Perpetual Limited — Management Reports 2008

May 26, 2008

2008 May Letter to Shareholders Robert Savage, Chairman

==> picture [131 x 47] intentionally omitted <==

Dear Shareholder

Operating environment

For the past four years, Australian equity investors have benefited from an investment environment characterised by an annual return of more than 20 per cent. This strong macro environment was built on a series of factors including the mining boom, low unemployment, low inflation and a high market appetite for risk.

We made reference to a change to this environment in our Half Year Report to 31 December 2007, the result of problems in the US sub-prime mortgage sector and the ensuing global credit crisis and decline in share markets.

These issues continued to drive market volatility and negatively impact investor sentiment into the second half of the 2008 financial year. A stronger Australian dollar, increased interest rates, the stagnation of the securitisation market and the Australian stock market’s high exposure to financial services stocks resulted in significant volatility in the Australian market during this period. For example, the All Ordinaries Index declined from 6421 points at the end of December 2007 to less than 5200 points in mid-March but has since recovered to approximately 5800 points today.

It is within this context that we provide our outlook, which is dependent on market conditions over the remainder of the 2008 financial year. Any significant movement in the equity markets will impact our revenue and subsequently also our profit for the full year to 30 June 2008.

Review of operations

Perpetual Investments

Funds under management (FUM) in Perpetual Investments were $32.6 billion at 30 April 2008, a decrease of 17 per cent since 30 June 2007.

Contributing to this result was negative asset growth in line with the decline in the All Ordinaries Index and outflows from our lower margin institutional business, predominantly in our cash and fixed interest portfolios.

Since equity markets started to deteriorate in November 2007, we have outperformed the market across most of our equity funds, a reflection of our investment style which focuses on quality and relative valuation.

Perpetual reported that mark-to-market losses in its Exact Market Cash Fund (EMCF) had steadied at $26.2 million after tax at 30 April 2008. The balance of these losses is largely unrealised. The stabilisation of the mark-to-market losses reflect the improved market conditions in the domestic investment grade credit market in late March and throughout April.

Perpetual Private Clients

Funds under advice (FUA) in Perpetual Private Clients were $8.0 billion at 30 April 2008, a decrease of 5 per cent since 30 June 2007.

While Perpetual Private Clients achieved excellent inflows and increased client numbers during this period, overall funds under advice were impacted by the decline in the equity markets.

Perpetual Corporate Trust

Funds under administration (FUA) were $195.6 billion at 30 April 2008, a decrease of 7 per cent since 30 June 2007.

The decrease in funds under administration was a direct result of the inertia in the securitisation market over the past six months combined with the natural run-off of our securitisation book from monthly mortgage repayments and the refinancing of mortgages.

Consequently we have reduced our cost base and repositioned Perpetual Corporate Trust in line with market conditions. Although the outlook for the securitisation market remains subdued in the near term, we are seeing a number of emerging opportunities in our mortgage processing business.

Outlook

Despite the current cyclical downturn in our operating environment we remain very optimistic of our future growth potential. The long term growth of our businesses is fuelled by superannuation monies which are forecast to grow at low double digit rates over the long term. Accordingly, we continue to invest in the growth of our business. This investment is funded directly from operating earnings.

In addition, we responded to the current reduction in our revenue with a review of all elements of our cost base and in particular of our employee costs, which as a people business, form the largest part of our costs. We expect the majority of savings from the review to flow through in the 2009 financial year. The effect of any benefits in the current year will be largely offset by one-off costs, such as redundancy payments, which were incurred to achieve savings.

We expect operating profit after tax for the 2008 financial year to be between $130 million and $140 million, which compares to the prior year result of $145.3 million. Operating profit after tax excludes profit on sale of investments ($21.1 million after tax in the December 2007 half year) and mark-to-market losses incurred in the EMCF since 30 June 2007 ($26.2 million loss after tax at 30 April 2008).

It is important to note that Perpetual’s capacity to deliver on this result is premised on the All Ordinaries Index remaining at its current level. Any sizeable movements in the market between now and the end of the 2008 financial year will ultimately have a bearing on our performance.

As always, we value the continued support of our shareholders during what has been a challenging year. Our full year results will be presented to the market on 20 August 2008.

Yours faithfully

==> picture [105 x 52] intentionally omitted <==

Robert Savage Chairman

27 May 2008