Perpetu

Dear shareholder

Welcome to our May update for the 2007 financial year in which we give you a brief overview of our operations for the period to date and a forecast of our results for the current financial year. This year, we have also included an update on our strategy and the investments we are making for the future.

Environment

Australia's strong economy is being driven by global demand for resources. This has helped sustain low rates of unemployment, strong company profits and healthy increases in personal incomes,

The prospects for Australia's wealth management industry have been further enhanced by the recent changes to superannuation. Coupled with the strong increase in the Australian stock market, the financial outcomes for our clients have been very attractive. However, we have observed a reduction in the availability of quality stocks at good values, driven by merger and acquisition activity in general and the surge in private equity in particular.

Review of operations

Perpetual Investments

Funds under management (FUM) in Perpetual Investments were \$39.4 billion at 30 April 2007. This represents an increase of \$6.6 billion or 20 per cent since 30 June 2006. This result has been substantially driven by buoyant conditions in the equities market and by the success of our new offerings such as the Exact Market Cash Fund and the Diversified Income Fund.

Perpetual Private Clients

Funds under advice (FUA) in Perpetual Private Clients were \$7.6 billion at 30 April 2007, an increase of \$1.0 billion or 15 per cent since 30 June 2006. Our initiative to expand the sales capabilities of Perpetual Private Clients over the past few years has been driving the rise in FUA. Strong inflows are expected in June in line with the Government's superannuation initiative, effective 1 July.

Perpetual Corporate Trust

Funds under administration (FUA) were \$196.3 billion at 30 April 2007. The \$17.7 billion or 10 per cent rise over the amount of \$178.6 billion reported at 30 June 2006 is primarily the result of healthy market growth in the residential mortgage backed securitisation sector.

Outlook

The financial year began well for Perpetual and the outlook continues to be strong. In February, we announced an operating profit after tax (OPAT) of \$68.8 million for the six months to 31 December 2006, representing an 18 per cent increase in OPAT over the previous corresponding period. The result reflected the success of our strategy to build track record in our newer asset classes and to invest in new growth engines for our business.

During the second half of the year, we continued to invest in the implementation of our strategy.

We expect an increase in operating profit after tax for the 2007 financial year of approximately 18 per cent over the prior year result of \$122.4 million (adjusted to include operating losses attributable to our global equities business). This outlook is dependent on market conditions over the remainder of the financial year.

Strategy update

Our ambition is to be Australia's leading creator and protector of wealth. We aim to achieve this based on four sources of competitive advantage:

• our approach to managing philosophies and processes around funds management
• our strong relationships with the financial planning community
• our trusted brand
• our long history as a provider of fiduciary services to individuals and institutions

We are funding our strategic initiatives directly from operating earnings while continuing to drive earnings growth.

Each March, we review and refresh our strategy. As a result of that process, our strategy to develop a more balanced portfolio and to build new growth engines will focus on the four priorities set out below:

Perpetual Investments

• 1. We will maintain our focus on creating outstanding investment performance in Australian equities and continue to offer a range of new and innovative products which leverage that performance. These include self managed accounts, structured products such as the new Perpetual Protected Investments series and geared investments. We expect this will strengthen revenue margins in our Australian equities business over time.
• 1. We will continue to grow funds under management in our other asset classes by strengthening our sales and support capabilities in international equities, credit, mortgages, property and infrastructure.

Perpetual Private Clients

1. We will continue to accelerate growth in Perpetual Private Clients' share of the high net worth investor market by building high quality adviser teams and improving our support capabilities.

Perpetual Corporate Trust

1. We will continue to leverage our capability and market position as a securitisation trustee by rapidly driving growth in our mortgage services business and becoming an industry hub and outsource partner of choice to the lending industry.

We thank you, our shareholders, for your continued support during the year and look forward to presenting you and the market with our full year results on 22 August 2007.

Yours faithfully

Robert Savage Chairman

29 May, 2007

Perpetual Limited ABN 86 000 431 827