Perpetual Limited — Annual Report 2003

Aug 5, 2003

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ABOUT PERPETUAL

PERPETHAL TRUSTEES AUSTRALIA LIMITED

Perpetual Trustees Australia Limited is an independent public company which first listed on the Australian Stock Exchange in 1964 following the merger of leading state-based trustee companies, the oldest of which was founded in 1884.

The Perpetual group now offers a range of managed investment funds, financial advice, wealth management services, estates, trusts and superannuation management for individuals, families, philanthropic foundations and institutional investors. As well, the group provides a range of corporate trust services to fund managers, superannuation trustees and capital market participants. The group also owns 50 percent of Australia's second largest share registrar. ASX Perpetual Registrars Limited.

OUR CORPORATE MISSION

Our mission is to help Australians secure their financial independence and grow their wealth from generation to generation.

We do this by providing trustworthy, high quality and efficient services to individuals and families, to financial services institutions and to finance professionals.

OUR COMMITMENT TO GOOD GOVERNANCE

Perpetual's board and management have a longstanding commitment to ensure that Perpetual's operations are conducted ethically, responsibly and with the highest standards of integrity. This commitment is embodied in Perpetual's Five Principles of Good Conduct, our code of ethics set out on this page. Perpetual welcomes the Principles of Good Corporate Governance and Best Practice Recommendations (the ASX Guidelines) adopted by the ASX Corporate Governance Council in

March 2003. Although the ASX Guidelines are not mandatory until 2004, the board believes that Perpetual's current policies and practices comply in all substantial respects with the ASX Guidelines, as more fully described in the Corporate Responsibility Statement in this annual report and on Perpetual's corporate website www.perpetual.com.au

OUR FIVE PRINCIPLES OF COOD CONDUCT

1 | We nut our clients first

Putting client interest first is a traditional value at Perpetual. After all, a trustee's first duty is to act in the clients best interest, not its own. What's right for our clients comes first, second and third with us.

$2 \mid$ We act with honesty and integrity

The relationship of trust we have with our clients is fundamental and always based on complete good faith. All our dealings with clients, colleagues and business partners are conducted against this standard.

3 | We deal fairly with all

Our clients can rely on us to deal fairly with them in all things. We will charge clients fairly for the work we do. We will deal fairly and honestly with each other, our business partners and all who rely on us.

4 | We treat everybody with courtesy

This principle applies to our clients, our colleagues and the general public. At Perpetual we respect the dignity of every individual. We condemn discrimination of all kinds.

$5 \parallel$ We strive to be a good corporate citizen

Good citizenship means giving something back to the community. We strive for the highest standards in the way we conduct our business. We consider the social consequences of our actions and not just financial outcomes.

CHAIRMAN'S REPORT TO SHAREHOLDERS

PERPETUAL TRUSTEES AFSTRALIA LIMITED

Dear Shareholder.

On behalf of the board of Perpetual Trustees Australia Limited, I am pleased to present the group's annual report for the 2003 financial year.

Our profit after tax and before gains on sale of investments was $$68.2$ million for the year compared to $$58.7$ million last year. The board views this increase of $16.2$ percent over last year $\mathbb R$ as a good result in yiew of the difficult business environment. CHARLES P CURRAN AO CHAIRMAN

During the past year, Perpetual has continued to focus on its core businesses of wealth management and corporate trust in a business environment that has been challenged by volatile global equity markets, war in Iraq and investor uncertainty. Despite these challenges, Perpetual has met its objectives for the 2002-2003 financial year and has achieved a satisfactory increase in operating profit.

In this report. I will review our financial performance and final dividend, comment on our corporate governance policies, and provide an update on our progress in the recruitment of a new managing director for the group.

PROFIT RESULT

Our profit after tax and before gains on sale of investments was $68.2 million for the year compared to $58.7 million last year. The board views this increase of 16.2 percent over last year as a good result in view of the difficult business environment.

Our net gains realised on sales of investments were $10.0 million compared to $16.9 million last year. A second payment for the sale of our Fund Services business to Roval Bank of Canada in 2001 accounted for the largest part of these gains. As a result, our profit after tax and gains

on sale of investments was $78.2 million, an increase over last year's net profit of $75.6 million.

Set out in the table on page 3 are the components of our profit for the 2002-2003 financial year.

In a year of reduced asset values and subdued investment inflows, it is pleasing to increase revenues by 8.6 percent to $265.0 million. It is even more pleasing that increased revenues and continued careful management of operating expenses have combined to produce improved profitability. This is reflected in higher earnings before interest, tax, depreciation and amortisation (EBITDA) which increased by 12.8 percent from $100.7 million in the prior year to $113.6 million. EBITDA as a percentage of revenue rose from 41.3 percent for the prior year to 42.9 percent.

FINANCIAL POSITION AND CAPITAL MANAGEMENT

Our financial position remains strong, with cash holdings of $113.2 million and an investment. portfolio carried at cost of $68.8 million compared to its market value at period end of $$102.1$ million. Our cash holdings and the market value of our investment portfolio equate to approximately $5.70 per issued share.

ANALYSIS OF FINANCIAL RESULTS.

	FY 2003	FY 2002	Increase/(Decrease)
		$M	96
Operating revenue	254.0	235.7	78
investment income	2.111110	8.4	31.0
Total revenues	$-265.0$	244.1	8.6
Operating expenses	T(151.4)	(143.4)	5.6
Earnings before interest, tax, depreciation and amortisation (EBITDA)	113.6	100.7	12.8
Depreciation and amortisation	$22 - 110.21$	(10.5)	(2.9)
Goodwill expense	10.91	(4.0)	(2.5)
interest expense	$\sim 10.0$	(3.0)
Share of net (losses)/profits of associates	$\overline{1}$ (0.4)	0.5	(180)
Profit before tax and gains realised on sale of investments	96.1	83.7	14.8
Tax expense	* {27.9}	(25.0)	11.6
Profit after tax before gains realised on sale of investments	68.2	58.7	16.2
Profit attributable to members of the company	68.2	58.7	16.2
Net gains realised on sale of investments	10.0	16.9	(40.8)
Net profit	78.2	75.6	3.4

Our solid financial position is supplemented by accumulated franking credits of $54.8 million at year end.

The quality of our financial position underpins our regulatory and prudential capital requirements and enhances the confidence and trust of clients dealing with Perpetual. Our sound financial position, coupled with our healthy dividend franking account, provides us with flexibility to enhance shareholder value by exploiting growth opportunities, paying fully franked regular and special dividends, and buying back Perpetual's shares when appropriate.

As shareholders know, your board is committed to limiting growth in the number of shares on issue so that each share will maintain its proportional entitlement to the earnings and

value of the company. During the current year, in addition to buying back and cancelling $275,419$ shares (for an outlay of $10.2 million), we also bought 866,869 shares on-market (for an outlay of $26.8 million) to satisfy allocations under our long term staff incentive and retention programs rather than issuing shares for this purpose. Under our current on-market buy-back scheme we have capacity to buy a further 740,000 shares.

DIVIDENDS

The board aims each year to increase dividend returns to our shareholders and we have consistently done this through the payment of increasing interim and final dividends, and by paying special fully franked dividends where possible.

CHAIRMAN'S REPORT TO SHAREHOLDERS

PERPETUAL TRUSTEES AUSTRALIA LIMITED

Shareholders will receive three dividends fully franked at 30 percent in respect of the year to 30 June 2003: one interim dividend of 60 cents per share in March 2003, a special dividend of 50 cents per share in June 2003, and a third and final dividend of 70 cents per share which will be paid on 3 September 2003 (record date 18 August). This will bring total dividends declared in respect of the 2003 financial year to $1.80 per share compared to last year's $1.60 per share, an increase of 12.5 percent.

As noted in my May 2003 letter to shareholders, a further special dividend of not less than 50 cents per share fully franked will be paid to shareholders in June 2004, in addition to the usual interim and full year dividends.

CORPORATE GOVERNANCE

Your board is strongly committed to meeting the highest standards of corporate governance. We believe Perpetual's governance policies have been at the forefront of best practice over recent. years, and we welcome the adoption in March 2003 by the ASX Corporate Governance Council of the ASX Guidelines.

The board believes that Perpetual's current policies and practices comply in all substantial respects with the ASX Guidelines, and, in some instances, go further. Our policies and practices are described in the Corporate Responsibility Statement on page 14 of this report.

Best practice in corporate governance continues to evolve; therefore your board keeps its policies under regular review to ensure that they serve well the interests of shareholders, the market and the wider community. The board has made a number of changes during the past year to further reinforce our commitment to best practice, as described more fully in this annual report. These changes include the following:

• $\infty$ The board has adopted the definition of independence recommended by the Guidelines. The board has confirmed that all seven non-executive directors are independent directors, none of whom have relationships or other circumstances that materially affect their ability to exercise unfettered and independent judgment in the interests of Perpetual shareholders.
• The board has established a separate Nominations Committee, comprising three independent non-executive directors, to review periodically the skills and experience of the board, and to recommend candidates to fill vacancies. These tasks were previously performed by the Chairman's Committee.
• $\infty$ The board has resolved to discontinue its existing retirement benefits scheme for all new nonexecutive directors appointed after 1 July 2003.

We have again expanded our Corporate Responsibility Statement set out in this annual report to assist shareholders to appreciate more fully the board's approach to important governance matters. Shareholders who wish to know more about our policies are also invited to review our website www.perpetual.com.au, or to contact me with comments and suggestions.

MANAGING DIRECTOR SUCCESSION

As announced in my May letter to shareholders, Graham Bradley will be retiring shortly, on the appointment of a new managing director.

Graham Bradley has made a significant contribution to the growth and development of Perpetual as the leading independent fund manager, personal wealth manager and corporate trustee in Australia. During his eight years as managing director, he has developed and led a team which has increased Perpetual Investments' funds under management from $2.4 billion in 1995 to more than $17.4 billion currently, with group operating profit having increased from $11.0 million in 1995 to $68.2 million in the vear to June 2003.

Graham Bradley has also made an important contribution in the wider corporate field, particularly in relation to corporate governance issues, and in community organisations. The board values the significant contribution made by Graham Bradley, which has been widely acknowledged, and wishes him well in his future endeavours.

The new managing director will be expected to lead the Perpetual team into a stage of further expansion, capitalising upon our strong position as a leading fund manager and corporate trustee and our financial capability to take advantage of opportunities for future growth. Korn/Ferry International is assisting the board in selecting a candidate for appointment and the selection process is well advanced.

BUSINESS OUTLOOK

Despite the difficult business environment, Perpetual performed well in 2003.

The forthcoming year will again be a challenging one for Perpetual. Despite markets recovering somewhat from their low point in March 2003, net inflows for retail investors have been subdued over the past six months compared to recent years. The level of the group's earnings growth in

2004 will be largely determined by the rate of further improvement in market conditions and investor confidence.

The board and executive team believe Perpetual enjoys a strong position in markets with long term growth prospects, offering sound opportunities for Perpetual's continued profitability. Our independence, our professional and dedicated team, our commitment to quality service, our solid financial position, and our integrity in dealing with clients are the building blocks of our future. In particular, our proven investment process is well suited to uncertain times.

As an organisation, we have the opportunity to grow our core businesses organically, and we also maintain the financial capacity to make acquisitions should the right opportunities become available. Our brand position is strong, we have excellent systems and our products are well supported by financial planners. The board is confident, therefore, that the group is favourably positioned to continue its profitability and growth, and to take advantage of additional opportunities on the return of a more positive business environment.

In closing, the board thanks all of Perpetual's executive team and staff for their hard work and commitment over the past year and pays special tribute to the outstanding contribution made by Graham Bradley over the last eight years.

Thanks Guman

CHARLES P CURRAN AO CHAIRMAN 6 August 2003

MANAGING DIRECTOR'S YEAR IN REVIEW

PERPETUAL TRUSTEES AUSTRALIA LIMITED

It is pleasing to report another record operating profit for the year to 30 June 2003. This is the eighth consecutive year of increased operating profit achieved during my time as managing director. During this time, operating profits have grown at a compound rate of over 26 percent per annum. I would, therefore, at the outset of my report like to thank the great team of people at Perpetual whose hard work and commitment over many years has produced these excellent results for shareholders.

an di kacamatan di kacamatan di kacamatan di kacamatan di kacamatan di kacamatan di kacamatan di kacamatan diA salah samun ng taong kalamatan di kacamatan sa tahun di kacamatan sa tahun di kacamatan di kacamatan di kaca I am particularly pleased to report increased revenues and earnings. in a year that has been a testing one, both for Perpetual and for the Áustrallan wealth management industry.

GRAHAM J BRADLEY MANAGING DIRECTOR

2003 RESULTS

I am particularly pleased to report increased revenues and earnings in a year that has been a testing one, both for Perpetual and for the Australian wealth management industry, as the values of clients' assets under management were eroded by falling stock markets in the nine months leading up to the war in Iraq. Concern about market conditions in the second half of the year saw net inflows from retail investors drop to low levels compared to recent years. Despite these adverse market conditions, Perpetual's operating profit after tax (before gains on sale of investments) of $68.2 million, up 16.2 percent over the prior year, demonstrates the underlying strength of Perpetual's businesses and market position.

Total revenues in 2003 were $265.0 million. an increase of $20.9 million (8.6 percent) over last year. Operating expense growth was restricted to $8.0 million (5.6 percent). As a result, EBITDA improved by 12.8 percent from $100.7 million to $113.6 million.

The 2003 result includes revenues of some $4.5 million from institutional mandates lost during the year. However, the impact of these losses on future profits has been ameliorated by expense reduction and restructuring initiatives implemented in the second half. These initiatives saw our full time equivalent employee numbers decrease from 904 at 30 June 2002 to 824 at 30 June 2003.

I will now briefly review the key achievements of each of our operating divisions, starting with our wealth management businesses - Perpetual Investments and Personal Financial Services.

PERPETUAL INVESTMENTS

Perpetual Investments' operating revenues for the year were $146.5 million ~ up from $132.8 million last year, an increase of 10.3 percent.

Our disciplined investment philosophy applied by our experienced Australian equities team generated strong relative returns for investors. This is the second consecutive year of declining markets during which Perpetual has generated positive returns for investors in our Australian equity funds. For example, although the S&P/ASX 300 Industrials Accumulation Index return was -1.0 percent, our flagship Industrial Share Fund produced a pre-fees return of 4.9 percent for the year to 30 June. This fund has now earned a positive return for 21 consecutive financial years. In addition, before fees, our Concentrated Equity Fund returned 10.5 percent above its benchmark (the S&P/ASX $300$ Accumulation Index which returned $-1.6$ percent for the year), and our highly regarded Smaller Companies Fund returned 11.8 percent before fees compared to 3.7 percent for the S&P/ASX Small Ordinaries Accumulation Index.

Our consistently strong investment performance was again recognised when Perpetual was named 'Australian Equities Fund Manager of the Year 2002' by leading research house Morningstar. This is the third consecutive year Perpetual has won this award. Our Australian equities performance over time was ranked number two over one year, four over three years and one over five and seven years out of a field of some 50 managers in the independent InTech survey of major investment managers as at 30 June 2003.

With equities struggling to produce positive returns, investors favoured income over growth funds during the past year. As a result, our highly rated Monthly Income Fund attracted strong inflows. At 30 June we managed $2.4 billion in our various mortgage funds. With record inflows during the year, our mortgage team was extremely busy sourcing quality mortgages, and we advanced over $570 million against properties that met our strict lending criteria.

One area of disappointment for many investors in 2003 was the poor performance of most international equity funds generally, and our international funds have also underperformed.

Steps have been taken in consultation with Fidelity International to turn that performance around. and we have already seen an improvement in relative performance since January.

Perpetual Investments' total funds under management at 30 June 2003 were $17.4 billion compared to $19.4 billion at the same time last year. Even though adverse market movements reduced asset values, retail and masterfund funds under management (FUM) increased from $13.4 billion at 30 lune 2002 to $15.2 billion at 30 June 2003. Inflows into our retail and masterfund products were $1.8 billion during the year.

During the year, Perpetual launched a series of new retail investment funds, including our SHARE-PLUS fund, our geared Australian share fund and wholesale property securities fund through our joint venture company, Perpetual fames Fielding. After six months of full operation. Perpetual lames Fielding had property securities under management of $235 million at 30 June. We are continuing our focus on new retail product development with the impending launch of a new multi-manager retail platform which will become available to investors and advisers in the last quarter of the 2003 calendar year.

Against the strong retail inflows, institutional FUM reduced from $6.0 billion at 30 fune 2002 to $2.2 billion, due to the loss of institutional mandates. We remain committed to our valued institutional clients to whom we now offer an expanded range of investment services including active property securities funds through Perpetual James Fielding, Quantitative Investments through our association with BARRA Inc. and infrastructure asset management services, through a new in-house team recruited during the year.

MANAGING DIRECTOR'S YEAR IN REVIEW

PERPETUAL TRUSTEES AUSTRALIA LIMITED

Despite the continuing market challenges, we believe Perpetual Investments is well positioned to take advantage of the return of investor confidence and more favourable market conditions. Perpetual's reputation is built upon our strong, independent position and our historyof stability, reliability, true to label' investment. processes and superior investment performance, especially in difficult markets.

PERSONAL FINANCIAL SERVICES

Despite difficult trading conditions. Personal Financial Services achieved revenues of $65.6 million comparable to last year.

The division added some $760 million in gross new fund inflows in 2003. The private client business continued to receive strong investor support with the addition of 560 new portfolio management accounts entrusting a further $315 million to our care. Assets managed for our philanthropic foundations also grew by some $45 million in additional inflows, and now total $630 million. At the end of 2003, total funds managed for our private clients, estates, personal trusts, superannuation clients and philanthropic foundations were $5.1 billion.

Important new products were also released during the year, including our Charitable Gift Fund service which is designed to provide cost-effective access to philanthropic services for individuals with a lower level of investments than required by traditional philanthropic structures. We also released new DIY superannuation services, expanding the range of pension options available to clients.

We successfully completed in 2003 a multi-year program of operational and technology

improvements and also implemented a number of efficiency initiatives, so that our operations will benefit from lower costs in 2004 and beyond.

We look forward to 2004 with a lower cost base. solidly performing operations and a quality financial advisory service model. We are also well prepared for the implementation of the Financial Services Reform Act, and to take advantage of improved investor sentiment in the year ahead.

CORPORATE TRUST

Corporate Trust had another strong year, with revenues increasing from $36.6 million last year to $41.9 million at 30 June 2003, an increase of 14.5 percent.

Securitisation bonds on issue for which we act as trustee increased from $52.3 billion to $71.2 billion, an increase of 36 percent on the previous year. In addition, we administer a further $15.9 billion in preliminary funding arrangements and security trusteeships for our clients. The securitisation business maintained its market leadership, gaining several major new clients, including SG, Merrill Lynch, Invested and FirstMac.

The continued growth of our securitisation business is largely driven by the increased level of residential mortgage backed securities. Offshore issuance of these securities means that our business is becoming increasingly global and our strong relationship with the Bank of New York provides our clients with the services they require to participate in these markets.

The development of our value-added services to the securitisation market received a major boost. during the year following our appointment by

Standard & Poor's to act as its sole data collection agent for their residential mortgage-backed securitisation rating surveillance service in Australia. This appointment draws on our investor reporting service and is testimony to the high reputation it has gained in the marketplace.

A further development in our asset support. services was our appointment as cashflow servicer of the residential mortgage portfolio of AIMS Home Loans, to complement our existing commercial mortgage servicing operations.

a number of new mandates, including Pengana Capital Limited, and several prominent UK/US boutique fund managers setting up in Australia. Further growth is expected in this area in the next 12 months.

ASX PERPETUAL REGISTRARS

ASX Perpetual Registrars Limited (ASX Perpetual), our 50 percent joint venture with the Australian Stock Exchange, reported revenues of $48.9 million for the year ended 30 lune 2003, 12 percent above last year's result. Our share of ASX Perpetual's net

Our consistently strong investment performance was again recognised when Perpetual was named Australian Equities Fund Manager of the Year 2002 by leading research house Morningstar Equr flagship Industrial Share Fund thas uniduced a positive raturn for $21$ consecutive vears. $\mathbb{Z}$

During the year our Property Services business continued to expand its support services to the property market, providing property syndicators with registry and accounting services, complementing our leading property custody business. New mandates include James Fielding Direct, MacLaughlins Financial Services, Macarthur Cook Investment Managers Limited and others.

Our Corporate and Structured Finance business continues to provide value-added services to the corporate debt and project finance markets, and is well placed to tailor its services for new funding products including hybrids, credit linked notes and public/private partnerships.

Our Fund Governance Solutions business, which provides responsible entity and trustee services to the funds management industry, continues to build momentum. During the year the business won

loss for the year was $$0.6$ million - below last year's net profit of $0.55 million. While profit was adversely affected by subdued trading conditions, cash returns as measured by EBITDA increased 42 percent from $8.5 million last year to $12.1 million in 2003, allowing ASX Perpetual to begin repaying borrowings associated with its investment in new systems.

ASX Perpetual enjoyed its first full financial year of technology independence in 2003, and, with its leading edge technology now supporting a quality service offering, increasingly differentiated itself from other service providers. During the year ASX Perpetual won significant new clients including Brambles Industries (jointly with our afliance partner Lloyds TSB Registrars), John Fairfax Holdings, Australian Agricultural Company, Investa Property Group, David Jones employee share plans and most recently, Westpac Banking Corporation.

MANAGING DIRECTOR'S YEAR IN REVIEW

PERPETUAL TRUSTEES AUSTRALIA LIMITED

During the year, ASX Perpetual also undertook major transactions on behalf of its clients including a share purchase plan for John Fairfax Holdings, the takeover of Goodman Fielder for Burns Philp & Co., and the initial public offering of Westpac FIRsTS. In addition, ASX Perpetual handled the demerger and initial public offering for BHP Steel Limited, one of the largest in the past year. ASX Perpetual has laid a solid foundation for its future business growth. The registry services provider is now well positioned for an upturn in the Australian equities market and an increase in the level of corporate actions.

Looking forward, I believe Australians will seek sound financial advice and professional, quality management of their assets from independent and trusted organisations such as Perpetual. Perpetual is well placed to be one of the leading service providers of quality financial advice and wealth management.

Similarly, there is a growing recognition in the business community of the valuable role that a trusted, independent fiduciary can play to help ensure the integrity of capital market transactions and structures. Perpetual's pre-eminent position

ikan di kacamatan Sulawesi Sulawesi Sulawesi Sulawesi Sulawesi Sulawesi Sulawesi Sulawesi Sulawesi Sulawesi SuSulawesi Sulawesi Sulawesi Sulawesi Sulawesi Sulawesi Sulawesi Sulawesi Sulawesi Sulawesi Sulawesi Sulawesi Su I have had the privilege of overseeing the re-positioning of Perpetual as one of $\overline{A}$ ustralia's leading independent financial services organisations... I want to thank $\overline{A}$ again all my board and executive colleagues and all our staff for another year of : achievement for the group, and for their support during my time with Perpetual.

PERPETUAL'S FUTURE

Despite challenging market conditions, Perpetual's future remains positive. Our team based culture, our proven investment process, the experience and dedication of our people, and our careful and prudent financial management have positioned Perpetual well to capitalise on the return of investor confidence and more favourable equity market conditions.

During my term as managing director, I have had the privilege of overseeing the re-positioning of Perpetual as one of Australia's leading independent. financial services organisations. Today, Perpetual provides a quality range of products and services of increasing value to Australians as they build and manage their wealth across generations.

among Australia's trustee companies, together with our deep experience and expertise, will underpin strong future growth in this area of the group's operations.

In closing, it has been a great privilege to serve Perpetual as managing director during the past eight years. Perpetual's mission is to serve its clients. I would therefore like to thank our clients, large and small, for their support and partnership during 2003. I want to thank again all my board and executive colleagues and all our staff for another year of achievement for the group, and for their support during my time with Perpetual. I wish Perpetual well for the future.

Graham Boadley.

GRAHAM | BRADLEY MANAGING DIRECTOR 6 August 2003

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PERPETUAL IN PROFILE

PERPETHAL TRUSTEES AUSTRALIA LIMITED

HISTORY

The Perpetual group is a broadly based provider of financial services, established over 118 years ago. The parent company, Perpetual Trustees Australia Limited, is an independent public company, listed on the Australian Stock Exchange Limited for almost 40 years.

WEALTH MANAGEMENT

Perpetual is committed to being a leading national provider of wealth management services. Perpetual provides a range of services to help Australians plan and manage their investments and provide for their retirement.

With over $17.4 billion in funds under management. Perpetual Investments is a leading investment manager serving retail and institutional investors.

Perpetual's investment philosophy is to generate attractive returns for investors by selecting quality investments, while seeking to manage risk. In our equity funds, we achieve this by careful stock selection based on well established criteria that have been applied consistently over very many years.

Perpetual's Personal Financial Services division is responsible for managing financial assets for over 5,000 private clients, trusts, estates, and philanthropic foundations. Our private clients team provides comprehensive wealth management services for individual investors, including financial planning, personal portfolio management, taxation advice, estate planning, estate administration, and trustee services for philanthropic foundations.

Perpetual also offers a multi-manager masterfund of some $1.9 billion for private and corporate superannuation clients, and a comprehensive service to the personal (DIY) superannuation market.

CORPORATE TRUST

Perpetual's Corporate Trust division is the market leader in trustee services to Australia's capital markets.

Products and services offered include trustee services for mortgage-backed and other securitisation programs for major banks and non-bank organisations, responsible entity and compliance services for fund managers, custody services for property trusts, and trusteeships for corporate debt issues, infrastructure projects, and other capital market transactions.

SHARE REGISTRY

ASX Perpetual Registrars, our 50/50 joint venture with Australian Stock Exchange Limited, is Australia's second largest share registrar. ASX Perpetual provides registry services to public companies and listed trusts, and provides advice and services related to corporate actions such as floats, employee share plans, and capital raisings.

With over 200 clients ASX Perpetual Registrars maintains the share registers for approximately 7 million shareholdings.

PERPETUAL IN PROFILE

PERFEIUAL IRUNTEEN AFNIRALIA LIMITED

Executive Caucatator - Jenn wit

Richard Boyer Group Executive - Information Technology, Roban Mead Group Executive - Personal Financial Services, Paul McAuley Group Executive -Human Resources, Joanne Hawkins Company Servings, Graham Bradley Managing Disease, Michael Stefanovski Chief Financial Offen: Gerard Doherty Cross Executive - Persecual Investments. Emilio Gonzalez Chief Investment Office, Phillip Vernon Group Executive - Corsorate Trust.

EXECUTIVE COMMITTEE

Richard Boyer BA GROUP EXECUTIVE - INFORMATION TECHNOLOGY

Richard joined Perpetual in October 1997. He manages our Information Technology division, providing vital business support across the group.

Gerard Doherty

GROUP EXECUTIVE - PERPETUAL INVESTMENTS

Gerard joined Perpetual in March 1993. He is responsible for the growth and profitability of Perpetual Investments' retail and masterfund business.

Emilio Gonzalez CEA BCow (Roos) CHIEF INVESTMENT OFFICER

Emilio has been with Perpetual since July 1990. He was appointed Chief Investment Officer in March 2001 and is responsible for the management of our asset management team, our research team and our investment processes.

Joanne Hawkins BCOM, LLB. GRADDIR CSP. ACIS COMPANY SECRETARY

Joanne joined Perpetual in November 2002 and was appointed Company Secretary in June 2003. Joanne is responsible for the company secretarial functions across the group.

Paul McAufey BA (Psychosocy) GROUP EXECUTIVE - HUMAN RESOURCES

Paul joined Perpetual in October 2001. He has responsibility for our recruitment, performance management processes, training, remuneration, and other human resources policies.

Rohan Mead

GROUP EXECUTIVE - PERSONAL FINANCIAL SERVICES

Rohan joined Perpetual in April 1996. He was appointed to his current role in March 2001. He has overall responsibility for Perpetual's private client business, our multi-manager masterfund and DIY superannuation services, and the Wilson Dilworth financial planning business.

Michael Stefanovski BEC CPA ACIS CHIEF FINANCIAL OFFICER

Michael was appointed in March 1999. His responsibilities include management of finance and administration, investor relations, human resources and information technology. He is chairman of ASX Perpetual Registrars Limited.

Phillip Vernon BEC, MCCoat, MBA, FCPA GROUP EXECUTIVE - CORPORATE TRUST

Phillip has been with Perpetual since September 1982. He has responsibility for our securitisation, corporate and structured finance, property trust and responsible entity businesses.

Portectual's Commitment to Philanthropy (www.committee.com/www.committee.com/ .Perpetual currently manages over 400 private philanthropic foundations with collective assets of some $630 million. We are Australia's largest manager of charitable foundations and trusts. Last year we distributed some $25 mation on behalf of benefactors to over $1550$ chanties and commently groups across Australia. Perpetual also advises benefactors on how to structure their foundations $11\sim10$ elfectively, to manage their funds so they grow over lime, and to identify worthy recipients of philamhropic gifts that meet the aspirations. The benefactors. The property of the second control to the control of the second control of the second control of the second control of the second control of the second control of the second control of the second control o

Some examples of the many philanthropic foundations we manage are:

والموارد والمتلا

Ramaciotti Foundations for Biomedical Research

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.Established by Clive and Vera Ramaciotti, the Foundations support Australian biomedical research. With capital of over $50 million, .The Foundations have in the past 30 years gilted over $40 million to more than 3,000 biomedical research programs across Australia.

Nita B Kibble Awards for Women Writers

.These awards were established in 1994 to recognise women writers of liction or non-liction classified as life writing. Two awards are made each year: the $20,000 Kibble Award for best book and the $2,500 Dobble Award for a first published work..."

Helen Lempriere National Sculpture Award

."Australia's richest art prize, the Helen Lempriere National Sculpture Award is an annual art scholarship valued at $120,000. Through the Helen Lempriere bequest, the award is designed to attract and benefit Australian attists of the three dimensional art form.

The Perpetual Foundation

.To give tangible expression to Perpetual's own commitment to the Australian commanity, we established The Perpetual Foundation $\sim$ .In 1997, Each year, the group donates a percentage of its pre-tax profits to the Foundation to support charitable endeavour in five. categories – social welfare, education, medical research, the environment, and the arts. The Foundation also accepts donations from $\tilde{ }$ (individuals to support causes selected by dopors, $\mathbb{C}[\mathbb{N}]$ , $\mathbb{C}[\mathbb{N}]$

th 2003, the Perpetial Foundation distributed grants exceeding $200,000 from Perpetial's gift fund for some 40 community initiatives. The larger recipients and programs supported by the Foundation this year include: $\mathbb{R}^{1\times1}$

AUSTRALIAN BUSH HERITAGE FUND

The Charles Darwin Reserve is a 68,600 hectare property cubside Perth. It contains eight vegetation systems that are poorly protected and several threatened species. The Perpetual Foundation funded the development of a live year management plan for the reserve, $\sim$ ren beste breezho

CYSTIC FIBROSIS SOUTH AUSTRALIA

.The Breathe Easy proceam funded by the Perpetual Equadation aims to support families of cystic fibrosis sufferers and therefore, 1 thelp children "breathe.easy." special life scale, say specially.

SANDRINGHAM & DISTRICT MEMORIAL HOSPITAL LETTER TELL. The Foundation purchased an infant incubator, allowing the hospital to care for babies who are in need of specialised medical attention after birth. Julie

CANTEEN AUSTRALIA

Our funding went to support a new program - Offspring - for children whose parents have been diagnosed with cancer, providing high quality been support across Australia.

BELL SHARESPEARE COMPANY

.Through its Shakespeare in Action program the Bell Shakespeare Company is working with young people considered lat risk from li suicide, gang behaviour and enemployment in metropolitan and regional centres. $\cdots$

CORPORATE RESPONSIBILITY STATEMENT

PERPETUAL TRUSTEES AUSTRALIA LIMITED

In this statement we describe Perpetual's ethical business orinciples, our approach to corporate governance and board supervision, our policies for ensuring the integrity of financial accounting and reporting to shareholders, our policies related to staff welfare and our commitment to the wider community. We set out here the main policies and practices of the board which we believe, complyin all substantial respects with the ASX Guidelines.

OUR COMMITMENT TO ETHICAL BUSINESS PRACTICES

Perpetual's reputation for trustworthiness is vitally important to our clients, our business partners, our employees and our shareholders, it is the cornerstone of our success. Our ethical standards are distilled in our code of ethics: Perpetual's Five Principles of Good Conduct, as set out on page 1 of this report. These principles govern the way we conduct our business, they enshrine our commitment to serving the interests of our clients, to honest and fair business practices, to non-discriminatoryemployment practices and to being a socially responsible corporate citizen.

These principles apply to all directors, executives and employees. They are supplemented by a range of written policies dealing with our obligations to maintain confidentiality of client and company information, avoid conflicts of interest, ensure full and timely disclosure of material, price sensitive information to shareholders and the market, and other matters. It is the responsibility of all directors and executives to report instances of unethical conduct by Perpetual staff or business partners in breach of Perpetual's Five Principles or other relevant policies by Perpetual staff or business partners to the chairman or to the managing director. The chairman or managing director is required to investigate such reports, and to address any breaches with appropriate corrective and disciplinary action.

OUR COMMITMENT TO GOOD CORPORATE GOVERNANCE

Your board is accountable to shareholders, clients and to the wider community for the group's performance. The board's specific responsibilities include:

• $\infty$ setting the strategic direction of the group and objectives for management;
• $\infty$ selecting the managing director and approving senior executive appointments:
• on monitoring business performance and the group's financial position;
• $\infty$ overseeing the integrity of the group's financial accounts and reporting;
• $\infty$ ensuring that significant business risks are identified and managed effectively;
• $\infty$ setting high standards for the ethical conduct of the group's activities; and
• $\infty$ overseeing the group's investment activities.

The board has outlined its responsibilities in detail in a document entitled "The Role of the Board'. This document is reviewed periodically to ensure it accurately reflects current practice. The board delegates day-to-day responsibility for management to the managing director and senior executives, but remains responsible for overseeing the performance of the management team. To ensure that responsibilities for day-to-day operations are clearly defined and operate efficiently and effectively, the board has delegated a range of authorities to management through formal delegations. These include expenditure authority (subject to limits), and authority to enter into contracts and to engage staff.

Board composition

At the date of this report, the board comprises eight directors of whom seven are non-executive directors. Directors come from a variety of business and professional backgrounds, and bring to the board diverse skills and expertise relevant

to the group. Details of the directors' experience, expertise, and terms of office are set out on pages 23 and 24 of this annual report.

The board has confirmed that all non-executive directors are independent directors under the definition adopted by the board as recommended by the ASX Guidelines. The chairman is also an independent director, and the roles of chairman and managing director are separate.

In considering the independence of each director, the board considers, on a director by director basis, whether his or her shareholding in the group. relationships with suppliers and competitors, or tenure as a director of Perpetual would materially affect the director's ability to exercise unfettered and independent judgement in the interests of Perpetual's shareholders.

Mr Kent is a director of Commonwealth Bank of Australia, whose subsidiary companies hold a total of 9.64 percent of Perpetual's issued shares on behalf of 32 investment funds administered by the bank. The board does not consider that this has any impact on the issue of director independence.

The independence of each director is reviewed annually in May and at any time when a change occurs that may affect a director's independence. Non-executive directors also formally advise the chairman of any relevant information, and update the chairman if their circumstances change at any time.

The board has established a Nominations Committee responsible for reviewing whether the mix of skills and experience of the board will add value for shareholders. If a board vacancy arises,

the board will appoint the most suitable candidate on the recommendation of the Nominations Committee. External consultants may be engaged to assist the board to identify qualified candidates. A director appointed to fill a vacancy must stand for election at the next annual general meeting.

One-third of the non-executive directors must retire at each annual general meeting, being those longest in office since their last election. The retirement age for non-executive directors is 72. In order to revitalise the board, directors agree to retire after three terms of three years. The board may invite a director to continue in office beyond nine years if this would be advantageous for reasons such as board leadership or continuity. For example, in 2001, the board invited Mr Curran to continue beyond nine years in order to provide leadership as chairman.

Board operations

In 2003, the board met 10 times, including a strategic planning session held over two days. The board receives monthly performance, operations and compliance reports from the managing director and chief financial officer, quarterly reports from each operating division detailing operational and strategic issues and quarterly reports on risk and compliance issues.

In addition, directors spend time reading and analysing board papers and reports submitted by management and they engage in regular informal discussions with management. The views of the chairman and directors are canvassed regularly by the managing director and the executive team on a range of strategic and operational issues. Senior executives often attend board and committee meetings to report on particular issues.

CORPORATE RESPONSIBILITY STATEMENT

PERPETUAL TRUNTEEN AFNIRALIA LIMITED

Non-executive directors regularly confer without management present. The board also meets at least twice per year in the absence of the managing director, to discuss the performance of the managing director and the senior management team, All directors have unrestricted access to company records and information. We have a formal policy allowing the board or individual directors to seek independent professional adviceat the group's expense.

Board committees. . The live standing committees of the board, their membership and key responsibilities are set out below:

Chairman's Committee

MEMBERS: CHARLES CURRAN (CHAIRMAN), STEPHEN CHAPMAN AND GRAHAM BRADLEY.

This committee's charter encompasses corporate opvernance procedures, important issues that arise between board meetings and other matters referred by the board from time to time. The committee also plans the agenda for each board meeting, and identifies items to be brought forward for board consideration.11

Audit Risk and Compliance Committee

MEMBERS; LINDA NICHOLLS (CHAIRMAN), WARWICK KENT, BONITA BOEZEMAN AND ROBERT SAVAGE $(FROM MARGH.2003)$ . a i stori të të matematike.Ngjarë të tërmika me të metëmbë a de la Constitución.2001 - Partido de Maria de la Cartela de la Cartela de la Cartela de la Cartela de la Cartela de la Cartela d aNasara masarar

The main functions of this committee are to oversee group accounting policies and practices, the integrity of financial statements. and reports, the scope, quality and independence of our external audit arrangements, the effectiveness of risk management policies. and the adequacy of our insurance programs. This committee is also responsible for monitoring overall legal and requistory compliance.

Investment Committee

MEMBERS; CHARLES CURRAN (CHAIRMAN), STEPHEN CHAPMAN, JOHN CURTIS (JULY 2002-MARCH 2003), WARWICK KENT (FROM MARCH 2003) AND GRAHAM BRADLEY.

This committee's main functions are to review and approve investment strategies and policies for all types of investments managed. by the group. to monitor performance of all assets managed on behalf of clients, and to review the allocation of the group's assets from time to time.

Human Resources and Remuneration Committee.

MEMBERS; JOHN CURTIS (CHAIRMAN), BONITA BOEZEMAN (FROM MARCH 2003), CHARLES CURRAN, LINDA NICHOLLS (JULY 2002-MARCH 2003) AND ROBERT SAVAGE (FROM MARCH 2003)...) This committee's charter is to oversee the group's human resources policies and practices, to assist the managing director to implement. tair, effective and market competitive remuneration and incertive programs, and, alter considering advice from external remuneration. advisers, to recommend remuneration for non-executive directors, the managing director, executive committee members and senior employees and to review succession and career plans for key executives.

Nominations Committee

MEMBERS, CHARLES CURRAN (CHAIRMAN), STEPHEN CHAPMAN AND WARWICK KENT

Established in March 2003, the Committee's role is to recommend to the board nominees for the board (including re-election of existing

.Doard members) and to review at least annually the size and structure of the board to ensure that the board comprises appropriately. qualified and experienced people. This committee is also responsible for implementing a formal evaluation process of the board's

performance as a whole and a formal program of disector education. I

Board committees

The board reviews its governance structures. including board committees, annually to assess their effectiveness and efficiency. For example, in March 2003, the board constituted a separate Nominations Committee to fulfil certain functions previously undertaken by the Chairman's Committee. Consistent with the ASX Guidelines. the board believes that there is value in having a separate committee dedicated to these functions.

Also, as part of its review in March, the board decided to disband its Regulatory Compliance Committee, and to divide responsibilities between the Audit Risk and Compliance Committee and a new Compliance Committee serving group subsidiary companies. The new Compliance Committee has two external members, with specialist qualifications, and one executive member.

The membership and terms of reference of the board's five committees are set out on page $16$ of this report. Each committee has written terms of reference. Unless more frequent meetings are required, all committees meet quarterly, except the Chairman's Committee which meets at least monthly and the Nominations Committee which will meet twice yearly.

Board performance and remuneration

The board reviews performance annually. The chairman reviews with each director their individual performance and after obtaining feedback from the other directors, the deputy chairman reviews the chairman's performance. This process aims to ensure that individual directors continue to contribute effectively

to the board's performance. In 2004, the board intends to expand its current performance evaluation process to include a formal review of the board's overall effectiveness.

The total remuneration available to non-executive directors is set by shareholders and was last increased in 2000 to $1.200.000. Total fees paid to non-executive directors in 2003 were $796.923. When reviewing fees, the board takes into account any change in the size and scope of the group's activities, the potential liability of directors and the demands placed on them in discharging their responsibilities. The board also bases its review on the advice of independent remuneration consultants. Board fees were last reviewed effective from 1 July 2003. The following are the standard fees for 2003 and 2004:

	2004	2003
Chairman	$220,000	$199.500
Deputy chairman	$135.000	-8127 ABD
Other directors	$85.000	$72.500

Except for the chairman and deputy chairman, non-executive directors receive additional fees for their work on board committees. The additional fee for membership of board committees (except the Chairman's Committee and Nominations Committee for which no additional fees are paid) are $20,000 per year effective 1 July 2003 (previously $15,000) for a committee chairman and $10,000 per vear for other committee members.

CORPORATE RESPONSIBILITY STATEMENT

PERPETUAL TRUSTEES AFSTRALIA LIMITED

In accordance with the company's constitution, non-executive directors are required to hold a minimum of 1,000 shares. Directors' individual shareholdings are set out in Note 30 to the financial statements. Under a share purchase planfor non-executive directors approved in 1998, non-executive directors may sacrifice up to 50 percent of their directors' fees to acquire shares in the company. Shares are purchased on a quarterly basis and disposal is restricted for $10$ years or until the director retires. Non-executive directors do not receive share options. All directors elected to receive shares in lieu of a portion of their fees in 2003.

Directors are entitled to certain benefits on retirement under a scheme approved by shareholders in 1990, and revised and approved at the annual general meeting in 2001. Benefits are related to years of service and provisions are accrued each year for these entitlements and reported in the annual report. The board has resolved to discontinue this retirement scheme for new non-executive directors appointed after 1 July 2003. Benefits will continue to accrue to existing directors under the existing scheme; new directors will receive increased board fees but will not receive retirement benefits.

Details of directors' remuneration are set out in the Directors' Report.

Contracts with directors

In the financial year, no director had a material personal interest in any contract entered into by any member of the Perpetual group other than the remuneration paid to the directors as outlined in this annual report, and the deeds of indemnity described below

Indemnity of directors and officers

The company has entered into deeds to indemnify directors and officers of Perpetual and its subsidiaries (other than the auditors) from all liabilities incurred as a director or officer except liabilities to Perpetual and its subsidiaries, and liabilities that arise out of conduct that was not in good faith. In addition, the company has directors and officers' insurance against claims the company may be liable to pay under these indemnities. This policy also insures directors and officers directly and they have contributed to the premium for this purpose.

PERPETHAL'S SHBSHDIARY BOARDS

The boards of Perpetual's subsidiaries consist wholly of executive directors. Perpetual's corporate governance policies are applied to its subsidiaries but adapted to reflect the size and nature of each subsidiary's operations and to recognise the fact that the boards of these companies do not comprise independent directors.

OUR COMMITMENT TO FINANCIAL INTEGRITY

The board has adopted policies designed to ensure that the group's financial reports are true and fair, meet high standards of disclosure and audit integrity and, when read in conjunction with the group's annual and periodic reports to shareholders, provide all material information necessary to understand the group's financial performance and position. These policies require that both the managing director and the chief financial officer state in writing to the board that the group's financial reports present a true and fair view, in all material respects, of the group's financial condition and operational results and are in accordance with relevant accounting standards.

The group's financial accounts are subject to an annual audit by an independent, professional auditor, who also reviews the group's half-yearly financial statements. The Audit Risk and Compliance Committee oversees this process on behalf of the board. The auditor attends each quarterly meeting of the Committee, and it is the Committee's policy to meet with the auditor for part of these meetings in the absence of all management executives. The Committee chairman meets face to face with our audit partner at least once every quarter also in the absence of executives. The auditor has a standing invitation to meet with the Committee, its chairman or with the group's chairman in the absence of management. The auditor attends board meetings at which annual and half-yearly accounts are adopted. For part of these meetings, the board has discussions with the auditor in the absence of executives. In addition, the auditor attends the annual general meeting for the purpose of answering shareholder questions about the audit report and audit process.

Auditor independence

The board has in place policies for ensuring the quality and independence of the group's external auditor. Those policies include the following:

• $\infty$ the group's audit must be tendered at least. every seven years and after the fifth year, the board must make a positive decision each year to retain existing arrangements;
• $\infty$ the audit partner must be rotated at least every. five years, with a two year gap before a partner may be reappointed; and
• os former audit partners and audit firm employees involved in our audit cannot become directors or employees of group companies for at least two years.

In addition, our policies prohibit our external audit firm being engaged to provide non-audit services that may materially conflict with its ability to exercise objective and impartial judgment on issues that may arise within our audit, such as services related to mergers and acquisitions, tax planning and strategy, senior management recruitment, significant valuations and appraisals, design and implementation of financial information systems, and other services that our auditor may be required to assess during its audit. In 2003, the greater part of fees paid to our external auditor for work other than audit of group accounts was for audit and taxation compliance services in relation to investment funds of which Perpetual companies are the responsible entity and/or manager. It is the board's view that these services are appropriately provided by the group's external auditor, and are not services of a kind that might impair the impartial judgement of the external auditor in relation to the group's audit.

The current external auditor is KPMG. The audit partner for the 2003 financial year was Mr Chris Hall, who first supervised our audit in 2000.

Risk management and oversight

The board is committed to effective risk management, bearing in mind the need to appropriately balance risk and reward. The group has in place a risk management framework that identifies the major areas of risk across the group and sets out how these risks are identified, assessed, managed and monitored. A nominated senior executive is responsible for the risk management. program relating to each major area of risk and the board through the Audit Risk and Compliance Committee is responsible to oversee the effectiveness of each risk management program.

CORPORATE RESPONSIBILITY STATEMENT

PERPETUAL TRUSTEES AUSTRALIA LIMITED

To underpin the integrity of Perpetual's financial reporting, it is Perpetual's practice for the managing director and chief financial officer to state to the board in writing that:

• $\sim$ The group's financial reports present a true and fair view, in all material respects, of the group's financial condition and operational results and are in accordance with relevant accounting standards.
• $\infty$ The financial reports are founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the board.
• $\infty$ The group's risk management and internal compliance and control system is operating efficiently and effectively in all material respects.

OUR COMMITMENT TO RESPONSIBLE EXECUTIVE REMUNERATION

The board believes that it has a responsibility to ensure that executive remuneration is fair and reasonable, having regard to the competitive market for executive talent, structured effectively to motivate and retain valued executives, and designed to produce value for shareholders. Perpetual seeks to employ and retain highly talented executives and staff, and has in place remuneration policies to achieve this aim. These include schemes under which both fully paid shares and share options may be issued to executives as part of their packages. All of Perpetual's employee and executive share and option plans have been previously approved by shareholders and each incorporates dilution. limits to protect the interests of shareholders. Details of these schemes are set out in the Directors' Report on pages 23 to 32 of this annual report.

To help retain key staff, Perpetual's remuneration packages provide benefits that are often deferred and are withheld unless executives meet necessary performance objectives and remain employees until benefits vest. The board's Human Resources and Remuneration Committee reviews the remuneration of the managing director which must be approved by the full board. The committee also reviews the managing director's recommendations on remuneration for key senior executives, and obtains professional advice from external remuneration specialists. Details of the key executive remuneration are shown on pages 27 and 28 of this report.

OUR COMMITMENT TO SHAREHOLDERS Market disclosure

The board is committed to ensuring that shareholders are fully informed of all material matters that affect the position and prospects of the group. It seeks to accomplish this through:

• $\infty$ the annual report distributed in August each year;
• $\infty$ the chairman's and managing director's addresses to the annual general meeting, which are mailed to shareholders'
• $\infty$ letters from the chairman to all shareholders. in February (on the release of the half yearly financial results), in May each year, and whenever significant developments occur; and
• $\infty$ posting significant information on Perpetual's internet site as soon as it is disclosed to the market.

Perpetual has a market disclosure policy to ensure compliance with the continuous disclosure obligations under ASX Listing Rule 3.1 and the Corporations Act 2001. The managing director. chief financial officer and company secretary are

members of the continuous disclosure committee responsible for deciding what information is required to be disclosed to the ASX. Perpetual ensures that all senior executives give regular sign-offs as to whether there are matters that require disclosure to the ASX. The board also fully recognises its disclosure obligations, and this is a standing agenda item at each scheduled board meeting. Copies of major announcements lodged with the ASX in the past year can be found on the company's website.

Share dealings by directors and executives

Our overriding policy is that there should be no dealings in the company's shares by any director or employee who is in possession of price sensitive information or where the dealing is for short-term or speculative gain. Provided they do not have price sensitive information, directors, executive committee members and other senior executives are permitted to deal in the company's shares only in the two month periods commencing 24 hours after announcement of the half year and full year financial results and the annual general meeting, and two months after release of the chairman's letter to shareholders in May. The group's policy requires prior approval for any share dealings from the chairman in the case of directors, from the deputy chairman in the case of the chairman and from the managing director in the case of senior executives.

OUR COMMITMENT TO OUR STAFF

Perpetual aspires to be a well regarded and progressive employer whose staff work in a non-discriminatory, safe and supportive environment where they can contribute their talents fully to the achievement of our corporate strategy and client service mission. Perpetual is

an equal opportunity employer and, in accordance with our Five Principles of Good Conduct, our hiring, promotion, remuneration and other peoplemanagement policies aim to respect basic human rights and avoid discrimination on the grounds of race, sex, age, religion, disability, sexual preference or political affiliation. We are also committed to provide our staff with training and development opportunities that will advance their career prospects and with remuneration policies that reward high achievement.

Perpetual is committed to protecting the health, safety and wellbeing of all employees and visitors to our premises. We do this by maintaining workplaces and systems of work that meet. contemporary safety standards designed to minimise risks to health and by providing training and supervision on health and safety issues.

All permanent staff are eligible to participate in a performance linked bonus scheme; to allow staff to share in the company's wealth creation, Perpetual has over recent years offered staff with tenure of six months or more the opportunity to acquire shares under an employee share purchase plan. More details of the operation of Perpetual's share plans are set out in the Directors' Report on pages 28 to 31.

Perpetual regularly surveys staff to gauge satisfaction with the group's policies and performance. Survey results are reviewed by the board and taken into account in setting targets for improvement in relevant areas.

CORPORATE RESPONSIBILITY STATEMENT

OUR COMMITMENT TO THE COMMUNITY

The board believes that Perpetual has a responsibility to contribute to the Australian community. Perpetual aspires to be a good corporate citizen and gives expression to this aspiration through the efficient delivery of services to our clients, through the taxes we pay, through the employment and training we provide our staff, and through our philanthropic endeavours.

Perpetual gives concrete expression to its community commitment by making donations to the Perpetual Foundation ('Foundation') which supports worthy causes in the areas of social welfare, education, medical research, environmental conservation and the arts. In 2003, the group donated $250,000 to the Foundation, bringing donations over the past seven years to $2.5 million. Details of grants made by the Foundation are contained on page 13 of this report.

Perpetual also provides sponsorship support to a range of organisations that contribute to the community, these include Australian Brandenburg Orchestra, The Bell Shakespeare Company, Art Gallery of NSW, National Gallery of Australia, Committee for the Economic Development of Australia, Sydney Institute, Securities Institute of Australia, and The Centre for Independent Studies, and several other community causes.

Shareholders who wish to know more about Perpetual's corporate policies are invited to review our website www.perpetual.com.au, or to contact the chairman or managing director. Comments and suggestions from shareholders are welcomed.

Shoules Cuman

CHARLES P CURRAN AO CHAIRMAN

Graham Boadley.

GRAHAM J BRADLEY MANAGING DERECTOR

DIRECTORS' REPORT

PERPETILAL TRUSTEES AUSTRALIA LIMITED

The directors present their report together with the financial report of Perpetual Trustees Australia Limited (the 'Company') and the consolidated financial report of the Company and its controlled entities (the 'consolidated entity'), for the year ended 30 June 2003 and the auditors' report thereon.

DIRECTORS

The directors of the Company at any time during or since the end of the financial year are;

Charles P Curran AO CHARMAN LLB, FCPA (AGE 64) .Appointed as a director in May 1990, deputy chairman since January 1995 and chairman since October 2001. A fil He is chairman of Capital Investment Group Pty Limited, a director of QBE Insurance Group Limited, an international Advisor.

to Goldman Sachs, Inc and a member of the Financial Sector Advisory Council. He is chairman of Perpetual's Chairman's $\sim$ Committee, chairman of the Investment Committee and a member of the Human Resources and Remuneration Committee.

Mr Curran brings to the board almost 40 years of experience as a stockbroker, businessman and investor, as well as over in 25 years' experience as a public company director and chairman. Subscription of the state of the

Stephen J Chapman DEPUTY CHARMAN BCOM, MBA, ACA (ACE 47)

.Appointed as a director in May 1995 and deputy chairman since October 2001. He is a founder and chairman of Baron .Partners Limited, an Australian merchant bank. He is also a director of Ascham Foundation Limited, Blackmores Limited, $\frac{1}{2}$ Hostworks Group Limited and Macquarie Radio Network Pty Limited. He is a member of Perpetual's Chairman's Committee. and Investment Committee. Which is a straight of the sign of the control of the state of the state of the state

Mr Chapman's career has given him wide experience of the strategic and financial issues affecting public companies and investment markets. Development of the second contract the property of the

$\frac{1}{2} \left( \frac{1}{2} \log \frac{1}{2} \log \frac{1}{2} \right) \left( \frac{1}{2} \log \frac{1}{2} \log \frac{1}{2} \log \frac{1}{2} \log \frac{1}{2} \log \frac{1}{2} \log \frac{1}{2} \log \frac{1}{2} \log \frac{1}{2} \log \frac{1}{2} \log \frac{1}{2} \log \frac{1}{2} \log \frac{1}{2} \log \frac{1}{2} \log \frac{1}{2} \log \frac{1}{2} \log \frac{1}{2} \log \frac{1}{2} \log \frac{1}{2} \log \frac{1}{2} $ Bonita L Boezeman AO DIRECTOR PMD (HARV.) (ACE 54)

.Appointed as a director in August 1996. She was formerly managing director and chairman of the South Pacific Division of $\stackrel{?}{\sim}$ .Time Life, a subsidiary of Time Warner Inc. She is deputy chairman of NSW Lotteries Conporation and a director on the board of the Defence Housing Authority and the Catholic Development Fund. She is a member of Perpetual's Audit Risk and $\pm 1$ Compliance Committee and Human Resources and Remuneration Committee. .Mis Boezeman brings to the Perpetual board over 25 years of experience as a local and international executive, together with

experise in marketing, client relationship management and business development. The simple show that the field $\mathbb{N}$

John S Curtis DIRECTOR BA, LLB (Hons) (Ace 53)

Appointed as a director in April 1995. He is chairman of Allianz Australia Limited and Calibum Partnership Pry Limited. T He is a director of St George Bank Limited and other companies. He is chairman of Perpetual's Human Resources and $,$ . Remaneration Committee: New York State (1989), New York State (1989), New York State (1989), New York State (19The Contract Committee: New York State (1989), New York State (1989), New York State (1989), New York State .Prezidente poli In addition to his experience as a former lawyer and business executive, Mr Curits brings to the Perpetual board his $\triangle\cdots$ considerable experience as a professional non-executive director across a wide range of industries together with experience in insurance and investment markets. [111111111111111111111111111111111111

DIRECTORS' REPORT

PERFEIUAL IRUSIEKS ANSIRALIA LIMITED

Warwick G Kent AO DIRECTOR CIT.WA, BEC, FCPA (ACE 67) a e SantoGermania Appointed as a director in May 1998. He is a former managing director and deputy chairman of Bank of Western Australia Limited. He is chairman of Coventry Group Limited and WA Newspapers Holdings Limited and a director of Commonwealth Bank of Australia. He is a member of Perpetual's Audit Risk and Compliance Committee and Investment Committee. ~~

As an experienced banking executive. Mr Kent brings to the Perpetual board his background in the management of operations, ; finance and risk management in the financial services industry together with his experience as a non-executive chairman. The Robert Barb and director. A service of

للمناسبين والمتحدث المتحدث Linda B Nicholls DIRECTOR BA (ECON), MBA (HARV.) (AGE 55) anSan San T ."Appointed as a director in March 1996. She is chairman of Australia Post, deputy chairman of Healthscope and a director .Of Sioma Pharmaceutical Group, Insurance Manufacturers of Australia Limited and St George Bank Limited and an International .Advisor to Goldman Sachs, Inc. She is chairman of Perpetual's Audit Risk and Compliance Committee. -1 Ms Nicholls brings to the Perpetual board her 20 years of experience, both focal and international, in linancial services and, investment management, together with considerable experience in relation to the audit and risk management issues faced by public comparies. As Revealed Assembly the distribution of the Association of the Association of

He is chairman of Mincom Limited and David Jones Limited and a director of Smorgon Steel Group Limited. He is a member of Perpetual's Audit Risk and Compliance Committee and Human Resources and Remuneration Committee. [1944] In addition to his particular expertise in the management of information technology and systems. Mr Savage brings to the Perpetual board his experience as a serior executive in Australia and the Asian region, including experience in people. $\mathbb{C}$ management and organisation effectiveness issues. The manner that the coninter 1994 (m. 1994)2000 - Patrick Bernstein, frantziar2000 - Patrick Bernstein, frantziar

.Appointed as a director in August 2001. He was formerly chairman and mapaging director of IBM Australia and New Zealand. []

Graham J Bradley MANAGING DIRECTOR BA, LLB (HONS) (SYD), LLM (HARV.) (AGE 55)

te Alban Alexandri Berlin al Barr

Robert M Savage DIRECTOR FASCPAS (AGE 61)

Appointed managing director in September 1995, He is a former partner of the international management consulting [3, 3] organisation McKinsey & Company and a former national managing partner and chief executive officer of Blake Dawson Waktron. He is currently chairman of the Garvan Research Foundation and a director of the Garvan Institute of Medical Research. He is .Ia mamber of Perpetual's Chairman's Committee, Investment Committee and a director of ASX Perpetual Registrars Limited. In ."As managing director, Mr Bradley brings to the group his prior professional experience as a strategy consultant to top management and as a lawyer, logether with some 32 years, as a chief executive officer. And a conditional conditional conditions

PRINCIPAL ACTIVITIES

The principal activities of the consolidated entity during the financial year were those of funds management, retirement savings and incomes, portfolio management, financial planning, trustee, responsible entity and compliance services, executor services, investment administration and custody services. There were no significant changes in the nature of activities during the year.

CONSOLIDATED RESULTS

The consolidated net profit for the year attributable to the members of Perpetual Trustees Australia Limited was $78.201.000 (2002: $75.584.000).

The Community

DIRECTORS' MEETINGS

The number of directors' meetings which directors were eligible to attend (including meetings of board committees) and the number of meetings attended by each director during the year to 30 June 2003, were:

Directo:		Board		Audit Risk &ComplianceCommittee		InvestmentCommittee		Chairman'sCommittee		RequiatoryComplianceCommittee*		тинапResources &Remuneration
	Eligible.to attend	Attended	Eligäsleto anend	Attended	täigibleto atrend	Attended	Eligibie්ට වෙළොයි	Attended	Eligibleto attered	Attended	itži gäsle.to arrend	Auended
	10		$\cdots$	$\cdots$					$\cdots$
B L Boezeman
不可有的现代		8	$\sim$				$\cdots$	ALC UNIT
							$\cdots$
					$\cdots$		$\cdots$	A 100				$\sim$
	10		11.11	11.1					$\cdots$	11.1	11.1

Perpeusis Regulary Complete Committe hed is fast metting on 19 May 2003 and is responsibles were dident beween the Audi Risk and Complete Committee and a new Complance Committee serving group subsitiony companies. For further information on board activities refer to the Corporate Responsibility Statement on page 16 of this annual report.

DIVIDENDS

Dividends paid or declared by the Company since the end of the previous financial year are set out in the table following:

Date	lvoe	Centsper share	Paid ordeclared$'000	Tax rate forfranking credit
As proposed and provided for in last year's report:
20 September 2002.	HBAÍ		-22.752 -	-30% Class C
in respect of the current financial year:
21 March 2003	laterian		-22.622.	-30% Class C
25 June 2003	Several	50	3.R. Q24	RAM Class C
3 September 2003.	Final	71	26.493*	-30% Class C
Total for the current financial year		1863

Calculation based on the ordering stares on issue as at 30 June 2003.

All the dividends paid or declared by the Company since the end of the previous financial year were 100 percent franked.

REVIEW OF OPERATIONS

A review of the operations of the consolidated entity and the results of those operations for the financial year are contained in the Chairman's Report to Shareholders and the Managing Director's Year in Review.

DIRECTORS' REPORT

PERPETUAL TRUSTEAS AUSTRALIA LIMITED

STATE OF AFFAIRS

Significant changes in the state of affairs of the consolidated entity during the financial period were as follows:

• $\sim$ Additional deferred consideration of $9 million was received from RBC Global Services Australia Pty Limited with respect to the sale of Perpetual Fund Services in July 2001.
• $\infty$ A share buy-back program was carried out where 275.419 shares in the Company were purchased on market for a total consideration. of $10,170,000 and subsequently cancelled.
• $\approx$ During the year 866,869 shares with a value of $26,792,000 in the Company were purchased under the Executive Share Purchase Plan to satisfy long term staff incentive and retention plans.

EVENTS SUBSEQUENT TO BALANCE DATE

The directors are not aware of any other event or circumstance since the end of the financial period not otherwise dealt with in this report or the consolidated financial report that has or may significantly affect the operations of the consolidated entity, the results of those operations or the state of affairs of the consolidated entity in subsequent financial years. Events subsequent to balance date are set out in Note 34 to the consolidated financial report.

LIKELY DEVELOPMENTS

Further information about likely developments in the operations of the consolidated entity and the expected results of those operations in subsequent financial years has not been included in this reportbecause the directors believe, on reasonable grounds, that to include such information

would be likely to result in unreasonable prejudice to the consolidated entity.

DIRECTORS' REMUNERATION

Perpetual's remuneration policy for non-executive directors aims to ensure that the group can attract and retain suitably skilled, experienced and committed individuals to serve on the board. Total remuneration available to non-executive directors is approved by shareholders, and was last increased in 2000 to $1,200,000. Total fees paid to non-executive directors in 2003 were $796,923 (2002: $765,232).

The board's Human Resources and Remuneration Committee (HRRC) is responsible for reviewing and recommending to the board any changes to board remuneration, taking into account the size and scope of the group's activities. the responsibilities and liabilities of directors and the demands placed upon them. In developing its recommendation, the HRRC takes advice from independent remuneration consultants.

Non-executive directors do not receive any performance-related remuneration, nor are they entitled to receive options over Perpetual shares. Non-executive directors may, however, elect to receive shares in lieu of up to 50 percent of normal board fees. Shares acquired under the group's non-executive directors share plan are purchased on market, at prevailing market prices, and are subject to a non-disposal restriction for 10 years or until a director leaves the board.

The nature and amount of emoluments paid to each non-executive director in the year to 30 June 2003 were as follows:

		Board and committee fees
	Cash	Shares	Total	Refirementbenefits accrued 2
,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,C.P. Currao	541	750	-500
-Chaoman	90 Z50.	36.250 - 1	-127.000
,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,BOSPRISERΨś.	95.529.	3.625.	154
H S Garis	76.567	18.325.	93 B92
,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,W G Kent,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,	58.289.	-36.250-	୍ୟାଣ୍ଡ ମିଟିସି
	AA 2	Kł
,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,	GQ 223	-3.25

NON-EXECUTIVE DIRECTORS' EMOLUMENTS

(A) Value of shares received in sacrifice of directors' fees as described above

(2) This amount represents the accresi during the vear of the restrement penels a successful and conserve meeting and described in Note 26.

More details of non-executive directors' remuneration policies are set out in the Corporate Responsibility Statement on page 17 of this annual report.

EXECUTIVE REMUNERATION

The group's ability to attract and retain talented executives, and to align their interests with those of shareholders, is critically important to Perpetual's ability to deliver sustained shareholder value. At the same time, the board has a responsibility to ensure that executive remuneration is fair and reasonable, and is effectively structured to produce superior results for shareholders. Accordingly, the board has adopted remuneration policies designed to achieve these important objectives. The HRRC is responsible for reviewing the remuneration of the managing director, which must be approved by the full board. The committee also reviews the remuneration of key senior executives, and periodically reviews our executive and staff remuneration policies, with advice from external remuneration specialists, to ensure that these remain effective to achieve the desired benefits for shareholders.

As a performance driven organisation, Perpetual's policy is that performance-based compensation elements should comprise a substantial portion of total remuneration for all senior executives. Remuneration packages for senior executives typically comprise three components: a fixed pay component, a short-term bonus component and a component related to longer-term performance. and retention.

The fixed pay component is calculated on the basis of total cost, including employee benefits such as motor vehicles, superannuation, car parking and any other form of compensation, together with fringe benefits tax applicable to those benefits. Short-term bonus incentives at Perpetual are based on the achievement of specific annual goals and objectives related to the performance of the group as a whole and its operating divisions. Bonuses may take the form of cash or executive shares and options issued under the group's equity based incentive schemes.

DIRECTORS' REPORTPERFECTUAL TRUSTES AUSTRALIA LIMITED

In addition, senior and other key executives may be granted long-term incentives designed to retain the loyalty of those executives over the medium to long term. In general, the long term variable element will take the form of a grant of shares or options under our equity based incentive plans described more fully below.

The nature and amount of each component of remuneration paid and accrued to each of the five most highly paid executive officers and managing director of the company in the year to $30$ June 2003 is set out below.

	Fixed	Incentive remuneration	fotal
	remuneration		Shares ®	Untions rola	remuneration
	,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
Managing director
G.J. Bradley ®	787.316	$\cdots$	1495 169	$\cdots$	1.282.485
Executives
D C Crowler	255.489.	190.346.	330.625
G 9 Doherty	433.295	245.298	300 983	51936	823 53A
F Geozalez	-GRQ	147.217	230.699	51 936.
M Stefanavski	---------------------------------------,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,	545.068 234.283	- 133.482.	$\cdots$	012.833
	273 366.	-86.248	五子 ( Mei /	$\cdots$

EXECUTIVE REMUNERATION

(1) Based on assessed fail vation distinsed and the conditional with the valuation methodology described below. The vation fecogened is based on the vesting period for options issued in the current year Options issued in pido years were disclosed in their entirey in the year of issue and accordingly have not been included in the current vest disclosures.

(2) Represents the proportion of equity based incerave programs applicable to current year remoneration.

(3) As previously annuanced. Me Bradby will necesse $800,000 on this realistimate in addition. 200,000 particle of streets and as a mest of $20,000, will was

EXECUTIVE SHARE PLANS

The board has discretion to issue shares to executives on the basis that those shares are retained for 10 years (or until termination). This plan is designed to ensure that executives throughout the group have a personal stake in the future performance of the group. Typically, shares granted under this plan are linked to performance objectives set on an executive-by-executive basis, and grants are then adjusted through the forfeiture of some or all of those shares at the end of the financial year if those objectives have not been fully met. Eligible executives may also sacrifice an additional portion of their cash bonuses to purchase shares under this plan. In other circumstances, where a grant of shares forms part of a long-term retention incentive, entitlement to the shares vests over a period of up to five years, and shares are forfeited if the employee resigns. Under the plan, shares are issued to executives at prevailing market prices. Alternatively, in keeping in line with the group's capital management. policies, the board may elect to purchase shares on-market to issue under this plan.

EXECUTIVE OPTION PLANS

The group may grant options under this plan to executives by way of short-term or long-term incentive arrangements. Typically, options are issued subject to achievement of individual objectives which, if not achieved, result in all or part of the options being forfeited. The exercise price of options issued under this plan is the prevailing market price for Perpetual shares at the time of issue. Typically, options issued under the plancannot be exercised for a minimum of three years,

and may be issued with exercise dates up to five vears from the date of issue. Options expire after six years from the date of grant, and resignation prior to the option exercise date will normally result in forfeiture.

Exercise of options issued in 2003 is conditional upon achievement of the following performance hurdle: the percentage increase in total shareholder returns (broadly growth in share price plus dividends reinvested) from the date of grant to the date of first exercise must exceed the average percentage growth of the S&P ASX 300 Industrials Accumulation Index over the relevant period.

During 2003, the HRRC reviewed the hurdles applicable to shares and options granted under our long-term incentive plans, and new hurdles will apply in 2004. Under the new policy, each grant of shares or options is divided into two equal portions. The first portion will vest fully only if Perpetual's total shareholder return (TSR) from date of grant to date of vesting exceeds the TSR achieved by 75 percent of a comparator group of companies (the ASX 100, excluding listed property trusts), and only partial vesting will occur if Perpetual's TSR is between the median and the 75th percentile of the comparator group. The second

portion will vest only if Perpetual's compound growth in earnings per share from date of grant to date of vesting exceeds 10 percent per annum.

Taking into account all relevant factors including, vesting timeframes, performance hurdles, share price volatility, dividend rates and interest rates. the board has determined that the value of options issued in 2003 was 12 percent of the option exercise price. The value of options is explicitly considered in assessing the competitiveness and appropriateness of executive remuneration packages. During the 2003 financial year, 411,940 net options were issued after adjusting for options forfeited during the year (2002: 190,588). Options issued during the 2003 year were predominantly issued at exercise prices of $31.03 and $32.46 per share (2002: $38.66 per share). The cost of net options issued during 2003, valued at 12 percent of the exercise price, was $1,489,787 (2002: $1,002,520). Pending the issue of an Australian Accounting Standard specifying the methodology for accounting for share options, this cost has not been reflected in the Statements of Financial Performance.

Total outstanding options issued to executives and other staff are summarised below:

	As at36 June 2003	As at30 June 2002
Number of options on issue	1.467.024	1.257.157
Weighted average exercise price	$\frac{1}{2}$ $\frac{1}{2}$ $\frac{1}{2}$ $\frac{1}{2}$ $\frac{1}{2}$ $\frac{1}{2}$ $\frac{1}{2}$ $\frac{1}{2}$ $\frac{1}{2}$ $\frac{1}{2}$ $\frac{1}{2}$ $\frac{1}{2}$
Closing share price -- 30 June	The part ofቁቁስ ግስ	-$42.90.
Exercise price value of options on issue ('000).	The County	$38.180
Market price value of options on issue ('000).	The property	ାଷ୍ଟ୍ର ପ୍ରାହ୍ମ

The number of options on issue equates to 3.9 percent (2002: 3.3 percent) of issued capital.

The dilutive effect of outstanding options on earnings per share is reported in Note 9 to the consolidated financial report.

DIRECTORS' REPORTPERPETUAL TRUSTESS ATSTRALIA LIMITED

The following options issued under the plan, or previous plans, to the named executives were exercised during the financial year:

	Number ofoptions exercised	Exercise	Market value of shareson date of exercise
Executive director	,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
G. J. Bradley	40 000	$21.84	829 70
G J Bradley	--------------------------------------20.000	$21.84	329 B.A
G J Bradley	27.477	$21.77	328. ZO
G J Bradley	-22.523.---------------------------------------	321.84	828. ZO
-bradley	-500	-821-77	-30
Freculiuss
M I Stefanovski	-22.363--------------------------------------	$22.56	8 70
	-9.255,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,	$20.66	-70

OPTIONS

During the financial year, the Company granted options over unissued ordinary shares to the following named officers as part of their remuneration:

	Options granted	Exercise price	First exercise date	Expiry date
Executives
G.O.Doherty	-100 AOA	ISB2 46.	-28 October 2005 -	-28 October 2008
E Gonzalez	-100 AOD	RR2 46.	-28 October 2005 -	-28 October 2008

At the date of this report, unissued ordinary shares of the Company under option are shown in Note 23 to the consolidated financial report. These options do not entitle the holder to participate in any share issue of the Company or any other body corporate. No options have been granted since the end of the financial year.

During or since the end of the financial year, the Company issued shares as a result of the exercise of options as follows:

Shares issued	Amount paid per share
11.325	S. 83
31.028	$22.56
45.851	$21.77
96.033	$21,84
16.720	$20.66
1.316	$31.67
202.073

There were no amounts unpaid on the shares issued.

OTHER EMPLOYEE SHARE SCHEMES

In addition to the Executive Share Plan and the Executive Option Plan, the group makes two further equity based benefit programs generally available to staff and executives: the Employee Share Purchase Plan and Employee Share Reward Plan.

Under the Employee Share Purchase Plan, eligible employees may acquire Perpetual shares, with the cost being financed by a non-recourse, $10$ year interest free loan from Perpetual which is repaid by dividends paid on shares issued under the plan. This plan has been in operation since 1995.

During the 2003 financial year a total of 47,280 shares were acquired by the plan trustee for a total value of $1,467,000 for the benefit of 611 employees. Over 82 percent of eligible employees elected to acquire shares under the plan in 2002. The board believes that this plan has created significant benefits for the group by assisting employees at all levels to acquire an ownership stake in Perpetual.

Under the Employee Reward Share Plan. employees may be offered up to $1,000 worth of Perpetual shares at no cost in recognition of their contribution to Perpetual's performance over the previous financial year. This plan was first activated in 2002 to acknowledge the contribution by staff to the financial results of the company in the 2002 financial year. A total of 19,957 shares were issued to over 700 employees under this scheme at a total cost to the company of $650,000.

DIRECTORS' INTERESTS

The relevant interest of each director in the share capital of the Company shown in the Register of Directors' Shareholdings and the relevant interests of each director in registered schemes of the consolidated entity are set out in Note 30 to the consolidated financial report.

ENVIRONMENTAL REGULATION

The consolidated entity acts as trustee or custodian for a number of property trusts, which have significant developments throughout Australia. These fiduciary operations are subject to environmental regulations under both Commonwealth and State legislation in relation to property developments. Approvals for commercial property developments are required by state planning authorities and environmental protection agencies. The licence requirements relate to air, noise, water and waste disposal.

The responsible entity or manager of each of these property trusts is responsible for compliance and reporting under the government legislation.

The consolidated entity is not aware of any non-compliance in relation to these licence requirements during the financial year.

INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Company has resolved to indemnify the current directors and officers of the Company against all liabilities to another person (other than the Company or a related body corporate) that may arise from their position as directors of the Company and its controlled entities, except where the liability arises out of conduct involving a lack of good faith. The resolution stipulates that the Company will meet the full amount of any such liabilities, including costs and expenses.

The Company's controlled entities have also resolved to indemnify their current directors and officers for all liabilities to another person (other than the Company or a related party) that may arise from their position, except where the liability arises out of conduct involving a lack of good faith. The resolution stipulates that each relevant controlled entity will meet the full amount of any such liabilities, including costs and expenses.

INSURANCE

In accordance with the provisions of the Corporations Act 2001, the Company has a Directors' and Officers' Liability policy which covers all directors and officers of the Company and its controlled entities. The terms of the policy specifically prohibit disclosure of details of the amount of the insurance cover and the premium paid.

DIRECTORS' REPORT

AUTHORISED TRUSTEE CORPORATION

The Company is an authorised trustee corporation as defined in Section 9 of the Corporations Act 2001. In accordance with ASIC Class Order number 98/105 dated 10 July 1998 made pursuant to Subsection 341(1) of the Corporations Act 2001, the Company is relieved from compliance with paragraphs $4.1$ to $7.2$ of accounting standard AASB 1033 'Presentation and Disclosure of Financial Instruments' and paragraphs 4.1 to 7.2 of accounting standard AASB 1034 'Financial Report Presentation and Disclosures' insofar as those provisions require the directors of the Company to ensure that the Company's financial reports disclosed, whether in the Statements of Financial Position or any note to those financial reports:

• (a) liabilities incurred by the Company whilst acting:
  • $(i)$ as trustee: or
  • (ii) in any representative capacity where the Company has taken in its own name a grant of probate of the will of a deceased person or of letters of administration of the estate of a deceased person in respect of which the Company has a valid and subsisting right of indemnity out of any assets which are sufficient to satisfy the right of indemnity, and
• (b) the amount and description of the assets from which the Company has a right of indemnity in respect of any liability to which paragraph (a) applies.

ROUNDING OFF

The Company is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with that Class Order, amounts in this report and the financial report have been rounded off to the nearest thousand dollars, unless otherwise stated.

Signed on behalf and in accordance with a resolution of the directors:

Kharles Cuman

CHARLES P CURRAN AO CHAIRMAR

Graham Bradley.

GRAHAM J BRADLEY MANAGING DIRECTOR

Dated at Sydney: 6 August 2003

MSNOR ROKE

34 | STATEMENTS OF FINANCIAL PERFORMANCE FOR THE YEAR ENDED 30 JUNE 2003

	NOTE		CONSOLIDATED	THE COMPANY
		2003	2002	2003	2002
		$-5.1000 -$	$$^{\circ}$ $0.0$	$S^+0.0.0$	$.000
Revenue from the provision of services		254,025	235.689	75,225	77.679
Investment income		10,985	8.374	51,866	53.196
	2	265,010	244,063	127,091	130,875
Expenses
Staff related expenses		(103, 204)	(93.166)	(39, 631)	(29, 975)
Occupancy expenses		(6, 220)	(6,016)	(4, 915)	(1.808)
Administrative and general expenses		(42, 029)	(44.162)	(4, 654)	(1.460)
Earnings before interest, tax, depreciation andamortisation (EBITDA) excluding investment/
business/building sales	5.	113,557	100,719	77,891	97,632
Interest expense		(3,001)	(2,958)	(212)	(141)
Depreciation and amortisation expense	3	(10, 186)	(10,526)	(6, 196)	(6,064)
Goodwill amortisation expense	3	(3,868)	(4.012)
Proceeds from sale of investments/business/building		37,477	52.315	16,320	34.770
Cost of investments/business/building disposed of		(27, 476)	(34.912)	(8,389)	(20.515)
Profit on disposal of investments/business/boilding	4	10,001	17,203	7,931	14.255
Share of net (losses)/profits of associates accountedfor using the equity method	31	(369)	498
Profit from ordinary activities before incometax expense		106,134	100,924	79,414	105,682
Income tax expense.	7.	(27, 933)	(25.340)	(6, 772)	(13.289)
Net profit		78,201	75.584	72,642	92.393
Net profit attributable to members of the parent entityand total changes in equity other than those resultingfrom transactions with owners as owners		78,201	75.584	72,642	92.393
Basic earnings per share - cents per share	9	207.1	199.9
Diluted earnings per share - cents per share	ġ	206.4	197.5

The Statements of Financial Performance are to be read in conjunction with the noises to the financial statements.

STATEMENTS OF FINANCIAL POSITION AS AT 30 JUNE 2003

PERPETHAL TRUSTESS AUSTRALIA LIMITED AND ITS CONTROLLED ENTITIES.

	NOTE	CONSOLIDATED		THE COMPANY
		2003	2002	2003	2002
		$'000	$10.69	$!000	$$^{\circ}000$
Current assets
Cash assets	30	113,199	109.951	72,655	92.256
Receivables	31	48,512	53.144	22,900	34.954
Other financial assets	32	448	497	348	391
Other	16	13,226	7.399	10,255	4.482
Total current assets		175,385	170.991	106,158	132.083
Non-current assets
Receivables	31	14,695	35.310	14,695	15.110
Investments accounted for using the equity method	31	37,351	38.394
Other (inancial assets	32	72,937	88.764	160,077	162.924
Property, plant and equipment	13	42,691	45.913	16,915	16.793
Intengibles	34	55,303	58.972
Deferred tax assets	15	15,175	11.510	11,483	7.608
Other	16	17,634	1.887	17,482	41
Total non-current assets		255,786	260.548	220,652	202.476
Total assets		431,171	431.539	326,810	334.559
Current liabilities
Payabies	37	38,424	46.079	55,256	66.207
Interest-bearing liabilities	18	3,000	3.083	3,000	3.000
Current tax liabilities		16,141	20.302	5,789	33.721
Provisions	19	28,929	43.750	25,333	35.760
Total current liabilities		86,494	113.214	89,378	118.688
Non-current liabilities
	18		48.027		3.000
Interest-bearing liabilities		45,000			568
Deferred tax liab#ities		948	1.824	271
Provisions	19	11,302	11,874	9,086	9.496
Total non-current liabilities		57,250	61.725	9,357	13.064
Total liabilities		143,744	174.939	98,735	131.752
Net assets		287,427	256.600	228,075	202.807
Equity
Contributed equity	20	122,316	128.207	122,316	128.207
Reserves	21	86,201	76.200	48,320	40.389
Retained profits	22	78,910	52.193	57,439	34.211
Total equity attributable to members of the parent entity		287,427	256.600	228,075	202.807

The Statements of Francisi Position are to be read in conjunction with the notes to the francial statements.

36 | STATEMENTS OF CASH FLOWS FOR THEYEAR ENDED 30 JUNE 2003| PERPETUAL TRUSTERS AUSTRALIA LIMITED AND ITS CONTROLLED ENTITIES

	NOTE	CONSOLIDATED		THE COMPANY
		2003	2002	2003	2002
		$10.0	$$^+0.0.0$	$'00	$100
Cash flows from operating activities
Cash receipts in the course of operations		267,474	247,820	77,382	49.389
Cash payments in the course of operations		(149, 107)	(124, 213)	(30, 307)	(10.477)
Shares purchased to satisfy long term staffincentive and retention programs.	33(c)	(26, 792)		(26, 792)
Dividends received		$^{\circ}$ 5,303	4.228	45,870	48.712
Interest received		5,657	3.801	5,026	3,310
Borrowing costs paid		(2, 931)	(3.214)	(242)	(141)
Income taxes paid		(36, 635)	(20.977)	(18, 876)	(9.675)
Cease payments		(4, 828)	(5.001)	(3, 967)	(1.611)
Net cash provided by operating activities	33(b)	58,141	102.444	48,094	79.507
Cash flows from investing activities
Payments for investments in associates			(1, 850)
Payments for property, plant and equipment		(7,490)	(12,672)	(6,371)	(12.593)
Payments for investments		(10, 298)	(27.770)	(4, 841)	(6, 361)
Payments for controlled entities			(8, 350)
Proceeds from safe of non-current assets		840	70		44
Net proceeds from the sale of Fand Services	33(d)	9,000	26,037	9,000	26,037
Proceeds from sale of an associate			600
Proceeds from sale of investments		25,975	21.515	7,320	4.770
Net cash provided/(used) by investing activities		18,027	(2.420)	5,115	11.897
Cash flows from financing activities
Proceeds from issue of shares		4,279	7.753	4,279	7.753
Share buy-back		(10, 170)	(3.875)	(10, 170)	(3.875)
Repayment of borrowings to third parties		(3, 110)	(3.615)	(3,000)	(3.000)
Net kians to associate entities		316	(6.700)	316	(6.700)
Dividends paid		(64, 235)	(39.863)	(64, 235)	(39.863)
Net cash used by financing activities		ч.,(72, 920)	(46.300)	(72, 810)	(45.685)
Net increase/(decrease) in cash held		3,248	53,724	(19, 601)	45,719
Cash at the beginning of the financial year		109,951	56.227	92,256	46.537
Cash at the end of the financial year	33(a)	113,199	109.951	72,655	92.256

The Statements of Cash Flows are to be read in conjunction with the notes to the financial statements

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 BUNE 2003

PERPETHAL TRUSTEES AUSTRALIA LIMITED AND ITS CONTROLLED ENTITIES

1(i) Statement of significant accounting policies

The significant policies which have been adopted in the preparation of this financial report are:

(a) Basis of preparation

The financial report is a general purpose financial report which has been prepared in accordance with Accounting Standards, Urgent Issues Group Consensus Views, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001. It has been prepared on the basis of historical costs and, except where stated, does not take into account changing money values or fair values of non-current assets.

These accounting policies have been consistently applied by each entity in the consolidated entity and, except where there is a change in accounting policy, are consistent with those of the previous year.

(b) Principles of consolidation

The consolidated financial statements of the economic entity include the financial statements of the Company, being the parent entity. and its controlled entities (the consolidated entity).

Where an entity either began or ceased to be controlled during the year, the results are included only from the date control commenced or up to the date control ceased.

Unrealised gains and losses and later-eatily balances resulting from transactions with or between controlled entities are eliminated in full an consolidation.

(c) Goodwill - Note 14

Goodwill represents the excess of the purchase consideration plus incidental costs over the fair vatue of the identifiable net assets acquired on the acquisition of a controlled entity. Goodwill is amortised on a straight line basis over the period during which the benefits are expected to arise. The pariod of amortisation is up to 20 years.

The unamortised balance of goodwill is reviewed at least at each reporting date. Where the balance exceeds the value of expected future benefits, the difference is charged to the Statements of Financial Performance.

For associates, the consolidated financial statements include the carrying arrount of goodwift in the equity accounted investments' carrying amounts.

(d) Revenue recognition - Note 2

REVENUE FROM FEES AND COMMISSIONS

Revenue from lees and commissions is earned from the provision of services to customers putside the consolidated entity. Revenue is recognised when the products or services are provided, or when the fee or commission in respect of services provided is receivable.

INTEREST INCOME

Interest income is recognised as it accrues taking into account the effective yield of the financial asset.

ASSET SALES

The gross proceeds of asset sales are included as revenue of the consolidated entity. The profit or loss on disposal of assets is brought to account at the date an unconditional contract of sale is signed.

OTHER REVENUE

Ravenue recognition policies for other financial assets are described in Accounting Policy Note 1(i)(i).

(e) Loans and borrowing costs - Note 18

Coans are carried on the Statements of Financial Position at their principal amounts.

Borrowing costs include interest, amortisation of discounts relating to borrowings and lease finance charges. Borrowing costs are accrued over the period they become due and are recorded as part of payables.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2003

PERPETHAL TRUSTEES AUSTRALIA LIMITED AND ITS CONTROLLED ENTITIES

1(i) Statement of significant accounting policies (continued)

(f) Income $\text{tax} - \text{Note } 7$

The consolidated entity adopts the liability method of tax effect accounting, Income tax expense is calculated on profit from ordinary activities adjusted for permanent differences between accounting and taxable income. The tax effect of timing differences, which arise from items being brought to account in different periods for income tax and accounting purposes, is carried forward in the Statements of Financial Position as a deferred tax asset or a deferred tax liability.

Deterred tax assets are not brought to account unless realisation of the asset is assured beyond reasonable doubt. Deferred tax assets relating to entities with tax losses are only brought to account when their realisation is virtually certain. The tax effect of capital losses is not recorded unless realisation is virtually certain.

The Company and its wholly owned entities at the date of signing this report have not yet made a decision to adopt the lax consolidation system. As a consequence, the consolidated entity has applied thoent Issues Group Abstract 39 'Effect of Proposed Tax Consolidation Legislation on Deferred Tax Balances'. Deferred tax balances have been accounted for in accordance with AASB 1020 (version 1989). and are supported by taxation legislation (as amended by the tax consolidation legislation). If the Company and its wholly-owned entities were to implement tax consolidation, it is expected that consideration for deferred tax balances would be receivable/payable by entities in the consolidated entity.

(g) Non-current assets

The carrying amounts of all non-current assets valued on the cost basis are reviewed at least annually to determine whether they are in excess of their recoverable amount. If the carrying amount of a non-current asset exceeds the recoverable amount, the asset is written down to the lower value, in assessing recoverable amounts, the relevant cash flows have not been discounted to their present value.

(h) Trade debtors - Note 11

Those debiors to be settled within 90 days are carried at amounts due. The collectability of debis is assessed at year end and specific provision is made for any doubtful accorats.

(i) Earnings per share - Note 9

Basic earnings per share (EPS) is calculated by dividing the net profit attributable to members of the parent entity for the reporting period. by the weighted average number of ordinary shares of the Company, adjusted for any bonus issue.

Diluted EPS is calculated by dividing the basic EPS earnings, adjusted by the after tax effect of financing costs associated with dilutive potential ordinary shares and the effect on revenues and expenses of conversion to ordinary shares associated with dilutive potential ordinary shares, by the weighted average number of ordinary shares and dilutive potential ordinary shares adjusted for any bonus issue.

(i) Other financial assets - Note 12

CONTROLLED ENTITIES

Investments in controlled entities are carried in the Company's financial statements at the lower of cost or recoverable amount. Dividends and distributions are brought to account in the Statements of Financial Performance when they are declared by the controlled entities.

ASSOCIATES

An associate is an entity, other than a partnership, over which the consolidated entity exercises significant influence and where the investment in that entity has not been acquired with a view to disposal in the near future.

In the Company's financial statements, investments in associates are carried at the lower of cost or recoverable amount. Income from dividends is brought to account in the Statements of Financial Performance as dividends are received.

In the consolidated financial statements, investments in associates are accounted for using equity accounting principles, investments in associates are carried at the lower of the equity accounted amount and recoverable amount. The consolidated entity's share of the associates' net profit or loss after tax is recognised in the consolidated Statements of Financial Performance after adjustments for: revisions in depreciation of depreciable assets and amortisation of goodwill arising from notional adjustments made as at the date of acquisition; dissimilar accounting policies: and the elimination of unrealised profits and losses on transactions batween the associate and any entities in the consolidated entity or another associate of the consolidated entity. Other movements in reserves are recognised directly in consolidated reserves.

OTHER COMPANIES AND UNIT TRUSTS

Investments in other listed and unlisted companies and unit trusts are carried at the lower of cost or recoverable amount. Dividends are brought to account as they are declared.

Profits and losses on disposal of long term investments are transferred to a Capital Profits Reserve.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 BUNE 2003

PERPETHAL TRUSTEES AUSTRALIA LIMITED AND ITS CONTROLLED ENTITIES

1(i) Statement of significant accounting policies (continued)

(k) Property, plant and equipment - Note 13

ACOUISITION

Items of property, plant and equipment are recorded at cost and depreciated as outlined below.

The cost of items of property, plant and equipment constructed by the consolidated entity includes the cost of materials and direct labour. The proportion of overheads and other incidental costs directly attributable to its construction are also capitalised to the cost of the property, plant and equipment.

REVALUATION

Land and buildings are measured at fair value and are revalued with sufficient regularity to ensure the carrying value does not differ materially from its fair value at the reporting date, independent valuations are obtained at least every flivee years. Revaluation increments are recognised in the asset revaluation reserve except for amounts reversing a decrement previously recognised as an expense. which are recognised as revenues. Revaluation decrements are only offset against revaluation increments relating to the same class of asset and any excess is recognised as an expense.

DEPRECIATION AND AMORTISATION

Items of capitalised software, property, plant and equipment, including buildings and leasehold property but excluding freehold land. are depreciated/amortised using the straight line method over their estimated useful lives.

The depreciation rates used for each class of asset for the current and previous years are as follows:

«» Buildings	-2.5 percen
« Plant and equipment	10-27 percen
ss Capitalisad software	-20-40 bercen

Assets are depreciated or amortised from the date of acquisition or in respect of internally constructed assets. from the time an asset is completed and held ready for use.

SUBSEQUENT ADDITIONAL COSTS

Costs incurred on property, plant and equipment subsequent to initial acquisition are capitalised when it is probable that future economic benefits, in excess of the originally assessed performance of the asset, will flow to the consolidated entity in future years. Where these costs represent separate components, they are accounted for as separate assets and are separately depreciated over their useful lives.

Costs incurred on property, plant and equipment that do not meet the criteria for capitalisation are expensed as incurred.

LEASED PLANT AND EQUIPMENT

Leases of plant and equipment under which the Company or its controlled entities assume substantially all the risks and benefits of ownership are classified as finance leases. Other leases are classified as operating leases.

Finance leases are capitalised. A lease asset and a lease liability equal to the present value of the minimum lease payments are recorded at the inception of the lease. Capitalised fease assets are amortised on a straight line basis over the term of the relevant lease, or, where it is likely the consolidated entity will obtain ownership of the asset, the life of the asset. Lease liabilities are reduced by repayments of principal. The interest components of lease payments are charged to the Statements of Financial Performance.

Payments made under operating leases are charged against profits in equal instalments over the accounting periods covered by the lease term.

(i) Payables - Note 17

Liabilities are recognised for amounts to be paid in the future for goods or services received, whether or not billed to the Company or consolidated entity. Trade creditors are normally settled within 60 days.

(m) Employee entitlements - Note 19

WAGES, SALARIES AND ANNUAL LEAVE

Liabilities for employee benefits for wages, salaries, annual leave and sick leave expected to be settled within 12 months of the year-end represent present obligations resulting from employees' services provided to reporting date, calculated at undiscounted amounts based on remuneration wage and salary rates that the consolidated entity expects to pay including related on-costs.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2003

PERPETHAL TRUSTEES AUSTRALIA LIMITED AND ITS CONTROLLED ENTITIES

1(i) Statement of significant accounting policies (continued)

(m) Employee entitlements - Note 19 (continued)

LONG SERVICE LEAVE

The provision for employee benefits to long service leave represents the present value of the estimated future cash outflows to be made resulting from employees' services provided to reporting date.

The provision is calculated using expected future increases in wage and salary rates including related on-costs and expected settlement dates based on turnover history and is discounted using the rates attaching to national government bonds at reporting date which most closely match the terms of maturity of the related liabilities. The unwinding of the discount is treated as long service leave expense.

STAFF SHARE OPTION PLAN AND EMPLOYEE OPTION PLAN

The Company granted options to certain employees under executive option plans. Further information is set out in Note 23 and the Directors' Report. The costs of administering the schemes are expensed as incurred.

EMPLOYEE SHARE PURCHASE PLAN

The Company granted interest free loans to certain employees of the Company for the acquisition of shares in the Company under an employee share parchase plan. Further information is set out in Notes 23 and 30.

SUPERANNUATION

The Company and other controlled entities contribute to an employee superannuation fund. Contributions are charged against income as they are made. Further information is set out in Note 26.

DEFERRED INCENTIVES CLASSIFIED AS LONG TERM ASSETS - NOTE 16

The Company grants certain employees shares under long term incentive and retention plans. Under these plans, shares vest with the employees over periods ranging from three to five years. To satisfy the long term incentives granted, the Company purchases or issues shares under the Executive Share Plan with the cost of the shares purchased or issued being amortised on a straight line basis over the applicable vesting period. Further details are set out in the Directors' Report.

(n) 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 Australian Tax Office (ATO). In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense.

Receivables and payables are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the Statements of Financial Position.

Cash flows are included in the Statements of Cash Flows on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the ATO are classified as operating cash flows.

(o) Provisions - Note 19

A provision is recognised when there is a legal, equitable or constructive obligation as a result of a past event and it is probable that a fature sacrifice of economic benefits will be required to settle the obligation, the timing or amount of which is uncertain.

If the effect is material, a provision is determined by discounting the expected future cash flows (adjusted for expected future risks). required to settle the obligation at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability, being risk free rates on government bonds most closely matching the expected future payments, except where noted below. The unwinding of the discount is treated as part of the expanse related to the particular provision.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the recovery receivable is recognised as an asset when it is probable that the recovery will be received and is measured on a basis consistent with the measurement of the related provision.

In the Statements of Financial Performance, the expense recognised in respect of a provision is presented net of the recovery. In the Statements of Financial Position, the provision is recognised net of the recovery receivable only when the entity:

• on thas a legally recognised right to set off the recovery receivable and the provision: and
• << Intends to settle on a net basis, or to realise the asset and settle the provision simultaneously.

PERPETHAL TRUSTEES AUSTRALIA LIMITED AND ITS CONTROLLED ENTITIES.

1(ii) Changes in accounting policy

(a) Dividend provision - Note 19

The consolidated entity has applied AASB 1044 'Provisions. Contingent Liabilities and Contingent Assets' (issued in October 2001) for the first time from 1, July 2002. Dividends are now recognised at the time they were declared, determined or publicly recommended. Previously, dividends were recognised in the financial period to which they related, even though the dividends were announced after the end of the financial period.

If this policy was applied in the previous period the effect would have been to reduce the provision for dividend by $22,752,000 and increase retained profits by the same amount in the Statements of Financial Position as at 30 June 2002. There would have been no impact on the profit for the year ended 30 June 2002.

No adjustment has been made to the prior year comparatives for the change in accounting policy.

(b) Employee entitiements - Note 19

The consolidated entity has applied the revised AASB 1028 Employee Benefits' for the first time from 1 July 2002.

The liability for annual leave is now calculated using the remuneration rates the Company expects to pay, not wage and salary rates current at reporting date. The historical calculation of long service leave was in accordance with the revised standard and therefore there was no change in the year.

As a result of this change in accounting policy, employee benefits expense increased by $154,000 (the Company: $154,000) and income tax expense decreased by $46,200 (the Company, $46,200) for the year to 30 June 2003.

No adjustment has been made to the prior year comparatives for the change in accounting policy.

	CONSOLIDATED		THE COMPANY
	2003	2002	2003	2002
	000	$.069	$10.00	$\S 000$
Revenue from ordinary activities
Revenue from operating activities
Gross revenue from fees and commissions	253,985	235.619	7,566	8.970
Management fees -- related parties			67,652	68.665
Investment income
Dividends:
Related parties			44.296	-47.562
Other parties	4.778	3.884		1.150
interest:
Related parties	1,021
Other parties	4.691	4.536		4.047
Write down of investments		(734)
Rent and other investment income		688	1.066	437
Revenue from outside operating activities
Gross proceeds from sale of property, plant and equipment	40	70		객속
	265,010	244.063	127,091	130.875
Other revenue from outside operating activities
Gross proceeds from sale ofinvestments/business/building	37.477	52.115	16,320	34.770

$\frac{3}{2}$ Ĭ

NOTES TO THE FINANCIAL STATEMENTS FOR THEYEAR ENDED 30 JUNE 2003.PERPETUAL TRUSTERS AUSTRALIA LIMITED AND LTS CONTROLLED ENTITIES

		CONSOLIDATED		THE COMPANY
		2003	2002	2003	2002
		$10.00.	$°000	$$^{\circ}00$	$$^{\circ}000$
	3. Profit from ordinary activities before
	income tax expense
	Profit from ordinary activities before income tax hasbeen arrived at after charging/(crediting) the following items:
	Depreciation of property, plant and equipment:
	Freehold land and buildings	239	462
	Plant and equipment	4,233	5.606	3,070	4.272
	Capitalised software	5,714	4.216	3,126	1.792
	Leased plant and equipment		242
		10,186	10.526	6,196	6.064
	Rental charges -- operating leases	4,828	5,001	3,967	1,611
	Net expense from movements in provision for:
	Employee entitlements	5,567	3,543	9.872	1,628
	Bad and doubttul debts	50	850	50	850
	Amortisation of goodwill	3,868	4.012
	Net loss/(gain) on sale of property, plant and equipment	62	48	46	(10)
	Net gain on sale of investments/business/building	(10, 001)	(17.203)	(7, 931)	(14.255)
k,	individually significant items included in net profitattributable to members of the parent entity
	Profit on disposal of investments/business/building:
	Profit/(loss) on sale of investments	667	3.964	(1,069)	559)
	Loss on sale of the investment in the associateInvestor Security Group Ltd		(1,575)
	Profit on safe of land and building	334
	Profit on sale of Perpetual Fund Services	9,000	14.814	9,000	14.814
	Total individually significant items	10,001	17,203	7,931	14.255
	Income tax applicable on profit on sale of investments		(309)	we
	Profit on sale of investments/business/building after taxation	10,001	16,894	7,931	14.255
	Increase in the self insurance provision (after income tax)	والمعاملين والمراجح	(3,381)		(2,839)
	Profit applicable to lost institutional mandates (after income tax)	3,009
	Overprovided and forfeited employee incentives fromthe prior year (after income tax)	2,625		2,625
	Restructuring costs (after income tax)	(1, 728)		(1, 728)
	Retrenchment costs (after income tax)	(3,690)		(3,690)
	Income fax expense adjustment resulting from an
	over provision of income tax in a prior year	1,284	994	699

PERPETHAL TRUSTESS AUSTRALIA LIMITED AND ITS CONTROLLED ENTITIES.

5. Segment information

		WEALTHMANAGEMENT	GUTSOURCED	SUPPORTSERVICES		UNALLOCATED		CONSOLIDATED
	2003	2002	2003	2002	2003	2002	2003	2002
	000	$1000	$$^{6}000 \cdot$	$.000	S:000	$.000	n$5000.	$$^{\circ}000$
Total revenue	212,107	199.120	41,910	36,584	10,993	8,359	265,010	244.063
Carnings before interest.tax, depreciation andamerisation (EBITDA)excluding investment
sales (Segment Result)	91,576	94.169	23,558	17.717	(1,577)	(11.167)	113,557	100.719
Assets
Segment assets	161,051	150.921	54,382	53,057	178,387	189,167	393,820	393.145
Equity accountedinvestments					37,351	38.394	37,351	38.394
Total assets	161,051	150.921	54,382	53.057	215,738	227.561	431,171	431.539
Total liabilities	(44, 720)	(44.465)	(4, 597)	(4.699)	(94, 427)	(125.775)	(143, 744)	(174.939)
Net assets	116,331	106,456	49,785	48,358	121,311	101,786	287,427	256.600
Acquisitions ofnon-current assets	4,232	6.500	430	466	2,828	5.706	7,490	12.672

The consolidated entity operates in the financial services industry in Australia and provides wealth management and outsourced support services. The major services from which the above segments derive revenue are:

Services

Wealth Management :	Management and investment of financial and other assets on behalf of private, corporate, superannuationand institutional clients.
Outsourced Support-	Fiduciary and administration services including safe-keeping and recording of assets and transactions ascustodian and services as responsible entity, trustee and security trustee, registrar or agent for our corporateand financial services clients.

The revenue reported for each segment is for services provided to external parties only.

Assets

The assets of the consolidated entity are managed largely on a group basis and cannot be fully attributed to an individual segment. Assets have been allocated to segments where practical on a utilisation basis.

Geographical segments

The consolidated entity operates predominantly in Australia. More than 90 percent of revenue. EBTOA and assets relate to operations in Australia.

$4\sqrt{4}$

$\hat{z}^_{\hat{z}^_{\hat{z}^*}}$

$\ddot{\mathbf{r}}$

NOTES TO THE FINANCIAL STATEMENTS FOR THEYEAR ENDED 30 JUNE 2003.PERPETUAL TRUSTERS ATSTRALIA LIMITED AND ITS CONTROLLED ENTITIES

	CONSOLIDATED		THE COMPANY
	2003	2002.	2003	2002.
Auditors' remunes ation		S
Audit services:
Auditors of the Company -- KPMG	ono	231 ABA	300.000	-710 M T
Other services performed by KPMG
Audit and taxation compliance services in respectof managed investments	997.368	704-733
Corporate faxation compliance services	61.193	114 814	61.193	-141.4
Assixance services	88.610	104.050	88.610	184.050
Staff secondments		134 ABA		134 ପରେ
Transaction support services		305.850		305.850
	$1.147.171$ $1.363.447$		149.80359, 69	658.714

The other services amounts paid to KPMG are in accordance with the Company's auditor independence policy as outlined in the Corporate Responsibility Statement in this annual report.

	CONSOLIDATED		THE COMPANY
	2003	2002	2003	2002
	$'000	$°000	$.000	$.000
income tax expense
Prima facie income tax expense calculated at 30%		30,277	23.824	31,704
(2002: 30%) on the operating profitIncrease in income tax expense due to:	31,840
Amertisation of goodwill	1,160	1.204
Share of associates' net tosses	111
Depreciation of buildings.	41	47
Impetation gross-up on dividends received	527		5.877
Other expenditure	395	637	153	325
	34,074	32.165	29,854	32.029
Decrease in income tax expense due to:
Rebatable dividend income		983		14.584
Strare of associates' net profits		149
Franking credits on dividends received	1,757		19,590
Recoupment of capital losses not previously brought10 ЖКОВИЙ	210	259	190
Non-assessable gain on sale of business and investments	2,890	4.440	2,603	4.143
	4,857	5.831	22,383	18.727
Income tax expense on operating profit before individuallysignificant income tax items.	29,217	26.334	7,471	13,302
Less: Income tax over provided in prior year	(1, 284)	(994)	(699)	(13)
income tax expense attributable to profit fromordinary activities	27,933	25,340	6,772	13.289

PERPETIAL TRUSTESS AUSTRALIA LIMITED AND ITS CONTROLLED ENTITIES

7. Income tax expense (continued)

At 30 June 2003, the consolidated entity had carried forward capital tax losses of $78,401 (2002; $700,391) of which the tax benefit at 30 percent of $23,520 (2002; $210,117 at 30 percent) was not recognised in the Statements of Financial Position. The benefit of capital tax losses carried forward would only be obtained if:

• (i) the consolidated entity derives haure assessable capital income of a nature and of an amount sufficient to enable the benefit from the deductions for the losses to be realised;
• (iii) the consolidated entity continues to comply with the conditions for deductibility imposed by tax legislation; and
• (iii) no changes in tax legislation adversely affect the consolidated entity in realising the benefit from the deductions for the capital losses.

8. Dividends

(a) Dividends paid

Dividends proposed or paid by the Company are:

	CENTS:PER SHARE	TOTALAMOUNT$$^{\circ}0.00$	DATE OFPAYMENT	TAX RATEFOR PRANKINGCREDIT	– PERCENTAGE主食 太 N K E C
2003
Interim -- ordinary		22.622	21 March 2003	30% (Class C)
Special dividend -- ordinary	50	18.924	25 June 2003	30% (Class C)	100%
Final -- ordinary"	70	26.493	3 September 2003	30% (Class C)	100%
Total franked amount	180	68.039
2002
Interim -- ordinary		38 QR7	-22 March 2002	30% (Class C)
Special dividend -- ordinary	-50	19 AOI	24 June 2002	30% (Class C)	l Anw
Final – ordinary	-60	-22.752	20 September 2002	30% (Class C)	100%
Total franked amount	160	-60.740

Catalation fased on the ordinary skapes on issue as at 30 Jane 2003.

	CONSOLIDATED			THE COMPANY
	2003	2002	2003	2002
(b) Dividend franking accountBatance of franking account, adjusted for franking creditswhich will arise from the payment of income tax providedfor in the financial statements, and after deducting frankingcredits to be used in payment of dividends provided for in theStatements of Financial Position at the end of the year:		$10.88	.	S 000
Class C 30% (2002: 30%) franking credits.		37.933

The ability to utilise the franking credits is dependent upon there being sufficient available profits to declare dividends.

From 1 July 2002, the New Business Tax System (Imputation) Act 2002 requires measurement of franking credits based on the amount of income tax paid rather than on after tax profits, Under the pre-1 July 2002 method of calculation, the franking credits available are $127,909,000 (2002: $88.511,000) for the consolidated group and $55.424.000 (2002: $27,116,000) for the Company. This change in the basis of measurement does not change the value of franking credits to shareholders who may be entitled to franking credit benefits.

發。

$\frac{1}{2}$

46 | NOTES TO THE FINANCIAL STATEMENTS FOR TREYEAR ENDED 30 JUNE 2003

	CONSOLIDATED
	20032002
	COENTS PER SHARE
Tarnings per share
Basic earnings per share
Oiluted earnings per share	206 A197 5
Weighted average number of ordinary shares used in thecalculation of basic earnings per share.	NUMBER OF SHARES37.768.834- 37 806 696
Weighted average number of potential ordinary shares usedin the calculation of diluted earnings per share.	The Same-38.268.90337,883,

Classification of securities as potential ordinary shares

Options outstanding under the Executive Option Plan have been classified as potential ordinary shares and included in the diluted earnings. per share calculation.

	CONSOLIDATED	THE COMPANY
	-2002 -2003	2002.2003
8. Cash assets.	$1890.$\cdots$	$1000
ិភៅ	The Color2.765	StateThe Company2156
Deposits at call®	Print107.186111.217	a Presidente1.00090.100
	113.199I (10-953Start Control	655And in the Asset92.256

(a) These lands are largely invested in a cash management anst operated by the consciolated entry

11. Receivables

Current
Trade debtors		52.857	_______________________________________	3.552
Cess: Provision for doubtful debts.	The group$\sim$.150)	(1.100)	$\cdots$Property 50)	60)
	$\cdots$The Corporation46.449	51.757	-5 c.14.186	2.452
Other debtors	.	- 387	The County	1.270
Coans to controlled entities.	The parameters.V40	$\cdots$	20.217	31.232
	the con-$\sim$	53.144	.$\sim$
Non-current
Coans to associates'	$\cdots$.14,695	35330	$\cdots$The state of14.695	35310

The najority of non-current lasms to associate is compresed of a science and Magazine of the local form of the manuscript of the magnety system is now the magnety system.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2003

PERPETIAL TRUSTESS AUSTRALIA LIMITED AND ITS CONTROLLED ENTITIES.

		CONSOLIDATED		THE COMPANY
	2003	2002	2003	2002
	$$1000$ .	$$^{\circ}000$	$-0.00137$	$$^{+}0.03$
12. Other financial assets
Current
Government, municipat and other public securities:
Listed on prescribed stock exchanges -- at cost	$^{\circ}$ 100	100
Secared foans"	348	397	348	391
	w.448	497	53.348	391
Total market value of short term investments listedon prescribed stock exchanges:
Government securities	100	100
Non-current
Shares in controlled entities			110,032	110.032
Unlisted units in controlled entities			2,083	5.000
		$\ddotsc$	112,115	115.032
Shares in associates			12,927	12.927
Shares in other corporations:	والوارد فالمتمام فالمتوارد		وليون والمتحدث والمتحدث
tisted on prescribed stock exchange	47,846	71.768	15,044	23.057
Unlisted		265		265
Investments in unlisted unk trasts	20,921	13.251	15,863	8.216
	والمحاجة68,767	85.284	30,907	31.538
Government, municipal and other poblic securities:
Usted on prescribed stock exchanges -- at cost	$-142$	142	$-100$	100
Secured foans"	4,028	3.338	4,028	3.327
	4,170	3.480	4,128	3.427
	72,937	88.764	160,077	162.924
Total market value of investments fistedon prescribed stock exchanges:
Shares	77,688	108.167	24,365	33.174
Government securities	142	142	100	100
	Saad77,830	108.309	24,465	33.274
Total market value of investments in unlisted unit trusts	24,375	16.042	19,287	11.037

Secured kans include employee stare parchase kans to lult time executives who are detectors of the Company or as concroled emitters exampled which we set out in Note 30

includes $3,340,000 (2002) $4,297,000 of shares with a market value of $8,386,000 (2002) $10,328,000 that is held or a keserie Fund by a connolectionlin The Tussee Companies Act 1984 (Vacorie) requires that a Reserve Fund be provided, the value of which shall be not less than one hall of a percension of this estates in Victoria in the event of the appointment of a ligadator, a receive and managed or an official managet of a busine company, mones in its Reserve Fund are svalidate for the payment of sums due from the trisiee company in accordance with Section 39(3) of the above Act. Pursuant to Section 38 of the above Act. the Company may otherwise provide for Reserve Fund by appropriately other bands available in any mainter market not as the electronic by a tunker ander the Tussee Act 1958 (Victore).

48 | NOTES TO THE FINANCIAL STATEMENTS FOR THEYEAR ENDED 30 JUNE 2003

	CONSOLIDATED			THE COMPANY
	2003	2002	2003	2002
	$1000	$°000	-$1000	$.000
13. Property, plant and equipment
Freehold fand and buildings
At directors' valuation 2001*	21.500	21.500
At cost	55	1.264
Provision for depreciation	(489)	(611)
	21,066	22,153
Plant and equipment -- at cost	147,854	43.373	34,675	30.883
Provision for depreciation	(36, 919)	(32.932)	(25, 699)	(23.080)
	10,935	10,441	8,976	7,803
Capitalised software -- at cost	28,869	22.580	13,441	8.112
Accaraulated amortisation	(18, 818)	(13.103)	(6,003)	(2.877)
	69.6710,051	9.477	$\sim$ $\sim$ $\sim$7,438	5,235
Project work in progress -- at cost	639	3.755	501	3.755
Ceased plant and equipment - at capitalised cost		1.424
Accomulated amortisation		(1.339)
	.	85
	42,691	45.911	16,915	16.793

The drecors' valuation (2001) was based on an independent valuation carried car as at 30 June 2001 by Junes Card, LSake and is on the base of the open market vibe of the property in its existing use. The dimension are of the rigidion that this basis provides a reacondule estimate of the fair value.

PERPETHAL TRUSTESS AUSTRALIA LIMITED AND ITS CONTROLLED ENTITIES.

13. Property, plant and equipment (continued).

Reconciliations

Reconciliations of the carrying amounts for each class of property, plant and equipment are set out below:

	FREEHOLDLAND ANDBUILDINGS		PLANT AND CAPITALISEDEQUIPMENT SOFTWARE	PROIECTWORK INPROGRESS	LEASEDPLANT ANDEQUIPMENT	TOTAL
	$$^{\circ}000$	$$^{\circ}$ $0.0$	$.000	$100	$°00	$$^{\circ}000$
Consolidated
Balance as at 1 July 2002 22.153		30.441	-9.477	-3,755	-85	45.913
Additions		2.865	255	-4.370	$\cdots$	-7-490
Translers from work inprogress		1.516	-6.033	47.4861	(63)
Transfers between assetcategories	(426)	-426
Depreciation and amortisation	(239)	(4.233)	(5.714)			(10.186)
Disposals	(422)	-1801	$\cdots$		-(22)	(524)
Balance as at 30 Jane 2003.	21.066	10.935	10.051	639	$\cdots$	42.691
Company
Balance as at 1 July 2002.		7,803	5.235	3,755		16.793
Additions		2,843	-132	3.396		6.371
Transfers from work in progress.		1.453	5.197	16.650)
Depreciation and amortisation		(3,070)	(3,128)			(6.196)
Oisposais		(53)				-(53)
Batance as at 30 Jane 2003		8.976	-7.438	501		36.915

	CONSOLIDATED			THE COMPANY
	2003	2002	2003	2002
	1000	$10,00	$1000	$10,00
l4. Imangibles
Goodwill -- at cost	68.687	70.304
Accumulated amortisation	(13, 384)	[11.332]
	55,303	58.972	ha Link.
IS. Deferred tax assets
Deferred tax assets comprise the estimated deferredasset at the applicable rate of 30% (2002: 30%)on the following items:
Provisions and accrued employee entitlements notcarrently deductible		30 549		7 043
Tax losses carried forward	584	1 (139)
Ofference in depreciation and amortisation of property,plant and equipment for accounting and income tax purposes	539	(78)	676	565
	15,175	11.510	11,483	7.608

NOTES TO THE FINANCIAL STATEMENTS FOR THEYEAR ENDED 30 JUNE 2003.PERPETUAL TRUSTERS AUSTRALIA LUMITED AND LTS CONTROLLED ENTITIES

	CONSOLIDATED			THE COMPANY
	2003	2002	2003	2002
	$$^{\circ}$ , 0 0 0.	$1000	$10.00	$.000
S. Biner assets
Current
Prepayments	7,450	6,327	4,479	4,432
Deferred staff incentives	5,776	1.072	5,776	50
	13,226	7.399	10,255	4.482
Non-current
Deferred staff incentives long-term	17,471	1,887	17,471	41
Other	163		11
	17,634	1.887	17,482	41
IV. Payables
Trade creditors	35,165	42.991	10,258	12,871
Other creditors and accruais	3,259	3,088	413	242
Amounts owing to controlled entities			44,585	53.094
	38,424	46.079	55,256	66.207
lä, interest-kearing liabilities
Current ®
Fixed rate bill facilities	3,000	3,000	3,000	3,000
Lease liabilities		83
	3,000	3,083	3,000	3,000
Non-current ®
Fixed rate bill facilities	45,000	48,000		3,000
Cease liabilities		27
	45,000	48.027		3.000
(a) See Notes 24 and 25 for additional information.
IS. Provisions
Current
Employee entitlements	24.649	19,082	2107	11.200
Proposed final dividend es		22,752		22,752
Restructuring provision	2,468		2,468
Other	1,812	1.916	1,793	1.808
	28,929	43,750	25,333	35,760
Non-current
Internal insurance and claims provision	7,957	8,100	5,741	5,722
Employee entitlements	1,574	1,153	1,574	1,153
Other	1,771	2.621	1,771	2.621
	11,302	11.874	9,086	9.496

(1) One to the change in accountry standards in the year, as disclosed in Note 1(A)(a), the providen for final discletend is 948 at 30 June 2003.

The number of full time equivalent employees at 30 Jane 2003 was 824 (2002: 904).

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 HUNE 2003

PERPETHAL TRUSTESS AUSTRALIA LIMITED AND ITS CONTROLLED ENTITIES.

	CONSOLIDATED		THE COMPANY
	2003	2002	2003	2002
	$$^{+0.0}_{-0.0}$	$.069	$!000	$.003
19. Provisions (continued)
Reconciliations
Reconciliations of the carrying amounts of each class ofprovision, except for employée benefits, are set out below:
Proposed final dividends
Carrying amount at beginning of year	22,752		22,752
Adjustment to provision due to movement inordinary shares on issue	(63)		(63)
Payments made daring the period	(22, 689)		(22.689)
Carrying amount at end of year
Restructuring provision
Carrying amount at beginning of year
Provisions made during the year	2.468		2,468
Carrying amount at end of year	2,468		2,468
Internal insurance and claims - non-current
Carrying amount at beginning of year	8,100		5,722
Provisions made during the year	- 598		- 186
Payments made during the period	(741)		(167)
Carrying amount at end of year	7,957		5,741
Other - current
Carrying amount at beginning of year	1,916		1,808
Payments made daring the period	(104)		(15)
Carrying amount at end of year	1,812		1,793
Other - non-current
Carrying amount at beginning of year	2,621		2,621
Payments made daring the period	(850)		(850)
Carrying amount at end of year	1,771		1,771

The revised accounting policy AASB 1044 'Provisions. Contingent Liabilities and Contingent Assets' was adopted for the first timein the current year. Comparative information that is required to be disclosed for the first

NOTES TO THE FINANCIAL STATEMENTS FOR THEYEAR ENDED 30 JUNE 2003.PERPETUAL TRUSTERS AUSTRALIA LIMITED AND ITS CONTROLLED ENTITIES.

	CONSOLIDATED			THE COMPANY
	2003	2002	2003	2002
20. Contributed equity	1$1000	$1000	- S'000 - J	$1000
Issued and paid-up capital
37.847.187 (2002: 37.920.533) ordinary shares, fully paid	122.316	128.207	122.316	128.207
Movements in ordinary share capital
Balance at beginning of year	128.207	L28 690
Shares issued:
Executive share plan		D 264		2 つらる
Exercise of staff options		7.753		7.753
Employee share plans		1 375		1 375
Share buy-back	(10, 170)	(3.875)	(10, 170)	(3.875)
Balance at end of year	$\sim$122.316	128.207	No allege122.316	128.200

During the year, the Company issued 202,073 ordinary strares in accordance with the Perpetual Executive Option Plan. 11.325 ordinary shares were issued at $8.83 per share, 16.720 ordinary shares were issued at $20.66 per share, 45.651 ordinary shares were issued at $21.77 per share. 96,033 ordinary shares were issued at $21.84 per share. 31.028 ordinary shares were issued at $22.56 per share. and 1.316 ordinary shares were issued at $31.67 per share.

During the year, the Company repurchased 275,419 ordinary shares at an average price of $36.93 per share under Perpetral's on-market share buy-back program. These represented approximately 0.7 percent of the shares on issue by quantity at the time.

21. Reserves

General		103
Asset revaluation s	7.093	7 093	105	3.305
Capital profits	61.048	51.047	.215	RT 284
Capital reserve ®	17.957	17.957
	86,201	76.200	Sec. 148.320	40.389
Movements during the year
Capital profits ic	the problem was a change of the
Batance at beginning of year	51.047	२२ ६८२	284	23.029
Add: Transfer from retained profits	10.001	-17.544	7.931	14.255
Balance at end of year	61.048	-51 O47	45.215	37.284
Total transfer from retained profits	10,001	17.544	7.931	14.255
Total movements in reserves	$-10.001$$\alpha$ , $\alpha$ , $\beta$	37.544	7.931$\sim$ $\sim$ $\sim$ $\sim$	34.255

1. The Asset Revaluation Reserve represents the incremient of land and buildings and other non-current assets over cost

(ii) The Capital Profes Reserve represents profes and losses on the disposal of long-term equity investments.

80 The Capital Reserve of $17,957,000 represents the increase in the consoldated entry's share of the red assess of an associated entry.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2003

PERPETHAL TRUSTESS AUSTRALIA LIMITED AND ITS CONTROLLED ENTITIES.

	NOTE		CONSOLIDATED		THE COMPANY
			20O
22. Retained profits			S 10 G O		文三百 B 打
Retained profits at the beginning of the financial year
.profit attributable to members of the parent entityNet					्छ१
	$\sim$			A 100
Transfer to capital profits reserve	Z.	The con-	.13 7 54 41	Brand	13 4 I
		78.910The contract	393	the state of.439

23. Employee share plans

(a) Option plans

The Company has an executive share option plan which was approved at the 1998 annual general meeting. Each option is convertible to one ordinary share. The exercise price of the options, determined in accordance with the rules of the plan, is based on the weighted average price of the Company's shares traded during the five business days preceding the date of granting the option.

All options expire on the earlier of the expiry date or termination of the employee's employment. There are no voting or dividend rights attached to the option nor the unissued ordinary share underlying the option.

A summary of options over unissued ordinary shares is set out on page 54.

$\sqrt{54}$

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2003

PERFETUAL TRUSTEES AUSTRALIA LIMITED AND ITS CONTROLLED ENTITIES

23. Employee share plans (continued)

(a) Option plans (continued)

							MOVEMENT IN NUMBER OF OPTIONS ON ISSUE		NUMBER		FAIR
GRANTDATE	EXERCISEDATE	DATE	EXPIRY EXERCISEPRICE	1 REY2002	ISSUED	LAPSED/	FORPETIED EXERCISED*	30 RINE2003	OPTRONSVESTED	OF PROCEEDSRECEIVED$300%	VALUEPERSHARE
Sep 1997	Sep 2000	Sep 2002	$8.83	11.325			(11.325)			100	$43.00
Apr 1999	Apr 2002	Apr 2004	$22.56	31.028			(31.028)			700	$28.25
Sep 1999	Sep 2002	Sep 2004	$21.77	45.651			(45.651)			994	$29.83
0d 1999	Oct 2002	Oct 2004	$21.84	131.683			06.033	-35.650	35,650	2.098	$29.59
0d 1999	Oct 2002 3	Oct 2004	$20.05	195,000				195.000	195,000
Sep 1999	Sep 2002 *	Sep 2005	$20.66	70.037			(16.720)	53.337	6.626	345	$30.56
0a 2000	0d 2003 c	Oct 2006	$34.51	114,899		12,569)		112.330
Jul 2000	Jal 2003?	Jul 2006	$27.68	27.095				27.095
Jan 2001	Jan 2004 er	Jan 2007	$31.67	59.203		(37.495)	(1.316)	20.392		42	$37.07
Jan 2001	Jan 2004 es	Jan 2007	$33.66	80.661		(46.829)		33.832
Feb 2001	Feb 2004 c	Feb 2007	$36.90	56.460				56,460
Mar 2001	Mar 2004 c	Mar 2007	$37.91	94.682				94.682
Jul 2001	Jal 2004	Jul 2007	$40.11	1.247		(1,247)
Aug 2001	Aug 2004 co	Aug 2007	$38.66	2.587				2.587
0a 2001	Oct 2004 c	Oct 2007	$38.65	321.795		(78.892)		242.903
Mar 2002	0a 2004°	Oct 2007	$44.59	11.218		(9.344)		1.874
Dec 2001	Dec 2004 2	Dec 2007	$38.66	2.586				2,586
0d 2002	0a 2005*	Oct 2008	$32.46		407.255	(29.337)		377.918
Dec 2002	Dec 2005 *	Dec 2008	$31.03		200.000			200.000
Feb 2003	Feb 2006 5	Feb 2009	$29.88	$\cdots$	10.398	$\ldots$	$\cdots$	10.398	$\ldots$	$\cdots$
				1.257.157	617.653	(205.713)	(202.073)	1.467.024	231.276	4.279

(1) Amount recognised in the linencial structurers of the Company in relation to executive share options exercised during the current financial year Refer Note 20

(2) One duri of this class of option can be exercised on this date with a batter dard, one year from this date and the last third, two years from this date

(3) This class of options will vest in its entirely as announced in the timea from the Charman dated May 2003.

(4) In certain extractionity cocurrences, as the discretion of the Human Resources and Remonetant Committee, options can be availabled of or their exacts and

The fair value of shares, issued as a result of options being exercised, is the market price of the Company's shares as quoted on the Australian Stock Exchange (ASX) on the date the options are exercised.

Further details are provided in the Directors' Report.

PERPETIAL TRUSTESS AUSTRALIA LIMITED AND ITS CONTROLLED ENTITIES

23. Empioyae share pians (continued)

(b) Executive Share Plan

The Executive Sture Plan (ESP) was approved by shareholders at the Company's annual general meeting in 1997 (as amended in 1999).

The ESP forms part of the structure for short and long term variable remuneration components paid to employees. Grants under the plan for short term performance are made on achievement of specific performance goals whist long term grants vest after periods of between three and live years after the date of crant.

The issue price of grants of shares is the weighted average of the prices at which shares were traded on the ASX for the five days up to the date of issue. Shares are either purchased on market or issued by the Company to satisfy the grants made to employees.

While shares are held by the ESP the employees receive dividends and have voting rights. Details of the movement in employee shares under the ESP are as follows:

	GRANT DATE	OPENING	BALANCE GRANTED		VESTED PORPEITED	CLOSINGBALANCE	GRANTFAIRVALUE	VESTINGFAIRVALUE
		NO.	NO.	NO.	NO.	NO.	$	ġ.
	$0a - 2000$	13.855			(5.653)	8.204	34.51
	Dec 2000	70.000	$\cdots$	$\cdots$	(40.000)	30.000	33.66
daa .	-2001	632	$\cdots$	(316)	$\cdots$	316	31.67	30.50
Peb-	-2001	-4.065	$\cdots$	$\ldots$	$\cdots$	-4.065	36.90
	Mar 2001	5.797	$\cdots$	$\cdots$	$\cdots$	5.797	37.91
-0a	-2001	41,439		(30.498)	$\cdots$	10.941	38.66	34.63
	0ec 2001	2.586				2.586	38.66
Âβ.	- 2002	2.964		$\cdots$	$\ldots$	2.964	44.59
	Aug 2002		2.587			2.587	38.66
Od I	- 2002		344.800			344.800	-32.46
	Dec 2002		516.265			516.265	31.03
dan.	- 2003		25,956			25.956	34.67
	Feb 2003		5.385			5.385	29.88
	Mar 2003		12.839			12.839	26.42
	May 2003	$\cdots$	7.921	$\cdots$	$\cdots$	-7.921	-31.56
Total		141.338	915.753	[30.814]	[45.65]	980.626

Grant fair value recresents the weighted average of the prices at which the shares were traded on the ASX for the five days up to the date of issue. Vesting fair value represents the closing price on the ASX on the date of vesting.

All grants of shares in the year were purchased on-market on behalf of the ESP.

The amounts recognised in the financial statements of the consolidated entity and the Company in relation to the ESP during the year were amortisation of shares purchased totalling $4,317,000 and deferred assets totalling $23,247,000 split between a current deferred asset of $5,776,000 and a non-current assat of $3,7,471,000 as at 30, hma 2003.

(c) Employee Share Purchase Plan

The Perpetual Employee Share Purchase Plan purchased 47,280 shares during the year in order to satisfy the current year invitation. The shares were cranted to the 611 employees participating at $31.02. The invitation was open to all full-time and part-time employees who commenced employment with Perpetual prior to 1 June 2002 with an offer to purchase a minimum of 30 shares to a maximum 150 shares. The issue price was the weighted average of the prices at which shares were traded on the ASX for the five days up to the date of issue. An interest free loan, for a period not exceeding 10 years, was made available by the Company to the eligible employees to enable the parchase.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2003

PERFETUAL TRUSTEES AUSTRALIA LIMITED AND ITS CONTROLLED ENTITIES

23. Employee share plans (continued)

(d) Employee Reward Share Plan

The Employee Reward Share Plan enables the Company to offer employees $1,000 of shares at no cost in recognition of their contribution to Perpetual's performance over the previous financial year. This plan was activated for the first time in the current year with 710 employees being offered shares under this scheme with a total cost to the Company of $650,000. This cost was reflected in the 30 June 2002 financial results.

(e) Non-Executive Directors' Share Purchase Plan

A share ourchase plan for non-executive directors was approved by shareholders at the 1998 annual general meeting in October 1998. under which each non-executive director can sacrifice up to 50 percent of their directors' fees to acquire shares in the Company. The shares are purchased on a quarterly basis at market value and have a disposal restriction of 10 years, or when the director ceases. to be a director of the Company.

Ouring the year the following directors participated in this plan:

NUMBER OF SHARES PURCHASED AT MARKET VALUE

DIRECTORS	,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
C.P. Curran	2.926	99 750
'S J Chapmas	1.047,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,	36 250
B E Boezeman	I AG	くもどう
TS Conts	538	38.325
W G Keat	,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,1.075,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,	38 250
- R Nichräs	-075	የዳ 250
R M Savage	可受合	38.125

	CONSOLIDATED		THE COMPANY
	2003	2002	2003	2002.
24. Financial arrangementsThe consolidated entity has access to the following lines of credit:		$$^{\circ}000$	់ខនរា	$.000
Total facilities available:
- Bank overdrafts		3.060	2.000	2.000
-- Standby bank bill facility		20.000		20.000
- Fixed rate bank bill facilities	48,000	51.000	3,000	-6.000
	122250.000	74.060	Turk a5,000	28.000
Facilities utilised at balance date:
- Fixed rate bank bill facilities	48,000	51.000	3,000	-6.000
Facilities not utilised at balance date:
-- Bank overdrafts		3.060		2.000
-- Standby bank bill facility		20.000		20.000
	2.000	23.060	2.000	22.000

PERPETHAL TRUSTESS AUSTRALIA LIMITED AND ITS CONTROLLED ENTITIES.

24. Financial arrangements (continued)

Bank overdrafts

Interest on bank overdrafts is charged at prevaling market rates. The weighted average effective interest rate is 8.45 percent (2002: 7.95 percent). The bank overdrafts are payable on demand and are subject to annual review.

Bill facilities

There are two fixed rate bank bill facilities of $3,000,000 and $45,000,000. Each facility is unsecured and has a fixed interest rate of 6.25 percent and 6.40 percent respectively. Repayment of the two existing facilities is due on 29 August 2003, however it is the Company's present intention to refinance the $45,000,000 facility for a further period. The decision to refinance is at the Company's discretion and accordingly the liability has been classified as a non-current liability.

The Company has agreed to various debt covenants including Shareholders' Funds as a specified percentage of Total Assets, a minimum amount of Shareholders' Funds, a maximum ratio of total debt and a minimum interest cover. Should the Company not satisfy any of these covenants, the outstanding balance of the loans may become due and payable.

25. Additional financial instruments disclusure

(a) Interest rate risk exposure

. . . . . . . . . . . . . . . .

The consolidated entity's exposure to interest rate risk and the effective weighted average interest rate for classes of financial assets and financial liabilities is set out below:

2000 - 2000 - 2000 - 2000 - 2000 - 2000 - 2000 - 2000 - 2000 - 2000 - 2000 - 2000 - 2000 - 2000 - 2000 - 2000 - 2000 - 2000 - 2000 - 2000 - 2000 - 2000 - 2000 - 2000 - 2000 - 2000 - 2000 - 2000 - 2000 - 2000 - 2000 - 200

Note	Floatinginterestrate	1 yearor less	Over 1 to5 years	Non-interestbearing	Total	Weightedaverageinterestrate*
	$1000	$°00	$.069	$7000	$°000	86
10	113,129	70			113,199	4.5
11	14,695			48,512	63,207	6.6
12	60	40		73,285	73,385	4.6
31				37,351	37,351
	127,884	110	w.	159,148	287,142
17				38,424	38,424
18		3,000	45,000		48,000	6.4
	u.	3,000	45,000	38,424	86,424
10	109.881	70			109.951	4.5
11	15.110			53.144	68,254	6.6
12	60	40		89.161	89.261	4.5
31				38.394	38.394
	125.051	110	$\cdots$	180.699	305.860
17				46.079	46.079
18		3.000	48,000		51,000	6.4
18		83	27		110	8.2
		3.083	48.027	46,079	97,189
					PIXED ENTEREST MAEGINING IN:

Catalation of weighted average interest rate excludes the non-interest betaing portion of the assets or labilities

57

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2003

PERPETUAL TRUSTEES AUSTRALIA LIMITED AND ITS CONTROLLED ENTITIES

25. Additional financial instruments disclesure (continued)

(b) Credit risk exposure

Credit risk represents the loss that would be recognised if counterparties failed to perform as contracted.

The credit risk on financial assets, excluding investments, of the consolidated entity which have been recognised on the Statements of Financial Position, is the carrying amount, net of any provision for doubtful debts.

The consolidated entity minimises concentrations of credit risk by undertaking transactions with a large number of customers and counterparties.

(c) Net fair values of financial assets and liabilities

Valuation approach

Net fair values of financial assets and liabilities are determined by the consolidated entity on the following basis:

Markerable shares included in Other financial assets' are traded in an organised financial market. The net fair vatue of marketable shares is determined by vaking them at the current quoted market bid price for an asset, adjusted for transaction costs necessary to realise the asset. The carrying amounts of bank term deposits and accounts receivable approximate net fair value. The net fair value of investments in unlisted shares in other corporations is determined by reference to the underlying net assets and an assessment of future maintainable earnings and cash flows of the respective corporations.

Net fair value

The consolidated entity's financial assets and liabilities included in current assets and fabilities in the Statements of Financial Position are carried at amounts in accordance with Note 1.

The carrying amounts and net tair values of financial assets and liabilities as at the reporting date are as follows:

	CARRYING AMOUNT		NET FAIR VALUE
	2003	2002.	2003	2002
		$1000		$1000
Financial assets
Cash assets		ING 951		109 961
Receivables		つちか		25.A
Shares in other corporations and unit trusts	68	-28.8	ภธร	IDA 474
Other investments	织	3.977		3 Q77
Investments in associates	35137	38.394	37.351	38.394
Financial liabilities
-Payabkes			hears.38.424
Interest-bearing liabilities	48.OOO.	51,110	1.1.1.1	51.310

PERPETHAL TRUSTESS AUSTRALIA LIMITED AND ITS CONTROLLED ENTITIES.

26. Commitments

Superannuation commitments

All employees are eligible to participate in the Select Master Superannuation Fund (an accumulation fund) operated by the consolidated entity. The consolidated entity has a legally enforceable obligation to contribute to the plan.

Oirectors' retirement benefits as approved by the shareholders in 2001 are cuttined in detail in Note 28.

	CONSOLIDATED		THE COMPANY
	2003	2002	2003	2002
	$$^{+}000$	$10.00	$.000	$10.00
Capital expenditure commitments
Contracted but not provided for and payable within one year	542	1.214	542	1.214
Operating lease commitments
Future operating lease restals not provided for in thelinancial statements and payable:
Not later than 1 year	4,972	4.642	1,704	1.854
Later than 1 year and not later than 5 years	9,744	7.003	3,518	1.519
Later than 5 years	950
	49,9915,666	11.645	5005,222	3.373
Operating leases are predominantly related to premises.
Finance lease commitments
Finance lease rentals are payable as follows:
Not later than 1 year		96
Later than 1 year but not later than 5 years		20
		116
Cess: Euture lease finance charges		6
		310
Cease fiabilities provided for in the financial statements:
Corrent		83
Non-corrent		27
Total lease liability		110	Product Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Cont

Other commitments

The Company has entered into a subordinated Ioan agreement with ASX Perpetual Registrars Limited (APRL) and has provided funding of $14,500,000 for the development of a new share registry system. This funding is in proportion to the Company's interest in APRL and APRL has an equivalent funding arrangement with its other shareholder.

59

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2003

PERPETUAL TRUSTEES AUSTRALIA LIMITED AND ITS CONTROLLED ENTITIES

27. Contingent Nabilities

• (a) The uncaded capital of the controlled entities amounts to $6,443.135 (2002: $6.638,130).
• (b) Contingent liabilities exist in respect of certain overdrawn trust and estate accounts against which ample assets are held in the respective trusts and estates.
• (c) Controlled entities have granted bank guarantees in the favour of the Australian Securities and Investments Commission in respect of Dealer's Licence arrangements of $120,000 (2002; $120,000).
• (d) The Company has granted a bank quarantee in the favour of the ASX Settlement and Transfer Corporation Pty Limited with respect to normal trading activities of $250,000 (2002: $250,000).
• (e) The Company has provided certain warranties to ASX in relation to their subscription for shares in ASX Perpetual Registrars Limited. At balance date, no additional claims have been made under these warranties.
• (f) The consolidated entity's initial layer of cover for its professional indemnity insurance program was underwitten by HIH Insurance Limited (HIN) until 15 March 2001 when HIM was placed into provisional liquidation. As a result of the asset deficiency of HIM, the consolidated entity may have financial exposure for claims notified but not settled which otherwise would have been recoverable from PIR. Based on the claims notified to date any financial exposure is not expected to be significant.
• (g) The Company has provided a quarantee to an Australian bank to secure a $45 million fully drawn bill facility of a controlled entity.
• (h) The consolidated entity tras identified potential instances of non-compliance with certain lodgement requirements in New Zealand. Although this potential non-compliance is administrative in nature, the consolidated entity may have a financial exposure if a breach has occurred and the relevant New Zealand authority seeks to impose penalties.

28. Directors' remuneration

The number of directors of the Company whose income from the Company or any related party falls within the folkwing bands:

		CONSOLIDATED
	2003	2002.	2003	2002
	NO.	NO.		NO.
$20,000 - $29,999
$70,000 - $79,999
$80,000 - $89,999
$120,000 - $129,999			ittera e television
$130,000 - $139,999	-9		۶
$140,000 - $149,999		$\cdots$
$150,000 - $159,999		2		2
$160,000 - $169,999			Market and a state
$180,000 - $189,999
$200,000 = $209,999	talen a a a n-4
$280,000 - $289,999	talen konstant	×,	New productions
$380,000 - $389,999
$1,280,000 - $1,289,999		$\cdots$
$1,290,000 = $1,299,999

		CONSOLIDATED		THE COMPANY
	2003	A 802		20O2
Total income (including the assessed value of options).paid or payable, or otherwise made available, to alldirectors of the Company and controlled entities in-	The Agency of Australia
the Company or any related party.	2.561.776	-2.501.927	2561.776	2.501.927

PERPETHAL TRUSTESS AUSTRALIA LIMITED AND ITS CONTROLLED ENTITIES.

28. Directors' remuneration (continued)

As approved by shareholders at the 1990 and 2001 annual general meetings, non-executive directors are entitled to receive a retirement benefit of up to live times their final average directors' fees (received during the three years preceding retirement) for 15 years' service in accordance with the following accrual table:

LENGTH OF SERVICE	MULTIPEE APPEECABEE
: vear	1.33 years' fees.
G years	-2.67 years' fees
A 46902,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,	1095
12 years	4.5 years' fees
15 years	o year

The Company sets askle amounts each year to fund the accrued retirement benefits via a superannuation fund and/or direct provisioning in the Company's accounts. Retirement benefits accrued during the year amounted to $482,368 (2002; $442,109). These retirement benefits accrued are included in the above disclosures. Total accrued retirement benefits are $2,438,104 (2002: $1,955,736) and full provision has been made by the Company.

29. Trecutives' remameration

Executive officers are those officers involved in the strategic direction, general management or control of the business at a company or operating division lavel. Specialist asset and sales managers do not qualify as executive officers under the definition above and therefore are excluded from the disclosure below.

The number of executive officers of the Company and its controlled entities, whose remuneration, including performance related bonuses. from the Company or related parties, and from entities in the consolidated entity falls within the following bands:

		CONSOLIDATED		THE COMPANY
	2003	2002	2003	2002
	∴NO. ∼ ∵	NO.	75.NO. 1	NO.
$100,000 - $109,999	Service of the		المهادي والمنافي
$110,000 = $119,999
$120,000 = $129,999	Service and the
$130,000 - $139,999	$\overline{\cdots}$ .	Ť	्प
$140,000 = $149,999	significant constructs
$150,000 = $159,999
$160,000 - $169,999			المعارب المتعاطيرية
$170,000 = $179,999		$\sim$	where $\mathbf{1}^{\text{even}}$
$180,000 - $189,999		2		2
$190,000 - $199,999		3		3.
$200.000 - $209.999
$210,000 - $219,999	Sergia anno 1980 ann	ş.	has such$\sim_{\rm{max}}$ .
$220,000 = $229,999	in the global property of the control of the control of the control of the control of the control of the control of the control of the control of the control of the control of the control of the control of the control of t	$\ddotsc$	2
$230,000 - $239,999	ولولوني وفا	2		2
$240,000 - $249,999	Magazine in the Law		bere e e en la catherine
$250,000 = $259,999	$\mathcal{P}{\mathcal{M}}(x) = \mathcal{P}{\mathcal{M}}(x) = \mathcal{P}_{\mathcal{M}}(x)$	Ť	بتميز والمتمنين
$260,000 = $269,999	The control of the	Ť	Service r
$270,000 = $279,999
$280,000 - $289,999

62 | NOTES TO THE FINANCIAL STATEMENTS FOR THEYEAR ENDED 30 JUNE 2003

		CONSOLIDATED		THE COMPANY
	2003	2002	2003	2002
	$\infty$	NO.		NO.
29. Executives' remuneration (continued)
$290.000 - $299.999
$300,000 - $309,9993
$310,000 - $319,999
$320,000 - $329,999
$330,000 - $339,999
$350,000 - $359,999	1
$360,000 - $369,999	4
$380,000 - $389,999	$\gamma$		4
$390.000 - $399.999
$420,000 - $429,999
$500,000 - $509,999
$550,000 - $559,999
$630,000 - $639,999
$700,000 - $709,999
$720,000 - $729.99955
$820,000 - $829,999
$830,000 - $839,999
$860,000 - $869,999
$910,000 - $919,999
$1,280.000 = $1,289.999
$1,290,000 - $1,299,999	$+ +$	1	$\ddot{}$	1

$\langle 1 \rangle$ - adults tendinger and other bandles

	CONSOLIDATED		THE COMPANY
	2003	20O	2003	XXV
Total income (including the assessed vatue of options").received or due and receivable from the Company,entities in the consolidated entity or related parties byexecutive officers of the Company and controlled entities.whose income exceeds $100,000	12,349,220	11.502.320		11.502.320

The value of options recognised in executives' remuneration is based on the value particle state of the content year. Options issued in prior years were decisional in the emery in the year of issue and accordingly have out been included in the current year disclosures.

PERPETIAL TRUSTESS AUSTRALIA LIMITED AND ITS CONTROLLED ENTITIES

10. Related parties

Directors

The names of each person holding the position of director of Perpetual Trustees Australia Limited during the year are C P Curran, S J Chapman, B L Boezeman, J S Curtis, W G Kent, L B Nicholls, R M Savage and G J Bradley, Details of directors' remuneration. superannuation and retirement payments are set out in Note 28.

No directors have entered into a material contract with the Company or the consolidated entity since the end of the previous financial year and there were no material contracts involving directors' interests subsisting at the year end.

Okectors hold the tollowing shares and options in the Company and in registered schemes of the consolidated entity:

	ORDINARYSHARES			DIVIDENDSRECEIVED		OPTIONS		REGISTEREDSCHEMEINTERESTS
	2003	2002	2003	2002	2003	2002	2003	2002
		NO.				NO.
C P Curran	70.091	67.165	116.456	AG 957		$\cdots$
SJOmaoman	5.335	4-288	8.098	4-288		$\cdots$
8 E Boezeman	2.468	2.359	4.096	2.456		$\cdots$	315,323	290.013
d S-Curtis	9.018	8.480	14.836	3.550		$\cdots$
W G Kear	9.686	8.611	15,479	8.828			787.574	175.709
t. B. Nichells.	5.779	.704	8.837	4.726		$\cdots$	294.986
R M.Savade	1.835	1.305	2.630	1.215		$\cdots$	881.153	745 977
BradleyG J	182,592	188.366	326,576	202.583	217,477	336.977	406.660	78.419

Transactions with directors and director-related entities

Transactions between directors and Perpetual Trustees Australia Limited and its controlled entities are within normal customer or employee relationships on terms and conditions no more (avourable than those available to other customers or employees. The directors are not erritled to any remission of application fees when investing in any pooled investment funds managed by the consolidated entity.

Loans made to directors of the consolidated entity

Coans made to executive directors are on the same terms and conditions as offered to Pernetual employees.

Employee share purchase loans

Coans to executive directors of entities within the economic entity are made for the purposes of acquiring shares in the Company in accordance with the Perpetual Employees Share Purchase Plan and are interest free for a maximum period of 10 years. Loans are made by the Company. At balance date there were 15 loans (2002: 16) totaling $234.652 (2002: $214.401) with a maximum to any one executive director being $23,952 (2002: $24,008). During the year loans made to the following executive directors totalled $62,350 (2002: $75,906):

G. J. Bradley, D. C. Bryant, W. J. Clancy, J. L. Couchman, D. C. Crowley, A. M. Cunich, G. D. Doherty, E. Gonzalez, A. J. McKee, R. W. Mead, I Pendelton, P. D. Ryan, M. J. Stefanovski, M. K. Yourid and P. A Vernon.

During the year loan repayments (other than by way of dividends received) made by the executive directors totalled $Nif (2002: $19,579).

Other related parties

Refer to Note 31.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2003

PERPETHAL TRUSTEES AUSTRALIA LIMITED AND ITS CONTROLLED ENTITIES

30. Related parties (continued)

Controlled entities

Details of the Company's interests in controlled entities are set out at Note 32. The Company from time to time has dealings with its controlled entities. All material dealings are on commercial terms and involve the provision of administrative and computing services.

Except for Perpetual Services Network Pty Ltd (PSN), intercompany funding is provided by interest free loans to wholly-owned entities. Interest of $376.171 (2002: $337.631) is charged on a loan from PSN to its parent entity at the Reserve Bank of Australia 90 day. bank bill rate.

A controlled entity provides office space to the Company at a commercial rental, which is reviewed every two years.

Balances with entities within the wholly-owned group

.
Aggregate amounts receivable from, and payable to, wholly-owned controlled entities bythe Company at balance date:	the presentation of proper	$1090
jerskahles	バ クすす	31.232
Creditors and other liabilities	,,,,,,,,,,,,,,,,,,,,,,The Card
	14.4
Dividends received or due and receivable by the Company from wholly-owned controlled entities	The course

Superannuation fund

Refer to Note 26.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2003

PERPETHAL TRUSTESS AUSTRALIA LIMITED AND ITS CONTROLLED ENTITIES.

31. Investments in associates

	CONSOLIDATED
	2003	2002
	$1000.	$.069
Results of associates
Share of associates' operating profit before income tax	781	1.309
Share of associates' income tax expense attributable to operating profit	(692)	(196)
Share of associates' net profit -- as disclosed by associates	89	1.313
Adjustments:
Amortisation of goodwill	(458)	(615)
Share of associates' net (loss)/profit -- equity accounted	(369)	498
Share of post-acquisition accumulated losses and reserves attributable to associates
Accumulated losses
Share of associates' accumulated losses at the beginning of the financial year	(180)	(1.505)
Opening retained fosses of associates disposed of in the year		1.373
Share of net (loss)/profit of associates	(369)	498
Dividends received from associates	(772)	(344)
Share of associates' accumulated losses at the end of the financial year	(1, 321)	(180)
Movements in carrying amount of investments
Carrying amoint of investments in associates at beginning of the financial year	38,394	38.565
Investments in associates acquired in the year		1.850
Provision against amounts owing from associate	98
Cost of investment in associate disposed of in the year		(2.175)
Share of associates' net (loss)/profit	(369)	498
Oividends received from associates	(772)	(344)
Carrying amount of investments in associates at the end of the financial year	37,351	38.394
Commitments
Share of associates' commitments payable:
Capital lease commitments
Contracted but not provided for and payable within 1 year		1.241
Operating lease commitments
Not longer than 1 year	1,201	1.335
Conger than 1 year but not longer than 5 years	2,969	3.427
	4,170	4.762
Total commitments	4,170	6.003
Contingent liabilities
Share of associates' contingent liabilities
(i) Guaranteed bank facilities	10	10

NOTES TO THE FINANCIAL STATEMENTS FOR THEYEAR ENDED 30 JUNE 2003.PERPETUAL TRUSTERS AUSTRALIA LIMITED AND ITS CONTROLLED ENTITIES.

31. Investments in associates (continued)

Details of investments in associates are as follows:

NAME	PRINCIPALACTIVITIES	BALANCEDATE.	CONSOLIDATED	OWNERSHIPINTEREST.	CARRYING AMOUNTCONSOLIDATED	INVESTMENT
				2002.	2003
ASX Perpetual				窗		$1000
Registrars t.td	合い出会く.	-30 Jane -	.	50 O	---------------------------------------	-699
	Master Trust Provider	30 lane	The Car
Jamesnsed	,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,Property Funds	30 Jane				---------------------------------------11.11
			The experience and a series and		$\mathbf{r}$$\cdots$

Dividends received from associates for the year ended 30 June 2003 by the consolidated entity amounted to $771,968 (2002: $344.471).

CONSOLIDATED

	2003	2002
		$'000
Summary performance and financial position of associates
The consolidated entity's share of aggregate assets, liabilities and profits of associates are as follows:
Net (loss)/profit -- as reported by associates	$-89$	1 113
Adjustment - amortisation of goodwill	(458)	(615)
Net (foss)/profit -- equity adjusted	(369)	498
Current assets	5,942	6,574
Non-current assets	45,960	44.374
Total assets	51,902	50,948
Current fiabilities	$\overline{2,759}$	5 3 8 7
Non-carrent liabilities	19,351	15.184
Total fiabilities	22,110	20.573
Net assets -- as reported by associates	29,792	30.377
Adjustments arising from equity accounting:
Add: Goodwill (net of amortisation)	7,559	-8.017
Net assets - equity adjusted	$-37,351$	38.394

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2003

PERPETHAL TRUSTESS AUSTRALIA LIMITED AND ITS CONTROLLED ENTITIES.

32. Particulars in relation to controlled entities

NAME OF COMPANY	BENEFICIAL INTEREST
	2003	2002
		X.
Perpetual Trustees Australia Limited
Controlled Entities®
Australian Trustees Limited	100	100
Commonwealth Trustees Pty Limited®	100	100
Investor Marketplace Limited	100	100
Perpetual Analysts Portfolio Fund	100	300.
Perpetual Small Companies Analysts Fund	100	300
Perpetual Assets Pty Limited*	100	100
Perpetual Property Services Australia Pty Limited*	100	100
Perpetual Australia Property Services (WA) Pty Limited®	100	100
Perpetual Australia Pty Limited®	100	100
Perpetual Fund Services Limited	100	100
Perpetual Investment Management Limited	100	100
Perpetual Nominees Limited	100	100
Perpetual Services Pty Limited®	100	100
Perpetual Superannuation Limited	100	100
Perpetual Trust Services Limited	100	100
Perpetual Trustee Company (Canberra) Limited	100	100
Perpetual Trustee Company Limited	100	300
Perpetual Trustees Queensland Limited	100	100
Perpetual Trustees SA Limited	100	100
Perpetual Trustees Victoria Limited	100	100
Perpetual Trustees WA Limited	100	100
Queensland Trustees Pty Limited	100	100
Perpetual Trustees Consolidated Limited	100	100
Entities under the control of Perpetual Trustee Company Limited
Perpetual Trustees Nominees Limited	100	100
Perpetual Custodians Limited	100	100
Hunter Nominees Pty Limited*	100	300
Perpetual Service Network Pty Limited®	100	100
PI Limited	100	300
Entities under the control of PT Limited
Perpetrust Nominees Pty Limited*	100	100

67

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2003

PERPETUAL TRUSTEES AUSTRALIA LIMITED AND ITS CONTROLLED ENTITIES

32. Particulars in relation to contrelled entities (continued)

NAME OF COMPANY	BENEFICIAL INTEREST
	2003	2002
		Ŵ.
Entities under the control of Perpetual Trustees Victoria Limited
Perpetual Executors Nominees Limited	100	100
Midway Nominees Pty Limited®	100	100
AXA GESP Exempt (Aust) Pty Limited*	51	51
AXA GESP Deferred (Aust) Pty Limited*	51	51
Entities under the control of Perpetual Trustee Company (Canberra) Limited
Charleville Leasing Limited	100	100
Entities under the control of Perpetual Trustees WA Limited
Perpetual Castodians WA Pty Limited®	100	100
Terrace Guardians Limited	100	100
Selwest Pty Limited®	100	100
Entities under the control of Perpetual Assets Pty Limited
Perpetual Asset Management Limited	100	100
Entities under the control of Perpetual Asset Management Limited
Perpetual James Fielding Limited (formerly ACT Nominees Limited) 36		100
Entities under the control of Perpetual Superannuation Limited
Wäson Dilworth Partnership Pty Limited*	100	100
Entities under the control of Wilson Dilworth Partnership Pty Limited
Wilson Ollworth Limited	າດຄ	10O
Wilson Dilworth Finance Pty Limited*	100	100
Entities under the control of Perpetual Trustees Consolidated Limited
Perpetual Nominees (Canberra) Limited	100	100
Perpetual Custodian Nominees Pty Limited*	100	100
Perpetual Victoria Nominees Pty Limited*	100	100

A small proposely company as delined by the Corporations Act 2001 and is not required to be audited for standiny parpases.

(i) Emilies in build are directly owned by Perpartial Trustees Australia Limited

(b) On 4 July 2002, Perpensal Russee Company Limited sold ACT Nominees Limited to Perpetual Asset Management Limited On 10 February 2003, ACT Nominees Linned changed is note to Perpetial James Fielding Linned and 50 percent of the shore capital of Perpetial James Fielding Innied was self to the James Fielding. Group As a result of this sale. Propertief James Flabling Cented ceased to be a committed endry of the group and bacaine an associate

PERPETHAL TRUSTESS AUSTRALIA LIMITED AND ITS CONTROLLED ENTITIES

33. Notes to the Statements of Cash Flows

	CONSOLIDATED			THE COMPANY
	2003	20O		2002
(a) Reconciliation of cashFor the poxposes of the Statements of Cash Flows, cash.includes cash on hand and at bank, short-term depositsat call and bank bills, net of outstanding bank overdrafts.Cash at the end of the financial period as shown in theStatements of Cash Flows is reconciled to the related		S 000		$`000
items in the Statements of Financial Position as follows:
isis at call^
	Print1.982	2.765	A.L.mara a con1.655	2.356
	.113,199		here a ser72.655	92.256

These funds are largely mested in a cash management rust operated by the consolidated entity $\mathbf{u}^{\dagger}$

(b) Reconciliation of net profit to net cash provided by operating activities

Net profit	78,201	75.584	72,642	92.393
Add/(less) items classified as investing/financing activities:
Profit on sale of investments	(10.001)	(17.203)	(7, 931)	${14.255}$
Add/(less) non-cash items:
Loss/(gain) on sale of property, plant and equipment	62	48	46	(10)
Depreciation and amortisation of property, plant and equipment	10,186	10.526	6.196	6.064
Transfer from deferred corpus commission		(369)
Amortisation of goodwill	3,868	4.012
Share of associates' net (profits)/losses	369	(154)
Net cash provided by operating activities before changein assets and liabilities	82,685	72.444	70,953	84.192
Change in assets and liabilities net of acquisition ofcontrolled entities during the financial year:
(Increase)/decrease in receivables	6.276	1.890	$-2,744$	4.423
Increase/(decrease) in accounts payable	(7,698)	14.040	(2,488)	(2.661)
(Increase)/decrease in other assets	(21, 898)	(519)	(22, 939)	-63
(Increase)/decrease in other financial assets otherthan investments	119	(166)	13	(371)
Increase/(decrease) in provisions	7,359	10.391	71,915	8.137
Increase/(decrease) in income taxes payable	(4, 161)	8.348	(7,932)	6.276
(Increase)/decrease in deferred tax assets	{3,665}	(2.330)	(3,875)	(1.811)
Amounts owing to controlled entities (net)				(18.090)
Increase/(decrease) in deferred tax liabilities	(876)	(1.854)	(297)	(857)
Net cash provided by operating activities	58,141	102.444	48,094	79.507

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2003

PERFETUAL TRUSTEES AUSTRALIA LIMITED AND ITS CONTROLLED ENTITIES

33. Notes to the Statements of Cash Flows (continued)

(c) Shares purchased to satisfy long term staff incentive and retention programs

The Company purchased Perpetual Trustees Australia Limited shares at a cost of $26.792,000 (2002: $rill) in the period to satisfy long term staff incentive and retention programs. The cash outflow from these purchases is classified as an operating activity in the Statements of Cash Plows.

(d) Net proceeds from the sale of Perpetual Fund Services of $9 million

During the period additional deferred consideration of $9 million was received from RBC Global Services Australia Pty Limited with respect to the sale of Perpetual Fund Services (PFS) in July 2001. The capital gains tax (CGT) applicable to the additional consideration received was $nil as the proceeds on sale of the PFS business did not exceed the applicable CGT cost base.

A summary of the safe is as follows:

	CONSOLIDATED		THE COMPANY
.	2003	2002	2003	2002.
		$1000	Tall 15	$.000
Cash consideration received		ିର ଯାଇ		30 AGA
Transaction costs paid	The company.	(3.963)	The company.
Net proceeds from sale	- 77 (11)Northern9.006	26.837	ThereTAL9.000	26.037
Assets and liabilities disposed of	The concerningDealers	(11.223)	The Committee Committee	(11.223)
Profil on sale of PFS	.	34 R14	The South of	3 4 R 1 &

(e) Financing facilities

Refer to Note 24.

34. Events subsequent to balance date

The directors are not aware of any event or circumstance since the end of the financial year not otherwise dealt with in this report or the consolidated financial report that has or may significantly affect the operations of the consolidated entity, the results of those operations or the state of affairs of the consolidated entity in subsequent financial years.

DIRECTORS' DECLARATION

PERPETUAL TRUSTEES AUSTRALIA LIMITED AND ITS CONTROLLED ENTITIES

In the opinion of the directors of Perpetual Trustees Australia Limited:

(a) the financial statements and notes, set out on pages 34 to 70, are in accordance with the Corporations Act 2001, including:

• (i) giving a true and fair view of the financial position of the Company and consolidated entity as at 30 June 2003 and of their performance, as represented by the results of their operations and their cash flows, for the year ended on that date: and
• (iii) complying with Accounting Standards in Australia and the Corporations Regulations 2001: and
• (b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

Dated at Sydney this 6th day of August 2003.

Signed in accordance with a resolution of the directors:

Kharles Cuman

CHARLES P CURRAN AO CHAIRMAR

Graham Bradley.

GRAHAM J BRADLEY MANAGING DIRECTOR

71

INDEPENDENT AUDITORS' REPORT

.TO THE MEMBERS OF PERPETHAL YRUSYESS AUSTRALIA LIMIYED AND ITS CONTROLLED ENYITIES

Scope

We have audited the financial report of Perpetual Trustees Australia Limited (the Company) for the financial year ended 30 June 2003, consisting of the statements of financial performance, statements of financial position, statements of cash flows, accompanying notes, and the Directors' declaration set out on pages 34 to 71. The financial report includes the consolidated financial statements of the consolidated entity. comprising the Company and the entities it controlled at the end of the year or from time to time during the financial year. The Company's directors are responsible for the financial report. We have conducted an independent audit of this financial report in order to express an opinion on it to the members of the Company.

Our audit has been conducted in accordance with Australian Auditing Standards to provide reasonable assurance whether the financial report is free of material misstatement. Our procedures included examination, on a test basis, of evidence supporting the amounts and other disclosures in the financial report, and the evaluation of accounting policies and significant accounting estimates. These procedures have been undertaken to form an opinion whether, in all material respects, the financial report is presented fairly in accordance with Accounting Standards and other mandatory or diessional reporting requirements and statutory requirements in Australia so as to present a view which is consistent with our understanding of the Company's and the consolidated entity's financial position and performance, as represented by the results of their coerations and their cash flows.

The audit opinion expressed in this report has been formed on the above basis.

Audit opinion

In our opinion, the financial report of Perpetual Trustees Australia Limited is in accordance with:

(a) the Corporations Act 2001, including:

• (i) niving a true and fair view of the Company's and consolidated entity's financial position as at 30 June 2003 and of their performance for the year ended on that date; and
• (ii) complying with Accounting Standards in Australia and the Corporations Regulations 2001; and

(b) other mandatory professional reporting requirements in Australia.

Dated at Sydney this 6th day of August 2003.

KPMG

CHRIS HALL FARTNER

LIST OF EQUITY INVESTMENTS

PERPETHAL TRUSTERS AUSTRALIA LIMITED AND ITS CONTROLLED ENTITIES.

COMPANY	MARKET VALUE
	$.000
Australia and New Zealand Banking Group	6.797
BRP Billion Limited	2.203
BRP Steel Limited	242
Boral Eimited	1.771
Brickworks Limited	4.984
Commonwealth Bank of Australia	3.251
CSR Limited	2.280
Fosters' Group Limited	5.334
Hills Industries	1.305
National Australia Bank	11.443
Orica Limited	542
Publishing & Broadcasting Limited	3.773
Rinker Group Limited	5.398
Rio Tinto	4.834
Rural Press	2.047
Rural Press Ltd Preference	1.454
Telstra Corporation	5.720
Westpac Banking Group	6.500
Woodside Petroleum	4.085
Woolworths Limited	639
Perpetual Small Companies Analysts Fund	3.088
Perpetual's Investor Choice Fund	5.147
Perpetual's Wholesale Balanced Growth Fund	572
Perpatual's Wholesale Quantitative Investments Alpha TE2 Fund	5.298
Perpetual's Wholesale Geared Australian Fund	2.806
Perpatual's Wholesale SHARE-PLUS Fund	5.463
Perpetual's Wholesate Ethical SRI Fond	5.087
Total listed holdings	102,063

73

STOCK EXCHANGE AND INVESTOR INFORMATION

PERFETUAL TRUSTEES AUSTRALIA LIMITED AND ITS CONTROLLED ENTITIES

2003 annual general meeting

The 2003 annual general meeting of the Company will be held at the Angel Place Conference Centre, Angel Place, 123 Pitt Street Sydney en Menday 20 October 2003 commencing at 11.00am.

Stock exchange listing

The ordinary strates of Perpetual Trustees Australia Limited are listed on the Australian Stock Exchange under the ASX code PPT, with Sydney being the home exchange. Details of trading activity are published in most daily newspapers.

Substantial shareholders

Shareholders appearing on the Company's register of substantial shareholders as at 7 July 2003:

NAME.	NUMBER OF SHARES
Commonwealth Bank of Australia Group	3.649.633

Statement of shareholdings

DISTRIBUTION SCREDULE OF HOLDINGSAS AT 7 JULY 2003	NUMBER OFHOLDERS	- NUMBER OFSHARES
$1 - 1.000$ shares	-9.334	-4.204-280
1.001 - 5.000 shares	- 2-873 - 11	-6.660.292
5.001 - 10.000 shares	419	R 019 884
10.001 - 100.000 shares	325.	7.065.254
$100.001 -$ and over shares	48	16897477
Total	13.000	37,847,187
Number of shareholders with less than a marketable parcel:

STOCK EXCHANGE AND INVESTOR INFORMATION

PERPETHAL TRUSTESS AUSTRALIA LIMITED AND ITS CONTROLLED ENTITIES

Top twenty shareholders as at 7 July 2003

NAME	NUMBER OFSMARES	PERCENTAGE OFISSUED CAPITAL
Citicorp Nominees Pty Limited	3.467.356	9.16
Westpac Custodians Nominees Limited	1.953.854	5.16
Queensland Trustees Pty Limited*	1.358.115	3.59
J P Morgan Nominees Australia Limited	1.173.670	3.10
National Nominees Limited	1,007,916	2.66
RBC Global Services Australia Nominees Pty Ltd	852.659	2.25
Queensland Investment Corporation	533,649	3.43
Washington H Soul Pattinson & Company Limited	529.598	1.40
Perpetual Trastee Company Limited*	528.605	3.40
Milton Corporation Limited	505.500	1.34
Australian Foundation Investment Company Limited	500.000	1.32
Atkins Brothers Pty Limited	399.679	1.06
Caledonia Investments Limited	371.789	0.98
HSBC Custody Nominees (Australia) Ltd	322.624	0.85
Enbeear Pty Ltd	310.678	0.82
UBS Private Clients Australia Nominees Pty Ltd	309.126	0.82
Commonwealth Custodial Services Ltd	303.871	0.80
Cogent Nominees Pty Limited	238.250	0.63
Carlton Hotel	237.332	0.63
Alfred Street Nominees Pty Ltd	204.719	0.54
Total	15,108,990	39.92

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STOCK EXCHANGE AND INVESTOR INFORMATION

PERPETUAL TRUSTEES AUSTRALIA LIMITED AND ITS CONTROLLED ENTITIES

Voting rights

Under the Company's Constitution, each member present at a general meeting (whether in person, by proxy, attorney or corporate representative) is entitled:

• « on a show of hands to one vote: and
• on a poll to one vote for each share held.

If a member is present in person, any proxy of that member is not entitled to vote.

If more than one proxy is present for a member:

• on a show of hands none of them is entitled to vote; and
• on a poll each of them is entitled to vote the number of shares in respect of which they have been appointed.

Voting by proxy

Voting by proxy allows shareholders to excress their views on the direction and management of the economic entity without attending a meeting in person.

On-market buy-back

An on-market buy-back of the Company's fully paid ordinary shares was announced to the Australian Stock Exchange on 29 October 2002. The buy-back commenced on 29 October 2002 and concludes on 29 October 2003.

Final dividend

The final dividend of 70 cents per share will be paid on 3 September 2003 to shareholders entitled to receive dividends and registered on 18 August 2003 being the record date.

Enquiries

If you have any questions about your shareholding, or matters such as dividend payments, tax file number or change of address, you are invited to contact the Company's share registry office below, or visit their website at www.asxperpetual.com.au.

ASX Perpetual Registrars Limited Level 8, 580 George Street Sydney NSW 2000

Locked Bad A14 Sydney South NSW 1232

Tel (02) 8280 7111 Fax (02) 9261 8489

Any other enquiries which you may have about the Company, can be directed to the Company's registered office or visit the Company's website.

Registered Office

Level 7 39 Hunter Street Sydney NSW 2000

Tel (02) 9229 9000 Fax (02) 9232 8936

Company Secretary

Joanne Hawkins

Website www.perpetual.com.au

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