Perpetual Limited — Management Reports 2005

May 17, 2005

Letter to shareholders

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May 2005

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Dear Shareholder

Each May, we take the opportunity to provide shareholders with a progress report on the company's operations and the outlook for our results for the current financial year.

Financial update

In late February, Perpetual announced a record half-year net operating profit of $54.3 million (before one-off costs) of major strategic initiatives and realised gains on sale of investments). This excellent result was achieved through strong investment performance, solid flows into our Wealth Management and Corporate Trust businesses and strong underlying markets.

Since 31 December 2004, our Wealth Management division's total Funds under Management (FUM) from Perpetual Investments declined by $0.4 billion to $25.6 billion at 30 April 2005. Although we enjoyed a period of sustained healthy inflows into our credit funds. diversified funds and Australian Equities funds, these inflows were offset by the return of approximately $250 million to investors as we closed overseas regional funds following our change in global equities managers, and a softening Australian equity market.

The performance of our investment teams across all asset classes continues to be outstanding. We were recently recognised as the Morningstar Fund Manager of the Year 2004; Morningstar Australian Equities Fund Manager of the Year 2004; and the Morningstar Multi-Sector Fund Manager of the Year 2004.

Our Perpetual Private Clients business achieved steady inflows, especially in the charitable trust sector where we experienced robust growth in our Prescribed Private Funds business. Total funds managed for our Private Clients, trusts, estates, philanthropic foundations and external IDPS (Investor Directed Portfolio Service) clients held firm at $7.0 billion in a period of leaner investment markets.

Funds under Administration (FUA) in our Corporate Trust business arew strongly over the period, increasing by $14.3 billion since 31 December 2004 to $138.4 billion at 30 April 2005. New bank issues in the Residential Mortgage Backed Securities (RMBS) sector have been very strong with several large mandates secured by the

team. We recently terminated our marketing alliance with the Bank of New York in light of its entry into the Australian market and are currently reviewing a range of alternative providers for this administrative component.

ASX Perpetual Registrars Limited (ASX Perpetual), 50 per cent owned by Perpetual, continued to perform well over the last 12 months, adding more than 100 new clients to its books including Babcock & Brown and Coles Mver.

In January this year, ASX Perpetual entered a joint venture with New Zealand Exchange Limited (NZX) to establish Link Market Services Limited, offering share registry services to the New Zealand market.

At group level, our focus remains on managing costs effectively. We are currently working on the implementation of a vendor management programme, which will lead to a more streamlined, efficient and cost effective way of working with our many suppliers.

Strategic update

We continue to invest in and to realise a range of key initiatives that focus on developing a more balanced portfolio and new growth engines, and on fully engaging our people in the delivery of our strategy. Following is an update of some of the initiatives implemented during this period.

We have made strong progress on the establishment of our global equities business, PI Investment Management Limited (PIIML), which is now fully operational. The Dublinbased team, appointed in September 2004, received its licence in February and has successfully completed the transfer of its $1.8 billion portfolio across from the previous manager, In addition, we have established a dedicated sales capability based in London to service the institutional market in the United Kingdom and Europe. Our major focus over the coming year will be to continue investment in the development of our alobal equities business and to build our reputation in these markets and eventually in the US institutional market.

In May, we announced that we had become the third external investment manager on frish Life's highly regarded $8.3 billion investment product platform. Irish Life is Ireland's largest distributor of pensions and investment products, receiving inflows of approximately $500 million per annum.

We have also been highly rated by van Eyk Research and have been appointed as an underlying manager for the van Eyk Blueprint International Shares Fund. Our initial target allocation is approximately $35 million.

In late 2004, we enhanced our asset management capabilities and expanded our credit product offering for our institutional clients. The team's investment track record has been strong and the response from asset consultants and institutional clients has been very encouraging, feading to net inflows of over $700 million.

Fundamental to the delivery of superior and sustainable fong-term growth is a remuneration system which gives the organisation the ability to attract, retain and motivate quality people. Our remuneration system is designed to not only encourage performance but to align the interests of our people with those of clients and shareholders. In April 2005, we established a deferred share plan for a number of key people in our asset management team to encourage high performance levels on an on-going basis and to secure their long term commitment to Perpetual.

As part of our move to a single Sydney premises at Angel Place in January 2006, we announced the sale of our heritage-listed building at 39 Hunter Street. While Hunter Street is an important part of our company's history, we are confident that the consolidation of our Sydney premises will improve the efficiency of our operations and provide a necessary platform for Perpetual to grow as an organisation going forward.

The implementation of these initiatives will continue into 2006 and will provide a stronger foundation for the continuation of Perpetual's growth in revenues and profits over future years.

Outlank

We remain confident of our ability to maintain strong investment performance, to attract good inflows and to effectively manage our costs. We have enhanced our wealth management business in terms of asset management coverage, product offerings and service to clients and are well-placed long term to participate in the strong expected growth of the Australian superannuation market and investment markets globally.

As always, our operating environment is subjected to fluctuations in the stock market. Since March this year, uncertainty about growth and inflation prospects for the Australian economy resulted in a retreat in the ASX 300 index (also known as The All Ordinaries index) of approximately seven per cent.

Despite some pull-back in the Australian stock market in recent months, our profit guidance given in February of an approximate 25 per cent improvement in operating profit for the year to 30 June 2005 remains appropriate. This profit outlook is subject to there being no further significant fluctuations in the domestic market between now and the end of the financial year.

In closing, I thank David Deverall and our team for their efforts in further building the capabilities of Perpetual and producing a strong profit performance.

Shoules Gunan

Charles Curran AO

Chairman

18 May 2005

AUSTRALIA

Sydney

39 Hunter Street Sydney NSW 2000 Tel 02 9229 9000

1 Castlereagh Street Sydney NSW 2000 Tel 02 9229 9000

9 Castlereagh Street Sydney NSW 2000 Tel 02 9229 9000

Adelaide

Level 8 115 Grenfell Street Adelaide SA 5000 Tel 08 8418 5656

Brisbane

Level 10 Riverside Centre 123 Eagle Street Brisbane QLD 4000 Tel 07 3834 5656

Canberra

Level 4 10 Rudd Street Canberra ACT 2601 Tel 02 6248 7977

Melbourne

Level 28 360 Collins Street Melbourne VIC 3000 Tel 03 8628 0400

Perth

Level 29 Exchange Plaza 2 The Esplanade Perth WA 6000 Tel 08 9224 4400

IRELAND

Dublin

5th Floor Alexandra House The Sweepstakes Ballsbridge Dublin 4 Tel +353 1 669 9200 Fax +353 1 669 9299

UNITED KINGDOM

London 9th Floor CityPoint 1 Ropemaker Street London EC2Y 9HT Tel +44 870 351 4668 Fax +44 870 351 4667