational risks and control

Operational risk relates to the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events which impact on the MyState Limited Group’s operations. The MyState Limited Group will be exposed to operational risks present in TPX’s and MSF’s current businesses including risks arising from process error, fraud, system failure, failure of security and physical protection systems, and unit pricing errors. Operational risk has the potential to have a material adverse effect on the MyState Limited Group’s financial performance and position as well as reputation.

TPX Explanatory Booklet

Section 8: Taxation implications

8.1 Introduction

The purpose of this summary is to provide a general description of the Australian taxation implications for TPX Scheme Shareholders who will exchange their TPX Scheme Shares for new MyState Limited Shares if the TPX Scheme and the Transaction are implemented.

Readers of this summary should be aware that the levels and basis of taxation can change and that the tax return consequences for each TPX Scheme Shareholder may differ depending on their particular circumstances. Accordingly, each TPX Scheme Shareholder should take independent professional advice having regard to their own particular circumstances.

This summary is intended as a general guide only and is not an authoritative or complete statement of the potential taxation implications for each TPX Scheme Shareholder. In particular this summary is relevant for TPX Scheme Shareholders who hold shares on capital account and are Australian residents for taxation purposes. It does not address the tax considerations applicable to shareholders that may be subject to different tax treatment, such as banks, insurance companies, tax-exempt organisations, taxpayers holding shares on revenue account (e.g. dealers in securities), foreign residents and shareholders who change their tax residency while holding TPX Shares. Nor does this summary apply to trustees of, or participants in, employee share plans.

8.2 Australian Tax Implications from disposal of TPX Scheme Shares by TPX Scheme Shareholders

As a result of the TPX Scheme, TPX Scheme Shareholders will dispose of their TPX Scheme Shares to MyState Limited in exchange for the issue of new MyState Limited Shares. The disposal of TPX Scheme Shares to MyState Limited by TPX Scheme Shareholders will constitute a capital gains tax ( CGT ) event and prima facie TPX Scheme Shareholders will be subject to tax on any capital gain crystallised as a result of the disposal.

8.2.1 For TPX Scheme Shareholders who acquired their TPX Scheme Shares before 20 September 1985

(a) Disposal of TPX Scheme Shares

For TPX Scheme Shareholders who acquired their TPX Scheme Shares before 20 September 1985 the disposal of those shares to MyState Limited will not give rise to any capital gain or loss as these TPX Scheme Shares are pre CGT shares. However, the MyState Limited Shares acquired as a result of the TPX Scheme will be acquired on the Implementation Date and as such the future disposal of these shares will be subject to capital gains tax (that is, TPX Scheme Shareholders currently holding pre CGT shares will lose the pre CGT status of their TPX Scheme / MyState Limited Shares as a result of the TPX Scheme).

(b) Cost base of MyState Limited Shares acquired

For TPX Scheme Shareholders holding pre CGT TPX Scheme Shares, the cost base of the MyState Limited Shares acquired as a result of the TPX Scheme will be equal to the market value of the MyState Limited Shares at the end of the day which is the Implementation Date. The cost base of the MyState Limited Shares will be relevant when shareholders dispose of MyState Limited Shares in the future. Shareholders should seek their own independent professional advice to determine the market value of the MyState Limited Shares at the end of the day which is the Implementation Date.

(c) Other considerations

TPX Scheme Shareholders who are not natural persons and who hold TPX Scheme Shares acquired before 20 September 1985 should seek independent advice as to whether any changes in the underlying ownership of the entity which owns the TPX Scheme Shares has occurred since 19 September 1985 which may deem the assets of that entity (including the TPX Scheme Shares) to have been acquired for capital gains tax purposes on or after 20 September 1985.

The Australian tax implications for TPX Scheme Shareholders will depend on when TPX Scheme Shareholders acquired their TPX Scheme Shares and whether the disposal of the TPX Scheme Shares resulting from the TPX Scheme would otherwise result in a TPX Scheme Shareholder crystallising a capital gain or a capital loss.

However, in general terms, and subject to the qualifications outlined below, TPX Scheme Shareholders who would otherwise derive a capital gain on this transaction should be able to defer any such capital gain until such time as they dispose of the MyState Limited Shares acquired as a result of the TPX Scheme.

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8.2.2 For TPX Scheme Shareholders who acquired their TPX Scheme Shares on or after 20 September 1985

(a) For TPX Scheme Shareholders who would otherwise crystallise a capital gain on disposal of their TPX Scheme Shares to MyState Limited

The disposal of TPX Scheme Shares acquired (or deemed to be acquired) on or after 20 September 1985 to MyState Limited by TPX Scheme Shareholders will constitute a CGT event and prima facie TPX Scheme Shareholders will be subject to tax on any capital gain crystallised as a result of the disposal (the capital gain being calculated based on the market value of the MyState Limited Shares received by TPX Scheme Shareholders).

However, for TPX Scheme Shareholders who would otherwise crystallise a capital gain, scrip for scrip rollover relief should be available to defer the capital gain until such time as the MyState Limited Shares are disposed of by the TPX Scheme Shareholders.

Availability of scrip for scrip rollover

Scrip for scrip rollover should be available for TPX Scheme Shareholders who would otherwise make a capital gain in relation to the TPX Scheme on the basis that they will satisfy all of the following conditions:

These TPX Scheme Shareholders acquired their shares on or after 20 September 1985;
MyState Limited will acquire all of the issued shares of TPX as a result of the TPX Scheme;
The only consideration received by TPX Scheme Shareholders for the disposal of their TPX Scheme Shares will be the new shares issued by MyState Limited;
All TPX Scheme Shareholders are required to participate in the TPX Scheme should the TPX Scheme receive Court approval (and the TPX Scheme will not proceed without Court approval);
Each TPX Scheme Shareholder will participate in the TPX Scheme on identical terms to all other TPX Scheme Shareholders; and
No other rollover applies to TPX Scheme Shareholders in relation to the TPX Scheme.

Electing for scrip for scrip rollover to apply

In order to access the scrip for scrip rollover, TPX Scheme Shareholders must elect for the rollover to apply. This election is evidenced in the way TPX Shareholders prepare and lodge their income tax return for the relevant income year and would ordinarily occur via the exclusion of any capital gain on the disposal of their TPX Scheme Shares from their assessable income in their income tax return. TPX Scheme Shareholders should consult the income tax return instructions prepared by the Australian Tax Office for the relevant year of income in this regard.

Effect of scrip for scrip rollover applying

The effect of a TPX Scheme Shareholder being eligible and electing for rollover relief to apply is that:

Any capital gain on disposal of the TPX Scheme Shares to MyState Limited as a result of the TPX Scheme is disregarded;
The cost base of the MyState Limited shares acquired by TPX Scheme Shareholders as a result of the TPX Scheme will be equal to the existing cost base of the TPX Scheme Shares disposed of by each TPX Scheme Shareholder; and
For the purposes of the CGT discount, TPX Scheme Shareholders will be deemed to have acquired the new MyState Limited Shares issued as a result of the TPX Scheme at the time TPX Scheme Shareholders originally acquired their TPX Scheme Shares.
(b) For TPX Scheme Shareholders who do not elect for rollover relief to apply on disposal of their TPX Scheme Shares to MyState Limited

For TPX Scheme Shareholders who would otherwise crystallise a capital gain and who do not elect for rollover relief to apply, then a net capital gain will arise for those shareholders to the extent that the capital proceeds received by TPX Scheme Shareholders exceeds the cost base of the TPX Scheme Shares held by those TPX Scheme Shareholders.

Calculation of the net capital gain

The capital proceeds received by TPX Scheme Shareholders in relation to the disposal of their TPX Scheme Shares will be equal to the market value of the new MyState Limited Shares issued to each TPX Scheme Shareholder at the end of the day which is the Implementation Date. Shareholders should seek their own independent professional advice to determine the market value of the MyState Limited Shares at the end of the day which is the Implementation Date.

Refer to Section 8.3 for comments in relation to the cost base of the TPX Scheme Shares held by TPX Shareholders.

TPX Scheme Shareholders who are individuals or trusts (other than as trustee of a complying superannuation fund) may reduce any net capital gain (after offsetting both prior and current year capital losses) by 50% provided the actual or deemed holding period of their MyState Limited Shares acquired under the TPX Scheme is at least 12 months.

TPX Scheme Shareholders that are complying superannuation funds may reduce the net capital gain (after offsetting current and prior year capital losses) by 33[1] /3% provided the actual or deemed holding period of their MyState Limited Shares acquired under the TPX Scheme is at least 12 months. Any net capital gain remaining after the application of current and prior year capital losses and any CGT discount which is available for each TPX Scheme Shareholder, will be taxable at each TPX Scheme Shareholder’s marginal tax rate.

TPX Explanatory Booklet

Cost base of MyState Limited Shares acquired as a result of the TPX Scheme

The cost base of the new MyState Limited Shares issued to each TPX Scheme Shareholder as a result of the TPX Scheme will be equal to the market value of the new MyState Limited Shares issued to each TPX Scheme Shareholder at the end of the day which is the Implementation Date. TPX Scheme Shareholders should seek their own independent professional advice to determine the market value of the MyState Limited Shares at the end of the day which is the Implementation Date.

(c) For TPX Scheme Shareholders who would crystallise a capital loss on disposal of their TPX Scheme Shares to MyState Limited

For TPX Scheme Shareholders who would crystallise a capital loss on disposal of their TPX Scheme Shares to MyState Limited, rollover relief will not be available and these TPX Scheme Shareholders will be required to calculate the capital loss arising from the disposal of their TPX Scheme Shares to MyState Limited.

Calculation of the capital loss

A capital loss will arise to the extent that the capital proceeds received are less than the cost base of the TPX Scheme Shares.

The capital proceeds received by TPX Scheme Shareholders in relation to the disposal of their TPX Scheme Shares will be equal to the market value of the new MyState Limited Shares issued to each TPX Scheme Shareholder at the end of the day which is the Implementation Date. TPX Scheme Shareholders should seek their own independent professional advice to determine the market value of the MyState Limited Shares at the end of the day which is the Implementation Date.

Refer to Section 8.3 for comments in relation to the cost base of the TPX Scheme Shares held by TPX Scheme Shareholders.

Any capital loss crystallised by TPX Scheme Shareholders must be offset against any other capital gains derived by TPX Scheme Shareholders during the same financial year. Any capital loss remaining can be carried forward to be offset against future capital gains. The ability of some entities to utilise capital losses in future income years is restricted in some circumstances. Therefore, TPX Scheme Shareholders should seek independent advice before utilising any capital loss arising from the TPX Scheme in future income years.

Cost base of MyState Limited Shares acquired as a result of the TPX Scheme

8.3 Cost base of existing TPX Scheme Shares held by TPX Scheme Shareholders

In general terms, the cost base of the TPX Scheme Shares held by TPX Scheme Shareholders will be the amount paid to acquire the TPX Scheme Shares, plus certain incidental costs relating to the acquisition of the TPX Scheme Shares and ownership of the TPX Scheme Shares. Generally, the time of acquisition of the TPX Scheme Shares will be the time the contract to acquire the TPX Scheme Shares was made (the time of acquisition is relevant to determining whether the TPX Scheme Shares held are pre or post CGT shares and whether TPX Scheme Shareholders are entitled to the CGT discount).

There have, however, been a number of events impacting upon the TPX Scheme Shares currently on issue which may impact upon the time of acquisition or the cost base of the TPX Scheme Shares held by TPX Scheme Shareholders. Each of these events is considered in Appendix 2 of this TPX Explanatory Booklet.

8.4 Payment of dividends on new MyState Limited Shares

Australian tax residents

TPX Scheme Shareholders who receive the new MyState Limited Shares pursuant to the TPX Scheme may receive dividends in respect of those MyState Limited Shares in the future. Some or all of the dividends may be partially or fully franked.

A shareholder who receives dividends must include the amount of the dividend received in their assessable income in the year in which the dividend is paid. In addition, to the extent to which that dividend is franked, the shareholder must also include in their assessable income the “franking credits” associated with that dividend. Subject to meeting certain criteria, a tax offset should generally be available for franking credits included in assessable income.

For individuals, complying superannuation funds and certain charitable institutions a cash refund of excess tax offsets may be available to the extent the tax offset for franking credits exceeds the income tax otherwise payable.

A shareholder will be assessed on any franking credits and be entitled to a tax offset provided the shareholder satisfies the 45-day holding period rule. Broadly, this requires shareholders to hold the new MyState Limited Shares, without a materially diminished risk of loss or opportunities for gain, for at least 45 clear days. Alternatively, shareholders may be entitled to franking credits in relation to the new MyState Limited Shares if the amount of franking credits they receive in the relevant year of income from all sources is $5,000 or less.

Foreign Residents

Foreign residents holding new MyState Limited Shares should seek their own independent professional advice in relation to the Australian and foreign tax implications arising from the receipt of dividends from MyState Limited.

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8.5 Disposal of the new MyState Limited Shares

The disposal of the new MyState Limited Shares may have CGT implications in Australia.

Australian Residents

For Australian tax residents, a capital gain will arise to the extent to which the capital proceeds received in respect of the disposal of the new MyState Limited Shares exceeds the cost base for the new MyState Limited Shares.

The cost base of the new MyState Limited Shares for TPX Scheme Shareholders is set out above and will depend on whether scrip for scrip rollover is available and whether TPX Scheme Shareholders elect for scrip for scrip rollover relief to apply.

If the cost base of the new MyState Limited Shares exceeds the capital proceeds on disposal of the new MyState Limited Shares, a capital loss should arise. A capital loss will reduce capital gains for the relevant year of income and any unused capital losses may generally be able to be carried forward to offset against future capital gains.

8.6 No Goods and Services Tax (GST)

No Australian GST is payable in connection with the disposal of the TPX Scheme Shares to MyState Limited and the issue of new MyState Limited Shares or the disposal of new MyState Limited Shares, as both the disposal of TPX Scheme Shares to MyState Limited, the issue of new MyState Limited Shares and any future disposal of those shares are input taxed supplies.

8.7 No Stamp Duty

No Australian stamp duty will arise on the disposal of the TPX Scheme Shares to MyState Limited by TPX Scheme Shareholders or to the issue of new MyState Limited shares to TPX Scheme Shareholders. In addition, no Australian stamp duty should be payable on the disposal of the new MyState Limited Shares, providing that the new MyState Limited Shares are quoted on the ASX at the time of disposal.

TPX Scheme Shareholders who are individuals or trusts (other than as trustee of a complying superannuation fund) may reduce any net capital gain by 50% (after offsetting both prior and current year capital losses) provided the combined holding period of their TPX Scheme Shares and new MyState Limited Shares acquired under the TPX Scheme is at least 12 months.

TPX Scheme Shareholders that are complying superannuation funds may reduce the net capital gain by 33[1] /3% (after offsetting current and prior year capital losses) provided the combined holding period of their TPX Scheme Shares and new MyState Limited Shares acquired under the TPX Scheme is at least 12 months.

Foreign residents

TPX Scheme Shareholders who are not residents of Australia for income tax purposes should seek independent advice in respect of the Australian and foreign taxation implications of disposing of the new MyState Limited Shares.

TPX Explanatory Booklet

Section 9: Procedural aspects of the TPX Scheme and the Transaction

9.1 Introduction

This Section 9:

discusses the purpose and effect of the TPX Scheme and the Transaction;
provides a summary of the Merger Implementation Agreement (as amended) including:
the conditions and approvals required for the TPX Scheme and the Transaction to proceed; and
the rights of TPX and MSF to withdraw from the Transaction.

The full terms of the Merger Implementation Agreement, the TPX Scheme document and the Deed Poll are available by contacting the Company Secretary of TPX on 03 6348 1111 or otherwise on TPX’s website at tasmanianperpetual.com.au.

9.2 The TPX Scheme, MSF Scheme and the Transaction

(a) Purpose

The combined purpose of the TPX Scheme, MSF Scheme and the Transaction is to:

implement the terms of a proposed arrangement between TPX and TPX Scheme Shareholders to deliver 100% ownership and control of TPX to MyState Limited; and
implement the terms of a proposed arrangement between MSF and MSF Scheme Participants to deliver 100% ownership and control of MSF to MyState Limited,

in exchange for the issue of MyState Limited Shares by MyState Limited.

If both the TPX Scheme and the MSF Scheme become Effective, TPX and MSF will become wholly-owned subsidiaries of MyState Limited. TPX will be delisted from the ASX and MSF will be demutualised.

Eligible TPX Shareholders are entitled to vote on the resolutions to approve the TPX Scheme and the Transaction. Eligible Members are entitled to vote on the resolutions to approve the MSF Scheme and the Transaction.

The terms of the TPX Scheme are available upon request by contacting the Company Secretary of TPX on 03 6348 1111 between 9.00am and 5.00pm (Tasmanian time) from Monday to Friday or otherwise on TPX’s website at tasmanianperpetual.com.au.

(b) Legal effect

If the TPX Scheme becomes Effective, it will constitute a binding arrangement between TPX and each TPX Shareholder as at the TPX Record Date under which:

all TPX Shares held by each TPX Scheme Shareholder (including those who do not vote on the TPX Scheme and the Transaction and those who vote against it) will be transferred to MyState Limited, without the need for any action on the part of the TPX Scheme Shareholders; and
each TPX Scheme Shareholder (including those who do not vote on the TPX Scheme and the Transaction and those who vote against it) will receive the TPX Scheme Consideration as consideration in full for the transfer of all of their TPX Shares to MyState Limited.

Similarly, if the MSF Scheme becomes Effective, it will constitute a similar, binding arrangement between MSF and each MSF Member as at the MSF Record Date.

(c) Classes of members affected by the TPX Scheme

TPX has only one class of TPX Shares on issue – fully paid ordinary TPX Shares. There is only one class of TPX Shareholders who will be affected by the TPX Scheme, namely TPX Shareholders. Accordingly, all TPX Shareholders will vote on the TPX Scheme as a single class at the TPX Scheme Meeting.

9.3 TPX Scheme Meeting

On 29 June 2009, the Court ordered TPX to convene a meeting of TPX Shareholders to consider and vote on the TPX Scheme and the Transaction.

The notice convening the TPX Scheme Meeting is enclosed with this TPX Explanatory Booklet. The order of the Court convening the TPX Scheme Meeting is not and should not be treated as an endorsement of, or any other expression of opinion by the Court on, the TPX Scheme and the Transaction.

(a) Eligibility to vote at the TPX Scheme Meeting

Each person who is registered on the TPX Share Register as a TPX Shareholder as at the Voting Entitlement Time (7.00pm Sydney time on Monday, 17 August 2009) is entitled to attend and vote at the TPX Scheme Meeting, either in person, by proxy or attorney or, in the case of a corporate TPX Shareholder or proxy, by a corporate representative.

Section 2.2 of this TPX Explanatory Booklet provides a summary of how to vote at the TPX Scheme Meeting. A proxy form for the TPX Scheme Meeting is enclosed with this TPX Explanatory Booklet.

(b)

Voting majority required

The resolution to approve the TPX Scheme is subject to approval by the majorities required under section 411(4)(a) (ii) of the Corporations Act. The TPX Scheme Resolution must be approved by:

a majority in number (more than 50%) of TPX Shareholders present and voting at the TPX Scheme Meeting (whether in person, by proxy, attorney or, in the case of corporate TPX Shareholders or proxies, by corporate representative); and
TPX Shareholders whose TPX Shares in aggregate account for at least 75% of the votes cast on the resolution.

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9.4 The TPX Scheme and the Transaction - conditions and termination

(a) Conditions

Implementation of the TPX Scheme and the Transaction are subject to the satisfaction or waiver of the following conditions.
( Regulatory Approvals ) before 8.00am on the MSF Second Court Date or the TPX Second Court Date (whichever occurs first), all regulatory consents or approvals which are necessary or desirable to implement the Transaction including but not limiting ASIC, ASX, ACCC and APRA approvals (other than the approval of the MSF Scheme by the Court in accordance with section 411(4)(b) of the Corporations Act);
( No prohibitive orders or determinations ) before 8.00am on the MSF Second Court Date or the TPX Second Court Date (whichever occurs first), no prohibitive orders of determinations prevent the implementation of the Transaction;
( Approvals under applicable legislation ) before 8.00am on the MSF Second Court Date or the TPX Second Court Date (whichever occurs first), all necessary approvals are required in respect of the Transaction under the Banking Act 1959 (Cth), the Financial Sector (Shareholdings) Act 1998 (Cth) and the Financial Sector (Business Transfer and Group Restructure) Act 1999 (Cth) which MSF and TPX agree are necessary or desirable to implement the Transaction;
( Tasmanian State legislation ) before 8.00am on the MSF Second Court Date or the TPX Second Court Date (whichever occurs first) all necessary approvals as agreed between MSF and TPX (acting reasonably) are provided in respect of the Transaction under relevant Tasmanian State legislation including Ministerial approval under , the Trustee Companies Act for MyState Limited to hold all of the issued share capital of TPX;
( No Material Adverse Change ) before 8.00am on the MSF Second Court Date or the TPX Second Court Date (whichever occurs first), no MSF or TPX Material Adverse Change occurs, being a single event, or collection of events, occurrences or matters which has, or have in aggregate, resulted in or could reasonably be expected to result in, an adverse effect on the net assets of MSF of $6 million or TPX of $1.7 million or on the earnings or prospects of MSF in any financial year of $2.4 million or in the case of TPX, $1.05 million;
( No Prescribed Occurrences ) before 8.00am on the MSF Second Court Date or the TPX Second Court Date (whichever occurs first) no MSF or TPX Prescribed Occurrences occur (these occurrences include occurrences relating to the ongoing solvency of each company and not taking any action to distribute cash outside the company or reorganise the company’s capital structure);
( Representations and Warranties ) the representations and warranties given by MSF and TPX to each other are (and remain) true and correct at 8.00am on the MSF Second Court Date or the TPX Second Court Date (whichever occurs first) and all undertakings have been complied with;
( Inconsistent obligations ) before 8.00am on the MSF Second Court Date or the TPX Second Court Date (whichever occurs first) any material agreement binding MSF or TPX which contains obligations which are or may be materially adverse to the interests of the MyState Limited Group is novated, assigned, terminated or otherwise dealt with;
( Listing of MyState Limited Shares ) before 8.00am on the MSF Second Court Date or the TPX Second Court Date (whichever occurs first) the MyState Limited Shares to be issued to MSF Scheme Participants under the MSF Scheme and to the TPX Scheme Shareholders under the TPX Scheme have been approved for official quotation on the ASX;
( Approval of the Schemes ) before 8.00am on the MSF Second Court Date or the TPX Second Court Date (whichever occurs first), MSF Members approve the MSF Scheme and the Transaction in accordance the Corporations Act and the MSF Constitution, and TPX Shareholders approve the TPX Scheme and the Transaction in accordance with the Corporations Act, the Listing Rules and the TPX Constitution;
( Court approval of the Schemes ) the MSF Scheme and the TPX Scheme are approved by the Court in accordance with section 411(4)(b) of the Corporations Act;
( MyState Limited ) MyState Limited does not take any step other than as strictly required to implement the Transaction; and
( No litigation ) before 8.00am on the MSF Second Court Date or the TPX Second Court Date (whichever occurs first) any current, pending or threatened legal proceedings against MSF, TPX or MyState Limited, which may have a material impact on the MyState Limited Group after the Implementation Date, are resolved.

If any of the conditions are not satisfied or waived by the required date, or if either the TPX Scheme or the MSF Scheme is not Effective before the End Date (being 30 September 2009 or other date agreed between TPX, MSF and MyState Limited), MSF, TPX and MyState Limited have agreed that they will consult in good faith with a view to determining whether:

the Transaction, or a transaction which results in a merger of MSF and TPX, may proceed by way of alternative means or methods; or
to extend the date for satisfaction of the relevant condition or the End Date; or
to adjourn or change the date of an application to the Court.

TPX Explanatory Booklet

If MSF, TPX and MyState Limited are unable to reach such an agreement within five Business Days of becoming aware that the condition has not been satisfied or waived, either MSF or TPX may, provided that the relevant condition is for their benefit, terminate the Merger Implementation Agreement within a further five Business Days.

(b) Termination of Merger Implementation Agreement

The Merger Implementation Agreement may be terminated by TPX, MSF or MyState Limited at any time prior to 8.00am on the MSF Second Court Date or the TPX Second Court Date (whichever occurs first), by that party (the Terminating Party ) giving the other parties written notice if:

another party is in breach of a material term of the Merger Implementation Agreement, other than as a result of a breach by the Terminating Party, and that party has not rectified the breach within the required period after it is given notice of that breach;
the Court fails to make orders in accordance with the Corporations Act to convene the MSF Scheme Meeting or TPX Scheme Meeting, and either all appeals from such failure are unsuccessful or the parties determine, in accordance with the Merger Implementation Agreement, not to initiate an appeal;
a Court or other Government Agency has issued an order, decree or ruling or taken other action that permanently restrains or prohibits the MSF Scheme or TPX Scheme, or has refused to do any thing necessary to permit the Transaction, and such order, decree, ruling or other action has become final and cannot be appealed;
if the conditions (as summarised above in paragraph (a)) are not satisfied or waived (if capable of being waived) by the required date and MSF, TPX and MyState Limited are unable to reach agreement on an alternative course of action as summarised above; or
if the Effective Date does not occur on or before the End Date.

TPX may terminate the Merger Implementation Agreement at any time prior to 8.00am on the MSF Second Court Date or the TPX Second Court Date (whichever occurs first) if:

the MSF Board (or a majority of the MSF directors):
withdraw their recommendation that MSF Members vote in favour of the MSF Scheme and the Transaction; or
make a public statement indicating that they no longer support the MSF Scheme or that they support a MSF Third Party Proposal, or
the TPX Board (or a majority of the TPX Directors) withdraw or change their recommendation that TPX Shareholders vote in favour of the TPX Scheme and the Transaction for the reason that they have determined that a TPX Third Party Proposal is more favourable to TPX Shareholders than the TPX Scheme and the Transaction.

9.5

MSF may terminate the Merger Implementation Agreement at any time prior to 8.00am on the MSF Second Court Date or the TPX Second Court Date (whichever occurs first) if:

the TPX Board (or a majority of the TPX Directors):
withdraw their recommendation that TPX Shareholders vote in favour of the TPX Scheme and the Transaction; or
make a public statement indicating that they no longer support the TPX Scheme and the Transaction or that they support a TPX Third Party Proposal, or
the MSF Board (or a majority of the MSF directors) withdraw or change their recommendation that MSF Members vote in favour of the MSF Scheme for the reason that they have determined that a MSF Third Party Proposal is more favourable to MSF Members than the MSF Scheme and the Transaction.

Representations and warranties

In the Merger Implementation Agreement, each of MSF, TPX and MyState Limited represented and warranted certain matters, as at 10 October 2008, as at both the MSF Second Court Date and the TPX Second Court Date and also at any other date the representation or warranty is expressed to be given. Each of MSF, TPX and MyState Limited also provided indemnities against losses incurred in respect of the representations and warranties made.

MSF, TPX and MyState Limited agreed to promptly advise the others in writing if they become aware of any fact, matter or circumstance which constitutes or may constitute a breach of any of the representations or warranties given by them.

Each representation and warranty given is severable, survives the completion of the Transaction and was given with the intent that liability thereunder will not be confined to breaches which are discovered prior to the date of termination of the Merger Implementation Agreement.

Each indemnity is severable, is a continuing obligation, constitutes a separate and independent obligation of the party giving the indemnity from any other obligations of that party under the Merger Implementation Agreement and survives the termination of the Merger Implementation Agreement.

The representations and warranties made by TPX are as follows:

i t is a validly existing corporation registered under the laws of its place of incorporation;
the execution and delivery of the Merger Implementation Agreement by TPX has been properly authorised by all necessary corporate action and TPX has full corporate power and lawful authority to execute and deliver the Merger Implementation Agreement and to perform or cause to be performed its obligations under the Merger Implementation Agreement;

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the Merger Implementation Agreement constitutes legal, valid and binding obligations on TPX and the Merger Implementation Agreement does not result in a breach of or default under any agreement or any writ, order or injunction, rule or regulation to which TPX or any of its subsidiaries is a party or to which they are bound;
the TPX Information provided to MSF for inclusion in the MSF Information Booklet will be provided in good faith and on the understanding that each of the MSF Indemnified Parties will rely on that information for the purposes of preparing the MSF Information Booklet and proposing and implementing the MSF Scheme in accordance with the requirements of the Corporations Act;
the TPX Information provided to the MSF Independent Expert will be provided in good faith and on the understanding that the MSF Independent Expert will rely on that information for the purposes of preparing its report for inclusion in the MSF Information Booklet;
as at the date the MSF Information Booklet is despatched to MSF Members, the TPX Information and the Joint Information (to the extent that TPX has prepared, contributed to or assisted in preparing the Joint Information), in the form and context in which that information appears in the version of the MSF Information Booklet registered by ASIC under section 412(6) of the Corporations Act, will not be misleading or deceptive in any material respect (whether by omission or otherwise);
TPX will, as a continuing obligation, provide to MSF all such further or new information which may arise after the MSF Information Booklet has been despatched until the date of the MSF Scheme Meeting which is necessary to ensure that the TPX Information and the Joint Information (to the extent that MSF has prepared, contributed to or assisted in preparing the Joint Information), in the form and context in which that information appears in the version of the MSF Information Booklet registered by ASIC under section 412(6) of the Corporations Act, is not misleading or deceptive in any material respect (whether by omission or otherwise);
the TPX Explanatory Booklet (excluding the MSF Information but including the Joint Information that TPX has itself prepared or contributed) will be prepared in good faith and on the understanding that each of the MSF Indemnified Parties will rely on that information for the purposes of preparing the MSF Information and the Joint Information and implementing the MSF Scheme;
the TPX Information provided to the TPX Independent Expert will be provided in good faith and on the understanding that the TPX Independent Expert will rely on that information for the purposes of preparing its report for inclusion in the TPX Explanatory Booklet;
as at the date the TPX Explanatory Booklet is despatched to TPX Shareholders the TPX Explanatory Booklet (excluding the MSF Information but including any Joint Information that TPX has itself prepared or contributed) will not be misleading or deceptive in any material respect (whether by omission or otherwise);
all information TPX provided to MSF prior to the date of the Merger Implementation Agreement is, to the best of TPX’s knowledge, accurate in all material respects and not misleading in any material respect;
TPX is not in breach of its continuous disclosure obligations under the Listing Rules and is not relying on Listing Rule 3.1A to withhold any information from disclosure (other than information about the Transaction);
TPX’s financial statements for the year ended 30 June 2008 give a true and fair view of the financial position of it as at the relevant date and as at the date lodged with the ASX and ASIC;
no Insolvency Event has occurred in relation to TPX or any of its subsidiaries;
TPX’s issued securities as of the date of the Merger Implementation Agreement comprise ordinary shares only;
TPX has not issued any other securities or instruments which are still outstanding and may convert into TPX Shares;
to the best of TPX’s knowledge, there are no restrictions on MyState Limited issuing new MyState Limited Shares to MSF Scheme Participants and TPX Scheme Shareholders in accordance with the MSF Scheme and the TPX Scheme and there are no restrictions to those new MyState Limited Shares being quoted on the financial market conducted by ASX (initially on a deferred settlement basis and thereafter on an ordinary settlement basis), other than receiving permission from ASX to have those new MyState Limited Shares so quoted;
to the best of TPX’s knowledge, the new MyState Limited Shares to be issued to MSF Scheme Participants and TPX Scheme Shareholders will upon issue be fully paid, be free from encumbrances and will rank equally in all respects with all existing MyState Limited Shares.
The representations and warranties made by MSF are substantially the same as those made by TPX and outlined above.

The representations and warranties made by MyState Limited are as follows:

it was incorporated on 8 October 2008 and is registered in Tasmania;
it is a validly existing corporation registered under the laws of its place of incorporation;
since incorporation, it has taken no steps other than execution and delivery of the Merger Implementation Agreement or as otherwise strictly required by the Merger Implementation Agreement;

TPX Explanatory Booklet

the execution and delivery of the Merger Implementation Agreement by MyState Limited has been properly authorised by all necessary corporate action and MyState Limited has full corporate power and lawful authority to execute and deliver the Merger Implementation Agreement and to perform or cause to be performed its obligations under the Merger Implementation Agreement;
the Merger Implementation Agreement constitutes legal, valid and binding obligations on MyState Limited and the Merger Implementation Agreement does not result in a breach of or default under any agreement or any writ, order or injunction, rule or regulation to which MyState Limited or any of its subsidiaries is a party or to which they are bound;
there are no restrictions on MyState Limited issuing new MyState Limited Shares to MSF Scheme Participants and TPX Scheme Shareholders in accordance with the MSF Scheme and the TPX Scheme and there are no restrictions to those new MyState Limited Shares being quoted on the financial market conducted by ASX (initially on a deferred settlement basis and thereafter on an ordinary settlement basis), other than receiving permission from ASX to have those new MyState Limited Shares so quoted; and
the new MyState Limited Shares to be issued to MSF Scheme Participants and TPX Scheme Shareholders will upon issue be fully paid, be free from encumbrances and will rank equally in all respects with all existing MyState Limited Shares.

9.6 No talk and no shop arrangements

TPX entered into a confidentiality agreement with MSF on 3 June 2008 for the purposes of holding discussions in relation to the Transaction and negotiating the Merger Implementation Agreement.

Under the Merger Implementation Agreement, TPX and MSF have agreed that during the Exclusivity Period but subject to the exceptions below, they must not, and must ensure that their Representatives do not, except with the prior written consent of the other party:

directly or indirectly solicit, encourage, facilitate or invite any enquiries, discussions or proposals or communicate any intention to do any of these things in relation to, or which may reasonably be expected to lead to, a Third Party Proposal;
initiate or continue any discussions or negotiations in relation to, or which may reasonably be expected to lead to, a Third Party Proposal, whether any such discussions or negotiations are solicited or encouraged by MSF or TPX (as applicable) or otherwise; or
enter into any agreement, arrangement or understanding in relation to a Third Party Proposal or any agreement, arrangement or understanding which may reasonably be expected to lead to the completion of a Third Party Proposal.

However, TPX and MSF may undertake any action that would otherwise be prohibited by the above exclusivity arrangements to the extent that they restrict TPX or the TPX Board, or MSF or the MSF Board (as applicable) from taking or refusing to take any action with respect to a bona fide Third Party Proposal provided that the TPX or MSF Board (as applicable) has determined, in good faith and acting reasonably, after having obtained written advice from its advisors, that:

the Third Party Proposal is, or would be if proposed, a Superior Proposal to the TPX Scheme or MSF Scheme (as applicable) and the Transaction; and
failing to respond to the Third Party Proposal would be likely to constitute a breach of the relevant directors’ fiduciary or statutory obligations.

The TPX Board believes that by including clauses in the Merger Implementation Agreement which allow the TPX Board not to comply with the exclusivity restrictions if non-compliance is necessary to discharge their fiduciary duties, the TPX Board are not in breach of their fiduciary duties, merely by agreeing to the exclusivity restrictions.

Status of conditions and termination rights

9.7

TPX will make a statement regarding the status of the other conditions to the Merger Implementation Agreement at the commencement of the TPX Scheme Meeting.

9.8 Reimbursement Amount

As compensation for the costs incurred in relation to the Transaction, TPX and MSF have agreed to pay to the other $1.0 million (exclusive of GST) ( Reimbursement Amount ) in certain circumstances. The agreement to pay the Reimbursement Amount has regard to the guidelines issued by the Takeovers Panel. This amount equated to approximately 1% of TPX’s market value at the time of entry into the Merger Implementation Agreement and slightly less than 1% of MSF’s net assets as at 30 June 2008.

The Reimbursement Amount may be payable if any of the following circumstances arise and the Merger Implementation Agreement is terminated in accordance with its terms prior to the Implementation Date:

either party is in material breach of its obligations under the Merger Implementation Agreement;
a MSF Prescribed Occurrence or TPX Prescribed Occurrence (as applicable) occurs between 10 October 2008 (the date that the Merger Implementation Agreement was executed) and 8.00am on the MSF Second Court Date or the TPX Second Court Date (whichever occurs first);

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a MSF Material Adverse Change or TPX Material Adverse Change (as applicable) occurs, or is discovered, announced, disclosed or otherwise becomes known to TPX or MSF (as applicable) between 10 October 2008 (the date that the Merger Implementation Agreement was executed) and 8.00am on the MSF Second Court Date or the TPX Second Court Date (whichever occurs first) unless the Material Adverse Change was fairly disclosed to the other party prior to 10 October 2008 or if it occurred on or after 10 October 2008 it was beyond the control of the party;
at any time before the end of the MSF Scheme Meeting or the TPX Scheme Meeting (as applicable), a majority of the MSF or TPX Directors (as applicable) recommend a Third Party Proposal; or
at any time before the end of the MSF Scheme Meeting or the TPX Scheme Meeting (as applicable), a majority of the MSF or TPX Directors (as applicable) make a public statement changing or withdrawing their support or recommendation of the relevant Scheme or of the Transaction, except where the change or withdrawal of their support or recommendation is as a consequence of:
any event referred to above;
the MSF or TPX Independent Expert (as applicable) gives an opinion to the effect that the MSF Scheme or the TPX Scheme (as applicable) and the Transaction are not in the best interests of MSF Members or TPX Shareholders (as applicable);
in the case of TPX, it has terminated the Merger Implementation Agreement prior to 8.00am on the MSF Second Court Date or the TPX Second Court Date (whichever has occurred first) due to the MSF Board (or a majority of the MSF Directors) withdrawing their recommendation that MSF Members vote in favour of the MSF Scheme and the Transaction or making a public statement indicating that they no longer supported the MSF Scheme and the Transaction or that they support a MSF Third Party Proposal;
in the case of MSF, it has terminated the Merger Implementation Agreement prior to 8.00am on the MSF Second Court Date or the TPX Second Court Date (whichever has occurred first) due to the TPX Board (or a majority of the TPX Directors) withdrawing their recommendation that TPX Shareholders vote in favour of the TPX Scheme and the Transaction or making a public statement indicating that they no longer supported the TPX Scheme and the Transaction or that they support a TPX Third Party Proposal.

The Reimbursement Amount is not payable in certain circumstances, including:

not being payable by TPX if the Merger Implementation Agreement is terminated by TPX:
due to a material, un-rectified breach of MSF’s obligations under the Merger Implementation Agreement;
at any time prior to 8.00am on the MSF Second Court Date or the TPX Second Court Date (whichever occurs first) due to the TPX Board (or a majority of the TPX Directors) withdrawing or changing their recommendation due to the TPX Independent Expert giving an opinion to the effect that the TPX Scheme and the Transaction are not in the best interests of TPX Shareholders;
at any time prior to 8.00am on the MSF Second Court Date or the TPX Second Court Date (whichever occurs first) due to the MSF Board (or a majority of the MSF Directors) withdrawing their recommendation that MSF Members vote in favour of the MSF Scheme and the Transaction or making a public statement indicating that they no longer support the MSF Scheme and the Transaction or that they support a MSF Third Party Proposal,

unless at the time TPX terminates the Merger Implementation Agreement, MSF was entitled to terminate the Merger Implementation Agreement as outlined below,

not being payable by MSF if the Merger Implementation Agreement is terminated by MSF:
due to a material, un-rectified breach of TPX’s obligations under the Merger Implementation Agreement;
at any time prior to 8.00am on the MSF Second Court Date or the TPX Second Court Date (whichever occurs first) due to the MSF Board (or a majority of the MSF Directors) withdrawing or changing their recommendation due to the MSF Independent Expert giving an opinion to the effect that the MSF Scheme and the Transaction are not in the best interests of MSF Members;
at any time prior to 8.00am on the MSF Second Court Date or the TPX Second Court Date (whichever occurs first) due to the TPX Board (or a majority of the TPX Directors) withdrawing their recommendation that TPX Shareholders vote in favour of the TPX Scheme and the Transaction or making a public statement indicating that they no longer support the TPX Scheme and the Transaction or that they support a TPX Third Party Proposal,

TPX Explanatory Booklet

unless at the time MSF terminates the Merger Implementation Agreement, TPX was entitled to terminate the Merger Implementation Agreement as outlined above,

not being payable by either party if the Merger Implementation Agreement is terminated by either party:
if the court fails to make orders in accordance the Corporations Act to convene the MSF Scheme Meeting or TPX Scheme Meeting (as applicable) and either all appeals from such failure are unsuccessful or the parties determine, in accordance with the Merger Implementation Agreement, not to initiate an appeal;
if a court or other Government Agency has issued an order, decree or ruling or taken other action that permanently restrains or prohibits the TPX Scheme or MSF Scheme (as applicable), or has refused to do any thing necessary to permit the Transaction, and such order, decree, ruling or other action has become final and cannot be appealed;
the conditions (as summarised above in Section 9.4(a)) are not satisfied or waived (if capable of being waived) by the required date;
if the MSF Scheme or TPX Scheme has not become Effective on or before the End Date,

in each case only where the circumstances giving rise to the termination would not have entitled TPX or MSF to terminate for a material, un-rectified breach by the other.

For the avoidance of doubt, the Reimbursement Amount is not payable only because the TPX Shareholders or MSF Members fail to pass, by the requisite majorities, the resolution to approve the TPX Scheme and MSF Scheme respectively (in circumstances where a majority of the TPX Board or MSF Board (as applicable) have not made a public statement changing or withdrawing their suppose or recommendation of the Transaction).

9.9 Joint Steering Committee

In the course of negotiations concerning the structure of the merger the Joint Steering Committee was established to facilitate negotiations and to ensure that informed decisions could be made by the TPX Board and the MSF Board, in some instances through representatives on the Joint Steering Committee. Under the Merger Implementation Agreement, it was agreed to continue the function of the Joint Steering Committee in relation to all material matters relevant to implementing the Transaction. The Joint Steering Committee comprises:

four directors, including the Managing Director from TPX; and
three directors and the Chief Executive from MSF.

The Joint Steering Committee has met regularly since the announcement of the Transaction.

9.10 TPX scheme document

The TPX Scheme document contains the formal steps required for the implementation of the TPX Scheme and the Transaction if the required resolution is passed at the TPX Scheme Meeting and all other conditions, including the approval of the Court, are satisfied or waived in accordance with the Merger Implementation Agreement. It is available on TPX’s website at tasmanianperpetual.com.au .

Implementation of the Transaction

If the conditions of the TPX Scheme and the MSF Scheme are satisfied:

TPX must lodge with ASIC an office copy of the Court Order; and
MSF will, in accordance with the MSF Scheme, lodge with ASIC an office copy of the Court Order approving the MSF Scheme,

in accordance with section 411(10) of the Corporations Act promptly after, and in any event by 5.00pm on the first Business Day (or such other Business Day as TPX and MSF agree) after the Court has approved both the TPX Scheme and the MSF Scheme and on the same Business Day.

When the TPX Scheme becomes Effective

The TPX Scheme will take effect when an office copy of the Court Order is lodged with ASIC in accordance with section 411(10) of the Corporations Act.

If the TPX Scheme becomes Effective it will:

bind TPX and all TPX Scheme Shareholders, including those who did not attend the TPX Scheme Meeting, those who did not vote at that meeting and those who voted against the TPX Scheme at that meeting; and
override the TPX Constitution, to the extent of any inconsistency.

Implementation Steps

MSF will execute the consent of the MSF Scheme Shareholders for the purposes of section 246D(1) of the Corporations Act to the variation of rights attaching to their MSF Scheme Shares;
the Constitutional Amendment Resolution will take effect;
all of the TPX Scheme Shares together with all rights and entitlements attaching to those shares as at the Implementation Date will be transferred to MyState Limited without the need for any further act by any TPX Scheme Shareholder (other than acts performed by TPX or its Directors or officers as attorney and agent of the TPX Scheme Shareholders) by:
TPX delivering to MyState Limited the duly completed TPX Scheme Share Transfer duly executed by TPX as the attorney and agent of each TPX Scheme Shareholder as transferor;

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MyState Limited duly executing the TPX Scheme Share Transfer as transferee and delivering it to TPX for registration; and
TPX entering the name and address of MyState Limited into the TPX Share Register as the holder of all of the TPX Scheme Shares;
all of the shares in MSF will be transferred to MyState Limited in accordance with the MSF Scheme;
MyState Limited will issue new MyState Limited Shares to the former holders of the TPX Scheme Shares transferred to MyState Limited as provided above; and
MyState Limited will issue new MyState Limited Shares to the former holders of the MSF Scheme Shares transferred to MyState Limited as provided above.

TPX Scheme Consideration

On the Implementation Date after completion of each of the steps set out above, MyState Limited will issue to or register a transfer in favour of each TPX Scheme Shareholder one new MyState Limited Share for every one TPX Scheme Share held by that TPX Scheme Shareholder.

Suspension of TPX Shares and delisting of TPX

It is expected that the suspension of trading in TPX Shares on ASX will occur from the close of trading on 18 August 2009, the day before the TPX Shareholders’ Meeting. On a date after the Implementation Date to be determined by MyState Limited, TPX will apply to have TPX removed from the official list of ASX.

Foreign Scheme Shareholders

The new MyState Limited Shares to which a Foreign Scheme Shareholder would otherwise be entitled ( Sale Shares ) will be issued to a nominee agent approved by each of MSF, TPX and MyState Limited.

MyState Limited must procure that on, or as soon as reasonably practicable and in any event not more than 20 Business Days after, the Implementation Date, the nominee:

sells on the ASX all Sale Shares it holds; and
pays the net proceeds received, after deducting any applicable brokerage, stamp duty and other taxes and charges, to that Foreign Scheme Shareholder.

Payment by the nominee to a Foreign Scheme Shareholder satisfies in full the Foreign Scheme Shareholder’s right to TPX Scheme Consideration.

Each Foreign Scheme Shareholder appoints TPX as its agent to receive on its behalf any Financial Services Guide or other notices which may be given by the nominee agent appointed by MyState Limited to that Foreign Scheme Shareholder.

Covenants by TPX Scheme Shareholders

Each TPX Scheme Shareholder:

agrees to the transfer of all of their TPX Scheme Shares to MyState Limited in accordance with the TPX Scheme;
agrees to the modification or variation of the rights attaching to their TPX Scheme Shares arising from the TPX Scheme;
without the need for any further act, irrevocably appoints TPX and each of its Directors and officers, jointly and severally, as that TPX Scheme Shareholder’s attorney and agent for the purpose of executing any document or doing any other act necessary to give full effect to the TPX Scheme and the transactions contemplated by it, including without limitation, the execution and provision of a TPX Scheme Share Transfer; and
consents to TPX doing all things and executing all deeds, instruments, transfers and other documents as may be necessary or desirable to give full effect to the TPX Scheme and the transactions contemplated by it.

The TPX Scheme Shareholders who receive new MyState Limited Shares as TPX Scheme Consideration accept those new MyState Limited Shares and agree to:

become a shareholder of MyState Limited for the purposes of section 231 of the Corporations Act; and
be bound by the MyState Limited Constitution.

From the Effective Date until TPX registers MyState Limited as the holder of the TPX Scheme Shares in the TPX Share Register, each TPX Scheme Shareholder is deemed to have appointed TPX as its attorney and agent (and directed TPX in such capacity) to appoint the chairman of MyState Limited as its sole proxy and, where applicable, corporate representative to attend shareholder meetings of TPX, exercise the votes attaching to the TPX Scheme Shares of which they are the registered holder and sign any TPX Scheme Shareholders’ resolution, and no TPX Scheme Shareholder may attend or vote at any of those meetings or sign or vote on any resolutions (whether in person, by proxy or by corporate representative). TPX undertakes in favour of each TPX Scheme Shareholder that it will appoint the chairman of MyState Limited as the TPX Scheme Shareholder’s proxy or, where applicable, corporate representative.

9.11 TPX Deed Poll

Prior to the date of this TPX Explanatory Booklet, MyState Limited signed a deed poll in favour of TPX Scheme Shareholders under which it confirmed its contractual obligations under the Merger Implementation Agreement including the obligation to issue the MyState Limited Shares to TPX Scheme Shareholders if the TPX Scheme becomes Effective. The TPX Deed Poll operates to contractually require MyState Limited to take the necessary steps required of it in relation to the TPX Scheme and gives the TPX Scheme Shareholders direct contractual rights, through TPX, as their appointed agent and attorney, against MyState Limited. MyState Limited has signed a similar deed poll in relation to the MSF Scheme.

TPX Explanatory Booklet

Section 10: Implementation procedures

10.1 Introduction

If:

the TPX Scheme is approved by TPX Shareholders at the TPX Scheme Meeting; and
all other conditions to the TPX Scheme and the Transaction as described in Section 9.4 of this TPX Explanatory Booklet (other than Court approval of the TPX Scheme) have been satisfied or waived (as applicable),

the further general steps required to implement the TPX Scheme and the Transaction are as described in this Section 10.

The description of these general steps is based on the obligations of TPX, MSF and MyState Limited under the Merger Implementation Agreement. MyState Limited has also executed a Deed Poll in which it acknowledges and confirms, for the benefit of TPX Scheme Shareholders, its obligation to pay them the TPX Scheme Consideration. The full terms of the Merger Implementation Agreement and the Deed Poll are available upon request by contacting the Company Secretary of TPX on 03 6348 1111 between 9.00am and 5.00pm (Tasmanian time) from Monday to Friday or otherwise on TPX’s website at tasmanianperpetual.com.au.

10.2 Court approval of the TPX Scheme

TPX will apply to the Court for orders approving the TPX Scheme. It is expected that the Court hearing to approve the TPX Scheme will be held on or about 20 August 2009. The Court has a wide, overriding discretion whether or not to approve the TPX Scheme under section 411(4)(b) of the Corporations Act.

The Corporations Act and the Supreme Court (Corporations) Rules 2008 provide a procedure for TPX Shareholders to oppose the approval by the Court of the TPX Scheme. If you wish to oppose the approval of the TPX Scheme at the Second Court Hearing, you may do so by filing with the Court and serving on TPX a notice of appearance, in the prescribed form, together with any affidavit on which you wish to rely at the hearing. The notice of appearance and affidavit must be served on TPX at its address for service at least one day before the MSF Second Court Hearing Date. The date for the Second Court Hearing is currently scheduled to be 20 August 2009, though an earlier or later date may be sought. Any change to this date will be announced through the ASX.

10.3 Receipt of Court orders

If the Court makes orders approving the TPX Scheme, TPX will lodge a copy of those orders with ASIC under section 411(10) of the Corporations Act. As soon as the copies of the Court orders approving the TPX Scheme are lodged with ASIC, the TPX Scheme will become legally Effective. This is expected to occur on or about 21 August 2009.

Only TPX Shareholders who qualify as TPX Scheme Shareholders will be bound by and have the benefit of the TPX Scheme. Section 10.5 of this TPX Explanatory Booklet describes the principles in the TPX Scheme for determining the identity of TPX Scheme Shareholders.

If the TPX Scheme does not become Effective by the End Date, the TPX Scheme will lapse.

10.4 Implementation

(a) Notice to ASX

If the Court approves the TPX Scheme, TPX will notify the ASX of that approval on the day, or the date after, it is received (expected to be Thursday, 20 August 2009). It is expected that suspension of trading in TPX Shares on the ASX will have already occurred from the close of trading on 18 August 2009.

(b) TPX Record Date

The TPX Record Date is the date for determining entitlements to the TPX Scheme Consideration, being 7.00pm Sydney time on the fifth Business Day (or such as other Business Day as TPX and MyState Limited agree) following the date on which the TPX Scheme becomes Effective. The TPX Record Date is expected to be 7.00pm (Sydney time) on 28 August 2009.

(c) Transfer and registration of TPX Scheme Shares

On the Implementation Date, the TPX Scheme Shares held by TPX Scheme Shareholders, together with all rights and entitlements attaching to those TPX Shares as at the Implementation Date, will be transferred to MyState Limited, without the need for any further act by any TPX Scheme Shareholder, by TPX effecting on behalf of TPX Scheme Shareholders a valid transfer or transfers of the TPX Scheme Shares to MyState Limited (this may be by a master TPX Scheme Share Transfer).

(d) Issue of TPX Scheme Consideration

On the Implementation Date, MyState Limited will issue the MyState Limited Shares to TPX Scheme Shareholders.

If you are a Foreign Scheme Shareholder the MyState Limited Shares to which you would otherwise be entitled will be sold by a Nominee and the funds remitted to you. This means that while you will be paid a cash sum in respect of your MyState Limited Shares, you will not receive the ongoing benefit of the rights that attach to MyState Limited Shares.

(e) Delisting of TPX

At a time determined by MyState Limited following the implementation of the TPX Scheme and the Transaction, MyState Limited will cause TPX to apply to be removed from the official list of the ASX. It is currently expected that this will occur on the first Business Day after the Implementation Date, being 1 September 2009.

If the TPX Scheme becomes legally Effective, TPX and MyState Limited will become bound to implement the TPX Scheme in accordance with the terms of the TPX Scheme and the Deed Poll.

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10.5 Determination of TPX Scheme Shareholders

To establish the identity of the TPX Scheme Shareholders, dealings in TPX Shares will only be recognised if:

in the case of dealings of the type to be effected using CHESS, the transferee is registered in the TPX Share Register as the holder of the relevant TPX Shares on or before the TPX Record Date; and
in all other cases, registrable transmission applications or transfers in respect of those dealings are received on or before the TPX Record Date at the place where the TPX Share Register is kept.

TPX must register any non-CHESS registrable transmission applications or transfers of TPX Shares by, or as soon as practicable after, the TPX Record Date.

TPX will not accept for registration or recognise for any purpose any transmission application or transfer in respect of TPX Shares received after the TPX Record Date, other than a transfer to MyState Limited in accordance with the TPX Scheme.

For the purpose of determining entitlements to the TPX Scheme Consideration, TPX will maintain (or procure the maintenance of) the TPX Share Register in the manner set out above. The TPX Share Register in this form will solely determine entitlements to the TPX Scheme Consideration.

From the TPX Record Date, all holding statements for TPX Shares will cease to have effect as documents of title, and each entry on the TPX Share Register at the TPX Record Date will cease to have any effect other than as evidence of the entitlements of TPX Scheme Shareholders to their TPX Scheme Consideration entitlement.

10.6 Trading MyState Limited Shares on ASX

(a) Deferred settlement market

Trading on the ASX of MyState Limited Shares issued as TPX Scheme Consideration is expected to commence on a deferred settlement basis on or about Monday, 24 August. Deferred settlement trading will continue until the dispatch of confirmation of the issue of MyState Limited Shares, which is expected to occur on or about 4 September 2009. These dates are indicative only and are subject to change without notice.

TPX and MyState Limited disclaim all liability, whether in negligence or otherwise, to any TPX Scheme Shareholders who trades MyState Limited Shares before receiving their written confirmation of issue.

(b) CHESS and issuer sponsored holdings

Shortly following the issue of MyState Limited Shares to TPX Scheme Shareholders, TPX Scheme Shareholders will be sent a confirmation of holding which will provide details of their Holder Identification Number ( HIN ) in the case of a holding on the CHESS subregister or Securityholder Reference Number ( SRN ) in the case of a holding on the issuer-sponsored sub register. TPX Scheme Shareholders receiving MyState Limited Shares under the TPX Scheme will be required to quote their HIN or SRN, as applicable, in all dealings with a stockbroker or the MyState Limited share registry.

MyState Limited will not issue share certificates to its shareholders.

TPX Scheme Shareholders will be sent subsequent holding statements at the end of any month in which there has been a change to their holding on the MyState Limited share register and as otherwise required under the Listing Rules.

10.7 Standing instructions held on TPX Shareholding

Under Australian tax law, a company is entitled to ask its shareholders to disclose their tax file numbers ( TFNs ) to the company. A shareholder can choose to disclose or choose not disclose their TFN.

As part of the TPX Scheme, TPX (or the TPX share registry) intends to transfer to MyState Limited (or the MyState Limited share registry those TFNs which have been provided to TPX by TPX Scheme Shareholders.

Under the TPX Scheme, the TPX Scheme Shareholders consent to TPX doing all things necessary, expedient or incidental to the implementation of the TPX Scheme. TPX (or the TPX share registry) intends to transfer all standing instructions and other relevant information in the register for payment by direct credit or otherwise, of dividends and other cash amounts to MyState Limited (or the MyState Limited share registry) on behalf of the TPX Scheme Shareholders in respect of their tax affairs so that MyState Limited will not otherwise be required to collect this information again. Should you wish to modify your current arrangements before the Implementation Date, please make use of the Computershare Investor Centre located at www.au.computershare.com and select the ‘Investor Centre’ page. You will need to have your TPX HIN or SRN to gain access to your information from this secure internet site.

If you do not wish your TFN and other standing instructions to be disclosed and collected in accordance with the process discussed above, you should notify TPX (or the TPX share registry) in writing before the TPX Record Date.

TPX Explanatory Booklet

Section 11: Additional information

11.1 Introduction

This Section 11 sets out the statutory information required by section 412(1)(a) of the Corporations Act and Part 3 of Schedule 8 to the Corporations Regulations 2001 (Cth) to be included in the TPX Explanatory Booklet, but only to the extent that this information is not otherwise disclosed in other Sections. This Section also includes additional information that your Directors consider material to a decision on how to vote on the resolution to be considered at the TPX Scheme Meeting.

In this Section, the terms ‘associate’, ‘marketable securities’, ‘related body corporate’ and ‘subsidiary’ have the meanings given to them in the Corporations Act. The term ‘executive officer’ is assumed to mean ‘senior manager’ as defined in the Corporations Act including the company secretary.

11.2 Rights attaching to MyState Limited Shares and Summary of MyState Limited Constitution

The rights attaching to the MyState Limited Shares are set out in the MyState Limited Constitution and arise from a combination of the MyState Limited Constitution, legislation, general law and while MyState Limited is listed on ASX, the Listing Rules and ASTC Settlement Rules. A summary of the rights attaching to the MyState Limited Shares and certain provisions of the MyState Limited Constitution are set out below. This summary is not intended to be exhaustive and is qualified by the full terms of the Constitution, a copy of which is available upon request by contacting the Company Secretary of MyState Limited on 03 6348 1111 between 9.00am and 5.00pm from Monday to Friday or otherwise on TPX’s website at tasmanianperpetual.com.au

General

The MyState Limited Shares will on implementation of the Transaction be the only securities on issue in the capital of MyState Limited. All MyState Limited Shares are of the same class and rank equally in all respects. The MyState Limited Board is empowered to issue shares of other classes with such rights as the MyState Limited Directors determine.

Notices

Each MyState Limited Shareholder is entitled to receive notice of and to attend and vote at general meetings of MyState Limited and to receive all notices, accounts and other documents required to be sent to MyState Limited Shareholders under the MyState Limited Constitution, the Corporations Act or the Listing Rules. The quorum required is 25 members present in person or by proxy, attorney or representative.

General meetings and voting

At a general meeting of MyState Limited, each MyState Limited Shareholder present in person or by proxy, representative or attorney has one vote on a show of hands and one vote for each fully paid MyState Limited Share held on a poll (adjusted for any partly paid shares on issue).

Voting is by a show of hands unless a poll is demanded and not withdrawn. A poll may be demanded by at least five MyState Limited Shareholders entitled to vote on the resolution, MyState Limited Shareholders with at least five per cent of the votes that may be cast on the resolution of the poll, or the chairperson.

The chairperson does not have a casting vote on a show of hands or on a poll.

Dividends

The MyState Limited Board may, from time to time, resolve to distribute the profits of MyState Limited by way of a dividend. A dividend declared by the MyState Limited Board will be payable in respect of each MyState Limited Share, subject to the rights attaching to any MyState Limited Shares with special dividend rights.

Shareholding limitations and enforcement of shareholding limitation

No MyState Limited Shareholders may, together with their associates, hold more than 10% of the MyState Limited Shares. This reflects the requirements of the Trustee Companies Act under which MyState Limited is a holding company of an approved trustee company. MyState Limited Shareholders holding MyState Limited Shares in excess of the shareholding limitations may be required to dispose of their MyState Limited Shares held in excess of the shareholding limitations and otherwise have their rights to vote at general meetings or to receive distributions or dividends suspended in relation to the MyState Limited Shares held in excess of the shareholding limitations.

Transfer of MyState Limited Shares

Subject to the Constitution and the Listing Rules, a transfer of MyState Limited Shares may be effected in any manner compliant with the ASTC Settlement Rules, including by a written instrument approved by the MyState Limited Directors. The MyState Limited Directors may refuse to register a transfer of MyState Limited Shares in circumstances permitted by the Listing Rules, ASX or the MyState Limited Constitution.

Non-marketable parcels

Subject to the MyState Limited Constitution, the Corporations Act, the Listing Rules and the ASTC Settlement Rules, MyState Limited may sell the MyState Limited Shares held by a MyState Limited Shareholder where the number of MyState Limited Shares held is less than a marketable parcel.

Share buy-backs

MyState Limited may buy back MyState Limited Shares at times and on terms determined from time to time by the MyState Limited Directors.

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Proportional takeover provisions

The Constitution contains provisions requiring the approval of MyState Limited Shareholders to any proportional takeover scheme. A transfer resulting from acceptance of an offer made under a proportional takeover bid must not be registered unless and until approved by an ordinary resolution. This provision will lapse in three years unless renewed by a special resolution of MyState Limited Shareholders.

Winding up

Subject to any rights that may be attached to MyState Limited securities issued with rights different to the MyState Limited Shares, if MyState Limited is wound up, the liquidator may, with the sanction of a special resolution, divide the whole or any part of the property of MyState Limited amongst the MyState Limited Shareholders.

For this purpose, the liquidator may determine a value considered fair for any property and may decide how the division shall be carried out as between MyState Limited Shareholders or different classes of MyState Limited Shareholders.

MyState Limited Directors – appointment and removal

The minimum number of MyState Limited Directors is five and the maximum number of MyState Limited Directors is 12. MyState Limited Directors are elected at the annual general meeting.

The MyState Limited Constitution provides that:

at the 2009 annual general meeting, two non-executive MyState Limited Directors nominated by TPX must retire and subject to the MyState Limited Constitution, the Corporations Act and the Listing Rules, will be eligible for re-election;
at the 2010 annual general meeting, two non-executive MyState Limited Directors nominated by TPX must retire and subject to the MyState Limited Constitution, the Corporations Act and the Listing Rules, one will be eligible for re-election;
at the 2010 annual general meeting, two non-executive MyState Limited Directors nominated by MSF must retire and subject to the MyState Limited Constitution, the Corporations Act and the Listing Rules, one will be eligible for re-election; and
at the 2011 annual general meeting, one non-executive MyState Limited Director nominated by TPX and three MyState Limited Directors nominated by MSF must retire and subject to the MyState Limited Constitution, the Corporations Act and the Listing Rules, all will be eligible for re-election.

Subject to the requirements of the Listing Rules, the retirement requirements set out above may be varied if approved by:

no less than 80% of the MyState Limited Directors; and
the MyState Limited Directors whose appointment will be directly affected by the proposed variation,

Subject to the requirements of the Listing Rules, following the 2011 annual general meeting, one-third of the MyState Limited Directors (those who have been longest in office since their last election) must retire at each annual general meeting. A retiring MyState Limited Director is eligible for re-election.

The MyState Limited Board may appoint a person to fill a casual vacancy or in addition to the existing MyState Limited Directors. This person will hold office until the next annual general meeting of MyState Limited, at which time they must be elected.

MyState Limited Directors - voting

Questions arising at a MyState Limited Board meeting will be decided on a majority vote of the MyState Limited Directors present and entitled to vote on the matter. The chairperson does not have a casting vote in respect of a tied vote.

MyState Limited Directors – remuneration

Subject to the Listing Rules, the MyState Limited Directors (other than the executive MyState Limited Directors) shall be paid for their services the maximum aggregate sum approved from time to time by MyState Limited in general meeting.

The remuneration of an executive MyState Limited Director is fixed by the MyState Limited Board.

MyState Limited will pay all reasonable expenses of all MyState Limited Directors in attending MyState Limited Board meetings and carrying out their duties.

MyState Limited Directors’ and officers’ indemnity

MyState Limited may, to the extent permitted by law, indemnify each of its current or former officers against any liability or any legal costs incurred because of the office the hold with MyState Limited.

MyState Limited’s right to recover certain payments

MyState Limited has certain rights including an entitlement to recover payments from a MyState Limited Shareholder and its personal representative and assigns, including by way of lien or set-off, in certain limited circumstances, including in relation to amounts unpaid on partly paid shares in MyState Limited and in relation to dividends or distributions paid to persons holding shares in breach of the shareholding limitations.

Alteration of Constitution

The MyState Limited Constitution may only be amended by a special resolution passed by at least three quarters of the votes cast by MyState Limited Shareholders present and voting at a general meeting. If the Corporations Legislation Amendment (Financial Services Modernisation) Bill 2009 (Cth) is enacted (see Section 4.16 for a discussion of this proposed legislation), the MyState Limited Board will consider whether it is appropriate to recommend to MyState Limited Shareholders any changes to the MyState Limited Constitution in order to reflect the requirements of the new legislation, including in relation to shareholding limitations.

provided that there must be no more than eight of the initial ten MyState Limited Directors at the close of the 2011 annual general meeting of the Company.

TPX Explanatory Booklet

11.3 Substantial holders

Based on data from TPX’s share registry and notices filed with TPX and the ASX under Chapter 6C of the Corporations Act, the persons who have a substantial holding (as that term is defined in section 9 of the Corporations Act) in TPX as at 24 June 2009 were as follows:

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% of total number
Number of TPX of issued TPX
Substantial holder Shares held Shares held
Trust Company Fiduciary Services Limited 2,093,344 9.57
Select Managed Funds Limited (lodged a substantial shareholder notice on 1,225,960 5.60
19/12/08 http://www.asx.com.au/asxpdf/20081219/pdf/31f98yx80vh7kb.pdf )
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11.4 Directors

The TPX Board consists of the following TPX Directors:

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Director’s name Position
Michael Vertigan AC Chairman, Non-executive Director
Mark Scanlon Executive TPX Director
Damian Bugg AM Non-executive TPX Director
Nicholas d’Antoine Non-executive TPX Director
Clyde Eastaugh Non-executive TPX Director
Miles Hampton Non-executive TPX Director
Ian Mansbridge Non-executive TPX Director
Sarah Merridew Non-executive TPX Director
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11.5 Marketable securities of TPX held by or on behalf of TPX Directors

As at 24 June 2009, the number of TPX Shares held by or on behalf of each of the TPX Directors is as follows:

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TPX Director Number of TPX Shares held by or
on behalf of the TPX Director
Michael Vertigan AC 14,000
Mark Scanlon 73,329
Damian Bugg AM 0
Nicholas d'Antoine 54,940
Clyde Eastaugh 6,800
Miles Hampton 15,000
Ian Mansbridge 170,000
Sarah Merridew 9,328
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11.6 Existing TPX executive long term incentive plan

Implementation of the TPX Scheme and the Transaction will trigger certain rights under TPX’s existing executive long term incentive plan. Rights of certain TPX executives to TPX Shares which currently have not vested and may not otherwise vest, may vest and the relevant executives may, accordingly, become entitled to those TPX Shares as follows:

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Number of Number of
Offer Year Shares Issued Shares Offered
2006 Offer 17,698
2006 Offer 23,229
2007 Offer 8,923
2007 Offer 23,458
2008 Offer 38,779
Total 26,621 85,466
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11.7 Marketable securities of MSF held by or on behalf of TPX Directors

As at the date of this TPX Explanatory Booklet, Damien Bugg has an indirect interest in a MSF Member Share, through his wife’s holding. In addition, Mrs Bugg has a substantial deposit account balance with MSF. No other TPX Directors hold a MSF Member Share (either directly or indirectly).

11.8 Relevant interests in marketable securities of MyState Limited

Each of the TPX Directors who are MyState Limited Directors will, prior to the Implementation Date, be the registered holder of ten shares in MyState Limited. Those MyState Limited Shares form part of the TPX Scheme Consideration and will be transferred to TPX Scheme Shareholders under the TPX Scheme.

Other than those MyState Limited Shares and MyState Limited Shares forming part of the TPX Scheme Consideration to be received by the TPX Directors as TPX Scheme Shareholders, no TPX Director nor any of the TPX Directors’ associates has any relevant interest in, or in any marketable security issued by, MyState Limited.

11.9 TPX Directors’ interests in any contracts with MyState Limited

No TPX Director nor any of the TPX Directors’ associates has entered into, or otherwise has any interest in, any contract with MyState Limited or any of its respective associates.

11.10 TPX Directors’ interests in agreements connected with or conditional on the TPX Scheme

The TPX Directors appointed to the MyState Limited Board, as set out in Section 6.3, will be entitled to receive directors’ remuneration as summarised in Section 6.10. Other than this or as set out below, no TPX Director has any other interest in any agreement or arrangement connected with or conditional on the outcome of the TPX Scheme and the Transaction.

Mark Scanlon, the Managing Director of TPX, has been offered an incentive arrangement in connection with the TPX Scheme as follows:

(a) ( performance ) a payment of up to 20% of his base annual remuneration for his contribution to the Transaction process and its outcome to be determined by the TPX Directors (excluding Mr Scanlon) based on an agreed set of criteria; and
(b) ( retention ) a payment of 50% of base remuneration if Mr Scanlon remains employed with TPX or its successors (including MyState Limited) until 31 December 2009 or such earlier date as Mr Scanlon agrees with TPX. This payment applies only if Mr Scanlon is not appointed as Managing Director of MyState Limited.

11.11 Retirement benefits

Other than as outlined in Section 11.10, no payment or other benefit is proposed to be made or given in connection with the TPX Scheme or the Transaction to any TPX Director, secretary or executive officer of TPX, or of any related body corporate of TPX, as compensation for loss of, or as consideration for, or in connection with, his or her retirement from office in TPX or in a related body corporate.

11.12 Material changes in the financial position of TPX

So far as is known to any TPX Director, except as disclosed in this TPX Explanatory Booklet or as otherwise disclosed to the ASX by TPX, the financial position of TPX has not materially changed since the date of its final report for the half year ended 31 December 2008, as lodged with the ASX on 24 February 2009.

Other than the TPX Scheme and the Transaction, there are no significant changes to the nature of TPX’s activities as at the date of this TPX Explanatory Booklet.

11.13 Auditors

Wise Lord and Ferguson Chartered Accountants are the auditors of TPX.

11.14 Effect on TPX creditors

TPX has paid and is paying all its creditors within normal terms of trade. It is solvent and is trading in an ordinary commercial manner. The TPX Scheme and the Transaction will not adversely affect the interests of TPX’s creditors.

TPX Explanatory Booklet

11.15 Impact on material contracts of TPX

TPX is a party to a large number of agreements, including property leases. Some of these agreements may contain change of control clauses, which could enable the relevant counterparties to terminate the agreements upon Implementation of the TPX Scheme and the Transaction. If a counterparty does terminate an agreement, TPX could lose the benefit of the agreement. However, the TPX Directors do not believe there are any contracts material to TPX which will be terminated or, if terminated, will not be able to be replaced on similar terms.

11.16 TPX Directors’ intentions regarding the business, assets and employees of TPX

If the TPX Scheme and the Transaction are approved and implemented, MyState Limited will have 100% ownership of TPX and will control TPX. Your Directors have been advised that the intentions of MyState Limited are as set out in Section 6 of this TPX Explanatory Booklet. In addition, TPX is in the process of finalising its exit from the TBS joint venture. See section 4.4 for further details.

11.17 Recent TPX Share price trading

Please refer to section 4.6 of the TPX Independent Expert’s Report for information regarding the prices and volumes at which TPX Shares traded on ASX since TPX the quarter ended June 2006.

11.18 ASX waivers

An application will be made for listing MyState Limited Shares on the financial market conducted by ASX within seven days of the date of this TPX Explanatory Booklet. In anticipation of that application, MyState Limited has sought a number of confirmations from ASX and waivers of a number of ASX Listing Rules:

ASX has been requested to waive a number of ASX Listing Rules to permit the constitution of MyState Limited to contain provisions entitling the MyState Limited Directors to ensure compliance with the requirements of the Trustee Companies Act (see section 7.3(j) for further details of these provisions);
ASX has been requested to confirm that provisions in MyState Limited’s constitution which ensure compliance with APRA’s ‘fit and proper person’ policies for directors do not breach the ASX Listing Rules; and
ASX has been requested to confirm that MyState Limited is not required to issue a prospectus (disclosure document) under Part 6D(2) of the Corporations Act on the basis that this TPX Explanatory Booklet is a sufficient substitute.

ASX has provided confirmation on each of the above matters.

ASX has also been requested to confirm that the shareholder spread requirements for a company listing its shares on the financial market conducted by ASX can be satisfied by the shareholdings in MyState Limited held by former TPX Shareholders.

Further, as the MyState Limited Group includes an ADI, MSF will maintain a relatively high level of cash holdings (or assets readily convertible to cash). MyState Limited will seek a waiver from ASX to allow cash (or assets readily convertible to cash) to represent more than half of MyState Limited’s total tangible assets despite MyState Limited not being committed to expending more than half of these resources..

TPX has asked for and received confirmation from ASX that shareholder approval of the Transaction is not required under Chapter 11 of the ASX Listing Rules on the basis that TPX Shareholders are considering the Transaction and voting on it at the TPX Scheme Meeting.

In accordance with the requirements for the listing of MyState Limited, MyState Limited has confirmed:

there will be enough working capital to carry out MyState Limited’s immediate objectives as outlined in Section 6 of this TPX Explanatory Booklet;
MyState Limited has not raised capital in the three months prior to the date of this TPX Explanatory Booklet and will not need to do so in the three months from the date of this TPX Explanatory Booklet;
admission to the official list by ASX does not indicate the merits of MyState Limited; and
ASX takes no responsibility for the contents of this TPX Explanatory Booklet.

11.19 No unacceptable circumstances

The TPX Board believes that the TPX Scheme and the Transaction do not involve any circumstances in relation to the affairs of TPX that could reasonably be characterised as constituting unacceptable circumstances for the purposes of section 657A of the Corporations Act.

11.20 Quotation of MyState Limited Shares

Within 7 days after the date of this TPX Explanatory Booklet, MyState Limited will make an application for the admission to quotation on ASX of MyState Limited Shares to be issued pursuant to the TPX Scheme and the Transaction. MyState Limited has no reason to believe that the MyState Limited Shares will not be admitted to quotation by the ASX.

11.21 Consents and disclaimers

The following parties have given and have not, before the time of registration of this TPX Explanatory Booklet by ASIC, withdrawn their written consent to be named in this TPX Explanatory Booklet in the form and context in which they are named:

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Minter Ellison and Dobson, Mitchell & Allport as legal advisers to TPX;
Deloitte as the TPX Independent Expert and to the inclusion of the TPX Independent Expert’s Report set out in Appendix 1 to this TPX Explanatory Booklet. Deloitte received fees of approximately $210,000 plus GST for the production of the report;
KPMG as tax adviser to TPX;
MSF (in relation to the MSF Information);
PKF as the MSF Independent Expert;
Wise Lord & Ferguson as auditors of TPX;
MyState Limited in relation to the information concerning MyState Limited in this TPX Explanatory Booklet; and
Computershare Investor Services Pty Limited as the TPX Share Registry.

Each of the above persons:

does not make, or purport to make, any statement in this TPX Explanatory Booklet or any statement on which a statement in this TPX Explanatory Booklet is based other than, in the case of Deloitte and KPMG, a statement or report included in this TPX Explanatory Booklet with the consent of that party;
to the maximum extent permitted by law, expressly disclaims and takes no responsibility for any part of this TPX Explanatory Booklet, other than a reference to its name and, in the case of KPMG and Deloitte, any statement or report which has been included in this TPX Explanatory Booklet with the consent of that party; and
except MSF, does not assume any responsibility for the accuracy or completeness of the MSF Information. The MSF Information has been prepared by and is the responsibility of MSF.

11.22 Independent advice

TPX Shareholders should consult their legal, financial, taxation or other professional adviser if they have any queries regarding:

the TPX Scheme or the Transaction;
the taxation implications for them if the Transaction is implemented;
your Directors’ recommendations and intentions in relation to the TPX Scheme and the Transaction, as set out in Section 3.1 of this TPX Explanatory Booklet; or
any other aspects of this TPX Explanatory Booklet.

11.23 Other material information

Except as set out in this TPX Explanatory Booklet, in the opinion of the TPX Board, there is no other information material to the making of a decision in relation to the TPX Scheme and the Transaction, being information that is within the knowledge of any director or of any related body corporate of TPX which has not been previously disclosed to TPX Shareholders.

TPX will issue a supplementary document to this TPX Explanatory Booklet if it becomes aware of any of the following between the date of lodgement of this TPX Explanatory Booklet for registration by ASIC and the Effective Date:

a material statement in this TPX Explanatory Booklet is false or misleading in a material respect;
a material omission from this TPX Explanatory Booklet;
a significant change affecting a matter included in this TPX Explanatory Booklet; or
a significant new matter has arisen and it would have been required to be included in this TPX Explanatory Booklet if it had arisen before the date of lodgement of this TPX Explanatory Booklet for registration by ASIC.

Depending on the nature and timing of the changed circumstances and subject to obtaining any relevant approvals, TPX may circulate and publish any supplementary document by:

making an announcement to the ASX; and/or
placing an advertisement in a prominently published newspaper which is circulated generally throughout Australia; and/or
posting the supplementary document to TPX Shareholders at their registered address as shown in the TPX Share Register; and/or
posting a statement on the TPX corporate website at tasmanianperpetual.com.au,

as TPX in its absolute discretion considers appropriate.

11.24 Privacy

TPX may collect personal information in the process of implementing the TPX Scheme and the Transaction. Such information may include the name and contact details and security holding of TPX Shareholders, and the name of persons appointed by TPX Shareholders to act as proxy, corporate representative or attorney at the TPX Scheme Meeting. The primary purpose of collection of the personal information is to assist TPX in the conduct of the TPX Scheme Meeting and to enable the Transaction to be implemented in the manner described in this TPX Explanatory Booklet. Without this information, TPX may be hindered in its ability to carry out these purposes to full effect. The collection of certain personal information is authorised by the Corporations Act.

Personal information may be disclosed to the TPX Share Registry, print and mail service providers, authorised securities brokers and to related bodies corporate of TPX, MSF and MyState Limited.

TPX Shareholders have certain rights to access personal information that has been collected. TPX Shareholders should contact TPX’s Company Secretary in the first instance, if they wish to request access to their personal information.

TPX Shareholders who appoint a named person to act as their proxy, corporate representative or attorney at the meeting should ensure that they inform that person of the contents of this Section 11.24.

TPX Explanatory Booklet

Section 12: Notice of TPX Scheme Meeting

Notice of Scheme Meeting

Notice is given that, by an Order of the Supreme Court of Tasmania ( Court ) made on 29 June 2009, pursuant to section 411(1) of the Corporations Act 2001 (Commonwealth) ( Corporations Act ), a meeting of the holders of ordinary shares ( Shareholders ) of Tasmanian Perpetual Trustees Limited ACN 009 475 629 ( TPX ) will be held at the Hotel Grand Chancellor Launceston, 29 Cameron Street, Launceston, Tasmania, on Wednesday, 19 August 2009, commencing at 11.00am (A.E.S.T.).

Purpose of the meeting

The purpose of the meeting is to consider, and if thought fit, approve a resolution for a scheme of arrangement (the TPX Scheme ) proposed to be made between TPX and the TPX Scheme Shareholders.

The TPX Explanatory Booklet contains details about the TPX Scheme which you should consider in making an informed voting decision.

Agenda

Pursuant to clause 11.4 of the TPX Constitution, the Chairman of the Board is entitled to act as Chairman of every general meeting of members. Chairman’s welcome.

Business of the meeting.

To consider and, if thought fit, approve the following resolution:

‘That pursuant to and in accordance with the provisions of section 411 of the Corporations Act, the shareholders are in favour of the arrangement proposed between Tasmanian Perpetual Trustees Limited and its shareholders, designated as the ‘TPX Scheme’, as contained in and more particularly described in the TPX Explanatory Booklet accompanying the Notice calling this meeting and authorise the Board of Directors of TPX to implement the Scheme (with or without any alterations or conditions required or approved by the Court to which the TPX Directors agree). ‘

Close of meeting.

Court approval

In accordance with section 411(4)(b) of the Corporations Act, the TPX Scheme is subject to the approval of the Court. If the resolution put to this meeting is approved, TPX intends to apply to the Court for the approval of the TPX Scheme.

Dated this 29th day of June 2009.

BY ORDER OF THE BOARD

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Paul Viney Company Secretary

Registration will commence at 10.00 am on the date of the meeting.

Please refer to Section 2 of the TPX Explanatory Booklet for information concerning:

Registration of Shareholders attending the meeting
Registration of proxies and other representatives, appointed by Shareholders, who are attending the meeting
The requirements for the appointment of proxies and representatives
The voting majority requirements for the resolution
Entry to the meeting will be restricted to Shareholders, their duly appointed representatives and other persons who have been approved by the TPX Board to be present at the meeting.

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Explanatory notes for the Scheme Meeting

GENERAL

Capitalised words and phrases used in this Notice of Scheme Meeting (including the proposed resolution) have the same meaning as set out in the Glossary in Section 13 of this TPX Explanatory Booklet of which this Notice forms part.

This Notice should be read in conjunction with the entire TPX Explanatory Booklet.

VOTING ENTITLEMENTS

The Chairman has determined that the vote will be conducted as a poll. Each Shareholder will have one vote for each fully paid ordinary share. Eligibility to vote will be determined as at 7.00pm on Monday 17 August 2009.

REQUIRED VOTING MAJORITY

For the TPX Scheme to be approved at the Scheme Meeting, votes in favour of the TPX Scheme must be received from:

a majority in number (more than 50%) of Shareholders that vote (in person, by proxy, by corporate representative or by attorney) at the Scheme Meeting, although the Court has the power by order to disregard this, see Section 2.1 of the TPX Explanatory Booklet for details; and
Shareholders who together hold at least 75% of the total number of ordinary shares voted at the Scheme Meeting.

HOW TO VOTE

Members entitled to vote at the Scheme Meeting may vote:

by attending the meeting and voting in person; or
by appointing an attorney to attend the meeting and vote on their behalf or, in the case of corporate Shareholders or proxies, a corporate representative to attend the meeting and vote on its behalf; or
by appointing a proxy to attend and vote on their behalf, using the proxy form accompanying this Notice or online by logging onto www.investorvote.com.au using the control number noted on your proxy form. A proxy may be an individual.

VOTING BY PROXY

A Shareholder entitled to attend and vote has a right to appoint a proxy to attend and vote instead of the Shareholder. A proxy need not be a Shareholder and can be either an individual or a body corporate.

A Shareholder that is entitled to cast two or more votes may appoint two proxies and may specify the proportion or number of votes each proxy is appointed to exercise. If no proportion or number is specified, each proxy may exercise half of the Shareholder’s votes.

A Proxy Form accompanies this Notice and to be effective must be received by 11.00am on Monday, 17 August 2009 at the Company’s corporate registry in any of the following ways:

By internet to Computershare:

Log on through www.investorvote.com.au using the control number noted on your proxy form

By post in the enclosed reply paid envelope provided to the TPX Share Registry:

The Registrar GPO Box 242 Melbourne, Victoria 3001

By hand delivery to the TPX Share Registry at:

452 Johnston Street, Abbotsford, Victoria 3067

By fax to the TPX Share Registry on:
(if within Australia) 1800 783 447 (if outside Australia) +61 3 9473 2555

VOTING BY CORPORATE REPRESENTATIVES

A body corporate which is a member, or which has been appointed as a proxy, may appoint an individual to act as its representative at the Meeting. The appointment must comply with the requirements of section 250D of the Corporations Act. The representative should bring to the Meeting evidence of his or her appointment, including any authority under which it is signed, unless it has previously been given to the Company.

VOTING IN PERSON (OR BY ATTORNEY)

Voting By Attorney

A member may appoint an attorney to vote on his or her behalf. For an appointment to be effective for the Meeting, the instrument effecting the appointment (or a certified copy of it) must be received by the Company at its registered office or at the Company’s corporate registry listed below, at least 48 hours before the Meeting.

TPX Explanatory Booklet

Section 13: Glossary

The following terms used in this TPX Explanatory Booklet (including the Notice of Scheme Meeting that form part of this TPX Explanatory Booklet) have the meanings given to them below, unless the context otherwise requires.

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ACCC the Australian Competition and Consumer Commission
ADI authorised deposit-taking institution
APRA Australian Prudential Regulation Authority
AFSL Australian Financial Services Licence
ASIC Australian Securities and Investments Commission
ASX ASX Limited ACN 008 624 691 or, as the context requires, the financial market conducted by it
ASTC ASX Settlement and Transfer Corporation Pty Ltd ABN 49 008 504 532
ASTC Settlement Rules the operating rules of ASTC
Bendigo Bendigo and Adelaide Bank Limited
Business Day a week day on which Australian banks are open for business in Hobart and Launceston in Tasmania,
Australia
Buy Form the form enclosed with this TPX Explanatory Booklet for you to complete if you want to participate
in the Top-up Facility
CHESS the Clearing House Electronic Sub-register System for the electronic transfer of securities operated by
ASX Settlement and Transfer Corporation Pty Limited ACN 008 504 532
connectfinancial Connect Credit Union of Tasmania Limited, the previous name of MSF
Constitutional Amendment the special resolution of MSF Members to enable or facilitate the transfer of MSF Member Shares as
Resolution provided by the MSF Scheme for the purposes of the Demutualisation and the MSF Scheme
Corporations Act the Corporations Act 2001 (Cth)
Court the Supreme Court of Tasmania
Court Order the order of the Court approving the TPX Scheme or the MSF Scheme (as applicable) made under
section 411(4)(b) of the Corporations Act
CRN Customer Reference Number
Deed Poll the deed poll executed by MyState Limited for the benefit of TPX Scheme Shareholders in which
MyState Limited acknowledges and confirms its obligation to provide the TPX Scheme Consideration.
A copy of the executed Deed Poll is available upon request by contacting the Company Secretary of
TPX on 03 6348 1111 between 9.00am and 5.00pm (Tasmanian time) from Monday to Friday
Demutualisation the demutualisation of MSF under Part 5 of Schedule 4 to the Corporations Act and pursuant to the
MSF Scheme whereby, amongst other things, the existing rights of MSF Members are cancelled and
MSF Scheme Participants receive an issue of new MyState Limited Shares, allocated as determined
by the MSF Board
Director or TPX Director a director of TPX (the TPX Directors as at the date of this TPX Explanatory Booklet are the persons
specified in Section 4.13)
EBIT earnings before interest and tax
EBITDA earnings before interest, tax, depreciation and amortisation
Effective the coming into effect, pursuant to section 411(10) of the Corporations Act, of the order of the
Court approving the TPX Scheme or the MSF Scheme (as applicable) under section 411(4)(b) of the
Corporations Act
Effective Date the date on which the order of the Court approving the TPX Scheme or the MSF Scheme (as
applicable) under section 411(4)(b) of the Corporations Act comes into effect pursuant to section
411(10) of the Corporations Act
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ELTIP MyState Limited's Executive Long Term Incentive Plan
End Date 30 September 2009 or such later date as agreed in writing by MSF, TPX and MyState Limited
ESP MyState Limited's Employee Share Plan
Exclusivity Period the period commencing on 10 October 2008 and ending on the earlier of:
• the End Date;
• the Implementation Date; and
• the date the Merger Implementation Agreement is terminated in accordance with its terms.
Federal Government Guarantee the Federal Government guarantee of deposits of Australian banks, building societies and credit
unions and Australian subsidiaries of foreign-owned banks that are regulated by APRA, announced
on 12 October 2008
Foreign Scheme Shareholder a TPX Scheme Shareholder whose address in the TPX Share Register as at the TPX Record Date is a
place outside Australia or its external territories
Government Agency any government or governmental, semi-governmental, administrative, fiscal, regulatory or judicial
body, department, commission, authority, tribunal, agency or entity and includes ASIC, APRA, ASX,
ACCC and the Treasurer of the Commonwealth of Australia
GST Goods and Services Tax
Headcount Test a majority in number (more than 50%) of shareholders of a company that are present and voting (in
person, by proxy, by corporate representative or by attorney) at a meeting of members in relation to
the approval of a scheme of arrangement under the Corporations Act
HIN Holder Identification Number
HQLA High Quality Liquid Assets
ICAAP Internal Capital Adequacy Assessment Process
Implementation Date the date that the TPX Scheme and the MSF Scheme are to be implemented according to their terms.
The Implementation Date is expected to be on or about 1 September 2009
Insolvency Event means in relation to a person:
• insolvency official: the appointment of a liquidator, provisional liquidator, administrator, receiver
and manager or other insolvency official (whether made under an Australian law or a foreign law)
to the person or to the whole or a substantial part of the property or assets of the person;
• arrangements with creditors: the entry by the person into a compromise or arrangement with its
creditors generally;
• winding up: the calling of a meeting to consider a resolution to wind up the person (other than
where the resolution is frivolous or cannot reasonably be considered to be likely to lead to the
actual winding up of the person) or the making of an application or order for the winding up or
deregistration of the person other than where the application or order (as the case may be) is set
aside within 14 days;
• suspends payment: the person suspends or threatens to suspend payment of its debts generally;
• ceasing business: the person ceases or threatens to cease to carry on business; or
• presumed insolvency: the person is or becomes unable to pay its debts when they fall due
within the meaning of the Corporations Act or is otherwise presumed to be insolvent under the
Corporations Act
Investor Centre Computershare’s online investor centre which allows registered users to view holdings for companies
registered with Computershare online, among other things
islandstate Island State Credit Union Limited ACN 087 651 287
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Joint Information information included in this TPX Explanatory Booklet regarding the profile of the MyState Limited
Group (if the Transaction is implemented) and the risk factors associated with the Transaction
Joint Steering Committee the committee established in accordance with the Merger Implementation Agreement to oversee and
progress the Transaction
KPMG KPMG (Launceston office)
Listing Rules the listing rules of the ASX
Management Integration the committee that will be established if the TPX Scheme and the Transaction are implemented to
Committee ensure a successful integration of the merger with MSF
Material Adverse Change when used in relation to TPX:
• a single event, or collection of events, occurrences or matters which has, or have in aggregate,
resulted in or could reasonably be expected to result in, an adverse effect on the net assets of TPX
of $1,700,000 or more, or the earnings or prospects of TPX in any financial year of $1,050,000
or more; and
when used in relation to MSF:
• a single event, or collection of events, occurrences or matters which has, or have in aggregate,
resulted in or could reasonably be expected to result in, an adverse effect on the net assets of MSF
of $6,000,000 or more, or the earnings or prospects of MSF in any financial year of $2,400,000
or more
Merger Implementation the agreement between MyState Limited, TPX and MSF dated 10 October 2008 and amended on
Agreement 21 January 2009 and 22 June 2009 under which each party undertakes specific obligations to give
effect to the TPX Scheme and the Transaction. The Merger Implementation Agreement (without
schedules) and as amended on 21 January 2009 and 22 June 2009 is available upon request
by contacting the Company Secretary of TPX on 03 6348 1111 between 9.00am and 5.00pm
(Tasmanian time) from Monday to Friday
MSF or MyState Financial MyState Financial Credit Union of Tasmania Limited ACN 067 729 195 (formerly Connect Credit
Union of Tasmania Limited)
MSF Board the Board of directors of MSF as at the date of this TPX Explanatory Booklet
MSF Constitution the constitution of MSF, which is available for download from MSF’s website at mystate.com.au
MSF Director a director of MSF (the MSF Directors as at the date of this Explanatory Booklet are the persons
specified in Section 5.8)
MSF General Meeting the general meeting of MSF to be held on Tuesday, 18 August 2009 to consider and, if thought fit,
pass the Constitutional Amendment Resolution
MSF Indemnified Parties MSF, each of its related bodies corporate and each of their respective Representatives
MSF Independent Expert or PKF PKF Corporate Advisory (East Coast) Pty Limited
MSF Information the information regarding MSF and its related bodies corporate included in Sections 5 and 6 of this
TPX Explanatory Booklet
MSF Information Booklet the Information Booklet sent by MSF to the MSF Members in relation to the MSF Scheme and the
Transaction
MSF Member a person who is registered in the MSF share register as a holder of one or more MSF Member
Shares
MSF Member Share an issued member share in MSF having the rights set out in Appendix 1 Division A of the MSF
Constitution
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MSF Record Date the date for determining entitlements to the MSF Scheme Consideration. The MSF Record Date is
expected to be 5.00pm Tasmanian time on 13 August 2009
MSF Scheme the proposed Demutualisation and scheme of arrangement under Part 5.1 of the Corporations
Act between MSF and MSF Scheme Participants to give effect to the MSF Scheme, subject to any
modifications or conditions made or required by the Court under section 411(6) of the Corporations
Act and approved in writing by MSF and TPX
MSF Scheme Consideration the aggregate consideration of MyState Limited Shares to be issued or transferred to MSF Scheme
Participants pursuant to the MSF Scheme or vested in the trustee of the MSF Unverified Members
Trust
MSF Scheme Meeting the meeting of Members to be held on Tuesday, 18 August 2009 to consider and vote on the MSF
Scheme.
MSF Scheme Participant a MSF Member other than MSF, as determined by the MSF Board, who held an MSF Member Share at
the time the Transaction was announced (9.30am on 10 October 2008) and who continues to hold
the MSF Member Share at the MSF Record Date
MSF Scheme Share a MSF Member Share on issue as at the MSF Record Date
MSF Second Court Date the first day on which the MSF Second Court Hearing is heard
MSF Second Court Hearing the hearing by the Court of MSF’s application to approve the MSF Scheme under section 411(4)(b)
of the Corporations Act
MSF Unverified Members Trust the trust established by MSF to hold MyState Trust Shares
MyState Limited MyState Limited ACN 133 623 962
MyState Limited Board the board of directors of MyState Limited, from time to time
MyState Limited Constitution the constitution of MyState Limited, which is available from the Company Secretary of MyState
Limited on 03 6348 1111
MyState Limited Director a director of MyState Limited and, where appropriate, includes an alternate director
MyState Limited Group MyState Limited and each of its related bodies corporate after the implementation of the Transaction,
including TPX and MSF
MyState Limited Share fully paid ordinary shares in the capital of MyState Limited
MyState Limited Shareholder a person who is registered in the MyState Limited Share Register as a holder of one or more MyState
Limited Shares
MyState Limited Share Register the register of members of MyState Limited maintained by or on behalf of MyState Limited in
accordance with section 168(1) of the Corporations Act
MyState Share Parcel the entitlement of a MSF Scheme Participant to MyState Limited Shares determined in accordance
with the rules adopted by the MSF Board for the purpose of the MSF Scheme
MyState Trust Shares shares in MyState Limited held by a trustee to be appointed by MSF for the benefit, and on behalf,
of persons whose eligibility as an MSF Scheme Participant was not determined as at the MSF Record
Date and which is established not later than 30 June 2010
NOHC Non Operating Holding Company
Nominee Bell Potter Securities Limited (ACN 006 390 772)
NPAT net profit after tax
NPBT net profit before tax
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Prescribed Occurrence other than as required or contemplated by the Merger Implementation Agreement or the Transaction,
or with the express written consent of MSF or TPX (as applicable), the occurrence of any of the
following by TPX or MSF (as applicable):
• converting all or any of its shares into a larger or smaller number of shares;
• resolving to reduce its share capital in any way or reclassifying, combining, splitting or redeeming
or repurchasing directly or indirectly any of its shares;
• entering into a buy-back agreement in relation to its issued share capital;
• resolving to approve the terms of a buy-back agreement in relation to its issued share capital under
the Corporations Act;
• declaring, paying or distributing any dividend, bonus or other share of its profits or assets or
returning or agreeing to return any capital to its members;
• issuing shares, or granting an option over its shares, or agreeing to make such an issue or grant
such an option;
• issuing or agreeing to issue, securities or other instruments convertible into shares or debt
securities;
• making or proposing any change or amendment to its constitution other than as provided by the
Constitutional Amendment Resolution;
• disposing, or agreeing to dispose, of the whole, or a substantial part, of its business or property
other than in the ordinary course of business;
• creating, or agreeing to create, any mortgage, charge, lien or other encumbrance over the whole,
or a substantial part, of its business or property; or
• an Insolvency Event occurring in relation to it or any of its subsidiaries.
Reimbursement Amount $1.0 million (exclusive of GST)
Representatives an officer, employee or professional advisor of TPX, MSF or MyState Limited or their subsidiaries
RSE Registered Superannuation Entity
Sale Shares the new MyState Limited Shares to which a Foreign Scheme Shareholder would otherwise be entitled
(refer section 9.10)
Section a section of this TPX Explanatory Booklet
SRN Securityholder Reference Number
Superior Proposal a bona fide Third Party Proposal which:
• in the determination of the TPX Board or the MSF Board (as applicable) acting in good faith is
reasonably capable of being financed and completed within a reasonable time, taking into account
the nature of the Third Party Proposal and the person or persons making it; and
• in the determination of the TPX Board or the MSF Board (as applicable) acting in good faith and
in order to satisfy what the TPX Board or the MSF Board (as applicable) reasonably considers to
be its fiduciary or statutory duties, would, if completed substantially in accordance with its terms,
be likely to result in a transaction more favourable to the TPX Shareholders or the MSF Members
than the Transaction.
TBS Tasmanian Banking Services Limited
Terminating Party a party (TPX, MSF or MyState Limited) that terminates the Merger Implementation Agreement at
any time prior to 8.00am on the MSF Second Court Date or the TPX Second Court Date (whichever
occurs first)
TFN Tax File Number
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Third Party Proposal any expression of interest, proposal or offer by any person made in writing to evaluate or enter
into any transaction which is similar to the Transaction or under which, other than as required or
contemplated by the Transaction:
• that person (together with its associates) may acquire a relevant interest in all or a substantial
percentage of TPX Shares or MSF Member Shares (as applicable) or the issued shares of any
subsidiary of TPX or MSF (as applicable);
• that person may acquire, directly or indirectly (including by way of joint venture, dual listed
company structure, strategic alliance or otherwise), any interest in all or a substantial part of the
business or assets of TPX or MSF (as applicable); or
• that person may otherwise acquire control of or merge or amalgamate with TPX or MSF or any
subsidiary of TPX or MSF (as applicable).
TPX Tasmanian Perpetual Trustees Limited ACN 009 475 629
TPX Board the board of Directors of TPX as at the date of this TPX Explanatory Booklet
TPX Constitution the constitution of TPX, which is available on the TPX website at tasmanianperpetual.com.au
TPX Explanatory Booklet this TPX Explanatory Booklet dated 29 June 2009 in relation to the TPX Scheme and the
Transaction
TPX Independent Expert or Deloitte Corporate Finance Pty Limited
Deloitte
TPX Independent Expert's Report the report of the TPX Independent Expert expressing an opinion on whether the TPX Scheme and
the Transaction are in the best interests of TPX Shareholders. The TPX Independent Expert's Report
is set out in Appendix 1 of this TPX Explanatory Booklet
TPX Information all information contained in this TPX Explanatory Booklet excluding the MSF Information and the
Joint Information
TPX Record Date the date for determining entitlements to the TPX Scheme Consideration, being 5.00pm Tasmanian
time on the fifth Business Day (or such as other Business Day as TPX, MSF and MyState Limited
agree) following the date on which the TPX Scheme becomes Effective. The TPX Record Date is
expected to be 7.00pm Sydney time on 28 August 2009
TPX Scheme the proposed scheme of arrangement under Part 5.1 of the Corporations Act between TPX and
the TPX Scheme Shareholders to give effect to the TPX Scheme, subject to any modifications or
conditions made or required by the Court under section 411(6) of the Corporations Act and approved
in writing by TPX and MSF. The scheme document is available upon request by contacting the
Company Secretary of TPX on 03 63481111 between 9.00am and 5.00pm (Tasmanian time) from
Monday to Friday
TPX Scheme Consideration the consideration to be provided by MyState Limited to TPX Scheme Shareholders as set out in
Section 9.10
TPX Scheme Meeting the meeting of TPX Shareholders to be held on Wednesday, 19 August 2009 to consider and vote
on the TPX Scheme. The notice convening the TPX Scheme Meeting is enclosed with this TPX
Explanatory Booklet
TPX Scheme Shareholder a TPX Shareholder as at the TPX Record Date
TPX Scheme Share Transfer a duly completed and executed instrument of transfer for each TPX Scheme Shareholder of their TPX
Shares which may be a master transfer of all the TPX Shares held by all TPX Scheme Shareholders
TPX Second Court Date the first day on which the TPX Second Court Hearing is heard
TPX Second Court Hearing the hearing by the Court of TPX's application to approve the TPX Scheme under section 411(4)(b)
of the Corporations Act
TPX Share a fully paid ordinary share in TPX
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TPX Shareholder a person who is registered in the TPX Share Register as a holder of one or more TPX Shares
TPX Share Register the register of members of TPX maintained by or on behalf of TPX in accordance with section 168(1)
of the Corporations Act
TPX Share Registry Computershare Investor Services Pty Limited ACN 078 279 277
Transaction the proposed merger of TPX and MSF pursuant to the TPX Scheme and the MSF Scheme
Trustee Companies Act Trustee Companies Act 1953 (Tasmania)
Voting Entitlement Time the time for determining eligibility of TPX Shareholders to vote on the TPX Scheme at the TPX Scheme
Meeting, being 7.00pm Sydney time on Monday, 17 August 2009
VWAP has the meaning given to it in Section 4.5
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Appendix 1: TPX Independent Expert’s Report

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Tasmanian Perpetual Trustees Limited Independent expert’s report and Financial Services Guide June 2009

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Financial Services Guide

29 June 2009

What is a Financial Services Guide?

This Financial Services Guide (FSG) provides important information to assist you in deciding whether to use any of the general financial product advice provided by Deloitte Corporate Finance Pty Limited (Deloitte, we, us or our) the holder of Australian Financial Services Licence (AFSL) No. 241457. The contents of this FSG include:

who we are and how we can be contacted
what services we are authorised to provide under our AFSL
how we (and any other relevant parties) are remunerated in relation to any general financial product advice we may provide
details of our dispute resolution systems and how you can access them.

Information about us

We have been engaged by Tasmanian Perpetual Trustees Limited to give general financial product advice in the form of a report to be provided to you in connection with the proposed merger between Tasmanian Perpetual Trustees Limited and MyState Financial Credit Union of Tasmania Limited. You are not the party or parties who engaged us to prepare this report. We are not acting for any person other than the party or parties who engaged us. We are required to give you an FSG by law because our report is being provided to you. You may contact us using the details located above.

Deloitte is ultimately owned by the Australian partnership of Deloitte Touche Tohmatsu. The Australian partnership of Deloitte Touche Tohmatsu and its related entities provide services primarily in the areas of audit, tax, consulting, and financial advisory services. Our directors may be partners in the Australian partnership of Deloitte Touche Tohmatsu.

Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com.au/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu and its member firms.

The financial product advice in our report is provided by Deloitte and not by the Australian partnership of Deloitte Touche Tohmatsu, its related entities, or the Deloitte Touche Tohmatsu Verein.

Deloitte Corporate Finance Pty Limited A.B.N. 19 003 833 127 AFSL No. 241457

550 Bourke Street Melbourne VIC 3000 GPO Box 78B Melbourne VIC 3001 Australia Tel: +61 (0) 3 9671 7000 Fax: +61 (0) 3 9671 7700 www.deloitte.com.au

Associations and relationships

We do not have any formal associations or relationships with any entities that are issuers of financial products. However, you should note that we and the Australian partnership of Deloitte Touche Tohmatsu (and its related bodies corporate) may from time to time provide professional services to financial product issuers in the ordinary course of business.

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The AFSL we hold authorises us to provide the following financial services to retail and wholesale clients:

provide financial product advice in respect of:
debentures, stocks or bonds to be issued or proposed to be issued by a government
interests in managed investment schemes including investor directed portfolio services
securities
deal in a financial product by arranging for another person to apply for, acquire, vary or dispose of financial products in respect of:
debentures, stocks or bonds issued or to be issued by a government
interests in managed investment schemes including investor directed portfolio services
securities.

Information about the general financial product advice we provide

The financial product advice provided in our report is known as “general advice” because it does not take into account your personal objectives, financial situation or needs. You should consider whether the general advice contained in our report is appropriate for you, having regard to your own personal objectives, financial situation or needs.

If our advice is being provided to you in connection with the acquisition or potential acquisition of a financial product issued by another party, we recommend you obtain and read carefully the relevant offer document provided by the issuer of the financial product. The purpose of the offer document is to help you make an informed decision about the acquisition of a financial product.

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Our fees are usually determined on a fixed fee or time cost basis and may include reimbursement of any expenses incurred in providing the services.

Fee arrangements are agreed with the party or parties who actually engage us, and we confirm our remuneration in a written letter of engagement to the party or parties who actually engage us.

Our fee for professional services is $210,000. Deloitte, its directors and officers, any related bodies corporate or associates and their directors and officers, do not receive any commissions or other benefits, except for the fees rendered to the party or parties who actually engage us.

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If you have any concerns regarding our report, you may wish to advise us. Our internal complaint handling process is designed to respond to your concerns promptly and equitably. All complaints must be in writing addressed to:

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If you are not satisfied with the steps we have taken to resolve your complaint, you may contact the Financial Ombudsman Service (FOS). FOS provides free advice and assistance to consumers to help them resolve complaints relating to members of the financial services industry. Complaints may be submitted to FOS at:

Financial Ombudsman Service Limited GPO Box 3 Melbourne VIC 3001 Telephone: 1300 780 808 Fax: +61 3 9613 6399 Email: [email protected] Internet: http://www.fos.org.au

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Deloitte Corporate Finance Pty Limited A.B.N. 19 003 833 127 AFSL No. 241457 550 Bourke Street Melbourne VIC 3000 GPO Box 78B Melbourne VIC 3001 Australia Tel: +61 (0) 3 9671 7000 Fax: +61 (0) 3 9671 7700 www.deloitte.com.au

The Directors Tasmanian Perpetual Trustees Limited 23 Paterson Street Launceston TAS 7250 Australia

29 June 2009

Dear Directors

Independent expert’s report

Introduction

On 10 October 2008 the directors of Tasmanian Perpetual Trustees Limited (Tasmanian Perpetual Trustees or the Company) and the directors of MyState Financial Credit Union of Tasmania Limited (MyState Financial) announced a proposal to merge the two entities by way of two schemes of arrangement (the Proposed Transaction). If the Proposed Transaction is implemented, Tasmanian Perpetual Trustees and MyState Financial will become wholly owned subsidiaries of a newly formed non-operating holding company, MyState Limited (the Proposed Merged Entity), which will be listed on the Australian Securities Exchange (ASX). Under the merger ratio for the Proposed Transaction announced on 10 October 2008, shareholders of Tasmanian Perpetual Trustees (Shareholders) and members of MyState Financial (MyState Financial Members) would have been entitled to 37.0% and 63.0%, respectively, of the equity in the Proposed Merged Entity.

On 21 January 2009, the directors of Tasmanian Perpetual Trustees and MyState Financial announced changes to the Proposed Transaction, including amendment to the merger ratio. Under the amended merger ratio, the Shareholders and MyState Financial Members will be entitled to 32.5% and 67.5% of the equity in the Proposed Merged Entity, respectively. The change in the merger ratio resulted due to changes in business conditions associated with the global financial crisis and the assessment by the directors of each entity as to how this should be reflected in the terms of the Proposed Transaction.

Under the Proposed Transaction, Shareholders will receive one share in the Proposed Merged Entity in consideration for each share held in Tasmanian Perpetual Trustees.

MyState Financial Members will receive, in total, the number of shares in the Proposed Merged Entity that equals 67.5% of the issued share capital in the Proposed Merged Entity. The number of shares to be received by each MyState Financial Member will be determined based on the number of MyState Financial Members as at the Record Date who are eligible to receive shares. Each MyState Financial Member will receive the same number of shares, subject to adjustment for specific circumstances, such as duplicate memberships and memberships held in trust.

Full details of the Proposed Transaction are provided in Section 1 of the explanatory statement prepared by the board of Tasmanian Perpetual Trustees (Explanatory Booklet).

Member of Deloitte Touch Tohmatsu

Purpose of the report

Whilst an independent expert’s report in respect of the Proposed Transaction may not be required to meet any statutory obligations, the directors of Tasmanian Perpetual Trustees (the Directors) have requested that Deloitte Corporate Finance Pty Limited (Deloitte) provide an independent expert’s report advising whether, in our opinion, the Proposed Transaction is in the best interests of Shareholders.

This report is to be included in the Explanatory Booklet to be sent to Shareholders and has been prepared for the exclusive purpose of assisting Shareholders in their consideration of the Proposed Transaction. We are not responsible to you, or anyone else, whether for our negligence or otherwise, if the report is used by any other person for any other purpose.

Basis of evaluation

Schemes of arrangement can include many different types of transactions, including being used as an alternative to a Chapter 6 of the Corporations Act 2001 (Cth) (Corporations Act) (Chapter 6) takeover bid. The basis of evaluation selected by the expert must be appropriate for the nature of each specific transaction.

Section 640 of the Corporations Act (Section 640) requires an independent expert’s report in connection with a takeover offer to state whether, in the expert’s opinion, the takeover offer is fair and reasonable. Where the scheme of arrangement has the same effect as a takeover, the form of analysis used by the expert should be substantially the same as for a takeover bid, however, the opinion reached should be whether the proposed scheme is ‘in the best interests of the members of the company’. Accordingly, if an expert were to conclude that a proposal was ‘fair and reasonable’ if it was in the form of a takeover bid, it will also be able to conclude that the proposed scheme is in the best interests of the members of the company.

In our determination as to whether the Proposed Transaction is fair and reasonable and therefore in the best interests of the Shareholders of the Company, we have had regard to common market practice and to Regulatory Guide 111 issued by the Australian Securities and Investments Commission (ASIC) in relation to independent expert’s reports.

Under ASIC Regulatory Guide 111, which provides guidance in respect of the content of expert reports, a control transaction such as the Proposed Transaction is:

fair, when the value of the consideration is equal to or greater than the value of the shares subject to the proposed scheme. The comparison must be made assuming 100% ownership of the target company, in this case, Tasmanian Perpetual Trustees. Our analysis of the fairness of the Proposed Transaction is set out in Section 10.2
reasonable, if it is fair, or despite not being fair, after considering other significant factors, shareholders should accept the offer under the proposed scheme, in the absence of any higher bids. Our analysis of these reasonableness factors is set out in Section 10.3.

To assess whether the Proposed Transaction is in the best interests of Shareholders, we have adopted the test of whether the Proposed Transaction is either fair and reasonable, not fair but reasonable, or neither fair nor reasonable, as set out in ASIC Regulatory Guide 111.

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

Summary and conclusion

In our opinion the Proposed Transaction is fair and reasonable and therefore in the best interests of Shareholders. In arriving at this opinion, we have had regard to the following factors:

The Proposed Transaction is fair

Set out in the table below is a comparison of our assessment of the fair market value of a share in Tasmanian Perpetual Trustees with a share in the Proposed Merged Entity.

Table 1: Evaluation of fairness

	Low	High
	($)	($)
Estimated fair market value of a share in Tasmanian Perpetual	3.10	3.55
Trustees (Section 8.2.5)
Estimated fair market value of a share in the Proposed Merged Entity	3.60	3.90
(Section 9.2.4)

Source: Deloitte analysis Note:

All amounts stated in this report are in Australian dollars ($) unless otherwise stated and may be subject to rounding

Our estimate of the value of the consideration offered under the Proposed Transaction is greater than the range of our estimate of the fair market value of a share in Tasmanian Perpetual Trustees. ASIC Regulatory Guide 111.10 provides that ‘an offer is fair if the value of the offer price or consideration is equal to or greater than the value of the securities the subject of the offer’. ASIC Regulatory Guide 111.62 provides that ‘an expert should usually give a range of values’ for the securities the subject of the offer. It is therefore our opinion that the Proposed Transaction is fair.

Valuation of a share in Tasmanian Perpetual Trustees

We have estimated the fair market value of a share in Tasmanian Perpetual Trustees using the capitalisation of maintainable earnings method, which estimates the value of Tasmanian Perpetual Trustees by capitalising its maintainable earnings using an appropriate earnings multiple.

We have adopted net profit after tax (NPAT) as an appropriate measure of earnings for Tasmanian Perpetual Trustees. We have selected future maintainable NPAT of $4.5 million. This estimate is based on our consideration of the actual financial results for the year ended 30 June 2008, the actual financial results for the six months ended 31 December 2008 and the forecast financial results for the year ending 30 June 2009. Based on an analysis of listed companies operating in the wealth management subsector of the financial services industry, we have selected a multiple of 12.5 times to 13.5 times future maintainable NPAT. We have applied a premium for control in the range of 10% to 15% to the equity value of Tasmanian Perpetual Trustees on a listed minority basis to reflect the value of a share in Tasmanian Perpetual Trustees on a control basis.

Valuation of consideration

We have also estimated the value of a share in the Proposed Merged Entity using the capitalisation of maintainable earnings method. Pursuant to the Proposed Transaction, Shareholders will receive one share in the Proposed Merged Entity in consideration for each share in Tasmanian Perpetual Trustees held.

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

We have adopted NPAT as an appropriate measure of earnings for the Proposed Merged Entity. We have selected future maintainable NPAT for the Proposed Merged Entity of $20.5 million. This estimate is based on our consideration of the actual financial results for the year ended 30 June 2008, the actual financial results for the six months ended 31 December 2008 and the forecast financial results for the year ending 30 June 2009 for each entity. We have also considered synergies that could be achieved by the Proposed Merged Entity. We have selected a multiple of 11.5 times to 12.5 times future maintainable NPAT, having had regard to the activities of the Proposed Merged Entity and to listed companies operating in the wealth management and banking services subsectors of the financial services industry.

The Proposed Transaction is reasonable

In accordance with ASIC Regulatory Guide 111 an offer is reasonable if it is fair. On this basis, in our opinion the Proposed Transaction is reasonable . We have also considered the following factors in assessing the reasonableness of the Proposed Transaction:

Advantages of the Proposed Transaction

The Proposed Merged Entity will have a larger share market capitalisation

The share market capitalisation of the Proposed Merged Entity implied by our valuation of a share in the Proposed Merged Entity is in the range of $240 million to $260 million (based on a valuation range for a share in the Proposed Merged Entity of $3.60 to $3.90).

The increased market capitalisation of the Proposed Merged Entity and enlarged shareholder base may attract additional analyst coverage and lead to inclusion in share market indices which may enhance the share market profile of the Proposed Merged Entity, particularly with institutional investors. These factors may provide increased liquidity and greater trading depth than that currently experienced by Shareholders. This may also result in a positive re-rating of the market price of shares in the Proposed Merged Entity.

As a result of the increased market capitalisation, the Proposed Merged Entity may also have improved access to equity, as the impact of the 10% ownership limit on shares in the Proposed Merged Entity will be diluted, enabling greater equity injections without breaching the 10% ownership limit. In addition, the Proposed Merged Entity may be able to access debt finance which is currently subject to limitations imposed by ASIC and the Australian Prudential Regulatory Authority (APRA) in respect of Tasmanian Perpetual Trustees.

The Proposed Merged Entity will have greater scale of operations and diversification than Tasmanian Perpetual Trustees

The Proposed Merged Entity will become a diversified financial services group with increased scale and will be able to provide a broader range of financial products and services, including wealth management and banking services, than Tasmanian Perpetual Trustees presently offers. It is intended that the Proposed Merged Entity will offer products and services to existing and new customers in new market segments both in Tasmania and, in due course, mainland Australia.

The Proposed Merged Entity will have:

a greater scale of operations which may lead to economies of scale
exposure to a larger and more diversified customer base, comprising the existing customer bases of Tasmanian Perpetual Trustees and MyState Financial

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

more diversified sources of revenues with significant contributions from interest income, insurance commissions and loan fees. This may lead to less volatile earnings for the Proposed Merged Entity than for Tasmanian Perpetual Trustees
greater presence and combined recognition of two established brands in the Tasmanian financial services market, providing the Proposed Merged Entity with a stronger competitive position
enhanced ability to expand through further acquisitions and improved attractiveness to potential joint venture partners
an enhanced ability to expand into the mainland Australian market as a result of greater scale
access to a larger franking account balance than currently available to Tasmanian Perpetual Trustees.

Synergy benefits

In addition to the synergy benefits included in our valuation of a share in the Proposed Merged Entity, the combination of Tasmanian Perpetual Trustees and MyState Financial may enable the achievement of further synergy benefits as a result of:

cross selling opportunities in excess of those considered in our assessment of the synergy benefits available to the Proposed Merged Entity due to its larger and more diversified customer base of the Proposed Merged Entity
cost savings which are greater than those assumed in our assessment of the synergy benefits available to the Proposed Merged Entity
increased market share in the Tasmanian financial services industry as a result of the consolidation of two established service providers.

Reduced impact of the Federal Government deposit guarantee

The Federal Government deposit guarantee has contributed to the decrease in funds under management (FUM) held by Tasmanian Perpetual Trustees (which are not covered by this guarantee). The Federal Government deposit guarantee will likely have a diluted impact on the Proposed Merged Entity compared to Tasmanian Perpetual Trustees, as deposits held by MyState Financial are covered by the guarantee. Consequently, the impact on the earnings of Tasmanian Perpetual Trustees of the deposit guarantee will be partially mitigated.

Disadvantages of the Proposed Transaction

Shareholders may prefer to hold shares in Tasmanian Perpetual Trustees

The investment decision of an individual Shareholder will be influenced by their attitudes to risk and return. Individual Shareholders may prefer to hold shares in Tasmanian Perpetual Trustees, a company operating in the wealth management subsector, rather than the Proposed Merged Entity, a diversified financial services provider. In addition, MyState Financial Members may prefer not to hold shares in the Proposed Merged Entity.

Consequently, Shareholders and MyState Financial Members may sell their shares on the ASX, which could result in a decrease in the price of a share in the Proposed Merged Entity after the implementation of the Proposed Transaction.

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

Diluted participation in future growth of Tasmanian Perpetual Trustees

Following implementation of the Proposed Transaction, Shareholders will hold 32.5% of the total issued shares in the Proposed Merged Entity. Shareholders will have their exposure to the potential upside from the current operations of Tasmanian Perpetual Trustees significantly diluted, as that upside will be shared by all shareholders in the Proposed Merged Entity.

This dilution will be mitigated to the extent that Shareholders participate in any upside attributable to the operations of MyState Financial.

Other matters

Potential for other takeover offers

Due to its scale of operations and geographical location the likelihood of an alternative offer for the shares in Tasmanian Perpetual Trustees is considered remote. Furthermore, the legislated 10% ownership limit on shares in Tasmanian Perpetual Trustees reduces the likelihood of an alternative offer for the shares in the Company. To date, there have not been any other takeover offers or other proposals for Tasmanian Perpetual Trustees.

Ownership structure of the Proposed Merged Entity

As discussed in Section 4.4, there is an upper limit of 10% on the ownership interest that a single shareholder may hold in the issued shares of Tasmanian Perpetual Trustees.

As part of the Proposed Transaction, the Tasmanian Government has been requested to introduce legislation to amend Tasmania’s Trustee Companies Act 1953 (the Act), to accommodate the Proposed Transaction, whilst retaining the current 10% ownership limit. If amended, the 10% ownership limit will apply to shares owned in the Proposed Merged Entity. This may limit the prospects of the Proposed Merged Entity receiving a takeover offer in the future. The ownership limit on shares in the Proposed Merged Entity is consistent with the current ownership limit in place for share in Tasmanian Perpetual Trustees, and therefore there is no change for Shareholders.

Taxation implications

Capital gains tax roll-over relief may be available to Shareholders since the consideration to be received under the Proposed Transaction will comprise scrip consideration. Further detail in respect to the potential taxation implications is provided in Section 8 of the Explanatory Booklet.

Conclusion on reasonableness

As the Proposed Transaction is fair it is also reasonable.

Opinion

In our opinion, the Proposed Transaction is fair and reasonable to Shareholders. It is therefore in the best interests of Shareholders.

An individual Shareholder’s decision in relation to the Proposed Transaction may be influenced by his or her particular circumstances. If in doubt, the Shareholder should consult an independent adviser.

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

This opinion should be read in conjunction with our detailed report which sets out our scope and findings.

Yours faithfully

DELOITTE CORPORATE FINANCE PTY LIMITED

==> picture [121 x 42] intentionally omitted <==

Stephen Reid Director

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Rachel Foley-Lewis Director

Note: All amounts stated in this report are Australian dollars ($) unless otherwise stated and may be subject to rounding.

7 Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

1	Terms of the Proposed Transaction	10
1.1	Overview of the proposal	10
1.2	Conditions precedent	11
2	Scope of the report	12
2.1	Purpose of the report	12
2.2	Basis of evaluation	12
2.3	Limitations and reliance on information	15
3	Financial services industry	16
3.1	Structure of industry	16
3.2	Wealth management	16
3.3	Banking services	21
4	Profile of Tasmanian Perpetual Trustees	29
4.1	Company history	29
4.2	Principal activities	29
4.3	Competitive position of Tasmanian Perpetual Trustees	32
4.4	Ownership structure	32
4.5	Capital structure	33
4.6	Share price performance	34
4.7	Financial performance	36
4.8	Financial position	40
5	Profile of MyState Financial	42
5.1	Company history	42
5.2	Legal structure	43
5.3	Products and services	43
5.4	Competitive position of MyState Financial	45
5.5	Capital structure	45
5.6	Financial performance	46
5.7	Financial position	48
6	Profile of the Proposed Merged Entity	50
6.1	Introduction	50
6.2	Operations	50
6.3	Management and directors	50

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

6.4	Ownership structure	51
7	Valuation methodology	52
7.1	Valuation methodologies	52
7.2	Selection of valuation methodologies	53
8	Valuation of Tasmanian Perpetual Trustees	55
8.1	Valuation of Tasmanian Perpetual Trustees before the Proposed
	Transaction	55
8.2	Capitalisation of maintainable earnings	55
8.3	Valuation cross-checks	60
9	Valuation of the Proposed Merged Entity	62
9.1	Introduction	62
9.2	Capitalisation of future maintainable earnings	62
9.3	Valuation cross-check	66
10	Evaluation and conclusion	68
10.1	Valuation of consideration	68
10.2	Fairness	68
10.3	Reasonableness	68
10.4	Conclusion	71
Appendices
Appendix 1: Glossary		72
Appendix 2: Comparable entities		74
Appendix 3: Control premium		78
Appendix 4: Sources of information		80
Appendix 5: Qualifications, declarations and consents		81

9 Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

1 Terms of the Proposed Transaction

1.1 Overview of the proposal

On 10 October 2008 the Directors of Tasmanian Perpetual Trustees and the directors of MyState Financial announced a proposal to merge the two entities by way of two schemes of arrangement.

Tasmanian Perpetual Trustees, which is listed on the ASX, provides wealth management services, including financial planning services, trustee services and lending services and is the responsible entity of 12 managed investment schemes, which had over $1 billion of FUM as at 31 December 2008. MyState Financial provides banking, insurance and financial planning services. MyState Financial is a mutual company and therefore is not listed on the ASX.

If the Proposed Transaction is implemented, Tasmanian Perpetual Trustees and MyState Financial will become wholly owned subsidiaries of a newly formed non-operating holding company, MyState Limited, which will be listed on the ASX. Under the merger ratio for the Proposed Transaction announced on 10 October 2008, Shareholders and MyState Financial Members would have been entitled to 37.0% and 63.0% of the equity in the Proposed Merged Entity, respectively.

On 21 January 2009, the Directors of Tasmanian Perpetual Trustees and the directors of MyState Financial announced changes to the Proposed Transaction, including an amendment to the merger ratio. Under the amended merger ratio, Shareholders and MyState Financial Members will be entitled to 32.5% and 67.5% of the equity in the Proposed Merged Entity, respectively. The change in the merger ratio resulted due to changes in business conditions associated with the global financial crisis and the assessment by the directors of each entity as to how this should be reflected in the terms of the Proposed Transaction.

Under the Proposed Transaction, Shareholders will receive one share in the Proposed Merged Entity in consideration for each share held in Tasmanian Perpetual Trustees.

MyState Financial Members will receive, in total, the number of shares in the Proposed Merged Entity that equal 67.5% of the issued share capital in the Proposed Merged Entity. The number of shares to be received by each MyState Financial Member will be determined based on the number of MyState Financial Members as at the Record Date who are eligible to receive shares. Each MyState Financial Member will receive the same number of shares, subject to adjustment for specific circumstances, such as duplicate memberships and memberships held in trust.

The board of the Proposed Merged Entity will initially comprise the following directors:

the existing chairman of Tasmanian Perpetual Trustees, Dr Michael Vertigan AC, will become the chairman of the Proposed Merged Entity
four directors from the existing Tasmanian Perpetual Trustees board of directors
five directors from the existing MyState Financial board of directors.

Full details of the Proposed Transaction are provided in Section 1 of the Explanatory Booklet.

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

1.2 Conditions precedent

The Proposed Transaction is subject to the satisfaction or waiver of a number of conditions, including the following:

receipt of relevant regulatory approvals and consents, including approvals from APRA, ASIC, and the ASX
receipt of relevant regulatory approvals and consents relating to the amendment of the Act to accommodate the proposed ownership structure of the Proposed Merged Entity pursuant to the Proposed Transaction
receipt of approvals under the Banking Act 1959 (Cth), the Financial Sector (Shareholdings) Act 1998 (Cth) and the Financial Sector (Business Transfer and Group Restructure) Act 1999 (Cth) that are necessary or desirable to implement the Proposed Transaction. These approvals have been received
no material adverse change occurs in relation to MyState Financial or Tasmanian Perpetual Trustees
no prescribed occurrences occur in relation to MyState Financial or Tasmanian Perpetual Trustees
representations and warranties of MyState Financial and Tasmanian Perpetual Trustees being true and correct
the novation, assignment, termination or otherwise dealing with, prior to 8.00am on the date of the Court hearing to approve the Proposed Transaction and to the reasonable satisfaction of the parties, of any material agreements binding MyState Financial or Tasmanian Perpetual Trustees which are or may be materially adverse to the interests of the Proposed Merged Entity
the obtaining of tax opinions to the satisfaction of the MyState Financial board of directors and the Tasmanian Perpetual Trustees board of directors in relation to the Proposed Transaction
approval of new MyState Limited shares to be issued to Shareholders and MyState Financial Members for official quotation on the ASX
approval and registration by ASIC of the disclosure statement for the demutualisation of MyState Financial under Schedule 4 of the Corporations Act in a form acceptable to MyState Financial
approval by the required majorities of Shareholders and MyState Financial Members of the Proposed Transaction
Supreme Court approval of the Proposed Transaction in accordance with Section 411(4)(b) of the Corporations Act
approval by special resolution in accordance with Section 136(2) of the Corporations Act and the MyState Financial Constitution to amend the MyState Financial Constitution which will enable the transfer of issued member shares in MyState Financial as provided by the proposed demutualisation and scheme of arrangement between MyState Financial and MyState Financial Members.

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

2 Scope of the report

2.1 Purpose of the report

Whilst an independent expert’s report in respect of the Proposed Transaction may not be required to meet any statutory obligations, the Directors have requested that Deloitte provide an independent expert’s report advising whether, in our opinion, the Proposed Transaction is in the best interests of Shareholders.

2.2 Basis of evaluation

2.2.1 Guidance

Schemes of arrangement can include many different types of transactions, including being used as an alternative to a Chapter 6 takeover bid. The basis of evaluation selected by the expert must be appropriate for the nature of each specific transaction.

Section 640 requires an independent expert’s report in connection with a takeover offer to state whether, in the expert’s opinion, the takeover offer is fair and reasonable. Where the scheme of arrangement has the same effect as a takeover, the form of analysis used by the expert should be substantially the same as for a takeover bid, however, the opinion reached should be whether the proposed scheme is ‘in the best interests of the members of the company’. Accordingly, if an expert were to conclude that a proposal was ‘fair and reasonable’ if it was in the form of a takeover bid, it will also be able to conclude that the proposed scheme is in the best interests of the members of the company.

In our determination as to whether the Proposed Transaction is fair and reasonable and therefore in the best interests of the Shareholders of the Company, we have had regard to common market practice and to Regulatory Guide 111 issued by ASIC in relation to the content of independent expert’s reports.

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

ASIC Regulatory Guide 111

This regulatory guide provides guidance in relation to the content of independent expert’s reports prepared for transactions under Chapters 5, 6 and 6A of the Corporations Act, in relation to:

takeover bids
schemes of arrangement
compulsory acquisitions or buy-outs
acquisitions approved by security holders under item 7 of Section 611 of the Corporations Act (Section 611)
selective capital reductions
related party transactions
transactions with persons in a position of influence
demergers and demutualisations of financial institutions
buy-backs.

ASIC Regulatory Guide 111 refers to a ‘control transaction’ as being the acquisition (or increase) of a controlling stake in a company that could be achieved, for example, by way of a takeover offer, scheme of arrangement, approval of an issue of shares using item 7 of Section 611, a selective capital reduction or selective buy back under Division 2 of Part 2J.1 of the Corporations Act.

In respect of control transactions, under ASIC Regulatory Guide 111 an offer is:

fair, when the value of the consideration is equal to or greater than the value of the shares subject to the proposed scheme. The comparison must be made assuming 100% ownership of the target company, in this case Tasmanian Perpetual Trustees (i.e. including a control premium where relevant)
reasonable, if it is fair, or, despite not being fair, after considering other significant factors, shareholders should accept the offer under the proposed scheme, in the absence of any higher bids before the close of the offer.

To assess whether the Proposed Transaction is in the best interests of Shareholders, we have adopted the tests of whether the Proposed Transaction is either fair and reasonable, not fair but reasonable, or neither fair nor reasonable, as set out in ASIC Regulatory Guide 111.

2.2.2 Fairness

ASIC Regulatory Guide 111 defines an offer as being fair if the value of the offer price is equal to or greater than the value of the securities the subject of the offer. The comparison must be made assuming 100% ownership of the target company.

Accordingly we have assessed whether the Proposed Transaction is fair by comparing the value of a share in the Proposed Merged Entity with the value of a share in Tasmanian Perpetual Trustees. ASIC Regulatory Guide 111 defines an offer in respect of a control transaction as being fair if the value of the offer price is equal to or greater than the value of the securities being the subject of the offer. The comparison must be made assuming 100% ownership of the target company.

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

The shares in Tasmanian Perpetual Trustees have been valued at fair market value, which we have defined as the amount at which the shares would be expected to change hands between a knowledgeable willing buyer and a knowledgeable willing seller, neither of whom is under any compulsion to buy or sell. Special purchasers may be willing to pay higher prices to reduce or eliminate competition, to ensure a source of material supply or sales, or to achieve cost savings or other synergies arising on business combinations, which could only be enjoyed by the special purchaser. Our valuation of a share in Tasmanian Perpetual Trustees has not been premised on the existence of a special purchaser.

We have assessed whether the Proposed Transaction is fair by comparing the value of a share in Tasmanian Perpetual Trustees with the value of the consideration to be received pursuant to the Proposed Transaction, being a share in the Proposed Merged Entity. We have assessed the value of each share in Tasmanian Perpetual Trustees by estimating the current value of Tasmanian Perpetual Trustees on a control basis and dividing this value by the number of shares on issue.

2.2.3 Reasonableness

ASIC Regulatory Guide 111 considers an offer in respect of a control transaction, to be reasonable if either:

the offer is fair
despite not being fair, but considering other significant factors, shareholders should accept the offer in the absence of any higher bid before the close of the offer.

To assess the reasonableness of the Proposed Transaction we considered the following significant factors in addition to determining whether the Proposed Transaction is fair:

any significant shareholdings in Tasmanian Perpetual Trustees
the likely market price and liquidity of shares in Tasmanian Perpetual Trustees in the absence of the Proposed Transaction
taxation losses, cash flows or other benefits through achieving 100% ownership of Tasmanian Perpetual Trustees
any synergies available to the Proposed Merged Entity as a result of the Proposed Transaction
the likelihood of an alternative proposal
other implications for shareholders of rejecting the Proposed Transaction.

2.2.4 Individual circumstances

We have evaluated the Proposed Transaction for Shareholders as a whole and have not considered the effect of the Proposed Transaction on the particular circumstances of individual investors. Due to their particular circumstances, individual investors may place a different emphasis on various aspects of the Proposed Transaction from the one adopted in this report. Accordingly, individuals may reach different conclusions to ours on whether the Proposed Transaction is fair and reasonable and therefore in the best interests of shareholders. If in doubt investors should consult an independent adviser.

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

2.3 Limitations and reliance on information

The opinion of Deloitte is based on economic, market and other conditions prevailing at the date of this report. Such conditions can change significantly over relatively short periods of time. This report should be read in conjunction with the declarations outlined in Appendix 5.

Recent volatility in capital markets and the current economic outlook has created significant uncertainty with respect to the valuation of assets. Recognising these factors, we consider that our opinions may be more susceptible to change than would normally be the case.

This engagement has been conducted in accordance with professional standard APES 225 Valuation Services issued by the Accounting Professional and Ethical Standards Board Limited (APESB)

Our procedures and enquiries do not include verification work nor constitute an audit or a review engagement in accordance with standards issued by the Auditing and Assurance Standards Board.

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

3 Financial services industry

3.1 Structure of industry

Tasmanian Perpetual Trustees and MyState Financial both operate in the financial services industry in Tasmania.

The Australian financial services industry is comprised of retail and non-retail banks, investment banks, credit unions, building societies, superannuation funds, managed funds, insurance offices, securitisation vehicles and various other financial corporations and financiers. The industry grew considerably over the five years to 30 June 2008 with total assets held by financial service providers increasing from $2.2 trillion as at 30 June 2003 to $4.3 trillion as at 30 June 2008 at a compound annual growth rate (CAGR) of 14.8% per annum (p.a.)[1] .

Tasmanian Perpetual Trustees operates predominantly within the wealth management subsector of the financial services industry, providing financial planning services, trustee services and lending services. It is the responsible entity of 12 managed investment schemes.

MyState Financial is a credit union which provides retail banking, insurance and financial planning services. MyState Financial is an authorised deposit-taking institution (ADI) authorised under the Banking Act 1959 to carry on banking business in Australia. Accordingly, MyState Financial operates predominantly within the banking services subsector of the financial services industry.

In the following sections, we have considered the relevant subsectors of the financial services industry as they relate to Tasmanian Perpetual Trustees and MyState Financial, being wealth management and banking services, specifically credit union activities. Where relevant, we have made comment in relation to the operation of these subsectors in Tasmania.

The global financial crisis, which commenced in late 2007 with the sub prime crisis in the United States, has had a significant impact on the stability of large financial institutions and equity markets. As household wealth, business activity and consumption levels have declined, central banks across the world have lowered official interest rates, and governments have introduced interventionary measures in an attempt to stimulate economic activity and stabilise the financial sector. In the sections below, where relevant, we highlight the impact that the global financial crisis has had on the relevant subsectors of the financial services industry.

3.2 Wealth management

3.2.1 Structure of the subsector

The wealth management subsector of the financial services industry in Australia provides products and services to individuals and institutions to assist in the management and investment of funds. Participants in the wealth management subsector typically provide the following products and services:

investment management: in recent years the investment management sector has shifted towards the use of investment managers who specialise in specific asset

1 Source: Reserve Bank of Australia (RBA)

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

classes. Consistent with the move towards specialist investment managers, multi-manager products have become increasingly popular

trustee services : trustee services include the provision of trustee and custodian services. Trustees are the legal owners of assets held within a trust and are legally responsible for the management of assets and for ensuring that decisions are made in the best interests of the trust’s beneficiaries. An advantage of professional trustees is that they can offer continuity, permanence and investment expertise.

A custodian acts on the directions of its clients and, in contrast to a trustee, is simply responsible for holding an asset on behalf of its owner, the client. The main benefit of using a custodian is administrative efficiency through the collection of income and the monitoring and reporting of asset values. The use of trust services has grown in recent years, in line with the broader wealth management subsector (discussed below)

financial planning : financial planners advise individuals on risk management, insurance, taxation, retirement and estate planning. As such, financial planners have a strong influence on the direction of funds into various investment products.

The Financial Planning Association estimated that there were over 16,000 financial planners in Australia as at 30 June 2007, the majority of which were employed by, or associated with, life insurance companies and domestic retail banks. The financial planning subsector has grown in line with the overall financial services industry in recent years. This growth is primarily attributable to the growth in superannuation FUM, since the introduction of compulsory superannuation in Australia in 1992.

The following figure shows the development of FUM (attributable to investment managers but excluding managed fund institutions) over the past 20 years.

Figure 1: FUM attributable to investment managers but excluding managed fund institutions

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----- Start of picture text -----

1,400
1,200
1,000
800
600
400
200
0
$ million
----- End of picture text -----

Source: Australian Bureau of Statistics (ABS)

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

FUM attributable to investment managers but excluding managed fund institutions has grown significantly over the past 20 years at a CAGR of 10.7% p.a. FUM attributable to investment managers but excluding managed fund institutions totalled $924 billion in March 2009, declining from a peak of $1.2 trillion in September 2007[2] . Contributing to this growth in FUM was growth in the wealth management subsector as a result of compulsory superannuation, an ageing population, product innovation and availability, and stock market and other asset returns.

Sources of revenue

Revenue in the wealth management subsector is generally derived in two ways:

commissions and/or trail fees: fund managers receive commissions and/or trail fees usually representing a percentage of FUM. Fund managers may also charge an up-front entry or exit fee. Under this model, any increase in the market value of FUM will result in an increase in the fund manager’s remuneration, and vice-versa
fee for service: under this model, investors pay for services up-front and no ongoing fees are payable. Advisers receive no commission or trail fees relating to the products recommended in the statement of advice and their remuneration for this advice is the up-front fee. Fees will then be incurred for any additional services required.

According to IBISWorld Pty Limited (IBISWorld), total revenue generated by the wealth management subsector (excluding superannuation funds) is estimated to be $4.0 billion for the 2008 financial year, 14.6% lower than for the 2007 financial year. Over the five years to 2008, the CAGR of revenue for the wealth management subsector has been 1.8% p.a.

3.2.2 Value chain for the wealth management subsector

The following diagram shows the value chain for the Australian wealth management subsector.

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----- Start of picture text -----

Figure 2: Wealth management value chain
Product
Investment Responsible
manufacture Dealership Advice
Management entity
and service
Revenue as a percentage of funds under management, administration or advice
40-70 basis points 5-10 bps 30-50 bps 10-20 bps 40-100 bps
(bps)
Key success factors
Performance; Compliance; Brand; Modern IT; Quality management;
people research skill; scale; strong advice model; strong business model;
portfolio modern robust infrastructure; scale;
management information skilled planners; infrastructure leverage
technology (IT); holistic advice
efficiency
----- End of picture text -----

Source: Challenger Financial Services Group

2 ABS

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

The wealth management subsector primarily covers the first four segments of the value chain. However, not all subsector participants are involved in all four segments and specialisation is increasing as participants increasingly focus on one or more core activities and outsource the others.

Investment management

The investment management segment of the value chain refers to the process of physically managing the assets of the fund in accordance with its investment mandate. The wealth management subsector in Australia is characterised by a concentration of several large fund managers owned by banks and life insurance companies, along with a growing number of small to medium sized boutique fund managers. The growing number of boutique fund managers reflects the trend towards specialist managers which, as discussed above, has led to the increasing popularity of multi-manager products. The multi-manager approach enables investors to diversify across a number of fund managers, thereby reducing risk, and enabling small investors to invest in funds to which they would otherwise not have access.

Responsible entity

The responsible entity segment of the value chain relates to the mandatory appointment of a single responsible entity (SRE) which has the dual roles of trustee and manager of the fund. The SRE has numerous duties, primarily relating to compliance and acting in the best interest of investors in the fund. The SRE role is increasingly being outsourced, particularly by smaller fund managers, primarily due to the requirement to have minimum net tangible assets (NTA) of $50,000, or where the fund’s assets exceed $10 million, 0.5% of the value of the fund up to $5 million per fund.

Product manufacture and service

The product manufacture and service segment of the value chain creates the structure and sets the parameters of products in order to meet the needs of a particular target market. The growth in multi-manager products means that this segment is increasingly involved in the selection and allocation of a number of fund managers to establish a fund.

Dealership

The dealership segment of the value chain refers to either a distribution network or an adviser base to promote fund managers’ products. This is a very important aspect of the funds management subsector, however, it takes time to establish and is costly to develop. Generally, fund managers either develop their own advisor base, or enter into alliances with financial institutions with a strong distribution network. The inability to access a strong distribution network or adviser base impedes the ability of a fund manager to market its products and attract new investments.

3.2.3 Regulation

ASIC is the key regulator within the wealth management subsector of the financial services industry. ASIC has supervisory powers over the managed investment sector and is responsible for monitoring the conduct of financial advisers, ensuring compliance with legislative requirements, issuing AFSLs and registering managed investment schemes.

The principal legislation governing the operation of the funds management subsector is the Managed Investments Act (1998), which imposes a number of requirements on fund managers, particularly in relation to investor protection and compliance.

19

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

3.2.4 Barriers to entry

The barriers to entry into the Australian wealth management subsector of the financial services industry are moderate, however they are increasing. The main factors influencing the ability of companies to enter the Australian wealth management subsector are as follows:

establishment cost: the cost of establishing a wealth management business and associated branding is high. The subsector has become highly competitive and the ability to offer a differentiated service offering is important. Success in the subsector is dependent on the ability to establish a reputable and trusted brand that is recognised in the market. The cost of building consumer awareness can be high
skilled staff : obtaining skilled staff with portfolio management, company analysis and securities experience has been increasingly difficult over the past five years, as the subsector has expanded rapidly over that period. Redundancies as a result of the global financial crisis may ease the skills shortage in the short term
product offerings : wealth managers need to have a range of product offerings to attract consumers and meet their investment needs. As such, strong relationships with financial institutions are important
past performance : past performance of a fund manager or financial adviser is a key factor in demonstrating expertise. The inability to demonstrate favourable past performance as a fund manager or financial adviser may reduce the prospects of attracting future clients and investments
high regulation: the subsector is categorised by high regulatory conditions for participants, including high standards required to obtain and maintain an AFSL issued by ASIC.

3.2.5 Outlook

Industry commentators have projected that after a decrease in FUM for the year ending 30 June 2009, due to the global financial crisis and decline in equity markets, FUM will increase over the following five years. This growth in FUM will result in growth in annual revenues for the funds management subsector. The CAGR of revenue for the funds management subsector is projected to be 10.7% p.a. for the five years to 30 June 2014.

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

The figure below shows the expected revenue growth over the next five years.

Figure 3: Revenue growth rate (real)

==> picture [366 x 224] intentionally omitted <==

----- Start of picture text -----

20%
Actual Projected
15%
10%
5%
0%
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14
-5%
-10%
-15%
-20%
Revenue growth (%)
----- End of picture text -----

Source: IBISWorld

The decrease in FUM projected for the year ending 30 June 2009 is likely to increase competition, resulting in reduced fees and greater emphasis on innovation and differentiation of products and services.

Smaller investment managers without a strong presence in niche markets may find it increasingly difficult to compete with large domestic and global operators. Furthermore, underperforming investment managers are likely to exit the market as customers seek strong investment returns. Cross-selling additional products to existing customers will be a key revenue driver along with investment market performance. The importance of having a strong distribution network is expected to increase along with growth by acquisition as a means of improving efficiency.

3.3 Banking services

3.3.1 Structure of the subsector

In contrast to the wealth management subsector, regional factors have a greater influence on the banking subsector. Accordingly, our discussion of the banking services subsector reflects issues relevant to the banking subsector nationally and in Tasmania. In particular, we focus on the operations of credit unions.

The principal participants in the Australian banking sector are the four major banks, regional banks, credit unions and building societies. All of these participants are ADIs and are subject to the same prudential regulations. The use of the terms ‘bank’, ‘credit union’ and ‘building society’ require the satisfaction of certain criteria under Australian prudential regulations.

The four major Australian banks, being the Commonwealth Bank of Australia, Westpac Banking Corporation, National Australia Bank Limited and Australian and New Zealand Banking Group, provide full banking services across Australia. Each of these banks operates an extensive nationwide branch network and is generally well represented across Australia. Branches of each major bank are located throughout Tasmania.

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

In addition to the four major banks, the banking services subsector comprises various regional banks which predominantly service retail customers and small to medium enterprises. Regional banks vary significantly in size and have a range of business models and strategies for growth. Of the regional banks, only Bendigo and Adelaide Bank Limited (Bendigo and Adelaide Bank) and Bank of Queensland Limited have branches in Tasmania.

3.3.2 Credit unions

Credit unions and buildings societies also provide banking services, and there are a number of these entities operating in Tasmania.

Participants in the banking services subsector generally rely on bank deposits, wholesale funding and securitisation of receivables to fund their lending activities. Credit unions predominantly act as intermediaries between lenders and borrowers and loan funds which have been received as deposits from members. Traditionally, deposits taken by credit unions have represented a relatively cheap source of funds due to the relatively low interest rates paid on deposits. However, over the past two decades deposit interest rates offered by all ADIs (including credit unions) have become more competitive, as an increased number of alternative financial service products have emerged in the market, such as managed investment schemes. Consequently, consolidation has become more attractive for credit unions in order to ensure access to adequate cash deposits to fund lending services.

Credit unions, such as MyState Financial, offer similar products and services to the banking sector. These products include:

residential housing finance : this product has increased substantially for credit unions compared to other product segments over the last 20 years. This has been driven by the strong demand for housing and general substitution of more expensive personal credit with mortgage loans, which are generally a less expensive source of finance
personal loans : with the increase in the provision of mortgage loans, the number of personal loans being provided has decreased over the past ten years. Examples of personal loans include vehicle loans and credit cards
other services: many credit unions also offer other services such as health insurance, travel services and managed fund products, usually as an agent for the underlying provider of such products. The introduction of these product offerings by credit unions is relatively recent, and accordingly they currently generate the smallest proportion of revenue for credit unions.

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

The following figure shows the proportion of revenue generated by each product segment for credit unions in Australia for the year ended 31 December 2007.

Figure 4: Product segmentation – credit unions

==> picture [366 x 223] intentionally omitted <==

----- Start of picture text -----

3.8%
16.8%
79.4%
Mortgage lending Personal lending Other services
----- End of picture text -----

Source: IBISWorld

Credit unions have experienced relatively consistent growth over the past ten years with financial assets increasing from $18 billion in 1998 to $44 billion in September 2008. Over this period, the CAGR of asset growth for credit unions has been 9.1% p.a., compared to 15.2% p.a.for other ADIs. The lower CAGR for credit unions has been caused by relatively smaller client bases, limited access to funding, and smaller product offering, compared to other ADIs.

The following figure shows the growth in financial assets held by credit unions over the past ten years, in comparison to other ADIs.

Figure 5: Growth in financial assets over the past ten years

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----- Start of picture text -----

3,000 100
90
2,500
80
70
2,000
60
1,500 50
40
1,000
30
20
500
10
0 0
Jun-98 Jun-99 Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08
Other ADIs (LHS) Credit unions (RHS)
Credit unions ($ billion)
Other ADI ($ billion)
----- End of picture text -----

Source: RBA

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

As mentioned above, residential housing finance comprises a significant proportion of revenue for credit unions. The following figure shows monthly lending commitments for secured residential housing finance, other personal finance and lease finance in Tasmania over the last five years.

Figure 6: Monthly lending commitments in Tasmania

==> picture [397 x 203] intentionally omitted <==

----- Start of picture text -----

300
250
200
150
100
50
0
Sep-03 Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09
$ million
----- End of picture text -----

Source: ABS

Between September 2003 and December 2007, the CAGR for monthly lending commitments in Tasmania was approximately 9% p.a. Over the six months to 30 June 2008, monthly lending commitments in Tasmania decreased by $55 million per month, or approximately 25%. Since June 2008, monthly lending commitments have increased by approximately 44%.

Residential housing finance

A key driver of growth for credit unions has been the growth in residential housing finance. This has been driven by:

increasing property prices which has led to an increase in mortgage lending as purchasers require, on average, more funds to purchase a property
increasing loan to value ratios as a result of lenders’ willingness to provide finance for a greater proportion of the value of a property
population increases, leading to increased demand for housing, and therefore residential housing loans
lower interest rates, which have had a positive effect on the customers’ ability and willingness to borrow

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

the cost of rental accommodation has increased, which has increased the attractiveness to individuals of entering the housing market
government measures, such as the introduction in 1999 of a 50% discount on the capital gains tax payable on assets (including property) held by individuals and some trusts for more than one year, and the introduction of a number of recent federal and state government incentives for first home buyers
consolidation of more expensive personal finance into mortgage loans, which are generally less expensive
since September 2008, monthly lending commitments have increased. Factors contributing to this increase include increases in Federal Government grants for first home buyers and decreases in mortgage lending rates.

Cost of funds

The cost of funds for an individual ADI depends on a variety of factors, such as the official cash rate, competition, global economic conditions and the credit rating of the ADI. ADIs must pay for all funding either through paying deposit interest rates or paying interest on domestic or global debt. The 90-day bank bill swap rate (90-day BBSW) provides a benchmark for the short-term funding cost of the ADIs.

The cost of funding has increased significantly in the 12 months from August 2007 and has become more volatile over the last 12 months. This is primarily due to the increase in the risk premium banks have been required to pay for short term borrowings and the outlook for the official cash rate, which was being driven by the global financial crisis. The decrease in the 90-day BBSW rate since August 2008 is due to cuts to the target cash rate made by the RBA. Since August 2008, the RBA has cut the official interest rate six times, hence the cash rate has reduced from 7.25% in August 2008 to the current cash rate of 3.00%.

3.3.3 Regulation

APRA is the prudential regulator of the Australian financial services industry with responsibility for the monitoring of the capital adequacy, liquidity and credit quality of financial institutions. APRA has had oversight of credit unions since July 1999.

Capital adequacy

ADIs are required to maintain a minimum level of capital relative to their risk-weighted assets. The ratio of capital to risk-weighted assets is referred to as the capital adequacy ratio (CAR) and serves as a measure of an ADI’s ability to absorb losses and meet its obligations.

The capital of ADIs is classified as either Tier 1 or Tier 2, with Tier 1 representing higher-quality assets. Tier 1 capital broadly comprises paid-up ordinary share capital, retained earnings, reserves, current year earnings and permanent irredeemable preference shares. Tier 2 capital generally relates to other capital which falls short of the quality of Tier 1 capital. ADIs are required to maintain a CAR of 8% with at least 50% of the total capital to be held in Tier 1 capital.

ADIs were required to comply with Basel II capital adequacy requirements from 1 January 2008. Basel II is an update to the original International Bank Capital Accord (Basel I), which came into effect in 1998. Basel II is an effort by international banking supervisors to ensure international capital regulations are more consistent, increase the

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

risk sensitivity of regulatory capital and promote enhanced risk-management practices in large, internationally active banking organisations.

Liquidity risk

The liquidity policy for each ADI is determined through consultation with APRA, which places significant emphasis on the internal liquidity management practices of an ADI. ADIs without approved risk management practices maintain the equivalent of 9% of liabilities in high quality liquid assets. This aims to ensure that financial obligations can be met as and when they fall due.

Asset quality and credit exposure

APRA requires ADIs to establish and maintain effective credit risk management systems. APRA must be advised of impaired assets and requires these to be disclosed in published financial statements.

Other regulatory requirements

In addition to APRA supervision, ADIs must comply with the Corporations Act and are therefore also regulated by ASIC. ADIs are also required to hold an AFSL under the Financial Services Reform Act 2001.

The Australian banking sector is also subject to the regulatory and other obligations imposed by other legislation. In particular, the Anti-Money Laundering and CounterTerrorism Financing Act 2006, which received royal assent in December 2006, imposes a number of obligations on banks and credit unions, which were phased in over a two year period.

Federal Government deposit guarantee

The Federal Government announced on 12 October 2008 that it would guarantee all types of deposits held by Australian banks, building societies and credit unions and Australian subsidiaries of foreign-owned banks. This guarantee was offered in response to volatility and uncertainty in the credit markets resulting from the global financial crisis, discussed in Section 3.1 above.

The guarantee was introduced in an attempt to maintain confidence in Australia’s banking sector, which had suffered as a result of the global financial crisis and dramatic recent volatility experienced in world stock markets.

The guarantee has resulted, at least in the short term, in some movement of investor funds away from investment products which are not covered by the guarantee into bank deposits.

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

3.3.4 Barriers to entry

The barriers to entry into the banking services subsector are considered high, as a result of the following factors:

capital requirements: the capital requirements to establish a branch network and to support lending activities are significant
distribution: access to a network of branches is essential to attracting retail customers, whose deposits are essential to fund growth
competition: competition for customers is high due to the number of competitors in the subsector and the availability of substitute products from non-bank lenders
existing participants: the dominant position of the existing financiers that operate within the Australian mortgage sector provides barriers to new entrants aiming to establish a market position
high regulation: regulatory requirements are becoming increasingly stringent, as discussed in Section 3.3.3.

3.3.5 Outlook

As discussed in Section 3.1, the global financial crisis is likely to have a negative impact on the short term earnings outlook for the banking services subsector. Credit unions are likely to continue to face strong competition from the larger banks, which are perceived to have greater security.

Despite the expected downturn in short term performance, industry commentators forecast the banking subsector to grow at a CAGR of 4.6% p.a. for the five years ending June 2014.

The following figure shows the historical and projected growth in revenue for credit unions and the broader financial services industry in Australia.

Figure 7: Revenue growth rate (real)

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----- Start of picture text -----

35.0% Actual Projected
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14
-5.0%
-10.0%
-15.0%
Credit union Financial services
Source: IBISWorld
Revenue growth rate (real) per annum
----- End of picture text -----

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

As shown above, credit unions are projected to experience lower growth than the financial services industry as a whole, with revenue expected to grow at a CAGR of approximately 2.9% p.a. for the five years ending June 2014. This lower growth is projected due to lower mortgage origination and existing mortgage delinquencies. It is therefore expected that there will be greater consolidation amongst credit unions, in an attempt to realise cost efficiencies and achieve greater membership volumes.

28 Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

4 Profile of Tasmanian Perpetual Trustees

4.1 Company history

Tasmanian Perpetual Trustees, which is listed on the ASX, provides wealth management services in Tasmania. The Company also has an interest in Tasmanian Banking Services (TBS), a joint venture with Bendigo and Adelaide Bank. TBS provides banking services in Tasmania predominantly via the branch network of Tasmanian Perpetual Trustees. Tasmanian Perpetual Trustees is currently in negotiations to sell its interest in TBS.

Tasmanian Perpetual Trustees is the only private trustee company currently authorised to operate in Tasmania.

The following figure sets out a summary of the history of the Company.

Figure 8: Company history

1887  Tasmanian Perpetual Trustees was originally established as Tasmanian Permanent Executors and Trustees Association Limited
1978  Name changed to Tasmanian Permanent Executors and Equity Trustees. The name was subsequently changed to Tasmanian Trustees Limited
1986  Listed on the second board of the ASX 1992  Moved to the main board of the ASX 2000  Tasmanian Trustees Limited entered into a joint venture with Bendigo Bank to establish a retail banking organisation to operate in Tasmania
2001  Tasmanian Trustees Limited merged with Perpetual Trustees Tasmania Limited, to form Tasmanian Perpetual Trustees and commenced trading on the ASX under the security code TPX
2003  AFSL granted by ASIC in November 2003 2004  Share split implemented at a ratio of four shares for each Tasmanian Perpetual Trustees share held. As a result of the share split, the number of shares on issue increased from 5.4 million to 21.6 million shares
2006  Registrable Superannuation Entity (RSE) licence granted by APRA 2007  Wound up dormant wholly owned subsidiary Perpetual Trustees Tasmania Limited
Acquired the financial planning businesses of Norm Collings and Ellen Burn
2008  Announced the proposed merger with MyState Financial

Source: Tasmanian Perpetual Trustees, ASX announcements

4.2 Principal activities

Tasmanian Perpetual Trustees employs approximately 100 staff across Tasmania, operating from nine branches in Burnie, Devonport, Glenorchy, Hobart, Kingston, Kings Meadows, Launceston, Rosny and Ulverstone.

Tasmanian Perpetual Trustees derives revenue from the following principal activities:

trustee services: estate planning, wills, power of attorney and estate management and trust administration services. Tasmanian Perpetual Trustees also offers funeral bond facilities and administration under guardianship services

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

funds management: Tasmanian Perpetual Trustees is the responsible entity for a number of managed investment schemes as discussed above. As at 31 December 2008, the Company managed approximately $1.0 billion in FUM. FUM has decreased since June 2008, mainly as a result of the Federal Government’s recent guarantee of bank deposits which resulted in some investors transferring funds from managed investment schemes to bank deposits. Management fees, charged as a percentage of FUM, derived from these services represented over 50% of the revenue earned by Tasmanian Perpetual Trustees in the 2008 financial year (FY)
mortgage financing: first mortgage finance for rural, commercial and business purposes
financial planning: a range of financial planning services which includes retirement and aged care planning, investment and superannuation planning, estate planning and insurance planning
TBS: Tasmanian Perpetual Trustees is a 50/50 joint venture partner with Bendigo and Adelaide Bank in TBS. TBS is a retail banking distribution company which operates from nine branches around Tasmania. Six of these branches are shared retail outlets with Tasmanian Perpetual Trustees, under co-tenant agreements. TBS provides Bendigo and Adelaide Bank products and services to private and corporate clients. Approximately 5% of the consolidated total revenue of Tasmanian Perpetual Trustees for the year ended 30 June 2008 was derived from TBS. Tasmanian Perpetual Trustees is currently in negotiations to sell its interest in TBS.

Funds management

Tasmanian Perpetual Trustees is the responsible entity for a number of managed investment schemes, as shown in the following figure.

Figure 9: Tasmanian Perpetual Trustees’ managed investment schemes

==> picture [378 x 199] intentionally omitted <==

----- Start of picture text -----

Tasmanian Perpetual
Trustees
(Responsible entity)
International share
At call fund Fixed term fund Balanced fund
fund
Cash management fund Long term fund Equity fund Property fund
Select term fund Select mortgage fund Leaders imputation fund
Income plus fund
----- End of picture text -----

Source: Tasmanian Perpetual Trustees 2008 Managed Investment Scheme financial reports

The Company manages three cash schemes, four income schemes and five investment growth schemes and receives a management fee based on the value of FUM for performing this role.

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

Tasmanian Perpetual Trustees holds an AFSL and has been approved by APRA to act as a trustee of superannuation funds in Australia.

The following figure shows the relative size of each of the managed investment schemes managed by Tasmanian Perpetual Trustees, based on FUM as at 30 June 2008.

Figure 10: Tasmanian Perpetual Trustees’ managed investment schemes, based on FUM

==> picture [324 x 212] intentionally omitted <==

----- Start of picture text -----

1.4% 1.1%1.1%
0.1%
2.0%
2.9%
3.1%
3.4%
35.7%
12.7%
13.0%
23.7%
Fixed term fund Long term fund Cash management fund At call fund
International share fund Select mortgage fund Equity fund Leaders imputation fund
Property fund Select term fund Balanced fund Income plus fund
----- End of picture text -----

==> picture [5 x 5] intentionally omitted <==

Source: Tasmanian Perpetual Trustees 2008 Managed Investment Scheme financial reports Note:

Figures are subject to rounding

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

4.3 Competitive position of Tasmanian Perpetual Trustees

Table 2 below sets out the strengths, weaknesses, opportunities and threats (SWOT) for Tasmanian Perpetual Trustees.

Table 2 : SWOT analysis

	Strengths		Weaknesses
	the only private trustee company currently		customer base is predominantly Tasmanian,
	authorised to operate in Tasmania		which restricts market growth
	strong brand recognition within the Tasmanian		small size relative to competitors in the
	market		Australian wealth management subsector
	diversity of product offering and ability to cross		10% cap on ownership of shares under
	sell to customers		current legislation may limit the ability of the
	consistently strong financial performance and		Company to raise equity capital
	strong net asset position
	long established, with $480 million of funds
	under advice or administration as at
	31 December 2008
	Threats		Opportunities
	bank deposits are covered by the Federal		further expand product and service offering
	Government guarantee, which has resulted in a		and also expand the customer base in
	withdrawal of funds from managed investment		Tasmania and interstate
	schemes		established distribution network with other
	very competitive industry and continued		advisers and fund managers provides a
	pressure to lower fees		platform for growth

Source: Deloitte analysis

4.4 Ownership structure

Tasmanian Perpetual Trustees is the only private trustee company currently authorised to operate in Tasmania. As an authorised trustee company, Tasmanian Perpetual Trustees must comply with the Act[3] . The Act sets out the general powers of a trustee and how administration of estates should be undertaken. The Act also dictates the ownership structure for authorised trustee companies. Under the Act, there is a limit of 10% on the ownership interest that a single shareholder may hold in the issued shares of Tasmanian Perpetual Trustees.

3 Trustee Companies Act 1953 (Tasmania)

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

4.5 Capital structure

As at 5 June 2009, Tasmanian Perpetual Trustees had approximately 21.9 million ordinary fully paid shares on issue and the top 20 shareholders held approximately 44% of this issued capital. There are no options on issue over Tasmanian Perpetual Trustees shares.

Tasmanian Perpetual Trustees has implemented an Executive Long Term Incentive Plan (ELTIP) and an Employee Share Plan (ESP). Under the ELTIP, share offers may be made to eligible members of the executive management based on a percentage of their fixed annual remuneration. An eligible member must meet performance criteria in order to receive the shares. Currently the performance criterion is an earnings per share threshold over a three year performance period.

Under the ESP, eligible employees can receive up to $1,000 worth of Tasmanian Perpetual Trustees shares in each financial year. Eligible employees who elect to participate in the ESP agree to forgo remuneration equivalent to the value of the shares they receive.

The following table sets out the top ten shareholders of Tasmanian Perpetual Trustees, and their shareholdings.

Table 3: Top 10 shareholders as at 5 June 2009

	Number of shares	Percentage of
Investor	held	ownership
Trust Company Fiduciary Services Limited	2,093,344	9.6%
Select Managed Funds Limited	1,225,960	5.6%
Bendigo and Adelaide Bank Limited	886,490	4.0%
Cogent Nominees Pty Limited	740,888	3.4%
Mr Brian David Faulkner	678,000	3.1%
UBS Wealth Management Australia Nominees Pty Limited	548,457	2.5%
Milton Corporation Limited	444,992	2.0%
Mrs Wendy Jean Faulkner	405,000	1.8%
ANZ Nominees Limited	348,487	1.6%
Mrs Joan E Evershed	312,160	1.4%
Subtotal	7,683,778	35.1%
Other shareholders	14,222,124	64.9%
Total	21,905,902	100.0%

Source: Tasmanian Perpetual Trustees

Note:

Figures are subject to rounding

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

4.6 Share price performance

The following table sets out the quarterly performance of the price of shares in Tasmanian Perpetual Trustees since the quarter ended June 2006.

Table 4: Tasmanian Perpetual Trustees quarterly share price volume information

Quarter end date	High ($)	Low ($)	Last Trade ($)	VWAP	Volume
May 20092	3.00	2.60	2.60	2.85	135,323
March 2009	3.55	2.70	2.90	2.90	386,414
December 2008	4.29	2.90	3.00	3.00	265,635
September 2008	5.08	4.00	4.20	4.20	238,170
June 2008	6.00	4.95	5.00	5.00	241,085
March 2008	6.60	4.80	5.10	5.09	206,144
December 2007	6.95	6.00	6.25	6.25	361,330
September 2007	8.00	6.75	6.80	6.81	170,846
June 2007	7.49	6.92	7.49	7.49	391,564
March 2007	7.80	6.75	7.10	7.10	211,746
December 2006	7.40	6.25	7.40	7.40	375,074
September 2006	6.89	6.36	6.69	6.61	320,135
June 2006	7.00	6.30	6.49	6.49	277,485

Source: Bloomberg Notes:

VWAP – Volume weighted average price
For two months to 31 May 2009

The price of a share in Tasmanian Perpetual Trustees increased by 16% from $6.70 1 April 2006 to a high of $7.80 on 27 February 2007. Since May 2007, the share price has decreased by approximately 61.6%. Trading in shares in Tasmanian Perpetual Trustees is highly illiquid. Over the past 12 months the average monthly trading volume was approximately 1% of the total outstanding shares.

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

The price movement of shares in Tasmanian Perpetual Trustees and trading volumes since June 2006 are shown in the figure below.

Figure 11: Tasmanian Perpetual Trustees stock activity on ASX

==> picture [344 x 227] intentionally omitted <==

----- Start of picture text -----

$9.0 250,000
$8.0 Acquisition of the financial
planning practice of Norm
Collings and Ellen Burn
200,000
$7.0
$6.0 Initial announcement
of the merger with
MyState Financial
150,000
$5.0
Federal government
$4.0 announced the guarantee
of deposits scheme
100,000
$3.0
Terms of the merger
with MyState Financial
$2.0 revised
50,000
$1.0
$0.0 0
Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09
Volume Tasmanian Perpetual Trustees share price
Volume
Share Price
----- End of picture text -----

Source: Bloomberg

The decrease in the share price from late 2007 to now is consistent with the decrease in the Standard and Poor’s (S&P) ASX 200 Financials Index over the same period, as shown in the following figure.

Figure 12: Tasmanian Perpetual Trustees share price performance compared to S&P ASX 200 Financials

Index

==> picture [343 x 227] intentionally omitted <==

----- Start of picture text -----

$9.0 8,000
$8.0 7,000
$7.0
6,000
$6.0
5,000
$5.0
4,000
$4.0
3,000
$3.0
2,000
$2.0
$1.0 1,000
$0.0 0
Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09
Tasmanian Perpetual Trustees share price S&P ASX 200 Finanicals Index
Index
Share Price
----- End of picture text -----

==> picture [64 x 9] intentionally omitted <==

----- Start of picture text -----

Source: Bloomberg
----- End of picture text -----

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

4.7 Financial performance

The audited profit and loss statements of Tasmanian Perpetual Trustees for the periods ended 30 June 2006 to 30 June 2008, and the reviewed profit and loss statement for the six months ended 31 December 2008 are summarised in the table below.

Table 5: Financial performance

				Actual
				six months
	Actual	Actual		ended
	30 June 2006	30 June 2007	Actual	31 December
	audited	audited	30 June 2008	2008
	consolidated1	consolidated1	audited	reviewed
	($’000)	($’000)	($’000)	($’000) 2
Management fees	12,577	12,412	11,942	n/a
Commissions	5,002	4,216	5,386	n/a
Other fees	1,752	2,145	2,808	n/a
Other income (excluding interest	1,020	1,452	957	n/a
income)
Total revenue	20,351	20,225	21,094	10,362
Revenue growth (%)	n/a	(0.6%)	4.3%	n/a
Expenses	(10,385)	(10,218)	(12,098)	(6,957)
EBITDA	9,966	10,007	8,995	n/a
Margin (%)	49.0%	49.5%	42.6%	n/a
Depreciation and amortisation	(451)	(383)	(443)	n/a
EBIT	9,515	9,624	8,552	3,405
Margin (%)	46.8%	47.6%	40.5%	32.9%
Share of profit of jointly controlled	749	898	1,009	450
equity accounted investee (TBS)
Interest income	61	81	64	n/a
NPBT	10,326	10,603	9,626	3,855
Margin (%)	50.7%	52.4%	45.6%	37.2%
Income tax expense	(2,802)	(2,842)	(2,591)	(1,028)
NPAT	7,523	7,761	7,036	2,827
Margin (%)	37.0%	38.4%	33.4%	27.3%

Source: Tasmanian Perpetual Trustees 2006, 2007, 2008 annual reports and financial results for the six months ended 31 December 2008

Notes:

2006 and 2007 financial results are consolidated as the Tasmanian Perpetual Trustees group included a number of subsidiaries. Prior to the 30 June 2007, these subsidiaries became dormant and were liquidated or deregistered, and consequently consolidated financial statements were not required thereafter
Breakdown of revenue and expenses are not reported in the financial results for the six months ended 31 December 2008
EBITDA – earnings before interest, tax, depreciation and amortisation
EBIT – earnings before interest and tax
n/a – not applicable
NPBT – net profit before tax
Figures in the table above are subject to rounding

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

Tasmanian Perpetual Trustees generates revenue from three main streams, being management fees from managed investment schemes, commission fees in relation to estate and financial planning, and other fees such as set fees for estate planning. The Company also receives revenue from interest, rent and in the form of distributions from managed fund investments which is classified as other income.

Other income for FY2007 includes $282,000 relating to profit on the sale of managed fund investments.

The following figure sets out total revenue of Tasmanian Perpetual Trustees for the year ended 30 June 2008 derived from each of its product and service offerings.

Figure 13: Revenue for Tasmanian Perpetual Trustees

==> picture [241 x 199] intentionally omitted <==

----- Start of picture text -----

5%
13%
56%
26%
Management fees Commissions Other fees Other income (excluding interest income)
----- End of picture text -----

==> picture [5 x 5] intentionally omitted <==

Source: Tasmanian Perpetual Trustees

Over the past five years the contribution to total revenue from each product and service offering has been relatively consistent.

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

The total FUM of Tasmanian Perpetual Trustees from 30 June 2003 to 31 December 2008 is set out in the following figure.

Figure 14: FUM of Tasmanian Perpetual Trustees

==> picture [355 x 215] intentionally omitted <==

----- Start of picture text -----

1,400 8%
1,350 6%
1,300
4%
1,250
2%
1,200
0%
1,150
-2%
1,100
-4%
1,050
-6%
1,000
950 -8%
900 -10%
30-Jun-03 30-Jun-04 30-Jun-05 30-Jun-06 30-Jun-07 30-Jun-08 31-Dec-08
FUM Growth
FUM growth (%)
FUM $ million
----- End of picture text -----

Source: Tasmanian Perpetual Trustees 2003 – 2008 annual reports and half-yearly result as at 31 December 2008

The decrease in FUM in the year to 30 June 2007 was driven primarily by the loss of the Responsible Entity role for the Murdoch Clarke Mortgage Fund, which had FUM of $69 million, to Murdoch Clarke on 1 July 2006.

The global financial crisis has contributed significantly to the decrease in FUM from 30 June 2007 of $1.30 billion to $1.03 billion as at 31 December 2008. In addition, the Federal Government deposit guarantee discussed in Section 3.3.3 has contributed to the decrease in FUM during the six months to 31 December 2008, as investors shifted their funds to institutions protected by the Federal Government deposit guarantee.

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

The EBIT and EBITDA presented in Table 5 are affected by a number of items that are either considered non-recurring or are related to surplus assets and hence do not form part of the trading operations of Tasmanian Perpetual Trustees. We have removed these items to present normalised EBITDA, EBIT, NPBT and NPAT in the table below.

Table 6: Adjusted financial performance

					Actual six
					months
					ended
		Actual			31
		30 June	Actual	Actual	December
		2006	30 June 2007	30 June	2008
		consolidated	consolidated	2008	reviewed
	Reference	($’000)	($’000)	($’000)	($’000)
Reported EBITDA		9,966	10,007	8,995	n/a
Profit on disposal of managed	a	-	(282)	-	-
fund investment
Adjusted EBITDA		9,966	9,725	8,995	n/a
Adjusted margin (%)		49.0%	48.1%	42.6%	n/a
Depreciation and amortisation		(451)	(383)	(443)	n/a
Adjusted EBIT		9,515	9,342	8,552	3,405
Adjusted margin (%)		46.8%	46.2%	40.5%	32.9%
Interest income		61	81	64	n/a
Impairment loss on available	b	-	-	607	471
for sale financial assets
Adjusted NPBT		9,576	9,423	9,224	3,876
Adjusted margin (%)		47.1%	46.6%	43.7%	37.4%
Income tax expense	c	(2,873)	(2,827)	(2,767)	(1,163)
Change in accounting policy	d	-	-	(379)	(391)
Adjusted NPAT		6,703	6,596	6,078	2,322
Adjusted margin (%)		32.9%	32.6%	28.8%	22.4%

Source: Tasmanian Perpetual Trustees 2006, 2007, 2008 annual reports and financial results for the six months ended 31 December 2008

Notes:

The above figures do not include Tasmanian Perpetual Trustees’ share of profits relating to its interest in TBS
Figures in the table above are subject to rounding

We describe each of the above adjustments below:

a) Profit on disposal of managed fund investment has been removed because this is a non-recurring item and does not relate to the trading operations of Tasmanian Perpetual Trustees
b) Impairment loss on available for sale financial assets has been removed as this is a non-recurring item
c) Provision for income tax has been adjusted based on a corporate tax rate of 30% on adjusted NPBT

39 Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

d) As at 30 June 2008, the Company revised the method used to determine the value of corpus administration fees earned but not charged at the reporting date, on estates administered by the Company. The effect of this change increased NPAT by $379,000 for the year to 30 June 2008 and $391,000 for the six months to 31 December 2008. The effect of this change has been removed as this is a non-recurring item.

4.8 Financial position

The audited balance sheet of Tasmanian Perpetual Trustees as at 30 June 2008 and the reviewed balance sheet as at 31 December 2008, are set out in the table below.

Table 7: Financial position

	Actual	Actual 31
	30 June 2008	December 2008
	audited	reviewed
	($’000)	($’000)
Cash	8,192	6,855
Receivables	4,052	4,864
Total current assets	12,244	11,719
Investment in equity accounted investee (TBS)	2,312	1,753
Other financial assets	2,435	1,977
Deferred tax assets	718	878
Property, plant and equipment	3,465	3,590
Goodwill	15,696	15,696
Intangibles	487	613
Total non-current assets	25,113	24,507
Total assets	37,357	36,225
Payables	1,810	1,183
Current tax payable	261	371
Provisions	756	691
Total current liabilities	2,828	2,246
Deferred tax liabilities	324	490
Provisions	338	419
Total non-current liabilities	662	909
Total liabilities	3,490	3,154
Net assets	33,867	33,071
FUM	1,211,000	1,030,000

Source: Tasmanian Perpetual Trustees 2008 annual reports and financial results for the six months ended 31 December 2008 Note:

Figures in the table above are subject to rounding

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

We note the following in relation to the balance sheet as at 31 December 2008 presented above:

Tasmanian Perpetual Trustees held approximately $6.9 million in cash as at 31 December 2008. The Company holds a certain amount of cash as part of its prudential strategy
the investment in equity accounted investee, represents the carrying value of Tasmanian Perpetual Trustees interest in TBS
goodwill, which is not amortised, relates to acquired goodwill as a result of historical transactions, primarily the merger with Perpetual Trustees Tasmania Limited in 2001. Goodwill increased by $1.5 million in 2008 due to the acquisition of financial planning practices based in Burnie and Launceston, Tasmania
Tasmanian Perpetual Trustees has a history of paying franked dividends and had a franking account balance of $7.4 million as at 30 June 2008
the level of debt finance undertaken by Tasmanian Perpetual Trustees is currently subject to limitations imposed by ASIC and APRA. The current gearing level of Tasmanian Perpetual Trustees is nil.

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

5 Profile of MyState Financial

5.1 Company history

MyState Financial was formed on 1 July 2007, as a result of the merger between two credit unions, connectfinancial and islandstate. MyState Financial, an ADI, is the largest Tasmanian-owned credit union, and provides services to members across the state.

islandstate formed as a result of the merging of 22 credit unions across Tasmania over time. Prior to the merger with connectfinancial in 2007, islandstate provided financial services to 80,000 Tasmanians through 11 branches. In addition, islandstate also provided financial planning advice to both members and non-members through islandstate Financial Planning Pty Limited, which was acquired in 2001.

connectfinancial formed as a result of mergers of various credit unions within Tasmania. It first commenced operations in 1959 with the formation of the Tasmania Public Service Savings and Loans Co-operative Society. In 1998, the Teachers Police & Nurses Credit Union merged with Savings & Loans Credit Union to form Connect Credit Union, which was then renamed connectfinancial in 2005.

MyState Financial currently holds deposit funds in excess of $1.6 billion. MyState Financial operates from 12 branches across Tasmania in Burnie, Claremont, Devonport, Glenorchy, Hobart, Kings Meadows, Kingston, Launceston, New Norfolk, New Town, Rosny and Sandy Bay.

The following figure sets out a summary of the history of MyState Financial.

Figure 15: Company history

==> picture [389 x 134] intentionally omitted <==

----- Start of picture text -----

1959  Formation of the Tasmania Public Service Savings and Loans Co-operative Society
1970  Postech Credit Union was founded, which later merged with 21 other credit unions
to become islandstate
1998  Teachers Police & Nurses Credit Union merged with Savings & Loan Credit Union
to become Connect Credit Union
2001  islandstate acquired islandstate Financial Planning Pty Limited
2005  Connect Credit Union renamed connectfinancial
2007  MyState Financial formed as a result of merger between islandstate and
connectfinancial
2008  Tasmanian Perpetual Trustees announce the proposed merger with MyState
Financial
----- End of picture text -----

Source: MyState Financial

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

5.2 Legal structure

Figure 16 below sets out a simplified group structure for MyState Financial.

Figure 16: MyState Financial group structure

==> picture [268 x 118] intentionally omitted <==

----- Start of picture text -----

MyState Financial
100% 100% 100%
Connect Asset
The Gourmet Club Pty islandstate Financial
Management Pty Limited Limited Planning Pty Limited
Source: MyState Financial 2008 annual report
----- End of picture text -----

The principal operations of each of the companies in the MyState Financial group are discussed below.

MyState Financial

MyState Financial is the parent company and is responsible for the provision of personal lending, savings, investment products and insurance.

Connect Asset Management Pty Limited

Connect Asset Management Pty Limited administers two mortgage securitisation programs. The securitisation of mortgages provides MyState Financial with an additional source of funds.

The Gourmet Club Pty Limited

The Gourmet Club Pty Limited is Tasmania’s largest membership loyalty club offering dining, retail and other lifestyle benefits across the state at over 150 locations, in addition to discount accommodation and car rental bookings around the country.

islandstate Financial Planning Pty Limited

Previously, islandstate Financial Planning Pty Limited provided financial planning advice to both members of islandstate credit union and non-members. These services have been integrated within the operations of MyState Financial and islandstate Financial Planning Pty Limited is currently in voluntary liquidation.

5.3 Products and services

MyState Financial offers a diverse range of services to its members, including:

loans: MyState Financial offers a range of loan types, including home, land, motor vehicle and personal loans, overdraft facilities and credit cards. As at 31 December 2008, MyState Financial had residential loan assets of approximately $895.3 million, personal loan assets of approximately $140.4 million and commercial loan assets of approximately $47.2 million

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

savings and term-deposit accounts: MyState Financial offers members a number of savings and term-deposit account options. MyState Financial Member deposits totalled approximately $1.3 billion as at 31 December 2008. Deposits are the primary source of funds for the lending facilities of MyState Financial and are protected by the Federal Government deposit guarantee
financial advice: MyState Financial offers members and non-members financial advice, provided by qualified financial planners
rewards : The Gourmet Club Pty Limited, which is owned and operated by MyState Financial, provides a variety of benefits to members from a number of locations across Tasmania and mainland Australia
mortgage securitisation : MyState Financial originates and services loans for a mortgage securitisation program, which is administered by its wholly owned subsidiary, Connect Asset Management Pty Limited.

The following figure shows the loan book assets of islandstate, connectfinancial and MyState Financial over the last three years and six months ended as at 31 December 2008.

Figure 17: Loan book assets

==> picture [359 x 213] intentionally omitted <==

----- Start of picture text -----

1,600 16%
1,400 14%
12%
1,200
10%
1,000
8%
800
6%
600
4%
400
2%
200 0%
0 -2%
30-Jun-06 30-Jun-07 30-Jun-08 31-Dec-08
islandstate connectfinancial/MyState Financial Growth (%)
$ million
----- End of picture text -----

Source: MyState Financial 2008 annual report, connectfinancial 2007 annual report, islandstate 2007 annual report and management accounts for the six months to 31 December 2008

During the year ended 30 June 2007, loan book assets increased by 15.7%, compared to the previous year. During the year ended 30 June 2008, MyState Financial increased the size of its loan book by 8.8% compared to the combined position of islandstate and connectfinancial at 30 June 2007. From 30 June 2008 to 31 December 2008, the loan book decreased by approximately 1% primarily as a consequence of the global financial crisis.

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

5.4 Competitive position of MyState Financial

The following table sets out the SWOT for MyState Financial.

Table 8: SWOT analysis

	Strengths		Weaknesses
	strong brand recognition in Tasmania		customer base is predominantly Tasmanian
	loyal base of approximately 117,000 members		based which restricts market growth
	with many having a long association with the		reliance on member deposits to grow business
	mutual		no dividends are paid to members
	strong operating results and historically strong net interest margin		narrow product range which renders the business dependent on certain income streams
	benefits from government guarantee on deposits		current focus on retail markets with limited
	and securitisation capability		access to wholesale clients
	strong distribution network
	scale achieved through merger of islandstate
	and connectfinancial has resulted in a valuable
	customer base
	Threats		Opportunities
	unlisted and mutual status restricts access to		expand into interstate markets in order to
	capital to fund growth. MyState Financial is		grow the customer base
	reliant on customer deposits to fund its lending activities		further acquisitions in the Tasmanian market to increase scale
	high cost of technology development such as online transaction services affects competitiveness with other ADIs		expand existing product offerings such as the financial planning arm, to help increase commission revenue from referrals, reduce
			volatility of earnings and enhance access to
			wholesale clients
			ability to penetrate the business and
			wholesale markets through increased scale
			achieved through the prior merger

Source: Deloitte analysis

5.5 Capital structure

MyState Financial is a mutual and is therefore beneficially owned by its members. Each individual member holds one share, which is non-transferrable, and is only permitted to hold one share in any single name. MyState Financial currently has approximately 117,000 members.

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

5.6 Financial performance

The aggregated profit and loss statements of MyState Financial for the years ended 30 June 2006, 30 June 2007 the audited profit and loss statement for the year ended 30 June 2008, and reviewed interim accounts for six months ended 31 December 2008 are summarised in the table below.

Table 9: Financial performance

				Actual
				six months
	Actual	Actual	Actual	31 December
	30 June 2006	30 June 2007	30 June 2008	2008
	aggregated ($’000) 1	aggregated ($’000) 1	audited ($’000)	reviewed ($’000)
Interest income	91,424	109,806	132,037	72,333
Interest expense	(44,903)	(58,568)	(76,772)	(45,032)
Net interest	46,521	51,238	55,265	27,301
Net interest margin (%)2	3.7%	3.6%	3.5%	n/a
Non-interest income	20,454	21,178	20,003	9,799
Non-interest expense	(51,943)	(61,578)	(55,157)	(29,731)
Bad and doubtful debts expense	(1,218)	(1,367)	(3,442)	(1,246)
NPBT	13,814	9,472	16,669	6,123
NPBT margin (%)	12.3%	9.3%	11.0%	7.5%
Income tax expense	(4,125)	(2,726)	(4,518)	(1,840)
NPAT	9,689	6,746	12,151	4,282
NPAT margin	8.7%	6.6%	8.0%	5.1%

Source: MyState Financial 2008 annual report, connectfinancial 2007 annual report, islandstate 2007 annual report and reviewed interim accounts for the six months ended 31 December 2008

Notes:

Based on the aggregation of financial results of islandstate and connectfinancial (which have been separately audited) as compiled by Deloitte for the purpose of this report. The aggregated financial results shown above do not necessarily reflect the consolidated financial performance of MyState Financial and have not been reviewed or audited by Deloitte or any other party
Net interest margin is calculated as net interest income as a percentage of average interest bearing assets
Figures in the table above are subject to rounding

The majority of revenue generated by MyState Financial relates to interest income on loans outstanding, contributing approximately 86% of total revenue in the year to 30 June 2008. MyState Financial also receives non-interest income from insurance commissions, loan fees and other fees and commissions in relation to other products and services provided to members. In the year to 30 June 2008, insurance commissions contributed 2%, loan fees contributed 2% and other fees and commissions contributed 10% to the total revenue of MyState Financial.

The consolidated financial performance in 2007 was significantly affected by merger costs incurred in respect of the merger of islandstate and connectfinancial.

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

The results presented in Table 9 above are affected by a number of unusual, non-recurring items. In the following table we have removed these items to present normalised NPBT and NPAT.

Table 10: Adjusted financial performance

					Actual
					six months
					31
		Actual	Actual	Actual	December
		2006	2007	2008	2008
		aggregated	aggregated	audited	reviewed
	Reference	($’000)	($’000)	($’000)	($’000)
Reported NPBT		13,814	9,471	16,669	6,123
Merger costs	a	-	7,352	2,300	-
Expenses incurred on strategic
projects and staff costs	b	-	-	-	1,547
Adjusted NPBT		13,814	16,823	18,969	7,670
Adjusted margin (%)		12.3%	12.8%	12.5%	9.3%
Income tax expense	c	(4,144)	(5,047)	(5,691)	(2,301)
Adjusted NPAT		9,670	11,776	13,278	5,369
Adjusted margin (%)		8.6%	9.0%	8.7%	6.5%

Source: MyState Financial 2008 annual report, connectfinancial 2007 annual report, islandstate 2007 annual report and reviewed interim accounts for the six months ended 31 December 2008

Notes:

Based on the aggregation of financial results of islandstate and connectfinancial (which have been separately audited) as compiled by Deloitte for the purpose of this report. The aggregated financial results shown above do not necessarily reflect the consolidated financial performance of MyState Financial and have not been reviewed or audited by Deloitte or any other party
Figures in the table above are subject to rounding

We describe each of the above adjustments below:

a) Costs relating to the merger of islandstate and connectfinancial have been removed from the 2007 and 2008 financial performance because these are non-recurring items
b) Expenses incurred on strategic projects and staff costs for the six months ended 31 December 2008 have been removed
c) Provision for income tax has been adjusted based on a corporate tax rate of 30% on adjusted NPBT.

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

5.7 Financial position

The audited consolidated balance sheet of MyState Financial as at 30 June 2008 and the reviewed consolidated balance sheet as at 31 December 2008 are set out in the table below.

Table 11: Financial position

		Actual
	Actual	31 December
	30 June 2008	2008
	audited	reviewed
	($’000)	($’000)
Cash	8,485	9,685
Receivables	5,609	3,818
Available for sale financial assets	184,324	237,416
Other assets	4,287	6,366
Loans receivable	1,482,013	1,468,527
Property, plant and equipment	12,201	14,379
Intangibles	5,694	2,946
Tax assets	4,081	7,656
Total assets	1,706,695	1,750,793
Payables	41,306	22,668
Provisions	2,828	4,986
Deposits1	1,541,048	1,602,087
Tax liabilities	1,315	371
Total liabilities	1,586,497	1,630,112
Net assets	120,198	120,682

Source: MyState Financial 2008 annual report and management accounts for the six months ended 31 December 2008

Notes:

This includes ConQuest Mortgage Trust notes and residential mortgage backed securities (RMBS)
Figures in the table above are subject to rounding

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

We note the following in relation to the balance sheet as at 31 December 2008:

MyState Financial has approximately $1.5 billion of loan assets owing by members. The majority of these loans (approximately 87%) relate to residential loans. Personal loans account for $140.4 million and commercial loans account for $47.2 million. MyState Financial also has a specific provision for doubtful debts of $4.2 million which represents approximately 0.3% of the loans outstanding. No other provisions currently exist
available for sale financial assets include funds due from financial and other nonbank financial institutions
other assets include shares held in unlisted companies, and an interest rate swap that has been recorded at fair value. Shares in unlisted companies includes the interest of MyState Financial in the Gourmet Club Pty Limited, held at a value equal to the price of a recent offer for the shares
as at 31 December 2008, the carrying value of the interest of MyState Financial in properties located in Launceston and Hobart (included in property, plant and equipment), were approximately $630,000 and $36,000, respectively. The Launceston property was sold in February 2009 for $560,000, with net proceeds from the sale of approximately $540,000
intangible assets include goodwill which has been recognised as part of business combinations. In addition, the entity has also recognised licence fees, software and RMBS set-up costs, all of which are being amortised over their respective useful lives
the franking account balance for MyState Financial was $37.3 million as at 30 June 2008.

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

6 Profile of the Proposed Merged Entity

6.1 Introduction

In this section we set out a profile of the Proposed Merged Entity, including:

a brief overview of the operational segments of the Proposed Merged Entity
the ownership structure of the Proposed Merged Entity, split between Tasmanian Perpetual Trustees shareholders and MyState Financial shareholders.

6.2 Operations

Through the combination of Tasmanian Perpetual Trustees and MyState Financial, the Proposed Merged Entity will become a diversified financial services group with increased scale and will be able to provide a range of financial products and services to existing and new customers. It is intended that the Proposed Merged Entity will offer products and services in new market segments both in Tasmania and, in due course, mainland Australia.

Based on the historical results for Tasmanian Perpetual Trustees and MyState Financial, individually, it is expected that the major sources of revenue for the Proposed Merged Entity will be interest income from loans (72%), management fees (12%) and other revenue, including insurance and other commissions and fees (16%). Historical financial results suggest that MyState Financial is expected to contribute approximately 65% of the historical combined NPAT of the Proposed Merged Entity with 35% expected to be contributed by Tasmanian Perpetual Trustees.

If the Proposed Transaction is implemented, the management of Tasmanian Perpetual Trustees and MyState Financial have jointly estimated cost savings to be realised over a three year period in the range from approximately $3.5 million to $4.5 million per annum (before tax) in the final year. In addition, revenue synergies are expected to arise in the future from cross selling and referral activities.

6.3 Management and directors

The board of directors of the Proposed Merged Entity will initially comprise:

the existing chairman of Tasmanian Perpetual Trustees, Dr Michael Vertigan AC, who will become the chairman of MyState Limited
four directors from the existing Tasmanian Perpetual Trustees board of directors
five directors from the existing MyState Financial board of directors.

Accordingly, the Proposed Merged Entity will be jointly controlled by Tasmanian Perpetual Trustees and MyState Financial, as the board will comprise of an equal number of representatives from Tasmanian Perpetual Trustees and MyState Financial. The total number of board members is expected to reduce in future years.

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

6.4 Ownership structure

The following figure shows the proposed ownership structure of the Proposed Merged Entity in the event the Proposed Transaction is implemented.

Figure 18: Ownership structure of the Proposed Merged Entity

==> picture [225 x 170] intentionally omitted <==

----- Start of picture text -----

Former Tasmanian
Former MyState
Perpetual Trustees
Financial members
Shareholders
32.5%
67.5%
MyState Limited
(ASX Listed)
100%
100% 100%
Tasmanian
MyState Financial
Perpetual Trustees
----- End of picture text -----

Source: ASX announcements dated 10 October 2008 and 21 January 2009

As shown above, if the Proposed Transaction is implemented, the Proposed Merged Entity will be established as a non-operating holding company called MyState Limited and Tasmanian Perpetual Trustees and MyState Financial will be subsidiaries of MyState Limited.

The following table shows the expected capital structure of the Proposed Merged Entity after implementation of the Proposed Transaction.

Table 12: Capital structure of the Proposed Merged Entity

	Total shares
	outstanding	% of shares
	(’000s)	outstanding
Tasmanian Perpetual Trustees shares outstanding	21,906	100.0%
New shares of the Proposed Merged Entity issued to Tasmanian	21,906	32.5%
Perpetual Trustees Shareholders
New shares of the Proposed Merged Entity issued to MyState	45,497	67.5%
Financial Members
Total shares outstanding of the Proposed Merged Entity	67,403	100.0%

Source: Tasmanian Perpetual Trustees and Deloitte analysis

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

7 Valuation methodology

7.1 Valuation methodologies

To estimate the fair market value of Tasmanian Perpetual Trustees and the Proposed Merged Entity we have considered common market practice and the valuation methodologies recommended by ASIC Regulatory Guide 111, which deals with the content of independent expert’s reports. These are discussed below.

7.1.1 Market based methods

Market based methods estimate a company’s fair market value by considering the market price of transactions in its shares or the market value of comparable companies. Market based methods include:

capitalisation of maintainable earnings
analysis of a company’s recent share trading history
industry specific methods.

The capitalisation of maintainable earnings method estimates fair market value based on the company’s future maintainable earnings and an appropriate earnings multiple. An appropriate earnings multiple is derived from market transactions involving comparable companies. The capitalisation of maintainable earnings method is appropriate where the company’s earnings are relatively stable.

The most recent share trading history provides evidence of the fair market value of the shares in a company where they are publicly traded in an informed and liquid market.

Industry specific methods estimate market value using rules of thumb for a particular industry. Generally rules of thumb provide less persuasive evidence of the market value of a company than other valuation methods because they may not account for company specific factors.

7.1.2 Discounted cash flow methods

Discounted cash flow methods estimate market value by discounting a company’s future cash flows to a net present value. These methods are appropriate where a projection of future cash flows can be made with a reasonable degree of confidence. Discounted cash flow methods are commonly used to value early stage companies or projects with a finite life.

7.1.3 Asset based methods

Asset based methods estimate the market value of a company’s shares based on the realisable value of its identifiable net assets. Asset based methods include:

orderly realisation of assets method
liquidation of assets method
net assets on a going concern basis.

The orderly realisation of assets method estimates fair market value by determining the amount that would be distributed to shareholders, after payment of all liabilities including realisation costs and taxation charges that arise, assuming the company is wound up in an orderly manner.

52

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

The liquidation method is similar to the orderly realisation of assets method except the liquidation method assumes the assets are sold in a shorter time frame. Since wind up or liquidation of the company may not be contemplated, these methods in their strictest form may not necessarily be appropriate. The net assets on a going concern basis method estimates the market values of the net assets of a company but does not take account of realisation costs.

These asset based methods ignore the possibility that the company’s value could exceed the realisable value of its assets as they ignore the value of intangible assets such as customer lists, management, supply arrangements and goodwill. Asset based methods are appropriate when companies are not profitable, a significant proportion of a company’s assets are liquid, or for asset holding companies.

7.2 Selection of valuation methodologies

We are of the opinion that the most appropriate methodology to value Tasmanian Perpetual Trustees and the Proposed Merged Entity is the capitalisation of maintainable earnings method due to the following factors:

both Tasmanian Perpetual Trustees and MyState Financial have shown a relatively consistent pattern of historical earnings which is expected to continue in the future
management of Tasmanian Perpetual Trustees and MyState Financial have provided us with details of their outlook for the financial performance for FY2009. Tasmanian Perpetual Trustees has also published half yearly accounts for the six months to 31 December 2008. MyState Financial have also prepared reviewed half yearly account for the six months to 31 December 2008
there are an adequate number of publicly listed companies with operations sufficiently similar to those of Tasmanian Perpetual Trustees and the Proposed Merged Entity to provide meaningful analysis
neither Tasmanian Perpetual Trustees nor the Proposed Merged Entity have a finite lifespan, nor is either company required to undertake significant capital expenditure in the near future
there are no long-term cash flow projects available for either Tasmanian Perpetual Trustees or the Proposed Merged Entity. Consequently, the discounted cash flow method is not appropriate.

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

In addition, we have also considered the following methodologies to provide additional evidence of the fair market value of Tasmanian Perpetual Trustees and the Proposed Merged Entity:

Tasmanian Perpetual Trustees
share trading in Tasmanian Perpetual Trustees prior to the initial announcement of the Proposed Transaction on 10 October 2008
the ratio of equity value of the company to FUM (FUM ratio) implied by our valuation of a share in Tasmanian Perpetual Trustees compared to the FUM ratios observed for comparable listed companies
the dividend yield implied by our valuation of a share in Tasmanian Perpetual Trustees compared to the dividend yields observed for comparable listed companies
Proposed Merged Entity
share trading in Tasmanian Perpetual Trustees after the initial announcement of the Proposed Transaction on 10 October 2008
the ratio of equity value of a company to the NTA (NTA multiple) implied by our valuation of a share in the Proposed Merged Entity compared to the NTA multiples observed for comparable listed companies.

Trading in shares in Tasmanian Perpetual Trustees is highly illiquid. Over the past twelve months the average monthly trading volume was approximately 1% of the total outstanding shares.

Notwithstanding the regular market announcements made by Tasmanian Perpetual Trustees, we do not consider that share trading provides sufficiently robust evidence as to the value of a share in Tasmanian Perpetual Trustees due to the highly illiquid market for the shares.

We also considered other cross checks for our valuation of a share in Tasmanian Perpetual Trustees and our valuation of a share in the Proposed Merged Entity, however they were inconclusive.

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

Valuation of Tasmanian Perpetual Trustees

8.1 Valuation of Tasmanian Perpetual Trustees before the Proposed Transaction

Deloitte has estimated the fair market value of a share in Tasmanian Perpetual Trustees before the Proposed Transaction to be in the range of $3.10 to $3.55, on a control basis.

For the purpose of our opinion fair market value is defined as the amount at which a share would be expected to change hands between a knowledgeable willing buyer and a knowledgeable willing seller, neither being under a compulsion to buy or sell. We have not considered special value in this assessment.

We estimated the fair market value of Tasmanian Perpetual Trustees before the Proposed Transaction using the capitalisation of maintainable earnings method. To provide additional evidence as to the value of a share in the Company, we have also considered the following:

the FUM ratio implied by our valuation of a share in Tasmanian Perpetual Trustees compared to the FUM ratios observed for comparable listed companies
the dividend yield implied by our valuation of a share in Tasmanian Perpetual Trustees compared to the dividend yields observed for comparable listed companies.

Our valuation of a share in Tasmanian Perpetual Trustees and the supporting cross checks are set out in Sections 8.2 to 8.3.

8.2 Capitalisation of maintainable earnings

The capitalisation of maintainable earnings method estimates fair market value by capitalising future earnings using an appropriate multiple, adding any surplus or non-operating assets and applying a premium for control. To value Tasmanian Perpetual Trustees using the capitalisation of maintainable earnings requires the determination of the following:

an estimate of future maintainable earnings
an appropriate earnings multiple
the value of any surplus assets
an appropriate premium for control.

Our considerations on each of these are discussed separately below.

8.2.1 Future maintainable earnings

Future maintainable earnings represent the level of maintainable earnings that the existing operations could reasonably be expected to generate. We have selected NPAT as an appropriate measure of earnings for Tasmanian Perpetual Trustees.

Tasmanian Perpetual Trustees holds a proportion of its assets in liquid assets, such as cash, as part of its prudential strategy. The interest income earned by Tasmanian Perpetual Trustees from these investments is considered a part of the operation of the business, and not an outcome of the financing of the business. NPAT incorporates the effects of net interest income or expense and this allows a better comparison with earnings multiples of other companies operating in the wealth management subsector of the Australian financial services industry.

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

We have estimated future maintainable NPAT to be $4.5 million. In determining future maintainable NPAT we have considered the following:

the adjusted NPAT, growth rates and NPAT margins for Tasmanian Perpetual Trustees which are set out in Section 4.7 and summarised below:

Table 13: Adjusted financial performance

					Actual
		Actual	Actual	Actual	31 December
		30 June 2006	30 June 2007	30 June 2008	2008
	Reference	($’000)	($’000)	($’000)	($’000)
Adjusted NPAT	4.7	6,703	6,596	6,078	2,322
NPAT growth (%)		n/a	(1.6%)	(7.9%)	n/a
NPAT margin (%)		32.9%	32.6%	28.8%	22.4%

Source: Tasmanian Perpetual Trustees 2006, 2007, 2008 annual reports and the financial results for the six month ended 31 December 2008

Note:

The above figures do not include Tasmanian Perpetual Trustees’ share of profits relating to its interest in TBS
management’s view of the outlook for the financial performance of Tasmanian Perpetual Trustees for the year ending 30 June 2009 including revised profit guidance provided to the market on 9 April 2009
discussions with the management of Tasmanian Perpetual Trustees as to the current trading position of the Company and its growth prospects in the future
consideration of the overall impact on the wealth management subsector of the global financial crisis and the likely resultant impact on Tasmanian Perpetual Trustees
earnings for the year ending 30 June 2009 are expected to be lower than in prior years due to the recent decline in FUM. Consequently, revenues from management fees have declined since 1 July 2008, without a commensurate decrease in costs
the adjusted NPAT for 2007 and 2008 was $6.6 million and $6.1 million, respectively. A future maintainable NPAT of $4.5 million implies an NPAT margin in the range of 18% to 23% based on revenue in the range of $20 million to $25 million. This is lower than the average historical NPAT margin for the three years to 30 June 2008 of approximately 31%, but is broadly consistent with the NPAT margin for the six months to 31 December 2008 of 22%. The NPAT margin is also broadly consistent with the historical NPAT margins observed for the comparable companies operating in the wealth management subsector of the financial services industry of 27%. These companies, together with their NPAT margins, are summarised in Appendix 2.

Taking into account the above considerations, for the purposes of our valuation, we have estimated future maintainable NPAT to be $4.5 million.

8.2.2 Earnings multiple

We have selected an earnings multiple in the range of 12.5 times to 13.5 times NPAT on a listed minority basis to apply to future maintainable NPAT of Tasmanian Perpetual Trustees.

In selecting these earnings multiples we have considered:

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

earnings multiples derived from share market prices of comparable listed companies and analyst earnings estimates
prices achieved in mergers and acquisitions of comparable companies.

These are discussed separately below.

Share market trading multiples

The share market valuation of listed companies provides evidence of an appropriate earnings multiple for Tasmanian Perpetual Trustees. The share price of a listed company represents the market value of a minority interest in that company.

We have compiled a selection of listed companies operating in the Australian wealth management subsector which we consider to be comparable to Tasmanian Perpetual Trustees. These companies, together with their earnings multiples, are summarised in Appendix 2.

Our comments in relation to the multiples implied by the trading prices of shares in comparable companies, are set out below:

the comparable companies set out in Appendix 2 offer trustees services, asset management and financial planning services
the overall average trading multiple of the comparable companies is 14.2 times historical NPAT and 15.8 times forecast NPAT. The observed historical multiple for IOOF Holdings Limited does not reflect the merged entity, arising from the merger with Australian Wealth Management Limited, which was completed on 30 April 2009. Therefore we have excluded the observed historical multiple of IOOF Holdings Limited from our analysis. The average trading multiple of the comparable companies excluding the historical NPAT multiple of IOOF Holdings Limited is 11.0 times historical NPAT and 15.8 times forecast NPAT
we consider the companies offering trustee services and asset management services to be the most comparable to Tasmanian Perpetual Trustees, as the provision of these services contributed approximately 60% of the FY2008 revenue of Tasmanian Perpetual Trustees. The average trading multiple of the companies offering trustee services and asset management services is 17.6 times forecast NPAT
specifically, we consider Equity Trustees Limited and Trust Company Limited to be the most comparable companies to Tasmanian Perpetual Trustees. Both of these companies offer similar products and services to Tasmanian Perpetual Trustees, including funds management, financial planning and trustee services. The average trading multiple for Equity Trustees Limited and Trust Company Limited is 14.9 times forecast NPAT.

Specific details regarding the above companies and the earnings multiples are provided at Appendix 2.

Merger and acquisition multiples

The price achieved in mergers or acquisitions of comparable companies provides evidence of an appropriate earnings multiple for Tasmanian Perpetual Trustees. The acquisition price of a company represents the market value of a controlling interest in that company. The difference between the market value of a controlling interest and a minority interest is referred to as the premium for control.

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

We have considered transactions in companies and assets with operations comparable to Tasmanian Perpetual Trustees. The selected transactions involved companies providing funds management and financial planning services. We were unable to identify any transactions involving companies providing trustee services.

Most of the recent transactions in comparable companies and assets identified are all over six months old and therefore the transaction multiples may not be reflective of current market conditions. For this reason, we have excluded these from our analysis.

Selected multiple

In selecting an appropriate multiple to apply to the future maintainable NPAT of Tasmanian Perpetual Trustees, we have considered the following:

the overall average trading multiple of the comparable companies is 15.8 times forecast NPAT, on a listed minority basis
we consider Equity Trustees Limited and Trust Company Limited to be the most comparable companies to Tasmanian Perpetual Trustees. Both of these companies offer similar products and services to Tasmanian Perpetual Trustees, including funds management, financial planning and trustee services. The average trading multiple for Equity Trustees Limited and Trust Company Limited is 14.9 times forecast NPAT
the size of Tasmanian Perpetual Trustees relative to the comparable companies, and future trading outlook given its scale, breadth of services and its current and prospective geographical spread.

Taking into account these factors, we have selected a multiple range of 12.5 times to 13.5 times NPAT on a listed minority basis to apply to the selected future maintainable earnings for Tasmanian Perpetual Trustees.

8.2.3 Surplus assets

Surplus assets are those assets owned by a company that are surplus to its main operating activities, such as unused property, loans or investments. Such assets should be valued separately from the main operating activities of the company, after adjusting operating results to remove the net-income or expense provided by the surplus assets.

As discussed in Section 4.2, Tasmanian Perpetual Trustees is currently in negotiations to sell its 50% interest in TBS. On this basis, we have treated the investment in TBS as a surplus asset.

We have included the 50% interest in TBS at a value in the range of $5.0 million to $7.0 million, based on management’s expectations of the consideration to be received as a result of the current sales negotiations.

8.2.4 Premium for control

Earnings multiples derived from market trading do not reflect the market value for control of a company as they are for portfolio holdings. The difference between the market value of a controlling interest and a minority interest is referred to as the premium for control. Australian studies indicate the premiums required to obtain control of companies range between 20% and 40% of the portfolio holding equity values.

The owner of a controlling interest has the ability to do many things that the owner of a minority interest does not. These include:

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

control the cash flows of the company, such as dividends, capital expenditure and compensation for directors
determine the strategy and policy of the company
make acquisitions, or divest operations
control the composition of the board of directors.

The following factors have been taken into consideration in determining an appropriate control premium to apply to the listed minority value of the equity in Tasmanian Perpetual Trustees:

there is a limit to the proportion of shares in Tasmanian Perpetual Trustees which may be held by a single shareholder. No shareholder may hold over 10% of the total number of shares on issue and consequently, no individual shareholder can gain control over the Company, without seeking and obtaining an amendment to the Act. This may reduce the pool of potential purchasers for Tasmanian Perpetual Trustees and may therefore reduce the premium for control
the control premiums paid in recent transactions for companies operating in the Australian financial services industry range between (54.4%) to 65.0% with an average in the range of 15% to 20%, as set out in Appendix 3
the offer for the shares in Australian Wealth Management Limited pursuant to the merger between Australian Wealth Management Limited and IOOF Holdings Limited implies a control premium of 19.5% above the share price one day prior to the announcement of the merger
there may be synergies that could be achieved by potential purchasers of Tasmanian Perpetual Trustees, such as cost synergies, including a reduction in corporate overheads
the gearing level of Tasmanian Perpetual Trustees, which is nil, and the restrictions on gearing imposed on the Company by ASIC and APRA.

Taking into account these factors, we consider a premium for control in the range of 10% to 15%, which is at the lower end of the range observed for recent transactions in the Australian financial services industry, to be reasonable.

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

8.2.5 Valuation: capitalisation of maintainable earnings

The value of Tasmanian Perpetual Trustees derived using the capitalisation of maintainable earnings method is summarised below.

Table 14: Summary – capitalisation of maintainable earnings method

			Low value	High value
	Section		($’000)	($’000)
Future maintainable NPAT	8.2.1	($’000)	4,500	4,500
NPAT multiple	8.2.2	times	12.5	13.5
Equity value excluding surplus assets (on a		($’000)	56,250	60,750
listed minority basis)
Surplus assets	8.2.3	($’000)	5,000	7,000
Equity value including surplus assets (on a		($’000)	61,250	67,750
listed minority basis)
Premium for control	8.2.4	%	10.0	15.0
Equity value (on a control basis)		($’000)	67,375	77,913
Number of shares on issue	4.5	(million)	21.9	21.9
Estimated value per share (on a control basis)		($)	3.08	3.56
Deloitte selected value		($)	3.10	3.55

Source: Deloitte analysis

Based on the foregoing, we estimate the value of a share in Tasmanian Perpetual Trustees to be in the range of $3.10 to $3.55 on a control basis.

8.3 Valuation cross-checks

We have cross checked our valuation of a share in Tasmanian Perpetual Trustees with reference to the following:

the FUM ratio implied by our valuation of a share in Tasmanian Perpetual Trustees compared to the FUM ratios observed for comparable listed companies
the dividend yield implied by our valuation of a share in Tasmanian Perpetual Trustees compared to the dividend yields observed for comparable listed companies.

8.3.1 FUM ratio

We have cross checked our valuation of a share in Tasmanian Perpetual Trustees by comparing the FUM ratio implied by our valuation to the FUM ratios observed for the comparable listed companies. The FUM ratio analysis is a commonly used valuation cross-check for businesses in the financial services sector.

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

The FUM ratio implied by our valuation of a share in Tasmanian Perpetual Trustees is set out in the following table.

Table 15: FUM ratio analysis

		Low value	High value
Assessed equity value (on a listed minority basis)	($’000)	61,250	67,750
Current FUM	($ million)	1,003	1,003
FUM ratio (on a listed minority basis)		6.1%	6.8%

Source: Deloitte analysis

The FUM ratio implied by the market trading in comparable companies operating in the wealth management subsector of the financial services industry is in the range of 5% to 16%, with an average of 9%. The FUM ratios observed for the comparable companies are on a listed minority basis. Details of the FUM ratios for the comparable listed companies are set out in Appendix 2.

The FUM ratio implied by our valuation of a share in Tasmanian Perpetual Trustees is broadly consistent with the FUM ratios observed for the comparable companies despite the wide variations in the product mix and cash flow profiles exhibited by Tasmanian Perpetual Trustees in comparison to those of the comparable companies.

In our opinion, the FUM ratio cross check provides broad support for our valuation of a share in Tasmanian Perpetual Trustees.

8.3.2 Dividend yield

We have cross checked our valuation of a share in Tasmanian Perpetual Trustees with the dividend yield implied by our valuation compared to the dividend yields observed for comparable listed companies.

The dividend yield implied by our valuation of a share in Tasmanian Perpetual Trustees is set out in the following table.

Table 16: Dividend yield analysis

		Low value	High value
Assessed equity value (on a listed minority basis)	($’000)	61,250	67,750
FY2008 dividend	($’000)	6,542	6,542
Implied dividend yield (on listed minority basis)	(%)	11%	10%

Source: Deloitte analysis and Tasmanian Perpetual Trustees

The dividend yield implied by the trading values of the comparable companies operating in the wealth management subsector of the financial services industry is in the range of 6% to 16%, with an average of 10%, on a listed minority basis. Details of the dividend yields for the comparable listed companies are set out in Appendix 2.

The dividend yield implied by our valuation of a share in Tasmanian Perpetual Trustees is consistent with the average dividend yields observed for the comparable companies and therefore we consider the dividend yield cross check provides support for our valuation of a share in Tasmanian Perpetual Trustees.

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

9 Valuation of the Proposed Merged Entity

9.1 Introduction

In this section we have estimated the fair market value of a share in the Proposed Merged Entity. This valuation has been performed on a listed minority basis because should the Proposed Transaction proceed, Shareholders will become minority holders of shares in the Proposed Merged Entity.

Deloitte has estimated the fair market value of a share in the Proposed Merged Entity to be in the range of $3.60 to $3.90 on a listed minority basis.

Our valuation of a share in the Proposed Merged Entity has been based on the capitalisation of future maintainable earnings method. To provide additional evidence as to the value of a share in the Proposed Merged Entity, we have also considered the NTA multiples implied by our valuation of a share in the Proposed Merged Entity compared to the NTA multiples observed for comparable listed companies.

Our valuation of a share in the Proposed Merged Entity and the supporting cross checks are set out in Sections 9.2 to 9.3.

9.2 Capitalisation of future maintainable earnings

The capitalisation of maintainable earnings method estimates fair market value by capitalising future earnings using an appropriate multiple and adding any surplus or non-operating assets. To value the Proposed Merged Entity using the capitalisation of maintainable earnings requires the determination of the following:

an estimate of future maintainable earnings
an appropriate earnings multiple
the value of any surplus assets.

Our considerations on each of these are discussed separately below.

9.2.1 Future maintainable earnings

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

We have estimated future maintainable NPAT for the Proposed Merged Entity to be $20.5 million. In determining future maintainable earnings we have considered the following:

the adjusted historical earnings for Tasmanian Perpetual Trustees and MyState Financial which are set out in Section 4.7 and Section 5.6, respectively, and summarised below:

Table 17: Adjusted financial performance

					Actual
			Actual	Actual	31
		Actual	30 June	30 June	December
		30 June 2006	2007	2008	2008
	Reference	($’000)	($’000)	($’000)	($’000)
*Adjusted NPAT*
Tasmanian Perpetual Trustees	4.7	6,703	6,596	6,078	2,322
MyState Financial	5.6	9,670	11,776	13,278	5,369
Total adjusted NPAT		16,373	18,372	19,356	7,691
NPAT growth (%)		n/a	12.2%	5.4%	n/a
NPAT margin (%)		*12.4%*	12.1%	11.2%	8.3%

Source: Tasmanian Perpetual Trustees 2008, MyState Financial 2008, islandstate 2007 and connectfinancial 2007 annual reports and financial results for the six months ended 31 December 2008 for each of Tasmanian Perpetual Trustees and MyState Financial

Notes:

The contribution of the interest of MyState Financial in residential properties have been excluded from the above financial results as they are considered surplus assets
Figures in the table above are subject to rounding
the views of the respective management teams of the outlook for the financial performance of Tasmanian Perpetual Trustees and MyState Financial for the year ending 30 June 2009 including revised profit guidance for Tasmanian Perpetual Trustees provided to the market on 9 April 2009
discussions with the management teams of Tasmanian Perpetual Trustees and MyState Financial as to the current trading position of Tasmanian Perpetual Trustees and MyState Financial and respective growth prospects of each entity in the future
consideration of the overall impact on the wealth management and the Australian banking subsectors of the global financial crisis and the likely resultant impact on the Proposed Merged Entity
aggregated earnings for the year ending 30 June 2009 which management project to be lower than the aggregated earnings in prior years due primarily to the recent decline in FUM managed by Tasmanian Perpetual Trustees as discussed in Section 8.2.1 and reductions in lending margins expected to be earned by MyState Financial
our estimated future maintainable NPAT for Tasmanian Perpetual Trustees of $4.5 million, as discussed in Section 8.2.1

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

the adjusted NPAT for MyState Financial increased from $11.8 million in 2007 to $13.3 million in 2008. A future maintainable NPAT of $12.0 million implies an NPAT margin in the range of 8% to 9% based on revenue in the range of $140 million to $160 million. This NPAT margin is broadly consistent with the historical average NPAT margin for the three years to 30 June 2008 of 9% but higher than the NPAT margin for the six months to 31 December 2008 of 7%. The NPAT margin is consistent with the average historical NPAT margin observed for the comparable companies operating in the banking services subsector of 7%
we have also considered synergies expected to be realised by the Proposed Merged Entity which include the following:
cost savings including savings in relation to rent, salaries, marketing costs and board fees
revenue synergies including additional revenues considered to be achievable through customer referrals and enhanced cross selling abilities.

We have considered the quantum of the synergies and the ability of the management of the Proposed Merged Entity to realise the synergies.

Based on the above considerations, for valuation purposes, we have estimated future maintainable NPAT to be $20.5 million.

9.2.2 Earnings multiple

We have determined an earnings multiple range for the Proposed Merged Entity of 11.5 times to 12.5 times NPAT, on a listed minority basis.

In selecting these earnings multiples we have considered:

the relative contribution of each of Tasmanian Perpetual Trustees and MyState Financial to the future maintainable earnings of the Proposed Merged Entity. Based on our estimate of the future maintainable NPAT for the Proposed Merged Entity 73% of the pre-synergies future maintainable NPAT is associated with the operations of MyState Financial with the remaining 27% attributable to Tasmanian Perpetual Trustees
our selected NPAT multiple range for Tasmanian Perpetual Trustees of 12.5 times to 13.5 times on a listed minority basis, as discussed in Section 8.2.2
earnings multiples derived from share market prices of comparable listed companies and analyst earnings estimates.

Share market trading multiples

The share market valuation of listed companies provides evidence of an appropriate earnings multiple for Proposed Merged Entity. The share price of a listed company represents the market value of a minority interest in that company.

The observed NPAT multiples for companies with operations comparable to the Proposed Merged Entity are set out in Appendix 2. Our comments in relation to the NPAT multiples observed for the comparable companies are set out below:

the overall average NPAT multiple of the comparable companies is 13.4 times historical NPAT and 13.9 times forecast NPAT on a listed minority basis. The overall average NPAT multiple of the comparable companies excluding the observed historical NPAT multiple of IOOF Holdings Limited is 11.2 times historical NPAT and 13.9 times forecast NPAT on a listed minority basis

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

the average trading multiple of the comparable companies in the wealth management subsector is 15.8 times forecast NPAT. Of the comparable companies offering funds management, financial planning and trustee services, we consider Equity Trustees Limited and Trust Company Limited to be the most comparable companies to the Proposed Merged Entity. The average trading multiple of Equity Trustees Limited and Trust Company Limited is 14.9 times forecast NPAT
the average trading multiple of the comparable companies in the banking services subsector is 9.9 times forecast NPAT. Of the comparable companies offering banking services, we consider the Rock Building Society Limited and Wide Bay Australia Limited to be most comparable to the Proposed Merged Entity. The average NPAT multiples for these companies is 11.3 times forecast NPAT
based on our estimate of the future maintainable NPAT for the Proposed Merged Entity 73% of the pre-synergies future maintainable NPAT is associated with the operations of MyState Financial
the Proposed Merged Entity will have more diversified earnings streams and a larger customer base than either Tasmanian Perpetual Trustees or MyState Financial on a stand-alone basis
the Proposed Merged Entity will have opportunities to expand in Tasmania and mainland Australia.

Based on our consideration of these factors, we have selected a multiple of 11.5 times to 12.5 times NPAT on a listed minority basis to apply to the maintainable NPAT of the Proposed Merged Entity.

9.2.3 Surplus assets

Surplus assets are those assets owned by a company that are surplus to its main operating activities, such as unused property, loans or investments. Such assets should be valued separately from the main operating activities of the company, after adjusting operating results to remove the cash flows associated with the surplus assets. We have identified the following surplus assets for the Proposed Merged Entity:

Table 18: Surplus assets

		Low	High
	Section	($’000)	($’000)
Consideration received on sale of TBS	8.2.3	5,000	7,000
Interest of MyState Financial in residential	5.7	600	600
properties (Launceston and Hobart)
Total		5,600	7,600

Source: Deloitte analysis

As at 31 December 2008, MyState Financial had interests in two residential properties located in Hobart and Launceston which we consider to be surplus assets. The Launceston property was sold in February 2009. The total included in the table above comprises the Hobart property at its recorded value as at 31 December 2008 and the proceeds from the sale of the Launceston property.

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

9.2.4 Valuation of the Proposed Merged Entity

The value of the Proposed Merged Entity derived from the capitalisation of maintainable earnings method is summarised below.

Table 19: Summary – capitalisation of maintainable earnings method

	Section		Low value	High value
Maintainable earnings	9.2.1	($’000)	20,500	20,500
Earnings multiple	9.2.2	times	11.5	12.5
Equity value (on a listed minority		($’000)	235,750	256,250
basis)
Surplus assets	9.2.3	($’000)	5,600	7,600
Equity value (on a listed minority		($’000)	241,350	263,850
basis)
Estimated number of shares on	6.4	(million)	67.4	67.4
issue
Value per share (on a listed		($)	3.58	3.91
minority basis)
Deloitte selected value		($)	3.60	3.90

Source: Deloitte analysis

Based on the foregoing, we estimate the value of a share in the Proposed Merged Entity to be in the range of $3.60 to $3.90 on a listed minority basis.

9.3 Valuation cross-check

We have cross checked our valuation of share in the Proposed Merged Entity with reference to the NTA multiple implied by our valuation of a share in the Proposed Merged Entity compared to the NTA multiples observed for comparable listed companies.

9.3.1 NTA multiple

NTA multiples analysis is a commonly used valuation cross-check for businesses operating in the financial services sector.

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

The NTA multiple implied by our valuation of a share in the Proposed Merged Entity is set out in the following table.

Table 20: NTA multiples analysis

		Low value	High value
Assessed equity value (on a listed minority	($’000)	241,350	263,850
basis)
NTA 1	($’000)	132,251	132,251
Implied NTA multiple (on a listed minority	(times)	1.8	2.0
basis)

Source: Deloitte analysis and MyState Financial

Note:

Based on the combined NTA of Tasmanian Perpetual Trustees and MyState Financial as at 31 December 2008

The NTA multiple (on a listed minority basis) implied by market trading in comparable companies operating in the banking services subsector is in the range of 1.0 times to 2.2 times, with an average of 1.4 times. The NTA multiples for the comparable listed companies are set out in Appendix 2. We consider the NTA multiple (on a listed minority basis) implied by our valuation of a share in the Proposed Merged Entity is broadly consistent with the NTA multiples observed for comparable listed companies operating in the banking services subsector.

In our view, the NTA multiple cross check provides broad support for our valuation of a share in the Proposed Merged Entity.

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

10 Evaluation and conclusion

In order to assess whether the Proposed Transaction is in the best interests of the Shareholders as a whole, we have had regard to the fairness and reasonableness of the Proposed Transaction, namely:

we have assessed whether the Proposed Transaction is fair by estimating the fair market value of a share in Tasmanian Perpetual Trustees and comparing that value to the consideration to be received by Shareholders pursuant to the Proposed Transaction
we have assessed the reasonableness of the Proposed Transaction by considering other advantages and disadvantages of the Proposed Transaction to Shareholders.

10.1 Valuation of consideration

We have estimated the value of a share in Tasmanian Perpetual Trustees, as set out in Section 8, to be in the range of $3.10 to $3.55. Pursuant to the Proposed Transaction, Shareholders will receive one share in the Proposed Merged Entity for each share in Tasmanian Perpetual Trustees held. Consequently, we have estimated the value of the consideration to be received by Shareholders pursuant to the Proposed Transaction in the range of $3.60 to $3.90 for each share in Tasmanian Perpetual Trustees held.

10.2 Fairness

Set out in the table below is a comparison of our assessment of the fair market value of a share in Tasmanian Perpetual Trustees with the consideration offered under the Proposed Transaction.

Table 21: Evaluation of fairness

	Low value	High value
	per share	per share
Estimated fair value of a share in:	($)	($)
Tasmanian Perpetual Trustees (on a control basis)	3.10	3.55
The Proposed Merged Entity (on a listed minority basis)	3.60	3.90
Source: Deloitte analysis

It is therefore our opinion that the Proposed Transaction is fair.

10.3 Reasonableness

In accordance with ASIC Regulatory Guide 111 an offer is reasonable if it is fair. On this basis, in our opinion the Proposed Transaction is reasonable and is therefore in the best interests of Shareholders. We have also considered the following factors in assessing the reasonableness of the Proposed Transaction:

68

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

We have formed our opinion on the reasonableness of the Proposed Transaction based on an analysis of the likely advantages and disadvantages to Shareholders of accepting the Proposed Transaction.

The Proposed Merged Entity will have a larger share market capitalisation

The Proposed Merged Entity will have greater scale of operations and diversification than Tasmanian Perpetual Trustees

The Proposed Merged Entity will become a diversified financial services group with increased scale and will be able to provide a broader range of financial products and services, including wealth management and banking services, than Tasmanian Perpetual Trustees presently offers. It is intended that the Proposed Merged Entity will offer products and services to existing and new customers in new market segments, both in Tasmania and, in due course, mainland Australia.

The Proposed Merged Entity will have:

a greater scale of operations which may lead to economies of scale
exposure to a larger and more diversified customer base, comprising the existing customer bases of Tasmanian Perpetual Trustees and MyState Financial
more diversified sources of revenues with significant contributions from interest income, insurance commissions and loan fees. This may lead to less volatile earnings for the Proposed Merged Entity than for Tasmanian Perpetual Trustees
greater presence and combined recognition of two established brands in the Tasmanian financial services market, providing the Proposed Merged Entity with a stronger competitive position
enhanced ability to expand through further acquisitions and improved attractiveness to potential joint venture partners
an enhanced ability to expand into the mainland Australian market as a result of greater scale
access to a larger franking account balance than currently available to Tasmanian Perpetual Trustees.

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

Synergy benefits

cross selling opportunities in excess of those considered in our assessment of the synergy benefits available to the Proposed Merged Entity due to its larger and more diversified customer base of the Proposed Merged Entity
cost savings which are greater than those assumed in our assessment of the synergy benefits available to the Proposed Merged Entity
increased market share in the Tasmanian financial services industry as a result of the consolidation of two established service providers.

Reduced impact of the Federal Government deposit guarantee

The Federal Government deposit guarantee has contributed to the decrease in FUM held by Tasmanian Perpetual Trustees (which are not covered by this guarantee). The Federal Government deposit guarantee will likely have a diluted impact on the Proposed Merged Entity compared to Tasmanian Perpetual Trustees as deposits held by MyState Financial are covered by the guarantee. Consequently, the impact on the earnings of Tasmanian Perpetual Trustees of the deposit guarantee will be partially mitigated.

Disadvantages of the Proposed Transaction:

The likely disadvantages to Shareholders if the Proposed Transaction is approved include:

Shareholders may prefer to hold shares in Tasmanian Perpetual Trustees

Diluted participation in future growth of Tasmanian Perpetual Trustees

This dilution will be mitigated to the extent that Shareholders participate in any upside attributable to the operations of MyState Financial.

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

Other matters

Potential for other takeover offers

Due to its scale of operations and geographical location, the likelihood of an alternative offer for the shares in Tasmanian Perpetual Trustees is considered remote. Furthermore, the legislated 10% ownership limit on shares in Tasmanian Perpetual Trustees reduces the likelihood of an alternative offer for the shares in the Company. To date, there have not been any other takeover offers or other proposals for Tasmanian Perpetual Trustees.

Ownership structure of the Proposed Merged Entity

As discussed in Section 4.4, there is an upper limit of 10% on the ownership interest that a single shareholder may hold in the issued shares of Tasmanian Perpetual Trustees.

As part of the Proposed Transaction, the Tasmanian Government has been requested to introduce legislation to amend the Act, to accommodate the Proposed Transaction, whilst retaining the current 10% ownership limit. If amended, the 10% ownership limit will apply to shares owned in the Proposed Merged Entity. This may limit the prospects of the Proposed Merged Entity receiving a takeover offer in the future. The ownership limit on shares in the Proposed Merged Entity is consistent with the current ownership limit in place for share in Tasmanian Perpetual Trustees, and therefore there is no change for Shareholders.

Taxation implications

Conclusion on reasonableness

As the Proposed Transaction is fair it is also reasonable.

10.4 Conclusion

In our opinion, the Proposed Transaction is fair and reasonable to Shareholders. It is therefore in the best interests of Shareholders.

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

Appendix 1: Glossary

Reference	Definition
$	Australian dollars
90-day BBSW	90-day bank bill swap rate
ABS	Australian Bureau of Statistics
Act, the	The Trustee Companies Act 1953 (Tasmania)
ADI	Authorised deposit-taking institution
AFSL	Australian Financial Services Licence
APRA	Australian Prudential Regulation Authority
APESB	Accounting Professional and Ethical Standards Board Limited
ASIC	Australian Securities and Investments Commission
ASX	Australian Securities Exchange Limited
Basel I	International Bank Capital Accord
Bendigo and Adelaide Bank	Bendigo and Adelaide Bank Limited
bps	Basis points
CAGR	Compound annual growth rate
CAR	Capital adequacy ratio
Chapter 6	Chapter 6 of the Corporations Act
Company, the	Tasmanian Perpetual Trustees Limited
Corporations Act	Corporations Act 2001 (Cth)
Deloitte	Deloitte Corporate Finance Pty Limited
Directors, the	The directors of Tasmanian Perpetual Trustees
EBIT	Earnings before interest and tax
EBITDA	Earnings before interest, tax, depreciation and amortisation
ELTIP	Executive long term incentive plan
ESP	Employee share plan
Explanatory Booklet	Explanatory statement prepared by the board of Tasmanian Perpetual Trustees
FICS	Financial Industry Complaints Service
FOS	Financial Ombudsman Services
FSG	Financial Services Guide
FUM	Funds under management
FUM ratio	The ratio of equity value of a company to its FUM
FY	Financial year
IBISWorld	IBIS World Pty Limited
LVR	Loan to value ratios
MyState Financial	MyState Financial Credit Union of Tasmania Limited
MyState Financial Members	Existing members of MyState Financial
MyState Limited	Non-operating holding company if the Proposed Transaction implemented
n/a	Not applicable
nmf	Not meaningful
NPBT	Net profit before tax
NPAT	Net profit after tax
NTA	Net tangible assets
NTA multiple	The ratio of equity value of a company to the NTA
p.a.	Per annum
Proposed Transaction, the	The Proposal to merge Tasmanian Perpetual Trustees and MyState Financial by
	way of a scheme of arrangement
Proposed Merged Entity, the	MyState Limited, the newly formed non-operating holding company for
	Tasmanian Perpetual Trustees and MyState Financial
RBA	Reserve Bank of Australia
RMBS	Residential mortgage backed securities
RSE	Registrable Superannuation Entity

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

Reference Definition S&P Standard and Poor’s Explanatory Booklet, the A scheme booklet containing the detailed terms of the Proposed Transaction Section 411 Section 411 of the Corporations Act Section 611 Section 611 of the Corporations Act Section 640 Section 640 of the Corporations Act Shareholders Existing shareholders in Tasmanian Perpetual Trustees SRE Single responsible entity SWOT Strengths, weaknesses, opportunities and threats Tasmanian Perpetual Trustees Tasmanian Perpetual Trustees Limited TBS Tasmania Banking Services VWAP Volume - weighted average price

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

Table 22: Tasmanian Perpetual Trustees earnings multiples – share market trading
NPAT multiple (times)
Market
capitalisation
($ million)
Historical
Forecast
NPAT margin
Historical
FUM ratio
Implied Dividend
yield
NTA multiple
Tasmanian Perpetual Trustees1
60.2
9.9
n/a
29%
6%
12%
3.6
Wealth management subsector
Trustee services
Trust Company Limited
165.7
8.0
14.3
35%
14%
10%
1.5
Equity Trustees Limited
121.5
11.5
15.6
27%
6%
7%
5.6
Average
9.8
14.9
31%
10%
9%
3.5
Asset management services
Platinum Asset Management Limited
2,356.2
14.5
20.2
57%
16%
6%
13.3
Perpetual Limited
1,274.2
9.9
17.9
20%
6%
11%
5.6
IOOF Holdings Limited2
939.9
40.3
17.8
6%
5%
7%
14.5
Hunter Hall International Limited
140.2
8.3
19.8
33%
9%
16%
3.0
Average
18.3
19.0
29%
9%
10%
9.1
Financial planning services
Count Financial Limited
352.3
16.5
18.6
15%
n/a
7%
9.4
DKN Financial Group Limited
63.5
9.7
9.6
29%
n/a
11%
0.9
Snowball Group Limited
53.5
9.2
7.9
20%
n/a
10%
nmf
Average
11.8
12.0
21%
n/a
9%
5.2
Low - Wealth management subsector
8.0
7.9
6%
5%
6%
0.9
Average - Wealth management subsector
14.2
15.8
27%
9%
10%
6.7
Median – Wealth management subsector
9.9
17.8
27%
8%
10%
5.6
High - Wealth management subsector
40.3
20.2
57%
16%
16%
14.5

NPAT multiple (times)
Market
capitalisation
($ million)
Historical
Forecast
NPAT margin
Historical
FUM ratio
Implied Dividend
yield
NTA multiple
Banking services subsector3
Regional banks
Bendigo and Adelaide Bank
1,941.9
11.4
8.4
6%
1.1
Bank of Queensland Limited
1,536.6
12.1
8.6
6%
1.4
Average
11.8
8.5
6%
1.2
Building societies
Wide Bay Australia Limited
217.1
12.0
10.6
10%
2.2
Rock Building Society Limited
48.1
10.7
12.0
5%
1.0
Average
11.3
11.3
7%
1.6
Low - Banking services subsector
10.7
8.4
5%
1.0
Average - Banking services subsector
11.5
9.9
7%
1.4
Median - Banking services subsector
11.7
9.6
6%
1.2
High - Banking services subsector
12.1
12.0
10%
2.2
Low – Overall
8.0
7.9
5%
5.2%
6%
0.9
Average – Overall
13.4
13.9
21%
9.3%
10%
5.0
Median – Overall
11.4
14.3
20%
7.6%
10%
2.6
High – Overall
40.3
20.2
57%
16.2%
16%
14.5

75
Deloitte:Tasmanian Perpetual Trustees Limited – Independent expert’s report
Source: Bloomberg and Deloitte analysis
Notes:
1.
The NPAT multiples for Tasmanian Perpetual Trustees are calculated based on the adjusted NPAT set out in Section 4.7. NTA multiples and FUM multiples are calculated based on the balance sheet as at
31 December 2008 and dividend yield is calculated based on the dividend in the year to 30 June 2008
2.
The historical earning multiple of IOOF Holdings Limited does not reflect the merged entity, arising from the merger with Australian Wealth Management Limited, which was completed on 30 April 2009
3.
We have excluded the major commercial banks from this analysis as we do not consider them comparable to the Proposed Merged Entity
4.
nmf – not meaningful
5.
Figures in the table above are subject to rounding

We provide below the descriptions of the comparable companies as follows:

Trustee services

Trust Company Limited

Trust Company Limited is a corporate trustee for unit trusts, property trusts and other trusts. Trust Company Limited also offers financial and retirement planning, first mortgage lending and common fund investments. It is an agent and has power of attorney to management investment portfolios.

Equity Trustees Limited

Equity Trustees Limited provides trust and financial services in Australia. Financial services offered include will and estate planning, investment and property management, mortgage loans and investments, fund investments and financial guardian services.

Asset management services

Platinum Asset Management Limited

Platinum Asset Management Limited is an Australian based fund manager specialising in international equities. Platinum Asset Management Limited’s investment methodology is applied with the aim of achieving absolute returns for investors.

Perpetual Limited

Perpetual Limited is a financial services company specialising in wealth management services and corporate trust services. Perpetual Limited offers other diverse services including funds management, financial planning, trustee services, investment administration, superannuation, custody and registry services.

IOOF Holdings Limited

IOOF Holdings Limited provides diverse financial services in Australia. The services offered include personal superannuation, allocated pension services and investment services. IOOF Holdings Limited predominantly derives its revenue from retail funds management and administration.

Hunter Hall International Limited

Hunter Hall International Limited is a fund manager whose investment policy is driven by ethical considerations, thereby restricting investment in companies involved in tobacco, armaments and gambling. Investment in companies that are involved in activities which are harmful to the environment or animals is also restricted.

Financial planning services

Count Financial Limited

Count Financial Limited provides a diverse range of financial services including financial planning, investment advice, insurance, superannuation, home, investment and business loans and leasing, and online broking services.

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

DKN Financial Group Limited

DKN Financial Group Limited offers integrated financial services and products including financial management and advisory services, consulting, funds management and insurance and share trading.

Snowball Group Limited

Snowball Group Limited is an independent financial services company primarily providing financial planning, portfolio administration and accounting services.

Australia and New Zealand Banking Group

Australia and New Zealand Banking Group Limited is an international bank with activities in general banking, mortgage and instalment lending, life insurance, leasing, hire purchase and general finance. The group also provides international and investment banking, investment and portfolio management and advisory services, nominee and custodian services, stock broking and executor and trustee services.

Regional banks

Bank of Queensland Limited

Bank of Queensland Limited operates trading and savings bank facilities that offer loans, advances and lines of credits to Queensland communities, credit card facilities, personal loans and nominee/corporate/international services. The bank also offers management services along with offering electronic banking and delivery services.

Bendigo and Adelaide Bank

Bendigo and Adelaide Bank offers a variety of banking and other financial services, including first mortgage housing finance, retail and business banking, commercial finance, funds management, treasury and foreign exchange services, superannuation and trustee services. Bendigo and Adelaide Bank also offers internet banking.

Building societies

Wide Bay Australia Limited

Wide Bay Australia Limited provides home loans and mortgages throughout Australia. The company also provides investment opportunities, associated financial services, electronic banking, insurance services, credit cards, lines of credit and foreign exchange services.

Rock Building Society Limited

Rock Building Society Limited raises retail deposit funds from the central Queensland general public and provides housing finance secured by registered mortgages over residential property. The company also provides household insurance products and financial planning services.

77 Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

Premium
Target
Acquirer
Announced
date
Completion
date
% acquired
after
transaction
1 day prior to
announcement
1 week prior to
announcement
4 weeks prior to
announcement
Pacific Strategic Investments
Brickworks Investment Company Limited
9-Aug-04
15-Nov-04
81%
7.7%
9.8%
12.0%
James Fielding Group
Mirvac Group
12-Oct-04
7-Jan-05
100%
6.4%
n/a
10.6%
Terrain Australia Limited
City Pacific Limited
27-Oct-04
17-Dec-04
100%
16.0%
28.9%
45.0%
Select Managed Funds Limited
Australian Wealth Management Limited
19-Jan-06
26-May-06
100%
(0.9%)
1.0%
(1.8%)
SFE Corporation Limited
Australian Stock Exchange Limited
27-Mar-06
7-Jul-06
100%
17.8%
17.9%
28.9%
Pioneer Permanent Building
Society Limited
Bank of Queensland Limited
15-Aug-06
5-Dec-06
100%
0.6%
n/a
n/a
OAMPS Limited
Wesfarmers Limited
5-Sep-06
10-Nov-06
100%
16.6%
25.0%
28.6%
Promina Group Limited
Suncorp-Metway Limited
23-Oct-06
13-Mar-07
100%
14.0%
n/a
35.8%
eTrade Australia Limited
ANZ Banking Group Limited
19-Feb-07
25-May-07
100%
16.2%
17.8%
25.4%
Macquarie ProLogis Trust
ProLogis
16-Apr-07
27-Jun-07
100%
12.2%
n/a
9.2%
Australian Hotel Fund
Tobar Trust
9-Jul-07
12-Nov-07
55%
22.9%
n/a
18.0%
Mackay Permanent Building
Society
Wide Bay Australia Limited
24-Jul-07
21-Jan-08
100%
46.3%
46.3%
48.4%
Adelaide Bank Limited
Bendigo Bank Limited
9-Aug-07
20-Nov-07
100%
23.2%
24.4%
17.5%
Colonial First State Private Capital
Limited
Sunsuper Pty Limited
16-Aug-07
21-Dec-07
100%
7.3%
n/a
7.3%
Home Building Society
Bank of Queensland Limited
31-Aug-07
4-Dec-07
100%
29.0%
30.9%
31.9%
Goldlink Growthplus Limited
Tidewater Investments Limited
24-Sep-07
8-Feb-08
84%
(5.3%)
3.9%
11.0%
New Privateer Holdings Limited
Magellan Financial Group
5-Oct-07
15-Feb-08
100%
(48.8%)
(48.8%)
(54.4%)
Babcock & Brown Environmental
Investments Limited
Babcock & Brown Limited
14-Nov-07
21-Apr-08
99%
33.7%
33.7%
3.7%
Macquarie Private Capital Group
The Bear Stearns Companies Inc
18-Feb-08
12-Jun-08
100%
56.2%
n/a
47.5%
St George Bank Limited
Westpac Banking Corporation
12-May-08
17-Nov-08
100%
27.7%
22.6%
43.3%
HFA Accelerator Plus Limited
HFA Accelerator Plus Limited
8-Aug-08
21-Aug-08
61%
0.0%
(6.0%)
(7.0%)
Huntley Investment Company
Limited
Brickworks Investment Company Limited
17-Sep-08
18-Nov-08
100%
9.0%
n/a
1.4%

78
Deloitte:Tasmanian Perpetual Trustees Limited – Independent expert’s report

Premium
Target
Acquirer
Announced
date
Completion
date
% acquired
after
transaction
1 day prior to
announcement
1 week prior to
announcement
4 weeks prior to
announcement
Aequs Capital Limited
Findlay Securities Limited
11-Nov-08
13-Jan-09
100%
65.0%
65.0%
65.0%
Scarborough Equities Limited
Bentley International Limited
20-Nov-08
27-Feb-09
100%
3.9%
3.9%
(24.1%)
Australian Wealth Management
Limited
IOOF Holdings Limited
24-Nov-08
30-Apr-09
100%
19.5%
5.6%
0.9%
Low – Overall
(48.8%)
(48.8%)
(54.4%)
Average – Overall
15.8%
16.6%
16.8%
Median – Overall
15.0%
20.3%
17.5%
High – Overall
65.0%
65.0%
65.0%

Source: SDC Platinum, Mergermarket and Deloitte analysis

Appendix 4: Sources of information

In preparing this report we have had access to the following principal sources of information:

annual reports for Tasmanian Perpetual Trustees for the years ending 30 June 2006, 2007, 2008, financial results for the six months ended 31 December 2008 and budget for 2009
audited financial statements for MyState Financial for the year ending 30 June 2006, 2007, 2008, monthly management accounts from 30 June 2008 to 31 December 2008 and budget for 2009
management presentations for Tasmanian Perpetual Trustees
merger implementation documents
MyState Financial Constitution
annual reports for comparable companies
company websites for Tasmanian Perpetual Trustees, MyState Financial and comparable companies
publicly available information on comparable companies and market transactions published by ASIC, Thompson research, Bloomberg Financial markets, SDC Platinum and Mergermarket
IBISWorld industry reports
other publicly available information, media releases and brokers reports on Tasmanian Perpetual Trustees, MyState Financial, comparable companies and the financial services industry.

In addition, we have had discussions and correspondence with including Mr Paul Viney, Company Secretary and Chief Financial Officer, Tasmanian Perpetual Trustees; Mr Mark Scanlon, Managing Director, Tasmanian Perpetual Trustees; Mr Chris Brooks, Managing Director, MyState Financial; and Nina Nelson, Chief Financial Officer, MyState Financial; in relation to the above information and to current operations and prospects.

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

Appendix 5: Qualifications, declarations and consents

The report has been prepared at the request of the Directors and is to be included in the Explanatory Booklet to be given to shareholders for approval of the Proposed Transaction. Accordingly, it has been prepared only for the benefit of the Directors and those persons entitled to receive the Explanatory Booklet in their assessment of the Proposed Transaction outlined in the report and should not be used for any other purpose. We are not responsible to you, or any one else, whether for our negligence or otherwise, if the report is used by any other person for any other purpose. Further, recipients of this report should be aware that it has been prepared without taking account of their individual objectives, financial situation or needs. Accordingly, each recipient should consider these factors before acting on the Proposed Transaction. This engagement has been conducted in accordance with professional standard APES 225 Valuation Services issued by the APESB.

The report represents solely the expression by Deloitte of its opinion as to whether the Proposed Transaction is in the best interests of the shareholders of Tasmanian Perpetual Trustees as a whole.

Statements and opinions contained in this report are given in good faith but, in the preparation of this report, Deloitte has relied upon the completeness of the information provided by the Directors and executives of Tasmanian Perpetual Trustees which Deloitte believes, on reasonable grounds, to be reliable, complete and not misleading. Deloitte does not imply, nor should it be construed, that it has carried out any form of audit or verification on the information and records supplied to us. Drafts of our report were issued to the management of Tasmanian Perpetual Trustees for confirmation of factual accuracy.

In recognition that Deloitte may rely on information provided by Tasmanian Perpetual Trustees and its officers, employees, agents or advisors, Tasmanian Perpetual Trustees has agreed that it will not make any claim against Deloitte to recover any loss or damage which Tasmanian Perpetual Trustees may suffer as a result of that reliance and that it will indemnify Deloitte against any liability that arises out of either Deloitte’s reliance on the information provided by Tasmanian Perpetual Trustees and its officers, employees, agents or advisors or the failure by Tasmanian Perpetual Trustees and its officers, employees, agents or advisors to provide Deloitte with any material information relating to the Proposed Transaction.

To the extent that this report refers to prospective financial information we have considered the prospective financial information and the basis of the underlying assumptions. The procedures involved in Deloitte’s consideration of this information consisted of enquiries of Tasmanian Perpetual Trustees’ personnel and analytical procedures applied to the financial data. These procedures and enquiries did not include verification work nor constitute an audit or a review engagement in accordance with standards issued by the Auditing and Assurance Standards Board.

Based on these procedures and enquiries, Deloitte considers that there are reasonable grounds to believe that the prospective financial information for Tasmanian Perpetual Trustees included in this report has been prepared on a reasonable basis. In relation to the prospective financial information, actual results may be different from the prospective financial information of Tasmanian Perpetual Trustees referred to in this report since anticipated events frequently do not occur as expected and the variation may be material. The achievement of the prospective financial information is dependent on the outcome of the assumptions. Accordingly, we express no opinion as to whether the prospective financial information will be achieved.

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

Deloitte holds the appropriate Australian Financial Services licence to issue this report and is owned by the Australian Partnership Deloitte Touche Tohmatsu. The employees of Deloitte principally involved in the preparation of this report were Stephen Reid, Director, M App. Fin. Inv., B.Ec, F Fin, CA, Rachel Foley-Lewis, Director, B.Comm., CA, F.Fin., Hamish Blair, Consultant, BCom (Hons), MCom, CA, F.Fin, Nicole Vignaroli, Associate Director, M App. Fin. Inv., B.Bus (B&F), BA, F Fin, Thimendra Karawdeniya, Client Manager, B.Com, B.Sc (Hons) and Rajesh Singh Senior Analyst, MBA, MCM, BSc. Stephen, Rachel, Hamish and Nicole each have many years experience in the provision of corporate financial advice, including specific advice on valuations, mergers and acquisitions, as well as the preparation of expert reports.

Neither Deloitte, Deloitte Touche Tohmatsu, nor any partner or executive or employee thereof has any financial interest in the outcome of the proposed transaction which could be considered to affect our ability to render an unbiased opinion in this report. Deloitte will receive a fee of $210,000 exclusive of GST in relation to the preparation of this report. This fee is based upon time spent at our normal hourly rates and is not contingent upon the success or otherwise of the Proposed Transaction.

Consent to being named in disclosure document

Deloitte Corporate Finance Pty Limited (ACN 003 833 127) of 550 Bourke Street, Melbourne VIC 3000 acknowledges that:

Tasmanian Perpetual Trustees proposes to issue the Explanatory Booklet
the Explanatory Booklet will be issued in hard copy and be available in electronic format
it has previously received a copy of the draft Explanatory Booklet (draft Explanatory Booklet) for review
it is named in the Explanatory Booklet as the ‘independent expert’ and the Explanatory Booklet includes its independent expert’s report in Appendix 1 of the Explanatory Booklet.

On the basis that the Explanatory Booklet is consistent in all material respects with the draft Explanatory Booklet received, Deloitte Corporate Finance Pty Limited consents to it being named in the Explanatory Booklet in the form and context in which it is so named, to the inclusion of its independent expert’s report in Appendix 1 of the Explanatory Booklet and to all references to its independent expert’s report in the form and context in which they are included, whether the Explanatory Booklet is issued in hard copy or electronic format or both.

Deloitte Corporate Finance Pty Limited has not authorised or caused the issue of the Explanatory Booklet and takes no responsibility for any part of the Explanatory Booklet, other than any references to its name and the independent expert’s report as included in Appendix 1.

Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

About Deloitte

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Deloitte: Tasmanian Perpetual Trustees Limited – Independent expert’s report

Appendix 2: TPX Shares Cost Base Information

1. Bonus issue on 17 December 1986

On 17 December 1986 TPX paid a bonus share issue of 1 share for every 4 shares held by TPX Shareholders. The bonus share issue was paid out of the asset revaluation reserve of TPX and bonus shares were issued equally to all existing shareholders of TPX. The bonus share issue did not constitute an assessable dividend for taxation purposes.

For TPX Scheme Shareholders who acquired their original TPX Scheme Shares before 20 September 1985, the bonus shares received in respect of shares acquired before 20 September 1985 will be deemed to be acquired when the original TPX Scheme Shares were acquired and accordingly will be pre-CGT shares. The taxation treatment of pre-CGT TPX shares is outlined at 8.2.1 above.

For TPX Scheme Shareholders who acquired their original TPX Shares on or after 20 September 1985, the bonus shares received in respect of these shares will be deemed to be acquired at the time the original TPX Scheme Shares were acquired. The cost base of the original TPX Shares will be spread equally across the original and bonus TPX Shares held. The taxation treatment of post-CGT TPX Scheme Shares is outlined at 8.2.2 above.

2. Bonus issue on 31 March 1987

On 31 March 1987 TPX paid a bonus share issue of 1 share for every 3 shares held by TPX Shareholders. The bonus share issue was paid out of the asset revaluation reserve of TPX and bonus shares were issued equally to all existing shareholders of TPX. The bonus share issue did not constitute an assessable dividend for taxation purposes.

3. Rights issue on 20 April 1990

On 20 April 1990 TPX issued 21,565 additional TPX Shares to raise additional finance for the company.

For TPX Scheme Shareholders who did not participate in the rights issue, there is no change in the cost base or time of acquisition of their TPX Scheme Shares.

For TPX Scheme Shareholders who did participate in the rights issue:

For TPX Shares held immediately prior to the rights issue, there is no change in the cost base or time of acquisition of these TPX Shares; and
For TPX Shares acquired pursuant to the rights issue, the cost base of those TPX Shares will be equal to the amount paid under the rights issue to acquire those shares (as adjusted by subsequent events noted below) and the time of acquisition will be 20 April 1990.

4. 10 for 1 share split on 21 April 1990

On 21 April 1990, TPX completed a 10 for 1 share split which involved the conversion of each TPX Share into 10 TPX Shares. No additional consideration was paid or received by TPX Shareholders as a result of the share split and the share split did not change the rights of TPX Shareholders or the market value of their entitlements in TPX.

In these circumstances, the Australian Tax Office accepts that no CGT event arises. Therefore the converted shares have the same date of acquisition as the original TPX Shares to which they relate. As such, TPX Scheme Shareholders who held pre CGT TPX Scheme Shares continue to hold pre CGT TPX Scheme Shares.

The cost base of the original TPX Scheme Shares acquired by TPX Scheme Shareholders will need to be apportioned across the converted shares (for example, if a TPX Scheme Shareholder held a single TPX Scheme Share with a cost base of $10 and the shareholder would receive 10 shares pursuant to the share split then each of those shares would have a cost base of $1).

5. Cancellation of uncalled capital on 22 December 1998

On 22 December 1998 TPX cancelled the uncalled capital component of $0.50 per share. The cancellation of the uncalled capital component did not result in any change to the number of TPX Shares held by each TPX Shareholder and did not result in any change in the beneficial ownership of TPX.

In these circumstances, no CGT event will arise as a result of the cancellation of the uncalled capital component as there was no change in the beneficial ownership of TPX. There will be no change in the time of acquisition of TPX Scheme Shares by TPX Scheme Shareholders and no change in the cost base of those shares.

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6. 2 for 1 split on 6 July 1999

On 6 July 1999 TPX completed a 2 for 1 share split which involved the conversion of each TPX Share into 2 TPX Shares. No additional consideration was paid or received by TPX Shareholders as a result of the share split and the share split did not change the rights of TPX Shareholders or the market value of their entitlements in TPX.

The cost base of the original TPX Scheme Shares acquired by TPX Scheme Shareholders will need to be apportioned across the converted shares (for example, if a TPX Scheme Shareholder held a single TPX Scheme Share with a cost base of $4.30 and the shareholder would receive 2 shares pursuant to the share split then each of those shares would have a cost base of $2.15).

7. 4 for 1 split of 4 November 2004

On 4 November 2004 TPX completed a 4 for 1 share split which involved the conversion of each TPX Share into 4 TPX Shares. No additional consideration was paid or received by TPX Shareholders as a result of the share split and the share split did not change the rights of TPX Shareholders or the market value of their entitlements in TPX.

The cost base of the original TPX Scheme Shares acquired by TPX Scheme Shareholders will need to be apportioned across the converted shares (for example, if a TPX Scheme Shareholder held a single TPX Scheme Share with a cost base of $16 and the shareholder would receive 4 shares pursuant to the share split then each of those shares would have a cost base of $4).

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stronger together

AI assistant

MYSTATE LIMITED — M&A Activity 2009

65395_rns_2009-09-08_9fb5933e-311c-4cbf-a8fd-63912041cae9.pdf

THIS IS AN IMPORTANT DOCUMENT AND REQUIRES YOUR URGENT ATTENTION

Important Notices

General

Defined terms and interpretation

Purposes of this TPX Explanatory Booklet

Status of TPX Explanatory Booklet

ASIC, ASX and the Court

Input from other parties

Investment decisions

Forward looking statements

Privacy statement

No internet site is part of this TPX Explanatory Booklet

Table of Contents

Section 5 - Profile of MSF ___ 36

ENQUIRIES REGARDING THE TPX SCHEME OR THE TRANSACTION

Letter from the Chairman of Tasmanian Perpetual Trustees Limited

29 June 2009

Dear Shareholder,

Letter from the Chairman of MyState Financial Credit Union of Tasmania Limited

29 June 2009

Dear Shareholder

Yours sincerely

Key reasons to vote in favour of the TPX Scheme and the Transaction

Disadvantages of the TPX Scheme and the Transaction

Section 1: Key features of the TPX Scheme and the Transaction

1.1 What you will receive

1.2 TPX Directors’ recommendations and intentions

1.3 Key conditions

1.4 Implementation and timetable

1.5 The TPX Scheme and the Transaction – your questions answered

1.6 Foreign Scheme Shareholders

Section 2: How to vote on the TPX Scheme and the Transaction

2.1 TPX Scheme Meeting

2.2 Summary of how to vote

(a) Voting entitlements

(b) Voting in person

Voting by proxy

(c)

(d)

Voting by attorney

(e) Voting by corporate representative

(f) Further information

2.3 What to do next

(a) Read the remainder of this TPX Explanatory Booklet

(b) Consider your options

(c) Vote at the TPX Scheme Meeting

(d) External advice

Section 3: Important considerations regarding the TPX Scheme and the Transaction

3.1 TPX Directors’ recommendation and intentions

3.2 Key reasons for your Directors’ unanimous recommendation

(a) The merger will create a stronger Tasmanian based diversified financial services group

(b) Opportunity to join other TPX Scheme Shareholders in owning 32.5% of the MyState Limited Group

(c) Potential for synergies to improve profits and earnings per share

(d) Independent Expert’s conclusions

(e) TPX will continue to offer the same products and services in the future

(f) Opportunity to improve products and services

(g) Opportunity to grow

(h) Reduced impact of the global financial crisis and also the Federal Government Guarantee

(i) Head office will be retained in Tasmania

(j) The ‘Tasmanian Perpetual Trustees’ brand will remain

(k) On-going statutory ownership protection

(l) Five TPX Board members on the MyState Limited Board

(m) Opportunity to increase your MyState Limited shareholding

(n) The TPX Independent Expert has concluded that the TPX Scheme and the Transaction are in the best interest of TPX Shareholders

(o) No Superior Proposal has been received

Consistent with TPX’s growth strategy

(p)

(q) The market price of TPX Shares may fall below their current levels if the TPX Scheme and the Transaction do not proceed

(r) No transaction costs on the disposal of your TPX Shares

3.3 Possible disadvantages

(a) The listing value of TPX Scheme Consideration is still to be determined by the market

(b) Taxation consequences

(c) Foreign Scheme Shareholders

(d) A Superior Proposal could potentially emerge

(e) Loss of customers

(f) No direct continuing interest

3.4 Risks associated with the TPX Scheme and the Transaction

MYSTATE LIMITED M&A Activity 2009