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Hastings Funds Level 27, 35 Collins Street Management Limited Melbourne VIC 3000 Australia ABN 27 058 693 388 T +61 3 8650 3600 AFSL No. 238309 F +61 3 8650 3701 www.hfm.com.au Melbourne, London, San Antonio, Sydney

The Manager Company Announcements Office ASX Limited

20 January 2012

Dear Sir

Hastings Diversified Utilities Fund (ASX: HDF) – takeover bid by APT Pipelines Limited Target’s Statement

We attach, by way of service pursuant to item 14 of section 633(1) of the Corporations Act 2001 (Cth), a copy of the target’s statement of Hastings Diversified Utilities Fund ( HDF ) in response to the off-market takeover bid by APT Pipelines Limited for all the stapled securities in HDF.

Yours faithfully

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Jane Frawley Company Secretary

Unless otherwise stated, the information contained in this document is for informational purposes only. It does not constitute an offer of securities and should not be relied upon as financial advice. The information has been prepared without taking into account the investment objectives, financial situation or particular needs of any particular person or entity. Before making an investment decision you should consider, with or without the assistance of a financial adviser, whether any investments are appropriate in light of your particular investment needs, objectives and financial circumstances. Neither Hastings, nor any of its related parties including Westpac Banking Corporation ABN 33 007 457 141, guarantees the repayment of capital or performance of any of the entities referred to in this document and past performance is no guarantee of future performance. Hastings, as the Manager or Trustee of various funds, is entitled to receive management and performance fees.

THIS IS AN IMPORTANT DOCUMENT

If you are in any doubt about how to deal with this document, you should contact your broker, financial adviser or legal adviser immediately.

YOUR DIRECTORS UNANIMOUSLY RECOMMEND THAT YOU REJECT THE OFFER

REJECT

Financial Advisers

Legal Adviser

Important notices

Nature of this document

This document is a target’s statement issued by Hastings Funds Management Limited (ABN 27 058 693 388) as responsible entity of HDUF Epic Trust (ARSN 109 770 961), HDUF Finance Trust (ARSN 109 770 765) and HDUF Further Investments Trust (ARSN 109 897 921), collectively Hastings Diversified Utilities Fund (HDF), under Part 6.5 Division 3 of the Corporations Act in response to the off-market takeover bid made by APT Pipelines Limited (ABN 89 009 666 700), a wholly-owned subsidiary of Australian Pipeline Trust (ARSN 091 678 778) ( Bidder ) and a member of APA Group, for all of the HDF Stapled Securities.

A copy of this Target’s Statement was lodged with ASIC and given to ASX on 20 January 2012. Neither ASIC nor ASX nor any of their respective officers take any responsibility for the content of this Target’s Statement.

Defined terms

A number of defined terms are used in this Target’s Statement. These terms are explained in Section 9 of this Target’s Statement. In addition, unless the contrary intention appears or the context requires otherwise, words and phrases used in the Target’s Statement have the same meaning and interpretation as in the Corporations Act.

No account of personal circumstances

This Target’s Statement does not take into account your individual objectives, financial situation or particular needs. It does not contain personal advice. Your Directors encourage you to seek independent financial, taxation and legal advice before making a decision as to whether or not to accept the Offer.

Disclaimer as to forward looking statements

Some of the statements appearing in this Target’s Statement may be in the nature of forward looking statements. You should be aware that such statements are only predictions and are subject to inherent risks and uncertainties. Those risks and uncertainties include factors and risks specific to the industry in which HDF operates as well as general economic conditions, prevailing exchange rates and interest rates and conditions in the financial markets. Actual events or results may differ materially from the events or results expressed or implied in any forward looking statement. None of HDF, HDF’s officers and employees, Hastings Funds Management Limited, Hastings Funds Management Limited’s officers and employees or any persons named in this Target’s Statement with their consent or any person involved in the preparation of this Target’s Statement, makes any representation or warranty (express or implied) as to the accuracy or likelihood of fulfilment of any forward looking statement, or any events or results expressed or implied in any forward looking statement, except to the extent required by law. You are cautioned not to place undue reliance on any forward looking statement. The forward looking statements

in this Target’s Statement reflect views held only as at the date of this Target’s Statement.

Disclaimer as to information

The information on the Bidder, APA Group, APA Stapled Securities and APA Group’s business contained in this Target’s Statement has been prepared by HDF Responsible Entity using publicly available information. The information in this Target’s Statement concerning the Bidder and APA Group and those entities’ assets and liabilities, financial position and performance, profits and losses and prospects, has not been independently verified by HDF Responsible Entity. Accordingly, HDF Responsible Entity does not, subject to the Corporations Act, make any representation or warranty, express or implied, as to the accuracy or completeness of such information.

Foreign jurisdictions

The release, publication or distribution of this Target’s Statement in jurisdictions other than Australia may be restricted by law or regulation in such other jurisdictions and persons who come into possession of it should seek advice on and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of applicable laws or regulations. This Target’s Statement has been prepared in accordance with Australian law and the information contained in this Target’s Statement may not be the same as that which would have been disclosed if this Target’s Statement had been prepared in accordance with the laws and regulations outside Australia.

Maps and diagrams

Any diagrams, charts, maps, graphs and tables appearing in this Target’s Statement are illustrative only and may not be drawn to scale. Unless stated otherwise, all data contained in diagrams, charts, maps, graphs and tables is based on information available at the date of this Target’s Statement.

Privacy

HDF Responsible Entity has collected your information from the register of HDF Securityholders for the purpose of providing you with this Target’s Statement. The type of information HDF Responsible Entity has collected about you includes your name, contact details and information on your security holding in HDF. Without this information, HDF Responsible Entity would be hindered in its ability to issue this Target’s Statement. The Corporations Act requires the name and address of securityholders to be held in a public register. Your information may be disclosed on a confidential basis to HDF’s related bodies corporate and external service providers (such as the securityholder registry of HDF and print and mail service providers) and may be required to be disclosed to regulators such as ASIC. If you would like details of information about you held by HDF Responsible Entity, please contact Computershare Investor Services Pty Limited at GPO BOX 2975 Melbourne Victoria 3001 – Australia. HDF’s privacy policy is available at http://www.hfm.com.au/privacy. The registered address of HDF is Level 27, 35 Collins Street, Melbourne, Victoria, 3000.

Key dates

Key dates
Date of the Offer	3 January 2012
Date of this Target’s Statement	20 January 2012
Close of the Offer Period	7.00 pm (Sydney time) on 31 March 2012
(unless extended or withdrawn)
Contents

Chairman’s letter	1	7 Taxation consequences	55
Key reasons toREJECTthe Offer	2	8 Additional information	62
Directors’ recommendation	4	9 Glossary and interpretation	67
Your Board’s response to APA’s claims	5	10 Authorisation	71
1 Why you should REJECT the Offer 2 Frequently asked questions 3 Your choices as an HDF Securityholder 4 Information about the Offer 5 HDF profile 6 Financial information and related matters	7 25 32 34 39 48	Attachment 1 Conditions of the Offer Attachment 2 Investigating Accountant’s Report Attachment 3 ASIC declaration Corporate directory HDF Securityholder information	74 78 82 83 84

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Chairman’s letter

“Your Board regards the Offer as opportunistic and entirely inadequate given the substantial expansion projects which HDF has recently delivered and which will benefit HDF Securityholders for many years to come.”

Alan Cameron AO Chairman

Dear HDF Securityholder,

Take NO ACTION and REJECT the bid for Hastings Diversified Utilities Fund (HDF) by APA

You should recently have received a Bidder’s Statement and First Supplementary Bidder’s Statement from APA outlining its Offer of $0.50 cash and 0.326 APA Stapled Securities for each HDF Stapled Security.

As confirmed in the First Supplementary Bidder’s Statement which APA agreed to issue, the value of the Offer, after adjusting for interim dividends for both APA and HDF, equates to $1.92 based on the closing price of APA Stapled Securities on 13 December 2011, rather than the headline implied value of $2.00 represented in APA’s original Bidder’s Statement. Based on the closing price of APA Stapled Securities as at 13 January 2012, the implied value of the Offer would be $1.95.[(1)]

Your Board has carefully considered the Offer and unanimously recommends that HDF Securityholders REJECT the Offer .

The Offer does not reflect an adequate premium for control of HDF and fails to appropriately value HDF’s anticipated strong medium term cash flow growth from 2015 that is both contracted and prospective.

Your Board regards the Offer as opportunistic and entirely inadequate given the substantial expansion projects which HDF has recently delivered and which will benefit HDF Securityholders for many years to come.

Following the recent completion of the SWQP Stage 3 Expansion and execution of material new gas supply contracts, HDF is entering a period of significant revenue growth, which is underpinned by over $4 billion of total contracted revenue. This Target’s Statement provides a comprehensive description of the contracted revenue growth which HDF is poised to deliver and which will be handed cheaply to APA if its highly conditional Offer succeeds.

Furthermore, new contracts such as those announced in December 2011 mean that HDF Securityholders can anticipate higher distributions in the medium term (2015 to 2017) and beyond as HDF more fully utilises its capacity amid increasing local and overseas demand for cleaner energy sources such as gas.

You should be aware that there are 19 conditions attached to the Offer and that HDF Securityholders who accept the Offer will not be eligible for CGT roll-over relief despite a large part of the Offer consideration being APA Stapled Securities.

Your Board’s reasons for recommending that you REJECT the Offer are set out in more detail in this Target’s Statement.

Your Board encourages you to read this Target’s Statement in its entirety and consider the Offer having regard to your own personal risk profile, investment strategy and tax circumstances.

To REJECT the Offer you should simply DO NOTHING and take NO ACTION in relation to all documents sent to you by APA.

For further enquiries please contact the HDF Securityholder Information Line on 1800 815 610 (toll-free in Australia) or +61 2 8256 3357 (outside Australia).

Yours sincerely,

Alan Cameron AO Chairman Hastings Funds Management Limited

(1) Calculated as the closing price of APA Stapled Securities as at 13 January 2012, multiplied by 0.326 + $0.475, representing the $0.50 cash component of the Offer less HDF’s $0.025 distribution payable on 30 January 2012.

Target’s Statement Page 1

Key reasons to REJECT the Offer

Gas transmission pipelines, like infrastructure assets more generally, require significant upfront capital expenditure and provide long term returns. HDF has raised approximately $800 million[(2)] of equity since its IPO in 2004 and its investments in gas transmission assets have included:

The acquisition of Epic Energy in 2004 for approximately $650 million.
The $168 million[(3)] construction of the QSN Link in 2008 connected Queensland, with its significant coal seam gas ( CSG ) resources, to the rest of the east coast gas market via Moomba in the Cooper Basin.
More recently, the completion of the $828 million[(4)] SWQP Stage 3 Expansion has provided significant capacity to ship CSG to Moomba, and by 2015 SWQP will have bi-directional capability to ship gas in either direction.

As a result of these investments, in particular the SWQP Stage 3 Expansion, HDF’s assets are poised to deliver significant growth in distributable cash flows from 2015, the value of which your Directors believe is inadequately reflected in the Offer. Furthermore, the timing of the Offer, just as HDF is about to commence delivering strong contracted revenue growth following the completion of the SWQP Stage 3 Expansion, is considered highly opportunistic. Your Directors unanimously recommend that you REJECT the Offer.

In making this recommendation, your Directors have considered the following supporting reasons:

1 The Offer undervalues HDF

The Offer does not reflect an adequate premium for control.
As confirmed in the First Supplementary Bidder’s Statement, the value of the Offer, after adjusting for interim dividends for both APA and HDF, equates to $1.92 based on the closing price of APA Stapled Securities on 13 December 2011, rather than the headline implied value of $2.00 represented in the original Bidder’s Statement. Based on the closing price of APA Stapled Securities as at 13 January 2012, the implied value of the Offer would be $1.95.[(5)]
The Offer fails to appropriately value HDF’s significant contracted revenues of over $4 billion which will be earned over the next 23 years and HDF’s significant revenue growth in the short term and beyond.
The Offer does not provide full value to HDF Securityholders for the benefits that HDF’s assets would provide to APA.

2 The timing of the Offer is highly opportunistic as HDF is about to commence delivering strong revenue growth

The recent completion of the SWQP Stage 3 Expansion[(6)] , the commencement in 2015 of the Santos Easternhaul GTA and a new $460 million contract in respect of SWQP for a period of up to 15 years commencing in 2015 will provide significantly higher revenue growth in the short term (2012 to 2014) to medium term (2015 to 2017) with only modest additional capital expenditure. This is expected to translate into material distributable cash flow growth from 2015, and the Offer does not provide full value to HDF Securityholders in recognition of this.
Improved short and medium term operating cash flow growth is expected if HDF achieves a debt refinancing in the short term. Further detail about the potential debt refinancing is set out in Section 5.4 of this Target’s Statement.

3 The Offer does not recognise the value of HDF’s strategically positioned pipelines

HDF owns a portfolio of highly strategic gas transmission pipelines which are uniquely positioned to benefit from expected strong growth in domestic and export demand for natural gas.
HDF’s pipelines are also ideally situated to benefit from the development of further gas supplies in the Cooper Basin as well as in the Eromanga, Surat and Bowen Basins.

(2) Excludes the $110 million proceeds raised upon the issue of Trust-issued Adjustable Preferred Securities by the TAPS Trust, proceeds from the HDF distribution reinvestment plans and securities issued in connection with HDF management and performance fees.

(3) Includes captalised interest and finance costs.

(4) Represents budgeted capital expenditure of $858 million (inclusive of capitalised interest and finance costs) less $30 million in expected savings as disclosed to the ASX on 19 December 2011.

(5) Calculated as the closing price of APA Stapled Securities as at 13 January 2012, multiplied by 0.326 + $0.475, representing the $0.50 cash component of the Offer less the $0.025 distribution payable on 30 January 2012.

(6) Subject to final administrative sign off processes that are expected to occur in 2012.

Page 2 Target’s Statement

4 HDF is delivering on its stated strategy

HDF is successfully pursuing its stated strategy of focusing on energy infrastructure investments and maintaining a disciplined management approach.
As calculated by Mercer, HDF Securityholders have received a total security return of 9.78% per annum compared to the S&P/ ASX 200 Industrials Accumulation Index return of 4.50% per annum since HDF’s IPO. On the other hand, APA Securityholders have received a total security return of 5.69% per annum compared to the S&P/ASX 200 Industrials Accumulation Index return of 5.59% per annum over the same period.[(7)]
HDF has a refinancing opportunity and expansion opportunities currently under consideration that could improve operating cash flows in the short to medium term, respectively.

5 Acceptance of the Offer may trigger a CGT liability

APA has stated that CGT roll-over relief will not be available to HDF Securityholders who accept the Offer, even though a large part of the Offer consideration is comprised of APA Stapled Securities, rather than cash. Accordingly, potential significant tax liabilities may be incurred by HDF Securityholders in the event the Offer is successful.

6 The Offer is highly conditional and uncertain

The Offer is subject to 19 conditions[(8)] which make it uncertain whether the Offer will ever become unconditional and impose unreasonable restrictions on HDF’s ability to run its business during the Offer Period.
There is no certainty that existing financiers to Epic Energy will allow the existing financing to remain in place if, as a result of the Offer, Hastings ceases to be the responsible entity for HDF Epic Trust. Furthermore, APA has not been able to guarantee that it will be able to secure replacement financing for Epic Energy’s debt if required.
A number of the conditions cannot be met[(9)] or may not be met and the satisfaction of a number of other conditions is wholly or partly outside of HDF’s control. Further information regarding the conditions to the Offer is provided in Section 4.3 of this Target’s Statement.

7 If you accept the Offer you will become an APA Securityholder, which will change the risk/return profile of your investment

• HDF is expected to generate considerably stronger revenue growth compared to APA over the next 3 years, primarily as a result of the completion of the SWQP Stage 3 Expansion. Consequently, your exposure to HDF’s significant revenue growth potential will be diluted as any future revenue generated by HDF’s assets will be shared amongst a larger securityholder base. Further information regarding HDF’s contracted revenue growth prospects is provided in Section 6.4 of this Target’s Statement.

The enlarged APA Group’s business operations and any future acquisition opportunities are likely to be subject to enhanced ACCC and regulatory scrutiny due to the nature of APA’s ownership and breadth of operations.
HDF’s assets are not currently subject to any price regulation, whereas a considerable portion of APA’s revenues are subject to full regulation.

Further details in relation to the Key Reasons to REJECT the Offer are set out in Section 1 of this Target’s Statement.

(7) Returns calculated as at the Announcement Date. The return calculations assume an investor reinvested each distribution in the applicable securities at the closing price on the distribution date and that the investor participated fully in any entitlement offers. HDF conducted a one-for-one entitlement offer in July 2009 and APA conducted a two-for-seven entitlement offer in November 2006. The S&P/ASX 200 Industrials Accumulation Index return differs between the APA and HDF comparisons as each index return figure assumes a proportionate investment in the index at the time of APA and HDF’s respective entitlement offers. Refer to Section 5.7 for further detail.

(8) The conditions include approval from the ACCC, a minimum acceptance condition of 90%, a condition that the S&P/ASX 200 Index does not fall to 3,800 or below for certain periods and a number of conditions that seek to require HDF to disclose information, provide confirmations, and conduct its business in a restrictive manner.

(9) Conditions (j), (k) and (s) of the Offer cannot be satisfied and condition (i) will not be satisfied. Refer to Section 4.3 of, and Attachment 1 to, this Target’s Statement for further details.

Target’s Statement

Page 3

Directors’ recommendation

After taking into account each of the matters in this Target’s Statement, the Bidder’s Statement and the First Supplementary Bidder’s Statement, each of your Directors recommends that you REJECT the Offer.

Each of your Directors who has a relevant interest in HDF Stapled Securities presently intends to REJECT the Offer in relation to those HDF Stapled Securities. To REJECT the Offer you should DO NOTHING and take NO ACTION in relation to all documents sent to you by APA.

Page 4 Target’s Statement

Your Board’s response to APA’s claims

APA made a number of claims in its Bidder’s Statement in support of its Offer. Your Board’s response to the key claims is summarised in the table below:

APA claims thatyou will…	HDF REJECTS these claims…	HDF REJECTS these claims…

Receive a substantial premium for your HDF Stapled Securities	• The Offer represents an inadequate premium for control of only 9.6% (based on 13 December 2011 closing prices)(10)
	• After taking into account potential CGT liabilities,
		the Offer may provide even less financial appeal
	• The Offer fails to appropriately value HDF’s significant
		contracted revenues of over $4 billion and significant
		revenue growth in the short term (2012–2014) and beyond
Gain exposure to APA, which has	• As calculated by Mercer, HDF Securityholders have received
achieved superior total securityholder		a total security return of 9.78% per annum compared to
return in excess of HDF and the market		the S&P/ASX 200 Industrials Accumulation Index return
		of 4.50% per annum since HDF’s IPO in December 2004.
		On the other hand, APA Securityholders have received
		a total security return of 5.69% per annum compared
		to the S&P/ASX 200 Industrials Accumulation Index
		return of 5.59% per annum over the same period(11)
	• Between August 2010, when HDF announced its strategic
		review and renewed focus on energy infrastructure, and
		the announcement of the Offer, HDF has generated total
		securityholder returns of 47%, exceeding those of APA at 38% and the S&P/ASX 200 Accumulation Index at 2%(12)

(10) Based on the implied Offer value using the APA Stapled Security price on 13 December 2011 adjusted for the $0.17 distribution payable by APA in March 2012 and adjusting the cash component of the Offer by the $0.025 distribution payable by HDF in January 2012, compared to the 5 day VWAP of HDF Stapled Securities as at 13 December 2011 adjusted for the $0.025 distribution payable by HDF on 30 January 2012. See Section 4.2 of this Target’s Statement for discussion of the effective value of the Offer at a range of APA Stapled Security prices. (11) Returns calculated as at the Announcement Date. The return calculations assume an investor reinvested each distribution in the applicable securities at the closing price on the distribution date and that the investor participated fully in any entitlement offers. HDF conducted a one-for-one entitlement offer in July 2009 and APA conducted a two-for-seven entitlement offer in November 2006. The S&P/ASX 200 Industrials Accumulation Index return differs between the APA and HDF comparisons as each index return figure assumes a proportionate investment in the index at the time of APA and HDF’s respective entitlement offers. Refer to Section 5.7 for further details. (12) Returns assume that an investor reinvested each distribution in the applicable securities at the closing price on the distribution date. Index returns are the same over this time period with and without equity offering participation as neither HDF nor APA conducted any entitlement offers during this timeframe.

Target’s Statement Page 5

Your Board’s response to APA’s claims

APA claims thatyou will…	HDF REJECTS these claims…	HDF REJECTS these claims…

Benefit from quality management,	• HDF has an experienced and talented executive team
energy industry know-how and		that is ensuring significant expansion projects are being
robust financial capability		realised on behalf of HDF Securityholders
	• HDF is well positioned to benefit from growth in the
		demand for gas, both domestically and internationally
	• HDF Securityholders benefit from Hastings’ 17 years
		of experience in managing investments in infrastructure
		assets and its scale of over $6.3 billion in funds
		under management(13)
Benefit from the self-managed	• HDF’s fee structure is aligned to its performance. Hastings
and transparent structure of the		only receives a performance fee when HDF outperforms the
combined Group, which is free		benchmark index, after taking into account any prior periods
from external management fees		of underperformance. Refer to Section 5.8 of this Target’s
		Statement for further detail
Become an investor in a significantly	• HDF’s revenue growth prospects on a stand-alone basis
larger entity offering the benefits		are superior to those of APA over the next three years
of scale and diversity, while retaining		(2011 – 2014). HDF’s forecast contracted revenue growth
exposure to HDF assets		over the next three years is 10.5% per annum compared
		to APA’s forecast total revenue growth of 3.2% per annum
		over this period. Furthermore, HDF is forecasting contracted
		revenue growth of 15.5% per annum over the next four years
		(2011 – 2015). Refer to page 23 of this Target’s Statement
		for further information
	• HDF Securityholders who accept the Offer will become
		securityholders in a much larger vehicle, resulting in a
		considerably diluted exposure to HDF’s strong contracted
		revenue potential as it will be shared amongst many
		more securityholders

(13) Funds under management as at 30 September 2011.

Page 6 Target’s Statement

Why you should REJECT the Offer

Target’s Statement Page 7

1 Why you should REJECT the Offer

1 The Offer undervalues HDF

You should REJECT the Offer because it does not appropriately value HDF’s growing contracted revenue profile

HDF has over $4 billion of contracted revenue which will be earned over the next 23 years. HDF’s contracted revenues will increase significantly in the short to medium term as:

Gas flows commenced in January 2012 on the recently completed SWQP Stage 3 Expansion;
The Easternhaul GTA with Santos commences in 2015; and
The recently announced $460 million take or pay contract on the SWQP for a period of up to 15 years commences in 2015.

This contracted revenue growth alone provides HDF Securityholders with a compelling outlook for expected medium term (2015 to 2017) contracted and prospective cash flows, which your Directors believe are not appropriately valued by the Offer.

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

HDF revenue: historical and forecast contracted revenue ($ million)
300 Historical actual revenues Forecast contracted revenues
250
32%
200
32%
150
25%
100
50
0
2008 2009 2010 2011 2012 2013 2014 2015
Source: HDF.
Notes:
----- End of picture text -----

(1) Historical revenue includes both contracted and uncontracted, intermittent and lease revenue. Historical revenue for year ended 31 December 2011 is based on the unaudited consolidated management accounts of HDF Epic Trust.

(2) HDF’s forecast contracted revenue includes inflation assumptions of 2.5% per annum, which are within the current target band of the Reserve Bank of Australia.

(3) Chart includes Easternhaul revenue for SWQP as contracted from 1 January 2015.

It is important to note that the forecast revenues in the above chart depict HDF’s current contracted revenue profile only and do not include any additional revenue that is likely to arise from contract renewals or other non-contracted or volume dependent charges over the period. Refer to Section 6.4 of this Target’s Statement for further detail and underlying forecast contracted revenue assumptions.

Page 8 Target’s Statement

The Offer does not provide full value for the benefit that HDF’s assets would provide to APA

APA has highlighted in its Bidder’s Statement a number of benefits it expects the acquisition of HDF will deliver to APA, yet has offered only a small premium to HDF Securityholders to secure these benefits. Such benefits are not reflected in the Offer price.

HDF’s assets are strategically valuable because they would provide APA with:

Access to all east coast markets in the transmission of gas;
An improved market position;
Synergies;
Access to a larger customer base;
Increased scale; and
A more diversified portfolio.

Your Directors believe that HDF Securityholders should reject the Offer because it does not adequately compensate you for all the benefits that APA will receive by owning HDF’s assets.

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Target’s Statement Page 9

1 Why you should REJECT the Offer

The effective value of the Offer was only $1.92 at the Announcement Date

As confirmed in the First Supplementary Bidder’s Statement, the value of the Offer at announcement was $1.92 per HDF Stapled Security and not $2.00 as represented in the original Bidder’s Statement for the following reasons:

1 APA’s stated Offer value of $2.00 in its original Bidder’s Statement did not take into account that APA Stapled Securities were trading, at the time the Offer was announced, with an entitlement to APA’s interim distribution of $0.17 per APA Stapled Security. HDF Securityholders who accept the Offer will not be entitled to receive this interim distribution from APA. Adjusting for this reduces the stated headline value of the Offer by $0.055[(14)] per HDF Stapled Security; and
2 APA has also stated that it will reduce the Offer price for any distributions paid by HDF subsequent to the announcement of the Offer. As HDF announced a distribution of $0.025 per HDF Stapled Security on 19 December 2011, the Offer price will be reduced by this amount.

The cumulative effect of these adjustments on the value of the Offer and the resulting significantly lower premia than those represented by APA in its Bidder’s Statement are shown below:

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

APA effective Offer value ($ per HDF Stapled Security)
$2.50 Premium as
represented by APA: 12.6% 20.6%
$2.00 $2.00 ($0.055) ($0.025) $1.92 premium9.6% premium17.8%
$1.75
$1.50 $1.63
$1.00
$0.50
$0
“Headline” APA distribution HDF distribution Effective offer [(4)] HDF adjusted HDF adjusted
offer [(1)] payable payable 5 day VWAP as at 3 month VWAP as at
15 March 2012 [(2)] 30 January 2012 [(3)] 13 December 2011 [(5)] 13 December 2011 [(5)]
Source: IRESS.
Notes:
----- End of picture text -----

(1) As disclosed by APA in its Offer announcement dated 14 December 2011 and Bidder’s Statement dated 15 December 2011. (2) Calculated as APA’s estimated distribution of $0.17 per APA Stapled Security multiplied by the Offer ratio of 0.326.
(3) APA has disclosed that it will reduce the Offer by the amount of any distribution paid by HDF after the Announcement Date. (4) Based on closing price of APA Stapled Securities on 13 December 2011.
(5) Calculated as the VWAP of HDF Stapled Securities over the prescribed period less the distribution of $0.025 per HDF Stapled Security payable on 30 January 2012.
(6) IRESS has not consented to the use of this reference.

Because the significant scrip component of the Offer will be subject to movements in the APA Stapled Security price, HDF Securityholders may receive less or more than the implied value of $1.92 per HDF Stapled Security as at the Announcement Date.

It is important for HDF Securityholders to note that the market price of APA Stapled Securities has, in the period from 22 December 2011 (when APA Stapled Securities first traded without entitlement to the $0.17 distribution) until 13 January 2012, ranged from $4.68 to $4.32, and that on 13 January 2012 the closing price of an APA Stapled Security was $4.53. Based on this closing price, the implied value of the Offer would be $1.95[(15)] . It is likely that the price of APA Stapled Securities will continue to vary throughout the Offer Period. See Section 4.2 of this Target’s Statement for discussion of the effective value of the Offer at a range of APA Stapled Security prices.

(14) Calculated as APA Group’s estimated distribution of $0.17 per APA Stapled Security multiplied by the Offer ratio of 0.326.

(15) Calculated as the closing price of APA Stapled Securities as at 13 January 2012, multiplied by 0.326 + $0.475, representing the $0.50 cash component of the Offer less the $0.025 distribution payable on 30 January 2012.

Page 10 Target’s Statement

The Offer does not reflect an adequate premium for control

The implied value of the Offer as at the Announcement Date of $1.92 was only 9.6% above the $1.745[(16)] price of HDF Stapled Securities on 13 December 2011, the day before APA announced the Offer.

The chart below illustrates the low implied Offer premium over the HDF Stapled Security price when HDF Stapled Securities and APA Stapled Securities are valued over the same time periods prior to the announcement of the Offer. On a like-for-like basis, the premium implied by the Offer is considerably less than the 20.6% premium to HDF’s 3 month VWAP represented by APA in its Bidder’s Statement and does not reflect an adequate control premium for HDF.

==> picture [400 x 228] intentionally omitted <==

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

Offer premium analysis at various VWAPs ($ per HDF Stapled Security)
$2.50
10.0% premium 10.2% premium 10.2% premium 12.2% premium 11.7% premium
$2.00 $1.92 $1.93 $1.90
$1.83
$1.745 $1.75 $1.72 $1.77
$1.63
$1.58
$1.50
$1.00
$0.50
$0
Close on 13/12/2011 5 day VWAP 1 month VWAP 3 month VWAP 6 month VWAP
HDF trading price [(1)] Implied Offer value [(2)]
----- End of picture text -----

Source: IRESS.

Notes:

(1) Calculated as the VWAP for HDF Stapled Securities for the relevant period to 13 December 2011, being the last full trading day prior to the announcement of the Offer less the distribution of $0.025 per HDF Stapled Security.
(2) Calculated as the VWAP for APA Stapled Securities for the relevant period to 13 December 2011 less the $0.17 distribution per APA Stapled Security, multiplied by the exchange ratio of 0.326 + $0.50 in cash less the distribution of $0.025 per HDF Stapled Security.
(3) IRESS has not consented to the use of this reference.

(16) Represents HDF’s Stapled Security price on 13 December 2011 of $1.77, less the $0.025 distribution payable in January 2012.

Target’s Statement Page 11

1 Why you should REJECT the Offer

2 The timing of the Offer is highly opportunistic as HDF is about to commence delivering strong contracted revenue growth

Gas transmission pipelines, like infrastructure assets more generally, require significant upfront capital expenditure and provide long term returns.

Since the Announcement Date, HDF has announced the completion of the SWQP Stage 3 Expansion and the exercise of an option for a significant new contract on the SWQP which will provide additional contracted revenue for a period of up to 15 years commencing in 2015.

Your Directors consider the Offer to be highly opportunistic in view of these recent announcements, particularly as completion of the SWQP Stage 3 Expansion will generate significant growth in future contracted revenues and the Offer does not provide full value to HDF Securityholders in recognition of this.

The SWQP Stage 3 Expansion more than doubled the capacity of the SWQP from 180 TJ/day to approximately 385 TJ/day. Gas flows commenced on 1 January 2012 and the SWQP Stage 3 Expansion is expected to be completed subject to final administrative sign off at nearly $30 million under budget.

Overview of the SWQP and SWQP Stage 3 Expansion

South West Queensland Pipeline Stage 3 expansion (looping)

==> picture [154 x 119] intentionally omitted <==

Queensland/South Australia/NSW (QSN) Link Pipeline – 180km, constructed 2009

South West Queensland Pipeline (SWQP) – 755km, constructed 1996

SWQP Stage 3 Expansion pipleine (showing connection points) – 937km, completed subject to final administrative sign off

Existing gas pipeline

==> picture [327 x 224] intentionally omitted <==

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

Ballera to Mount Isa
Gas Pipeline
Wallumbilla to Gladstone
Gas Pipeline
SWQP to Barcaldine
Gas Pipeline
Eromanga Charleville
Basin Roma
SS6 QCS4
Ballera SS2 Wallumbilla
Cooper Surat Basin
Basin
MLV1
Moomba
QMLV1 Ballera to Moomba
Raw Gas Pipeline QUEENSLAND
Moomba to Sydney
SOUTH AUSTRALIA Gas Pipeline NEW SOUTH WALES
----- End of picture text -----

Source: HDF.

Page 12 Target’s Statement

As a result of the SWQP Stage 3 Expansion and the significant new SWQP contract option being exercised, contracted revenue generated from the SWQP will more than double from $63 million in 2011 to approximately $134 million in 2013 and approximately $202 million in 2015, excluding spare capacity volumes that are also capable of being sold over this period. SWQP Stage 3 Expansion revenue is underpinned by long term contracts with Origin and AGL, with over 90% of incremental gas transmission volumes contracted through to 2028.

This significant growth in revenue is expected to translate into material distributable cash flow growth from 2015.

==> picture [398 x 231] intentionally omitted <==

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

SWQP profile post completion of the SWQP Stage 3 Expansion
$ million TJ/day
220 400
200
350
180
300
160
140 250
120
200
100
80 150
60
100
40
50
20
0 0
2008 2009 2010 2011 2012 2013 2014 2015
Actual/contracted take-or-pay revenue Contracted firm capacity Maximum capacity (incl. SWQP Stage 3 Expansion)
----- End of picture text -----

Source: HDF.

Note: The maximum capacity and contracted firm capacity represents one directional (Westernhaul) flows only whereas contracted revenue includes bi-directional revenue (i.e. both Westernhaul and Easternhaul, with Easternhaul revenues recommencing in 2015 after minor revenues were recorded in historical years (2008 to 2011) and a minor contracted amount in 2012). HDF’s forecast contracted revenue includes inflation assumptions of 2.5% per annum, which are within the current target band of the Reserve Bank of Australia.

Target’s Statement Page 13

1 Why you should REJECT the Offer

3 The Offer does not recognise the value of HDF’s strategically positioned pipelines

HDF’s unique suite of gas transmission pipelines is strategically positioned to benefit from substantial growth opportunities, including:

Rising gas demand, both domestically and for export;
Proximity to growing natural gas and CSG reserves, as well as potential new reserves, including Cooper Basin tight gas and reported massive shale gas resources; and
Unique market position to link these growing supply sources with end users.

Your Directors believe that the Offer does not fully value the important strategic position of HDF’s pipelines and the significant opportunities available as a result of the favourable demand and supply fundamentals of Australia’s east coast gas market.

Australian gas demand is expected to increase

Your Directors believe that the Offer does not adequately value HDF’s exposure to the growing Australian gas market.

Australian gas consumption is anticipated to significantly increase over the long term (see chart below) as Australian government policy initiatives such as the Clean Energy Future legislation and the Renewable Energy Target scheme support the development of a cleaner energy economy.

In particular, gas powered generation has been identified as a cleaner and cost effective alternative to coal fired generation. Gas powered generation can also provide back-up generation capacity to support increasing investment in other alternative but intermittent energy sources such as wind and solar.

Demand for natural gas

==> picture [447 x 240] intentionally omitted <==

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

Capacity of committed and proposed projects in the National Electricity Forecast Australian energy consumption mix (PJ)
Market by fuel source (MW)
18,000 8,000
16,439 590
16,000 7,000
2,575
14,000
6,000 277
12,000 11,820
5,000 1,240
10,000
2,787
4,000
2,083
8,000
3,000
6,000
2,000
4,000 2,124
1,763
2,000 2,000 1,000
1,074 839 550 43 694 525 213
0 0
Black Black Black Brown Gas Hydro Wind Solar Geo Bio 2007–08 2029–30
coal coal coal coal
other or gas
Publicly announced Committed Advanced Renewable Gas Oil Coal
Source: AEMO Electricity Statement of Opportunities 2011; ABARE Energy Projections to 2029–30 dated March 2010.
Committed and proposed capacity (MW)
----- End of picture text -----

Page 14 Target’s Statement

HDF’s pipelines are well placed to benefit from growth in east coast gas reserves

The rapid growth in Australia’s CSG reserves, in particular in Queensland’s Bowen and Surat Basins, has dramatically changed the supply dynamics of the east coast gas market. This has significantly benefited HDF’s pipelines, in particular the SWQP, which is currently the only pipeline connecting the Queensland CSG fields to Moomba and through which HDF can ship to the major markets of Sydney (via the Moomba to Sydney Pipeline) or Adelaide (via HDF’s Moomba to Adelaide Pipeline System (MAPS)). SWQP also supplies gas to Mt Isa via a connection at Ballera to the Carpentaria Pipeline.

==> picture [460 x 254] intentionally omitted <==

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

Gas reserve growth in Australia (2P)
December 2005 August 2011
Australia
Other 12.7% Other 5.9%
Gippsland 4.0%
Gippsland 13.3% Carnarvon 60.0% Surat/Bowen 30.5% Carnarvon 59.6%
Surat/Bowen 14.0%
East Coast
PJ PJ
50,000 50,000
Other 8.1%
40,000 40,000 NSW CSG 6.3%
Gippsland 9.8%
30,000 30,000
20,000 20,000
Surat/Bowen 75.8%
Other 20.2%
10,000 Bonaparte 10.6% 10,000
Gippsland 33.8%
0 Surat/Bowen 35.5% 0
----- End of picture text -----

==> picture [173 x 27] intentionally omitted <==

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

Source: AER State of the Energy Market 2007 and 2011.
Note: Includes conventional and unconventional gas.
Percentages may not sum to 100% due to rounding.
----- End of picture text -----

Australia also has significant potential shale and tight gas resources in the Cooper Basin. Companies including Santos, Senex and Beach Energy are currently exploring and testing for potential tight gas and shale reservoirs with a view to delineating the full extent of the Cooper Basin’s reserve potential. The EIA has estimated that there may be up to 85 trillion cubic feet of risked recoverable shale resources in the Cooper Basin.

The development of these potential resources represents a significant opportunity for HDF as the MAPS and SWQP represent the primary means of supplying Cooper Basin gas to the South Australian and Queensland markets respectively.

Target’s Statement Page 15

1 Why you should REJECT the Offer

HDF’s pipelines: the essential link to market

With depleting conventional gas reserves in southern gas basins, growing CSG reserves in Queensland and the potential for significant tight and shale gas resources to be exploited in the Cooper Basin, HDF’s pipelines are uniquely positioned to supply gas to end customers throughout the east coast gas market, in particular the SWQP which is currently the only pipeline connecting the Queensland gas fields to southern markets, via Moomba in the Cooper Basin.

==> picture [420 x 364] intentionally omitted <==

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

Overview of HDF pipelines
Pilbara Pipeline System (PPS)
328 km
Bonaparte Basin
1,184 PJ
South West Queensland
Pipeline (SWQP)
937 km
Carnarvon Basin Mt Isa
68,856 PJ
Amadeus Basin
141 PJ Gladstone
Cooper Basin1,373 PJ Moomba WallumbillaBRISBANE
Bowen and Surat Basins
35,169 PJ CSG [(1)]
NSW Basins
2,910 PJ CSG
SYDNEY
Cooper Basin Shale
estimate 85,000 PJ (US EIA) ADELAIDE CANBERRA
MELBOURNE
HDF pipelines Gippsland Basin
Otway Basin
4,571 PJ
939 PJ
Other pipelines Bass Basin
Moomba to Adelaide 268 PJ
Pipeline System (MAPS)
1,184 km HOBART
Source: AER State of the Energy Market 2011, EIA.
Note:
(1) Includes 183 PJ conventional gas.
----- End of picture text -----

Further growth opportunities from LNG

In addition to domestic gas supply, the SWQP is ideally positioned to supply gas into the burgeoning liquefied natural gas ( LNG ) sector at Gladstone. This is evidenced by the signing of the Easternhaul gas transportation agreement ( Easternhaul GTA ) with Santos, a 15 year agreement for 147 TJ/day of firm capacity commencing in 2015. Additionally, a recently exercised pre-existing option on a large gas transmission contract will provide HDF a further $460 million in contracted revenue for a period of up to 15 years commencing in 2015, which represents an 11% increase in HDF’s $4 billion of contracted revenue as at 31 December 2011. Additional Easternhaul capacity can be added via new compression and/or additional looping of the SWQP. Refer to Section 5.3(a) of this Target’s Statement for further detail.

The SWQP is currently the only pipeline capable of transporting gas from the Cooper Basin to Wallumbilla, from where it can be transported to Gladstone for export as LNG.

Page 16 Target’s Statement

4 HDF is delivering on its stated strategy

HDF is successfully pursuing its stated strategy of focusing on energy infrastructure investments

In August 2010, HDF completed a strategic review which refocused its strategy to concentrate on energy infrastructure investments.

Since then, HDF has taken a number of significant steps, including:

Entering into the Easternhaul GTA with Santos (25 October 2010) and the Easternhaul GTA subsequently becoming unconditional (21 September 2011);
Divesting a 38.7% economic interest in South East Water to Caisse de dépôt et placement du Québec for net proceeds to HDF of $206 million, a premium to the average broker valuation of the time[(17)] (17 December 2010);
Completing construction of the SWQP Stage 3 Expansion (subject to final administrative sign-off expected to occur in 2012) (19 December 2011); and
Confirming the exercise of a pre-existing option on a significant gas transmission contract on a take or pay basis on the SWQP worth $460 million over a period of up to 15 years commencing in 2015 (22 December 2011).

Since the strategic review and up to the announcement of the Offer, HDF has generated superior total securityholder returns of 47% compared to APA at 38% and the S&P/ASX 200 Accumulation Index at 2%, as illustrated in the chart below:

==> picture [392 x 10] intentionally omitted <==

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

HDF has generated superior total securityholder returns since the completion of its strategic review
----- End of picture text -----

==> picture [396 x 212] intentionally omitted <==

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

170
Announced conditional
Easternhaul agreement
160 (25 October 10)
Easternhaul unconditional
Sale of South East Water
150 (21 September 11)
(17 December 10) 47%
140
38%
130
120
110
100 2%
90
80
70
Aug 10 Nov 10 Feb 11 May 11 Aug 11 Nov 11
HDF APA S&P/ASX200 Accumulation Index
----- End of picture text -----

Source: Bloomberg.

Note: Rebased to 100 as at 27 August 2010. Past performance is not an indicator of future performance. Total securityholder return calculations assume that an investor reinvested each distribution in the applicable securities at the closing price on the distribution date. Index returns are the same over this time period with and without equity offering participation as neither HDF nor APA conducted any entitlement offers during this timeframe. Bloomberg has not consented to the use of this reference.

(17) Average broker valuation for South East Water calculated using the most recently disclosed value of HDF’s interest in South East Water provided by 7 brokers, which are dated between 19 February 2010 and 24 December 2010. These broker reports provide a value range of $0.26 per HDF Stapled Security to $0.39 per HDF Stapled Security compared to transaction proceeds of $0.40 per HDF Stapled Security.

Target’s Statement

Page 17

1 Why you should REJECT the Offer

Additionally, the price performance of HDF Stapled Securities from HDF’s IPO in December 2004 to the day prior to the announcement of the Offer is strong. As calculated by Mercer, since the IPO of HDF in December 2004 through to the trading day immediately before the Announcement Date, an HDF Securityholder who took up all HDF Stapled Securities offered by HDF has received a total security return of 9.78% per annum compared to the S&P/ASX 200 Industrials Accumulation Index return of 4.50% per annum.

On the other hand, an APA Securityholder who has taken up all APA Stapled Securities offered to them by APA over the same period would have received a total security return of 5.69% per annum compared to the S&P/ASX 200 Industrials Accumulation Index return of 5.59% per annum over the same period.

These figures differ from those presented by APA on page 11 of the Bidder’s Statement primarily because of the assumption that investors fully participated in HDF’s 2009 and APA’s 2006 entitlement offers respectively, whereas it is HDF’s understanding that the methodology in the Bidder’s Statement assumes investors did not participate in the entitlement offers. Refer to Section 5.7 of this Target’s Statement for further details.

	~~HDF, APA and S&P/ASX 200 Industrials Accumulation Index returns since HDF IPO in December 2004~~(1) S&P/ASX 200 S&P/ASX 200 Industrials Industrials Accumulation Accumulation HDF Index APA Index Return 9.78% 4.50% 5.69% 5.59%

Source: Mercer. Refer to Section 5.7 for further details.

Notes:

(1) Returns calculated as at the Announcement Date. The per annum return calculations assume an investor reinvested each distribution in the applicable securities at the closing price on the distribution date and that the investor participated fully in any entitlement offers. HDF conducted a one-for-one entitlement offer in July 2009 and APA conducted a two-for-seven entitlement offer in November 2006. The S&P/ASX 200 Industrials Accumulation Index return differs between the APA and HDF comparisons as each index return figure assumes a proportionate investment in the index at the time of APA and HDF’s respective entitlement offers. Refer to Section 5.7 for further detail.

Your Directors believe that by rejecting the Offer, you will continue to own a strongly performing portfolio of energy infrastructure assets with a proven management team and track record of generating strong securityholder returns.

HDF has identified revenue growth potential which is not recognised by the Offer

Your Directors are very confident in HDF’s future, because HDF:

Is in a strong position to capitalise on the substantial opportunities presented by the Australian gas market; and
Has successfully refocused its portfolio on its core, high growth pipelines which have strong contracted revenue growth profiles.

An overview of some short term revenue growth opportunities identified by HDF is set out below. These opportunities are not contracted and as a result are not reflected in the forecast contracted revenues in this Target’s Statement:

	~~Overview of short term revenue growth opportunities~~(1) Opportunities Comment 1. SWQP additional expansion through compression Additional circa 70 TJ/day 2. MAPS additional expansion through reinstating compression Additional circa 90 TJ/day 3. Port Hedland Power Station Additional circa 25 TJ/day to supply generation gap 4. SWQP compression Additional circa 150 TJ/day

Source: HDF. Notes:

(1) These short term opportunities are not legally committed and will be subject to the appropriate approval processes in due course.

Page 18 Target’s Statement

In addition, HDF has identified a number of medium term revenue growth opportunities, as detailed in the table below. These opportunities are not contracted and as a result are not reflected in the forecast contracted revenues in this Target’s Statement:

~~Overview of medium term revenue growth opportunities~~(1)
Opportunities
Comment
1. Additional revenue contracts for SWQP capacity
Fully contracting in either direction capacity of circa
1.through compression
315 TJ/day incremental
2. MAPS additional expansion
Pipeline augmentation on valuable easements owned
by HDF to meet Adelaide’s generation and retail demand,
and industrial and commercial demand on the MAPS route
3. PPS capacity demand
Utilisation of latent PPS capacity as significant Pilbara
gas resource developments are commercialised for
export and domestic consumption
4. Pipeline service opportunities arising from gas demand growth
Producers, shippers and consumers of gas expected
to seek to maximise flexibility to deliver gas to the
most lucrative or efficient markets

Source: HDF.

Notes:

(1) These medium term opportunities are not legally committed and will be subject to the appropriate approval processes in due course.

HDF has identified improved operating cash flow opportunities via debt refinancing which are not recognised by the Offer

In October 2011, prior to the announcement of the Offer, HDF commenced a process to refinance its debt facilities (which are described in Section 6.5 of this Target’s Statement), the impact of which may be to considerably increase operating cash flows in the short and medium term as interest costs are likely to be reduced relative to the current facilities. Further detail about the potential debt refinance is set out in Section 5.4 of this Target’s Statement.

Target’s Statement Page 19

1 Why you should REJECT the Offer

5 Acceptance of the Offer may trigger a CGT liability

Many HDF Securityholders purchased their HDF Stapled Securities at prices significantly below the Offer value. Additionally, as HDF has historically paid distributions that are tax deferred, many HDF Securityholders will have a cost base for capital gains tax (CGT) purposes which is lower than the price paid to acquire their HDF Stapled Securities.

In APA’s Bidder’s Statement and First Supplementary Bidder’s Statement, APA expressly states that ‘no CGT roll-over relief will be available for HDF Securityholders who accept the Offer’. This means that if you accept the Offer, are an Australian resident for tax purposes and hold your HDF Stapled Securities on capital account, you are likely to be required to pay CGT on any gains that you make, or, to the extent that you have carried forward tax losses, be required to utilise those tax losses to mitigate your CGT exposure, notwithstanding that the bulk of the Offer consideration is in the form of APA Stapled Securities.

For some HDF Securityholders, the crystallisation of this CGT liability could significantly reduce the post-tax cash proceeds received from APA, and, in the case of corporate investors who acquired their HDF Stapled Securities at certain prices, could result in a tax liability which exceeds the cash proceeds received from APA. If this is the case, those HDF Securityholders will need to fund part of the CGT liability from independent cash resources.

Set out below is an indicative assessment of the tax liability that HDF Securityholders who are Australian tax residents and who hold their HDF Stapled Securities on capital account (rather than revenue account) may be required to pay if they accept the Offer.

~~CGT example~~
APA
Example
Indicative
implied
Assumed
participating HDF
Hold period
acquisition
Example
Offer
marginal
CGT
CGT
Post-tax cash
Securityholder
(months)
price
cost base(1)
price(2)
tax rate(3)
discount
liability(5)
consideration(6)
Resident individual –
>12
$2.60
$1.44
$1.95
47.5%
Yes
$0.12
$0.35
13 December 2004(4)
Resident individual –
>12
$0.35
$0.06
$1.95
47.5%
Yes
$0.45
$0.03
9 March 2009
Resident individual –
<12
$1.47
$1.42
$1.95
47.5%
No
$0.25
$0.22
9 August 2011
Resident complying
>12
$2.60
$1.44
$1.95
15.0%
Yes
$0.05
$0.42
superfund –
13 December 2004(4)
Resident complying
>12
$0.35
$0.06
$1.95
15.0%
Yes
$0.19
$0.29
superfund –
9 March 2009
Resident complying
<12
$1.47
$1.42
$1.95
15.0%
No
$0.08
$0.40
superfund –
9 August 2011
Resident company –
>12
$2.60
$1.44
$1.95
30.0%
No
$0.15
$0.32
13 December 2004(4)
Resident company –
>12
$0.35
$0.06
$1.95
30.0%
No
$0.57
($0.09)
9 March 2009
Resident company –
<12
$1.47
$1.42
$1.95
30.0%
No
$0.16
$0.32
9 August 2011

Source: HDF.

Notes:

(1) For ease of understanding, the example cost base represents the aggregated cost base of the units in HDF Epic Trust, HDF Finance Trust and HDF Further Investments Trust. The example cost base includes an adjustment for the 2011 distributions that are expected to be 100% tax deferred. This is consistent with HDF’s 2010 distribution being 100% tax deferred and this is in accordance with HDF’s reasonable expectations. HDF will confirm this treatment prior to the close of the Offer and will keep HDF Securityholders informed if HDF’s expectations change.

Page 20 Target’s Statement

(2) Under the CGT rules, the capital proceeds received in respect of the HDF Stapled Securities will be the market value of the APA Stapled Securities on the date of disposal and the cash component of the Offer. For the purposes of this table the assumed total capital proceeds in respect of each HDF Stapled Security is $1.95.
(3) The assumed marginal tax rate for resident individuals is the top marginal tax rate on the date of this Target’s Statement plus the Medicare levy of 1.5% and the maximum Temporary Flood and Cyclone Reconstruction Levy of 1%.
(4) This row outlines the CGT consequences for participating HDF Securityholders who participated in HDF’s IPO. It demonstrates the CGT consequences in relation to the HDF Stapled Securities they acquired under HDF’s IPO. Different CGT consequences may apply for other HDF Stapled Securities they have acquired since HDF’s IPO (for example, under the HDF Distribution Reinvestment Plan).
(5) The CGT liability has been calculated on the assumption that the participating HDF Securityholder has not incurred any capital losses in the income year and does not have any capital losses or tax losses carried forward from previous income years.

(6) As noted in the First Supplementary Bidder’s Statement, the value of the Offer will be reduced by 2.5 cents as a result of the HDF interim distribution announced on 19 December 2011. To effect this reduction in the value of the Offer, APA will either reduce the cash component of the Offer or the number of APA Stapled Securities to be issued. The post-tax cash consideration in this table has been calculated on the basis that the cash component of the Offer will be reduced from $0.50 to $0.475.

Refer to Section 7 of this Target’s Statement for further information regarding the CGT implications of accepting the Offer which, among other things, specifies the relevant time for determining the value of APA Stapled Securities when calculating the amount of any CGT liability (see paragraphs 2.4 and 2.5 of Section 7 of this Target’s Statement).

Acceptance of the Offer will also cause the eligibility period for the CGT discount to recommence, meaning that eligible securityholders will be obliged to hold their APA Stapled Securities for a further twelve months from the date of receiving the APA Stapled Securities (not including the date of acquisition or disposal) before being eligible to claim the CGT discount on any further capital gains that may arise.

HDF Securityholders should be aware that the cost base of APA Stapled Securities received will not equal the market value of the HDF Stapled Securities disposed of under the Offer. Rather, the cost base of any APA Stapled Securities received will be the market value of all of the HDF Stapled Securities disposed of under the Offer less the cash consideration received . This is contrary to the disclosure in paragraph 2 of section 7 of the Bidder’s Statement, and this lower cost base should be used to calculate any future capital gain that arises in respect of the APA Stapled Securities.

These comments and examples should be read in conjunction with the more detailed discussion of the tax consequences of the Offer in Section 7 of this Target’s Statement.

Please note that the taxation consequences arising from accepting the Offer will depend on your own particular facts and circumstances and professional taxation advice should be sought before deciding whether or not to accept the Offer.

Target’s Statement Page 21

1 Why you should REJECT the Offer

6 The Offer is highly conditional and uncertain

The Offer is subject to 19 conditions, which makes it uncertain whether the Offer will ever become unconditional.

HDF considers that a number of these conditions impose unreasonable restrictions on HDF’s ability to run its business in the ordinary course for the benefit of HDF Securityholders. There are also a number of conditions whose satisfaction is wholly or partly out of HDF’s control, or which cannot be satisfied[(18) ] or which are unlikely to be satisfied (see Section 4.3 of this Target’s Statement for further detail). This introduces significant uncertainty as to whether the Offer could become unconditional.

In the event that FIRB approval is given, HDF Securityholders who accept the Offer whilst it remains open and unconditional will lose the ability to deal with their HDF Stapled Securities and not be able to accept a higher price from a competing bidder if such a bid eventuates (unless withdrawal rights are available).

Set out below is a list of the conditions to the Offer. Further detail and HDF’s comments on these conditions is provided in Section 4.3 of this Target’s Statement and the full text of the conditions is provided in Attachment 1.

Condition (a): 90% minimum acceptance
Condition (b): FIRB approval
Condition (c): ACCC approval
Condition (d): Other regulatory clearances
Condition (e): No restraining orders issued by a public authority in connection with the Offer
Condition (f): Material adverse event
Condition (g): No material acquisitions, disposals or new commitments
Condition (h): No retirement payments
Condition (i): Disclosure of repayment rights and break costs in financing arrangements, and confirmation that the break costs do not exceed $50 million
Conditions (j), (k), (l) and (m): Change of control implications for financing arrangements and material contracts
Condition (n): Confirmation of progress of SWQP Stage 3 Expansion
Condition (o): Confirmation of status of agreement with AGL
Condition (p): S&P/ASX 200 Index does not fall to 3,800 or below for certain periods
Condition (q): No “other occurrences” occur
Condition (r): No material litigation against HDF
Condition (s): HDF agrees to reduce performance fee entitlements

(18) Conditions (j), (k) and (s) cannot be satisfied and condition (i) will not be satisfied. Refer to Section 4.3 of, and Attachment 1 to, this Target’s Statement for further details.

Page 22 Target’s Statement

7 If you accept the Offer you will become an APA Securityholder, which will change the risk/return profile of your investment

Your Directors believe that HDF has excellent revenue growth prospects as a standalone entity, the value of which is not reflected in the Offer. However, if you choose to accept the Offer, and the Offer becomes unconditional, you will receive APA Stapled Securities as part of the Offer consideration. The risks inherent in owning APA Stapled Securities differ from those of owning HDF Stapled Securities, including in the ways set out below:

Reduced exposure to HDF revenue growth prospects

As illustrated in the table below, HDF is forecast to generate significantly stronger growth in contracted revenue alone compared to APA’s total revenue over the next 3 years, primarily as a result of the completion of the SWQP Stage 3 Expansion. Furthermore, over the next four years HDF is forecasting a revenue CAGR of 15.5% per annum, which highlights the medium term revenue impact of the Easternhaul GTA and the recently announced $460 million contract for a period of up to 15 years commencing in 2015. If you accept the Offer, your exposure to HDF’s significant contracted revenue growth potential will be diluted as an APA Securityholder, as any further revenue generated by HDF’s assets will be shared amongst a larger securityholder base.

Forecast revenue comparison ($ million)

						*FY11-14*	*FY11-15*
	2011A	2012F	2013F	2014F	2015F	*CAGR (%)*	*CAGR (%)*
HDF contracted revenue(1)	143	190	207	193	255
growth per annum (%)		32.2%	9.3%	(6.7%)	32.0%	10.5%	15.5%
APA revenue(2)	1,074	1,100	1,130	1,180	n.a.
growth per annum (%)		2.5%	2.7%	4.5%	n.a.	3.2%	n.a.

Source: Bidder’s Statement, broker estimates.

Notes:

(1) HDF figures represent a 31 December financial year end. The 2011 financial year represents the unaudited consolidated management accounts of HDF Epic Trust. For financial years 2012 to 2015 please refer to Section 6.4 of this Target’s Statement for further detail. HDF’s forecast contracted revenue includes inflation assumptions of 2.5% per annum, which are within the current target band of the Reserve Bank of Australia.

(2) APA revenue figures represent a 30 June financial year end and include pass-through revenue. Forecast revenue figures for 2012, 2013 and 2014 are based on the average forecasts from the most recent reports available to HDF from a collation of 11 brokers, of which 4 were excluded from the consensus calculation (2 did not publish subsequent to the Announcement Date and are therefore not comparable; 1 did not provide standalone APA revenue forecasts and 1 provided forecasts excluding pass-through revenue). The reports included in the consensus calculation are all dated between 14 December 2011 and 6 January 2012. The range of revenue estimates for 2012F is $948 – 1,174 million, for 2013F is $988 – 1,223 million and for 2014F is $1,021 – 1,262 million. Insufficient broker estimates were available for 2015F for APA to allow HDF to compile a consensus figure.

Target’s Statement Page 23

1 Why you should REJECT the Offer

Different tax distribution profile

If you accept the Offer, you may be subject to a different, and less advantageous, tax distribution profile as an APA Securityholder compared to your current profile as an HDF Securityholder.

Historically, HDF has paid tax deferred distributions to HDF Securityholders, ensuring that distributions are generally tax-free at the time you become presently entitled to them, but the HDF Securityholder’s cost base/reduced cost base is adjusted (i.e. tax on such distributions is generally ‘deferred’ until a gain is realised on disposal of the HDF Stapled Securities).

In contrast, the historical tax distribution profile for APA Securityholders has been different. In 2010, for example, the bulk of distributions by APA comprised either unfranked dividends or assessable trust distributions, both of which were assessable at the time of payment (for dividends) or present entitlement (trust distributions).

ACCC restrictions

If you accept the Offer, you will become a securityholder in APA. This enlarged entity’s business operations and any future acquisition opportunities will likely be subject to enhanced ACCC and regulatory scrutiny, as evidenced by APA’s proactive approach to the ACCC in relation to the Offer for HDF.

APA ownership restrictions

Over 17% of the issued APA Stapled Securities are currently owned by Petronas, the national petroleum corporation of Malaysia, which is wholly owned by the Malaysian Government. Petronas is entitled to appoint one APA director for as long as it owns at least 10% of the issued APA Stapled Securities, and has currently exercised that right. APA’s board also includes another former Petronas employee, and Petronas’ Australian activities include a significant investment in Santos’ Gladstone LNG Project. It is possible that Petronas’ role may restrict the strategic options available to APA in the future, as FIRB (for so long as Petronas owns 15% or more of APA) and the ACCC may place greater scrutiny on APA’s future activities.

Price regulation

HDF’s assets are not currently subject to any price regulation, whereas approximately 45% of APA’s pro forma revenues (excluding pass through revenue) for the year ended 30 June 2011 were generated from assets subject to full regulation. APA Stapled Securities are therefore subject to regulatory price risk that may adversely impact on APA’s financial performance.

APA financing considerations

If, as a result of the Offer, Hastings ceases to be the responsible entity of HDF Epic Trust, Epic Energy’s financiers would be entitled to demand repayment of certain loans, interest rate swaps and, potentially, an equipment lease. There is no certainty that existing financiers to Epic Energy will allow the existing financing to remain in place following such a change of control of HDF and APA has not been able to guarantee that it will be able to secure replacement financing for Epic Energy’s debt if required. Refer to Sections 4.3 and 4.4 of this Target’s Statement for further detail.

Page 24 Target’s Statement

Frequently asked questions

Target’s Statement Page 25

2 Frequently asked questions

This section answers some commonly asked questions about the Offer. It is not intended to address all relevant issues for HDF Securityholders. This section should be read together with all other parts of this Target’s Statement.

Target’s Statement.
Question	Answer

1 What is the Offer for my	APA has made a highly conditional Offer of 0.326 APA
HDF Stapled Securities?	Stapled Securities and $0.50 cash for each HDF Stapled
	Security held by you.
	Critically, the value of the consideration under the Offer
	will be reduced by the distribution to be paid by HDF for
	the quarter ending 31 December 2011 of 2.5 cents per
	HDF Stapled Security and the amount of any subsequent
	HDF distributions which are paid to you after the
	Announcement Date.
	In addition, if you are a Foreign Securityholder, you
	will not be entitled to receive APA Stapled Securities
	(see question 22 below).
2 What is the Bidder’s Statement?	The Bidder’s Statement is the document setting out the
	terms of the Offer. Holders of HDF Stapled Securities will
	have already received a copy of the Bidder’s Statement in the
	mail. The Bidder’s Statement should be read in conjunction
	with the First Supplementary Bidder’s Statement.
3 What is the First Supplementary	The First Supplementary Bidder’s Statement contains
Bidder’s Statement?	important additional information from APA, which clarifies
	several elements of the Offer, namely:
	• that the headline value of the Offer, after adjusting for
		interim distributions by both APA and HDF, equates to
		$1.92 based on the closing price of APA Stapled Securities
		on 13 December 2011, rather than the headline implied
		value of $2.00 as at that date represented in the original
		Bidder’s Statement;
	• that acceptance of the Offer may trigger a CGT liability,
		even though a large part of the Offer consideration is
		comprised of APA Stapled Securities; and
	• further information about the necessary process, and risks
		involved, if APA is required to arrange replacement financing
		in the event that Epic Energy’s existing debt financing
		is required to be repaid due to APA acquiring control
		of HDF as a result of the Offer.
4 What is this Target’s Statement?	This Target’s Statement has been prepared by HDF and
	provides HDF Responsible Entity’s response to the Offer,
	including the unanimous recommendation of the Directors
	to REJECT the Offer.

Page 26 Target’s Statement

Question
Answer
5 What choices do I have
as an HDF Securityholder?
As an HDF Securityholder, you have the following three
choices in respect of your HDF Stapled Securities:
• REJECT the Offer by doing nothing. The Directors
recommend that you REJECT the Offer;
• sell your HDF Stapled Securities on the ASX (unless you
have previously accepted the Offer and you have not validly
withdrawn your acceptance); or
• accept the Offer.
There are implications in relation to each of the above
choices. A summary of these implications is set out in
Section 3 of this Target’s Statement.
6 What are the Directors of the HDF
Responsible Entity recommending?
The Directors unanimously recommend that you REJECT
the Offer.
If there is a change to this recommendation or any material
development in relation to the Offer, HDF Responsible Entity
will inform you.
7 Why should I REJECT the Offer?
The Directors are unanimously recommending that you
REJECT the Offer because:
• The Offer undervalues HDF
• The timing of the Offer is highly opportunistic as HDF
is about to commence delivering strong contracted
revenue growth
• The Offer does not recognise the value of HDF’s strategically
positioned pipelines
• HDF is delivering on its stated strategy
• Acceptance of the Offer may trigger a CGT liability
• The Offer is highly conditional and uncertain
• If you accept the Offer you will become an APA Securityholder,
which will change the risk/return profile of your investment
Further details as to why you should REJECT the Offer are set
out in the “Key reasons to REJECT the Offer” section of this
Target’s Statement (which commences on page 2).
8 What do the Directors intend to do
with their HDF Stapled Securities?
Each Director who has a relevant interest in HDF Stapled
Securities intends to REJECT the Offer in relation to those
HDF Stapled Securities they own or control. Refer to
Section 8.4(c) of this Target’s Statement for further detail.

Target’s Statement Page 27

2 Frequently asked questions

	Question	Answer	Answer

	9 How do I REJECT the Offer?	To REJECT the Offer, you should DO NOTHING.
		You should take NO ACTION in relation to all
		correspondence from APA in relation to the Offer
		for your HDF Stapled Securities.
	10 What are the consequences	If you accept the Offer, unless withdrawal rights are available
	of accepting the Offer now,	(see question 23 below) and you exercise those rights, you will
	while it remains conditional?	give up your right to sell your HDF Stapled Securities on the ASX
		or otherwise deal with your HDF Stapled Securities while the
		Offer remains open (including the acceptance of any potential
		higher competing offer), provided that FIRB has approved
		the Offer.
		While the Offer remains conditional, you will not be
		paid consideration under the Offer. You should take into
		account the possibility that there may be a delay in certain
		conditions being satisfied (e.g. the regulatory approvals),
		or even that a condition may not be satisfied or waived
		(see question 15 below).
	11 What are the consequences of	If you accept the Offer after the Offer becomes unconditional
	the Offer becoming unconditional?	or the Offer becomes unconditional after you have accepted,
		you will be entitled to receive the consideration paid under
		the Offer. APA will be entitled to attend meetings of HDF
		and vote on behalf of those HDF Securityholders who have
		accepted the Offer in order to defeat resolutions relating
		to competing offers which may adversely affect the success
		of the Offer.
	12 What happens if the consideration	If APA increases the consideration payable under the Offer,
	payable under the Offer is increased?	the Directors will carefully consider the revised offer and
		advise you accordingly.
	13 When does the Offer close?	The Offer is presently scheduled to close at 7.00 pm
		(Sydney time) on 31 March 2012, but the Offer Period
		can be extended in certain circumstances.
		See Section 8.12 of this Target’s Statement for details of the
		circumstances in which the Offer Period can be extended.

Page 28 Target’s Statement

Question	Answer	Answer

14 What are the conditions to the Offer?	The Offer is highly conditional, with 19 conditions,
	including the following:
	• 90% minimum acceptance
	• FIRB approval
	• ACCC approval
	• Other regulatory clearances
	• No restraining orders issued by a public authority
		in connection with the Offer
	• No material adverse events
	• No material acquisitions, disposals or new commitments
	• No retirement payments
	• Disclosure of repayment rights and break costs in financing
		arrangements, and confirmation that the break costs do not
		exceed $50 million
	• Change of control implications for financing arrangements
		and material contracts
	• Confirmation of progress of SWQP Stage 3 Expansion
	• Confirmation of status of agreement with AGL
	• No “other occurrences” occur
	• No material litigation against HDF
	• The S&P/ASX 200 Index does not fall to 3,800 or below
		and remain at or below that level for at least 3 consecutive
		Business Days
	• HDF agrees to reduce performance fee entitlements.
	Further detail and HDF’s comments on these conditions
	is provided in Section 4.3 of this Target’s Statement and
	the full text of the conditions is provided in Attachment 1.
15 What happens if the conditions of the Offer are not satisfied or waived?	If the conditions are not satisfied or waived before the Offer closes,(19)the Offer will lapse and acceptances will be
	cancelled. You would then be free to deal with HDF Stapled
	Securities even if you had accepted the Offer.
16 When will I be sent my consideration	If you accept the Offer, you will have to wait for the Offer
if I accept the Offer?	to become unconditional before you will be sent your
	consideration from APA.
	See Section 8.16 of this Target’s Statement for further
	details on when you will be sent your consideration.

(19) Or, in the case of conditions (q)(1) to (q)(13), by the end of three Business Days after the end of the Offer Period.

Target’s Statement Page 29

2 Frequently asked questions

	Question	Answer	Answer

	17 What is the effect of the Offer on	On 19 December 2011, HDF announced a cash distribution
	HDF’s December 2011 distribution and	for the quarter ended 31 December 2011 of 2.50 cents per
	any other distributions HDF may declare	HDF Stapled Security, in respect of which the record closing
	prior to the end of the Offer Period?	date was 30 December 2011 and the estimated payment
		date is 30 January 2012. HDF may also announce one or
		more further distributions prior to the end of the Offer
		Period, for the quarters ending 31 March 2012 and beyond.
		Section 9.2.4 of the Bidder’s Statement provides that the
		Bidder will be entitled to all distributions declared, paid or
		made by HDF Responsible Entity after the Announcement
		Date in respect of HDF Stapled Securities acquired by
		the Bidder under the Offer. This includes the distribution
		for the quarter ended 31 December 2011 and any subsequent
		distributions. If the Bidder does not receive any of those
		distributions, the Bidder will reduce the Offer consideration
		by the amount or value of those distributions as reasonably
		assessed by the Bidder.
	18 What are the tax implications	A general outline of the tax implications of accepting the
	of accepting the Offer?	Offer is set out in Section 7 of this Target’s Statement.
		As the outline is a general outline only, HDF Securityholders
		are encouraged to seek their own specific professional advice
		as to the taxation implications applicable to their circumstances.
		In particular, you should note that the Bidder’s Statement
		and the First Supplementary Bidder’s Statement expressly
		state that if you accept the Offer, you will not be entitled
		to any CGT roll-over relief, even though a large part of the
		consideration is comprised of APA Stapled Securities rather
		than cash.
		Further, HDF Securityholders should be aware that the cost
		base of APA Stapled Securities received will not equal the
		market value of the HDF Stapled Securities disposed of under
		the Offer. Rather, the cost base of any APA Stapled Securities
		received will be the market value of all of the HDF Stapled
		Securities disposed of under the Offer_less the cash_
		consideration received.
	19 Is there a number that I can call	If you have any further queries in relation to the Offer,
	if I have further queries in relation	you can call the HDF Information Line on 1800 815 610
	to the Offer?	(a toll free line for calls made from inside Australia) or
		+61 2 8256 3357 (for calls made from outside Australia).
		Calls to these numbers may be recorded.

Page 30 Target’s Statement

Question
Answer
20 What happens if I do nothing?
You will remain an HDF Securityholder.
If APA acquires 90% or more of HDF Stapled Securities and
the Offer becomes unconditional, APA intends to compulsorily
acquire your HDF Stapled Securities. See Section 8.19 of this
Target’s Statement for more details.
If APA acquires between 50.1% and 90.0% of HDF Stapled
Securities and the Offer becomes unconditional, you will
be a minority securityholder in HDF. The implications of this
are described in Section 4.5 of this Target’s Statement. If APA
casts its votes to appoint a new responsible entity of HDF
in this context, the replacement responsible entity would
continue to be subject to its duties to continue to act in the
best interests of HDF Securityholders.
21 Can I be forced to sell my
HDF Stapled Securities?
You cannot be forced to sell your HDF Stapled Securities
unless APA acquires a relevant interest in at least 90% of
all HDF Stapled Securities by the end of the Offer Period,
and proceeds to compulsory acquisition of your HDF Stapled
Securities. If APA does proceed to compulsory acquisition
of your HDF Stapled Securities, you will receive the last price
offered by APA for HDF Stapled Securities before compulsory
acquisition commenced.
See Section 8.19 of this Target’s Statement for more details.
22 What if I am a Foreign Securityholder?
Any HDF Securityholder whose address (as recorded in the
register of HDF Securityholders provided by HDF to APA)
is in a place outside Australia or New Zealand will not be
entitled to receive APA Stapled Securities under the Offer.
Instead, the relevant APA Stapled Securities (that would
otherwise be transferred to such Foreign Securityholders)
will be allotted to a nominee approved by ASIC who will
offer those securities for sale and will distribute to each
of those Foreign Securityholders their proportion of the
proceeds of sale net of expenses.
See Section 9.5 of the Bidder’s Statement for further details.
23 If I accept the Offer, can I withdraw
my acceptance?
HDF Securityholders who accept the Offer will not be able
to withdraw their acceptance and sell their HDF Stapled
Securities (provided that FIRB has approved the Offer),
except in certain limited circumstances (see Section 8.15
of this Target’s Statement).

Target’s Statement Page 31

Your choices as an HDF Securityholder

Page 32 Target’s Statement

Your choices as an HDF Securityholder

The Directors unanimously recommend that you REJECT the Offer

However, as an HDF Securityholder you have three choices currently available to you:

(a) REJECT the Offer

HDF Securityholders who do not wish to accept the Offer or sell their HDF Stapled Securities on market should DO NOTHING.

If you do not wish to accept the Offer, do not take any action in relation to documents sent to you by APA.

(b) Sell your HDF Stapled Securities on market

You can still sell your HDF Stapled Securities on market for cash if you have not already accepted the Offer.

On 13 January 2012 the price of HDF Stapled Securities closed at $1.975, a 1.2% premium to the implied Offer value of $1.95 based on APA Stapled Securities’ closing price of $4.53 on 13 January 2012 on the ASX. The latest price for HDF Stapled Securities and APA Stapled Securities may be obtained from the ASX website www.asx.com.au.

HDF Securityholders who sell their HDF Stapled Securities on market:

1 will lose their exposure to the future contracted revenue growth potential of HDF;
2 may be liable for CGT or income tax on the sale (see Section 7 of this Target’s Statement);
3 may incur a brokerage charge; and
4 will not receive the benefits of any potential higher offer from APA or any potential higher competing offer for their HDF Stapled Securities than has been currently made by APA.

HDF Securityholders who wish to sell their HDF Stapled Securities on market should contact their broker.

(c) Accept the Offer

HDF Securityholders who accept the Offer:

1 will not receive the Offer consideration unless and until each of the 19 conditions of the Offer are satisfied or waived. You should be aware that there is a material risk that all of the conditions cannot be satisfied or indeed waived (see Section 4.3 of this Target’s Statement for further details);
2 will not be able to withdraw their acceptance and sell their HDF Stapled Securities (provided that FIRB has approved the Offer), meaning that they would not be able to accept a higher price from a competing bidder if such a bid eventuates, except in certain limited circumstances (see Section 8.15 of this Target’s Statement); and
3 may be liable to pay CGT or income tax on the disposal of their HDF Stapled Securities which may have financial consequences for some HDF Securityholders (see Section 7 of this Target’s Statement for further details of the tax consequences of the Offer).

HDF Securityholders who wish to accept the Offer should refer to the Bidder’s Statement for how to do so.

Target’s Statement Page 33

Information about the Offer

Page 34 Target’s Statement

4.1 Summary of Offer

The consideration being offered by APA under its takeover bid is 0.326 APA Stapled Securities and $0.50 cash for each HDF Stapled Security. You will be entitled to receive any distribution from HDF if you still hold HDF Stapled Securities on the record date for that distribution. However, the value of the consideration under the Offer will be reduced by the distribution to be paid by HDF for the quarter ending 31 December 2011 of 2.5 cents per HDF Stapled Security, together with the amount of any other HDF distribution which is paid to you after the Announcement Date.

If you are a Foreign Securityholder, you will not be entitled to receive APA Stapled Securities. Instead, the APA Stapled Securities to which you would otherwise be entitled will be sold by a nominee approved by ASIC and the net proceeds paid to you.

The Offer is subject to a number of conditions; these conditions are discussed in Section 4.3 of this Target’s Statement.

4.2 Value of the Offer

(a) APA’s implied Offer value has been amended for the payment of interim distributions

As confirmed in the First Supplementary Bidder’s Statement, the value of the Offer equates to $1.92 based on the closing price of APA Stapled Securities on 13 December 2011, rather than the headline value of $2.00 represented in the original Bidder’s Statement for the following reasons:

(1) HDF distributions after the Announcement Date will reduce the value of the Offer price. Refer to Section 4.1 of this Target’s Statement for further detail.
(2) HDF Securityholders are not entitled to APA’s interim dividend of $0.17 per APA Stapled Security.

Therefore the implied value of the Offer based on the $4.60 APA Stapled Security price as at the Announcement Date is overstated by $0.055.[(20)] APA Stapled Securities commenced trading ex the APA interim distribution of $0.17 per APA Stapled Security on 22 December 2011, at which time the price of APA Stapled Security fell by $0.19, or 4.1%.

(b) The value of the Offer is dependent on the trading performance of APA Stapled Securities over the Offer Period

The consideration offered for HDF Stapled Securities under the Offer is comprised substantially of APA Stapled Securities, the value of which is uncertain and subject to market volatility. Based on the closing price of APA Stapled Securities as at 13 January 2012, the implied value of the Offer would be $1.95.[(21)]

APA’s Stapled Security price has ranged from $4.11 to $4.70 over the 3 months to 13 January 2012 and has recently traded at the top end of its historical range. Between the announcement of the Offer and 13 January 2012, the price of APA Stapled Securities has decreased by $0.07 from $4.60 to $4.53 resulting in an implied Offer value of $1.95. The Offer is open until 31 March 2012 (unless extended or withdrawn), exposing you to risks associated with fluctuations in the market price of APA Stapled Securities over this period.

The table below indicates the potential effective values of the Offer for a range of APA Stapled Security prices.

HDF Securityholders should also consider their personal tax consequences of accepting the Offer, as acceptance may result in CGT liabilities that significantly reduce the post-tax proceeds available to you. You should refer to Section 7 of this Target’s Statement for more detailed discussion of the potential tax consequences of the Offer.

Value of 0.326
~~APA Stapled~~
~~APA Stapled~~
~~Cash~~
~~Headline~~
~~HDF~~
~~Effective~~
Security Price
Securities
Component
Offer
Distribution
Offer
$4.20
$1.37
$0.50
$1.87
($0.025)
$1.84
$4.30
$1.40
$0.50
$1.90
($0.025)
$1.88
$4.40
$1.43
$0.50
$1.93
($0.025)
$1.91
$4.50
$1.47
$0.50
$1.97
($0.025)
$1.94
~~$4.53~~
~~$1.48~~
~~$0.50~~
~~$1.98~~
~~($0.025)~~
~~$1.95~~
$4.60
$1.50
$0.50
$2.00
($0.025)
$1.97
$4.70
$1.53
$0.50
$2.03
($0.025)
$2.01
$4.80
$1.56
$0.50
$2.06
($0.025)
$2.04
$4.90
$1.60
$0.50
$2.10
($0.025)
$2.07

Source: HDF.

(20) Calculated as APA’s distribution of $0.17 per APA Stapled Security multiplied by the Offer ratio of 0.326.

(21) Calculated as the closing price of APA Stapled Securities as at 13 January 2012, multiplied by 0.326 + $0.475, representing the $0.50 cash component of the Offer less HDF’s $0.025 distribution payable on 30 January 2012.

Target’s Statement Page 35

4 Information about the Offer

4.3 Conditions of the Offer

The Offer is subject to 19 conditions which are set out in full in Attachment 1.

If all of these conditions are not satisfied, or waived by APA, before the end of the Offer Period,[(22)] then the Offer will lapse and no consideration will be received by HDF Securityholders who have accepted the Offer. Furthermore, HDF Securityholders who accept the Offer will, in the meantime, lose the ability to deal with their HDF Stapled Securities or accept any potential higher competing offer (provided that FIRB has approved the Offer), except in certain limited circumstances.

Whilst APA has stated in the Bidder’s Statement that the conditions may be waived, APA is not able to waive condition (b) (namely FIRB approval).

When considering how these conditions might affect the prospects of success of the Offer, you should be aware of the following information:

Many of the conditions are wholly or partly out of HDF’s control . These conditions include 90% minimum acceptance, FIRB approval, ACCC approval, other regulatory clearances or compliances, decline of the S&P/ASX 200 Index to 3,800 or below for certain periods, there being no restraining orders issued by a public authority in connection with the Offer, no material adverse events and no material litigation totalling $5 million or more against HDF. These conditions also include a requirement that financiers and counterparties to financing arrangements and other material contracts do not seek to exercise any rights they have that arise as a result of the Offer. There is no certainty whether these conditions will be satisfied. HDF is not currently aware of any litigation, restraining orders or material adverse events which it considers would be likely to result in a breach of the applicable conditions above. HDF is not aware of any material contracts, other than the financing arrangements described below, where counterparties have any rights of this type arising as a result of the Offer.

• Many of the conditions seek to impose obligations on HDF to disclose specific information . These conditions include disclosure of change of control provisions in financing arrangements and material contracts (and confirmation that any rights held by financiers or third parties arising from the Offer have been waived), confirmation that the quantum of any prepayment fees or similar costs on debt facilities does not exceed $50 million, and updates on the status of the SWQP Stage 3 Expansion contractual milestones and on a material gas transportation agreement with AGL. To the extent that matters relating to change of control implications under financing arrangements and other contracts are material to HDF Securityholders, HDF has disclosed them in this Target’s Statement. In particular, Section 4.4 contains an overview of the material implications under Epic Energy’s financing arrangements. The arrangements described in that overview breach APA’s conditions. HDF does not know if APA will rely on this breach to allow its Offer to lapse. HDF is not in a position to speculate on, and makes no comment in respect of, the likely consequences if Epic Energy’s financings were to remain in place after the Offer becomes unconditional and APA subsequently wished to refinance some or all of Epic Energy’s finance at some point in the future. Accordingly, APA’s condition requiring disclosure of the amount of any prepayment costs or break fees will not be satisfied.

Other than these financing arrangements, HDF is not aware of any material contract or similar arrangement, to which a member of the HDF Group is a party, which allows another party to exercise rights such as termination, variation, or enforcement as a result of the Offer, or the acquisition of HDF Stapled Securities as a result of the Offer, or Hastings ceasing to be responsible entity of any of the managed investment schemes comprising HDF, or the identity of the responsible entity of any of those managed investment schemes otherwise changing.

HDF believes that its ASX announcement on 19 December 2011 (SWQP expansion update) satisfies Offer condition (n) (HDF announcement re contractual milestones) and Offer condition (o) (HDF announcement re commencement of AGL gas transportation agreement).

• Many of the conditions require HDF to take (or refrain from taking) various actions, where satisfying those conditions may not be in the interests of HDF Securityholders . These conditions include not entering into any new material transactions (such as acquisitions, disposals or new commitments such as capital expenditure, but subject to various exclusions that allow “ordinary course of business” transactions), not entering into any revised arrangements regarding remuneration or retirement benefits and ensuring that no “other occurrences” occur. Other than the potential refinancing of Epic Energy’s debt facilities, which is described in Section 5.4 of this Target’s Statement, and the performance fee accepted by Hastings in respect of the period ending 31 December 2011, which is described in the bullet point immediately below, HDF is not currently aware of any matters that have arisen since the Announcement Date, or which are reasonably likely to arise during the Offer Period, which are likely to breach these conditions.[(23)] However, HDF notes that it and Epic Energy make changes to the employment terms of their employees from time to time, including changes to redundancy and remuneration entitlements, in the normal course of their businesses. Although in some cases such changes may be regarded as “substantial” (the wording used in the Offer condition) in the context of an individual employee, HDF considers that the overall effect of the changes would be immaterial.

(22) Or, in the case of conditions (q)(1) to (q)(13), by the end of three Business Days after the end of the Offer Period.
(23) For completeness, HDF notes that the “other occurrences” (which HDF must not undertake) extend to the prevention of any member of the HDF Group resolving to reduce its capital. HDF interprets this restriction as not extending to periodic distributions to HDF Securityholders which may take the form of capital, nor to any other fund flows (in whatever form) through the HDF Group which may give rise to or facilitate such a distribution.

Page 36 Target’s Statement

Given the extent to which these conditions unduly restrict HDF’s activities over a potentially lengthy period, it is possible that by pursuing opportunities in the interests of HDF Securityholders one or more of these conditions could be breached in the future. For example, it may be unclear whether capital expenditure required to be incurred on various value-accretive expansion projects would fall within the “ordinary course of business” exceptions. There may also be other opportunities which HDF may wish to pursue during the Offer Period. HDF would make a decision to pursue any such opportunity, or take any other action, having regard to the best interests of HDF Securityholders, the fiduciary duties of Hastings and its directors, and the applicable policies of the Takeovers Panel.

• One condition also requires that Hastings must agree to reduce its entitlement to a performance fee for acting as the responsible entity of HDF, both in respect of the period ending 31 December 2011 and in subsequent periods while the Offer remains open or while APA has acquired a relevant interest in 50% or more of the HDF Stapled Securities. The condition also requires Hastings to take any such performance fee in the form of new HDF Stapled Securities (issued at a price of $2.56) rather than cash.

On 6 January 2012, Hastings announced its performance fee for the six month period ending 31 December 2011. The terms of the performance fee breach APA’s condition. HDF does not know whether APA will rely on this breach to allow its Offer to lapse. See Section 5.8 of this Target’s Statement for further detail.

4.4 Implications of the Offer for Epic Energy’s current financing arrangements

Epic Energy, which is 100% owned by HDF, has finance facilities with a total committed value of $1,233.5 million which were drawn to $1,189.2 million as at 31 December 2011. These facilities were renegotiated and expanded in 2009, when Epic Energy commenced the SWQP Stage 3 Expansion. Epic Energy’s senior finance is provided by a syndicate of twelve banks, and its mezzanine debt is provided by the Government of Singapore Investment Corporation. Epic Energy has also entered into a number of interest rate swap arrangements in relation to its interest payment obligations under the facilities which significantly reduce exposure to future interest rate fluctuations, and it is a party to a lease for equipment used by the Moomba to Adelaide Pipeline System. A letter of credit issued pursuant to the senior finance facility supports Epic Energy’s obligations under the lease.

The maturity dates of the various components of the facilities vary, and range from January 2013 to December 2019.

The terms of the facilities contain conditions, typical of limited recourse financings entered into around that time, and largely consistent across their components, which allow the lenders to demand early repayment in certain events, including if Hastings (or any of its affiliates or related bodies corporate) ceases to be the responsible entity of HDF Epic Trust, if HDF Epic Trust (or Hastings, its affiliates or related bodies corporate) cease to own at least 50.1% of Epic Energy, or if Epic Energy ceases to conduct all or a substantial part of its business or an event occurs which has, or is likely to have, a material adverse effect on the business, operations, property or financial condition of Epic Energy taken as a whole. It is very likely, if the Offer is successful, that one or more of these conditions will be triggered, and that – unless consents are obtained from all of the relevant lenders – Epic Energy may be obliged to repay some or all of its lenders shortly thereafter (potentially within 60 days of the relevant event occurring).

If the above conditions are triggered and early repayment is demanded, then – in addition to being required to repay the outstanding amount of principal and any accrued interest on the various components of the facilities – it is possible that certain additional payment obligations may arise. In particular, it is likely that Epic Energy would be required to ‘close out’ its interest rate swap positions. Due to falls in interest rates, many of those swaps were ‘out of the money’ as at December 2011, such that closing them out would be likely to crystallise a payment obligation (assuming interest rates remain at December 2011 levels) of approximately $101 million. However, as a result of closing out these swaps, the interest rates payable by Epic Energy under any replacement financing would – all other things being equal – be likely to be lower.

Similar change of control triggers to those set out above also apply under the equipment lease. However, the lease cannot be terminated if the applicable letter of credit is retained or replaced. If the letter of credit cannot be retained or satisfactorily replaced (the cost of which cannot be accurately estimated), an estimated net liability of approximately $21.5 million could be incurred as a result of the lease’s termination procedures, which are usual for a lease of this type.

HDF is not able to confirm whether Epic Energy’s lenders are likely to demand early repayment under the arrangements described above, nor is HDF able to confirm what (if any) costs or other terms the lenders might seek to impose as conditions of not demanding such a repayment.

HDF is also not in a position to speculate on, and makes no comment in respect of, the likely consequences of Epic Energy’s lenders not demanding early repayment under the arrangements described above and APA subsequently wishing to refinance some or all of Epic Energy’s finance at some point in the future.

Target’s Statement Page 37

4 Information about the Offer

In the First Supplementary Bidder’s Statement, APA describes the situations in which it may organise replacement financing for Epic Energy, if this is required as a result of the Offer, and if APA chooses to waive the relevant financing conditions of the Offer. However, HDF does not know:

whether APA will choose to waive the relevant financing conditions of the Offer;
whether, if necessary, APA will be in a position to, and will elect to, implement a refinance of Epic Energy’s debt facilities; and

• what the terms of any refinanced facility would be, and whether these might adversely impact APA’s financial position, prospects or future distributions.

HDF is not in a position to speculate on what the wider consequences to Epic Energy or HDF may be if APA is unable to refinance any of Epic Energy’s debt by the time it is required to be repaid. However it is likely that, in such an event, Epic Energy’s ability to continue to conduct its business in the ordinary course would be materially adversely affected.

Further details about Epic Energy’s facilities are provided in Section 6.5 of this Target’s Statement.

4.5 Consequences of APA acquiring less than 90% of HDF

The Offer is presently subject to a 90% minimum acceptance condition which, if fulfilled (and all the other conditions are fulfilled or freed), will entitle APA to compulsorily acquire all outstanding HDF Stapled Securities. APA has the right to free the Offer from the 90% minimum acceptance condition, although it has not yet indicated whether it will do so.

If APA frees the Offer from the 90% minimum acceptance condition and acquires more than 50% but less than 90% of the HDF Stapled Securities then, assuming all other conditions to the Offer are fulfilled or freed, APA will acquire a majority security holding in HDF. In such circumstances, HDF Securityholders who do not accept the Offer will be minority securityholders in HDF. This has a number of possible implications, including:

APA will be in a position to cast the majority of votes at a general meeting of one or more of the trusts comprising HDF. This will enable APA to control the appointment of a responsible entity of HDF. Any replacement responsible entity would continue to be subject to a duty to continue to act in the best interests of HDF Securityholders;
as described in Section 4.4 of this Target’s Statement, if Hastings (or any of its affiliates or related bodies corporate) ceases to be the responsible entity of HDF Epic Trust or certain other specified events described in that section occur as a result of the Offer, Epic Energy may be obliged to repay various debt facilities, potentially within 60 days of the relevant event occurring (unless the requisite consents are obtained from lenders). In the First Supplementary Bidder’s Statement, APA acknowledges that the replacement financing facilities it is trying to arrange and which in any case are not yet certain, would not be available if APA acquired less than 90% of HDF;
the liquidity of HDF Stapled Securities may be lower than at present, and there is a risk that HDF could be fully or partially removed from certain S&P/ASX market indices due to a lack of free float and/or liquidity; and
if the number of HDF Securityholders is less than that required by the ASX Listing Rules to maintain an ASX listing then APA has indicated in the Bidder’s Statement that it may seek to have HDF removed from the official list of the ASX.

In addition, if APA acquires 75% or more of the HDF Stapled Securities it will be able to pass a special resolution of HDF. This will enable APA to, among other things, change the HDF Constitutions.

If the Offer lapses, or if APA acquires less than 50% of HDF Stapled Securities and waives the 90% minimum acceptance condition, the trading price of HDF Stapled Securities may be higher or lower than the Offer price. If you remain an HDF Securityholder in this circumstance, you will continue to enjoy the risks and rewards of being an HDF Securityholder.

4.6 Treatment of Foreign Securityholders

Any HDF securityholder whose address (as recorded in the register of HDF Securityholders) is in a place outside Australia and its external territories or New Zealand is not entitled to be issued with APA Stapled Securities under the Offer.

Instead, the relevant APA Stapled Securities (that would otherwise be transferred to such Foreign Securityholders) will be allotted to a nominee approved by ASIC. The nominee will sell the APA Stapled Securities as soon as reasonably practicable after the end of the Offer Period in such a manner, at such a price and on such other terms and conditions as are determined by the nominee, and will distribute to each of those Foreign Securityholders their proportion of the proceeds of sale net of expenses.

See Section 9.5.3 of the Bidder’s Statement for further details.

Page 38 Target’s Statement

HDF profile

Target’s Statement Page 39

5 HDF Profile

5.1 Background information on HDF

HDF is focussed on energy infrastructure investment and aims to capitalise on the strong, long term growth profile of that industry. HDF has been listed on ASX since 13 December 2004 and is comprised of three stapled trusts:

HDF Epic Trust;
HDF Finance Trust; and
HDF Further Investments Trust.

The responsible entity and manager of HDF is Hastings, a subsidiary of Westpac Banking Corporation.

HDF’s strategy is to leverage its strong market position in Australia’s gas transmission network and capitalise on the role gas is expected to play in the growing domestic and international energy market.

5.2 Current business activities of HDF

The principal activity of each of the stapled trusts comprising HDF is as follows:

the principal activity of HDF Epic Trust is the management, operation and maintenance of its assets (gas transmission pipelines in South Australia, South West Queensland and Western Australia);
the principal activity of HDF Further Investments Trust is to facilitate further investments for the HDF Group, including energy infrastructure assets; and
the principal activity of HDF Finance Trust is to provide finance to the HDF Group.

HDF’s investment portfolio currently comprises 100% ownership of Epic Energy, one of Australia’s largest gas transmission companies.

Your Board and management team continue to pursue options to maximise value for HDF Securityholders. These include considering investment decisions, capital structuring efficiencies and management structure arrangements. Hastings is committed to maintaining a disciplined management approach.

Illustrative of HDF’s commitment to increasing the risk adjusted returns of HDF Securityholders is that prior to the announcement of the Offer, Epic Energy and HDF commenced a process to refinance Epic Energy’s debt facilities. HDF considers that Epic Energy is capable of implementing the refinancing and that improved operating cash flow benefits will result from the refinancing in the short and medium term. The refinance of Epic Energy’s debt is discussed in detail in Section 5.4 of this Target’s Statement.

5.3 Epic Energy

Epic Energy’s pipeline operations consist of three major, unregulated natural gas transmission pipeline systems. These pipelines are strategically well located, servicing major participants in the Australian gas and energy sectors. These pipelines currently serve South Australia, regional Queensland and the Pilbara region of Western Australia.

==> picture [483 x 225] intentionally omitted <==

Page 40 Target’s Statement

(a) South West Queensland Pipeline (SWQP)

Following completion of the QSN Link (which connected the SWQP to Moomba), the SWQP was extended to a length of 937 kilometres with a partly compressed capacity of approximately 180 TJ/day connecting Wallumbilla in Queensland to Moomba in South Australia. As of January 2012, the SWQP’s capacity has been increased to approximately 385 TJ/day following the completion of the SWQP Stage 3 Expansion. The SWQP has potential fully compressed capacity of circa 700 TJ/day.

The SWQP enables gas to be supplied from the coal seam gas fields of south east Queensland to power stations in regional Queensland and to the Mount Isa market, via third party pipelines, and through connections at Moomba into the Moomba to Sydney pipeline for on-shipping to New South Wales and through the MAPS to South Australian markets. Commencing in 2015, the SWQP will also have the capacity to supply gas from the Cooper Basin to Wallumbilla, from which it can be supplied into the burgeoning LNG industry at Gladstone.

==> picture [483 x 250] intentionally omitted <==

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

Townsville
0 150 300km
HDF pipeline Existing gas pipeline
Existing oil pipeline
Wallumbilla to Gladstone
Mount Isa
Gas Pipeline
Moranbah
BowenBowen
Ballera to Mount Isa BasinBasin
Gas Pipeline
Barcaldine Emerald Rockhampton
Gladstone
SWQP to Barcaldine
Key Statistics Gas Pipeline
Bundaberg
Length 937 km
Maryborough
Eromanga
Current Capacity c. 385 TJ/day EromangaBasinBasin QUEENSLAND Roma Roma to Brisbane
Gas Pipeline
Potential fully Wallumbilla
compressed capacity c. 700 TJ/day Cooper Ballera South West Queensland Surat BasinSurat Basin BRISBANE
Basin Pipeline
Source: HDF. Moomba Jackson Moonie
Ballera to Moomba
Raw Gas Pipeline Jackson to Moonie Oil Pipeline
Moonie to Brisbane
NEW SOUTH WALES Oil Pipeline
NORTHERN TERRITORY
SOUTH AUSTRALIA
----- End of picture text -----

(b) Moomba to Adelaide Pipeline System (MAPS)

The MAPS is a 1,184 kilometre pipeline (including laterals) with a current partly compressed capacity of approximately 240 TJ/day. Two major lateral pipes connect to the MAPS mainline, including the Port Pirie/Whyalla lateral and the Angaston lateral. MAPS has potential fully compressed capacity of circa 330 TJ/day.

The pipeline provides gas transmission to Adelaide and South Australian regional centres from the Cooper Basin production and processing facilities at Moomba, as well as the coal seam gas fields of south east Queensland via the SWQP.

==> picture [483 x 243] intentionally omitted <==

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

Ballera to Moomba
Raw Gas Pipeline Ballera
Whyalla Moomba to Cooper Basin
Lateral Port Bonython Jackson
Moomba
Liquids Pipeline
QUEENSLAND
Coober Pedy
NEW SOUTH WALES
Moomba to Adelaide
Pipeline System
Moomba
to Sydney
Gas Pipeline
Key Statistics
Port
Length (incl. laterals) 1,184 km Whyalla Pirie Whyte-Yarcowie SEA Gas Pipeline
Current Capacity c. 240 TJ/day Burra
Berri
Potential fully Wasleys Mildura
compressed capacity c. 330 TJ/day HDF pipeline Port Lincoln Angaston
ADELAIDE
Source: HDF. Murray Bridge
Existing gas pipeline
South East
Existing oil pipeline Angaston Lateral Gas Pipeline
SOUTH AUSTRALIA
----- End of picture text -----

Target’s Statement Page 41

5 HDF Profile

(c) Pilbara Pipeline System (PPS)

The PPS comprises four connected pipelines with a mainline uncompressed capacity of approximately 180 TJ/day. The backbone of the system is the Pilbara Energy Pipeline, a 219 kilometre pipeline that runs from a connection point on the Burrup Extension Pipeline, outside Karratha, to the Pilbara Energy Pipeline’s terminal point outside Port Hedland, where it connects to the power units that comprise the Port Hedland power station and separately to the Port Hedland to Telfer gas pipeline.

The 24 kilometre Burrup Extension Pipeline connects Woodside’s North West Shelf processing plant at Dampier to the Pilbara Energy Pipeline outside Karratha. The 80 kilometre Wodgina Lateral connects Pilbara Energy Pipeline to the Talison tantalum mine at Wodgina. The new five kilometre Horizon Lateral connects the Burrup Extension Pipeline with the new Horizon Energy power station at Karratha.

==> picture [483 x 243] intentionally omitted <==

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

HDF pipeline Port Hedland
Burrup Extension to Telfer Gas Line
Pipeline
Existing gas pipeline North West Shelf
Carnarvon Burrup Port Hedland
Peninsula
Existing oil pipeline Basin
Cape Lambert
Dampier
Barrow Island BHPB HBI plant
Karratha
Wodgina
Compressor Station 1 (CS1)
Tubridgi Onslow Pilbara Energy
Key Statistics Gas Facility Pipeline
Length (incl. laterals) 328 km Exmouth Wodgina
Lateral
Current uncompressed
capacity c. 180 TJ/day CS2
WESTERN AUSTRALIA
Source: HDF.
Goldfields Gas Pipeline
Newman
0 150 300km Dampier to Bunbury
Natural Gas Pipeline
----- End of picture text -----

5.4 Potential refinance of Epic Energy’s debt facilities

Epic Energy has for some time been considering its most efficient long term capital structure and assessing options to refinance its debt to match its long term, contracted revenue profile. HDF and Epic Energy consider this course of action to be prudent and commercially advantageous given the undesirability of seeking to refinance debt closer to maturity and the structural benefits that may be obtained from revised finance terms due to the forecast contracted revenue growth arising from successful delivery of projects such as the SWQP Stage 3 Expansion.

For this reason, Epic Energy and HDF had, in October 2011, prior to the announcement of the Offer, commenced a process to refinance Epic Energy’s debt facilities. While such a refinance remains subject to uncertainties, and is not yet committed, HDF reasonably considers that, on the basis of engagement with potential financers to date, Epic Energy is capable of implementing a new funding framework that supports its short and medium term revenue growth prospects, provides the flexibility to realise organic growth opportunities as they arise and has the potential to improve operating cash flow in the short and medium term. HDF will keep the market updated of developments in regard to any proposed refinance.

As at 31 December 2011, HDF had consolidated gearing of 45.0%. HDF has significant cash reserves and does not have any refinancing requirements prior to January 2013.

Page 42 Target’s Statement

5.5 Hastings’ role as manager and responsible entity of HDF

HDF Securityholders benefit from Hastings’ 17 years’ experience in managing investments in infrastructure assets. Hastings was established in 1994 and is a leading Australian manager of infrastructure equity and alternative debt with over $6.3 billion in funds under management as at 30 September 2011. Hastings is a subsidiary of Westpac Banking Corporation, one of Australia’s largest banks by market capitalisation.

Hastings actively manages investments made by HDF. Hastings appoints two directors to the Epic Energy board.

Hastings provides the following key services to HDF:

Fund corporate governance, including the provision of the Board of Directors of Hastings, the chief executive officer, employees and ASX listing management and compliance;
Strategic development including asset acquisitions and divestments;
Investor relations and a range of other corporate head office functions; and
Financial management and administration (including debt and equity funding management).

~~Examples of key strategic initiatives undertaken by Hastings to enhance HDF Securityholder value since inception:~~
2004
Epic Energy acquired and restructured
2005
Mid Kent Water acquired
2006
South East Water acquired
2007
Merger of Mid Kent Water and South East Water
2007
Major construction of QSN Link
2007
Long term contracts for the expansion of the SWQP
2009
HDF circa $250 million equity rights issue
2009
Epic Energy circa $1 billion debt re-financing
2010
South East Water was sold at a premium to the average broker valuation at the time(24)
2011
Completion of the SWQP Stage 3 Expansion

Hastings receives a management fee of 1% of HDF’s market capitalisation per year. In order to further align Hastings’ interest with those of HDF Securityholders, Hastings is also entitled to a performance fee in situations where the total return on HDF exceeds the return on the S&P/ASX 200 Industrials Accumulation Index after taking into account any prior period of under performance. Further details about HDF’s fee structure are set out in Section 5.8 of this Target’s Statement.

5.6 HDF corporate history

HDF listed on the ASX in December 2004 after Hastings identified the long term value potential of the gas transmission assets now owned by HDF and acquired them out of a failed corporate structure. These assets were reconstituted and underwent a process of redevelopment with the support of Hastings, during which time active risk management was undertaken to mitigate business risk and lay the foundations for long term value generation for HDF Securityholders. Since then, Hastings has maintained a focused and disciplined approach to further investment in order to enhance HDF Securityholder value.

Consistent with its mandated objective to invest in a range of utility infrastructure assets within Australia and overseas, HDF sought to grow by diversifying into water utility assets in the UK through two investments, Mid Kent Water and South East Water, which were acquired in 2005 and 2006 respectively. These assets were successfully merged into a single entity in 2007 in the pursuit of efficiency and enhanced HDF Securityholder returns. Also during this period, a strategic expansion of the SWQP was identified, funded and completed which resulted in the connection of Queensland to the rest of the eastern Australia gas transmission network, resulting in a significantly enhanced market position for HDF.

In the face of significant market volatility and financial risk during the 2009 global financial crisis, HDF was recapitalised to return it to a stable and financially secure structure. The recapitalisation also provided equity capital for the pursuit of an additional opportunity to increase HDF Securityholder value, being the SWQP Stage 3 Expansion. Despite a challenging financial and economic environment, more than $1 billion of senior debt and mezzanine debt was raised to facilitate this opportunity. The SWQP Stage 3 Expansion was recently completed (subject to final administrative sign-off processes that are expected to occur in 2012) and will provide an opportunity for HDF Securityholders to benefit from strong revenue growth in the short term and beyond.

(24) Average broker valuation for South East Water calculated using the most recently disclosed value of HDF’s interest in South East Water provided by 7 brokers, which are dated between 19 February 2010 and 24 December 2010. These broker reports provide a value range of $0.26 per HDF Stapled Security to $0.39 per HDF Stapled Security compared to transaction proceeds of $0.40 per HDF Stapled Security.

Target’s Statement Page 43

5 HDF Profile

Most recently in 2010, a review of opportunities and the strategic direction of HDF was undertaken, with the key findings that HDF would focus on energy infrastructure to capitalise on the attractive long term growth profile of that sector. Consistent with the findings of the strategic review, HDF successfully sold its UK water investments, achieving a sale price that represented a premium to average broker valuations at the time[(25)] despite the sale occurring in a challenging economic environment.

Since its IPO, HDF has raised approximately $800 million[(26)] in equity. HDF has invested significantly in order to expand its natural gas transmission network, including the recently completed SWQP Stage 3 Expansion that will deliver strong contracted revenue growth in the short term and beyond. During this time, Hastings has maintained a disciplined approach to decision-making, resulting in HDF Securityholder returns that have consistently outperformed its benchmark index. HDF currently enjoys a stable financial position and is well placed to capitalise on the positive outlook for the energy infrastructure sector.

5.7 Financial returns of HDF Securityholders

The HDF structure has delivered a track record of out-performance for HDF Securityholders.

An assessment by Mercer of total returns (since inception and up until the announcement of the Offer) to HDF Securityholders that have taken up all HDF Stapled Securities made available to them by HDF shows a material outperformance by HDF against its performance benchmark, the S&P/ASX 200 Industrials Accumulation Index. This assessment shows that HDF Securityholder’s total return under this methodology was 9.78% per annum, a significant premium to the index return of 4.50% per annum.

Under the same assessment, an investor in APA that took up all the APA Stapled Securities made available to them by APA over the same period would have received a total return of 5.69% per annum, compared to the index return of 5.59% per annum.

These figures differ from those presented on page 11 of the Bidder’s Statement because of the assumption that investors fully participated in HDF’s 2009 and APA’s 2006 entitlement offers respectively, whereas it is HDF’s understanding that the methodology in the Bidder’s Statement assumes investors did not participate in the entitlement offers.

	~~HDF, APA and S&P/ASX 200 Industrials Accumulation Index returns since HDF IPO in December 2004~~(1) S&P/ASX 200 Industrials S&P/ASX 200 Industrials HDF Accumulation Index APA Accumulation Index Return 9.78% 4.50% 5.69% 5.59%

Source: Mercer.

Notes:

Since HDF completed its strategic review in 2010 which refocused its strategy to concentrate on energy infrastructure investments and up until the announcement of the Offer, HDF has generated total securityholder returns of 47% compared to APA at 38% and the S&P/ASX 200 Accumulation Index at 2%.[(27)]

(25) Average broker valuation for South East Water calculated using the most recently disclosed value of HDF’s interest in South East Water provided by 7 brokers, which are dated between 19 February 2010 and 24 December 2010. These broker reports provide a value range of $0.26 per HDF Stapled Security to $0.39 per HDF Stapled Security compared to transaction proceeds of $0.40 per HDF Stapled Security.

(26) Excludes the $110 million proceeds raised upon the issue of Trust-issued Adjustable Preferred Securities by the TAPS Trust, proceeds from the HDF distribution reinvestment plans and securities issued in connection with the HDF management and performance fees.

(27) Total securityholder return calculation assumes an investor reinvested each distribution in the applicable securities at the closing price on the distribution date. Index returns are the same over this time period with and without equity offering participation as neither HDF nor APA conducted any entitlement offers during this timeframe.

Page 44 Target’s Statement

5.8 Management and performance fees

(a) Fee structure

Hastings receives a management fee each year of 1% of HDF’s market capitalisation. In addition, Hastings is entitled to receive a performance fee where the total securityholder return on HDF exceeds the return on the S&P/ASX 200 Industrials Accumulation Index. The performance fee is calculated and payable six monthly and reflects 20% of the out-performance of the HDF Stapled Security price against the index, after taking into account any prior period of underperformance.

(b) Performance fee for six months ended 31 December 2011

For the six month period ended 31 December 2011, a review of HDF’s performance by Mercer showed that the total return that securityholders who participated in all rights and reinvestment opportunities would have achieved, had been 34.25% since a performance fee last became payable as at 30 June 2011. This compared favourably to the benchmark index that forms the basis of HDF’s performance fee calculation.

Further, HDF achieved above average returns for the period to 31 December 2011 against key market indicators, with HDF’s market capitalisation rising from $876 million to $1,087 million. Together with distributions paid to HDF Securityholders in the same period, securityholder value increased by $266 million.

As a result of HDF’s strong performance, for the six month period ended 31 December 2011, Hastings was entitled to a performance fee of $54,107,593, excluding GST and after taking into account any prior period underperformance and any resultant carried forward losses.

Hastings elected to receive $30,724,044 of the amount payable in cash and deferred its decision regarding the payment of the balance of the performance fee in view of the Offer by APA. Hastings believes it is appropriate to defer its decision regarding the payment of $23,383,549, being the portion of the performance fee which Hastings calculated as having accrued since the Offer was announced on 14 December 2011.

An independent valuer, Grant Thornton Corporate Finance Pty Ltd, has reviewed the performance fee for the period ending 31 December 2011 and, in its opinion, the performance fee was calculated in accordance with the product disclosure statement dated December 2004 and the HDF Constitutions.

5.9 Risk factors

In considering HDF and the Offer, HDF Securityholders should be aware of the risks relating to HDF, its business and assets. These risks include those specific to the industry in which HDF operates and general economic conditions, which may affect the future operating and financial performance of HDF. Many of the risks are outside the control of HDF and the Directors, and there can be no certainty that HDF’s objectives or anticipated outcomes will be achieved. These risks have been previously disclosed by HDF. However, set out below is a list of some of the risks that may affect HDF’s objectives or prospects, or any cash flow available for distribution. The list of possible risks noted below is not intended to be exhaustive, and there may be other risks that may have a material adverse affect on HDF’s business which it is not aware of. HDF Securityholders should read this Target’s Statement in its entirety and carefully consider it in light of their own personal circumstances.

Regulatory risks: HDF’s pipeline assets are not currently subject to economic regulation and are free to set their tariffs in a competitive market. Should tariffs be subject to economic regulation, or any changes to the regulatory environment be implemented by any government or regulatory authority, then this may have adverse implications for HDF’s operating and/or financial performance.
Key personnel risks: HDF is dependent upon the expertise of its management and employees for the successful operation of its assets. The loss of key employees and in-house skills and knowledge may adversely impact its operational performance.
Interest rate and financing margin risks: HDF’s debt facilities are currently substantially hedged and interest rates fixed. However, adverse movements in interest rates or financing margins, or the reduced availability of capital, may negatively impact HDF’s financial performance, particularly if these occurrences coincide with the timing of HDF’s future refinancing requirements.
Counterparty risks: HDF is party to a number of long term contracts for the generation of revenue. To the extent that counterparties do not satisfy their obligations to HDF under these agreements, HDF’s financial performance may be adversely affected.
Operating risks: HDF’s gas pipeline operations are subject to operational risks and hazards typically associated with such operations. HDF’s business and financial performance is dependent upon the continued safe operation of its assets and associated infrastructure. Any deterioration of this infrastructure may adversely impact HDF’s operating and financial performance.
Disputes and litigation: HDF may be subject to legal claims, disputes or litigation in the future made by or against HDF with its customers, suppliers or other third parties.
Industrial relations risks: HDF maintains positive relations with its workforce and to date has not been negatively impacted by industrial actions or work stoppages during the course of operations. However, industrial action by employees in future industrial relations actions may adversely impact operating or financial performance.

Target’s Statement Page 45

HDF Profile

Gas contract risks: HDF has individually tailored contracts with a number of counterparties. There are risks inherent within each contract and there is a risk that contracts may not be renewed or capacity recontracted which may adversely impact HDF’s revenue. As discussed in Section 6.4 of this Target’s Statement, HDF’s revenue forecasts assume contracted revenues are received and do not assume any recontracting or renewal.
Gas demand risk: HDF’s capacity to establish and influence new and renewed GTAs with other parties is dependent on demand (and any reductions, replacements and efficiencies realised in demand) for natural gas by direct and indirect industrial, commercial and residential consumers. Gas demand is in part impacted by the availability of substitute energy resources and consumption of gas in HDF’s markets. The ability of HDF’s customers to enter into gas “swap” arrangements (whereby customers “swap” gas at delivery points via contracts) may also affect demand for gas, possibly resulting in lower demand for natural gas and adversely impacting HDF’s financial performance.
Gas supply risk: HDF’s ability to establish new contracts and renew existing contracts is partially dependent on the availability and location of competitively priced gas, relative to the position of its pipelines. Supply is affected by both the level and type of extraction at producing basins, as well as suppliers making gas available for transmission. The availability of competitively priced gas supplies are outside the control of HDF, therefore any unforeseen shortages in the availability of gas could adversely impact HDF’s revenues and financial performance.
Pipeline bypass risk: The construction and operation of new pipelines which seek to serve the same markets as HDF may hinder HDF’s ability to establish new contracts or renew existing contracts with customers and could lead to bypass of HDF’s pipelines. HDF’s ability to achieve satisfactory contract terms (eg. price) may also be impacted by new competing gas transmission pipelines which may adversely impact HDF’s financial performance. Note however that, opportunities for HDF could arise due to the new construction of a pipeline if previously non-existing gas demand is stimulated.
Debt refinancing risk: HDF is exposed to risks relating to the refinancing of its existing debt instruments and facilities. It may be difficult for HDF to refinance all or some of these instruments and facilities as they reach their maturity dates. Further, if some or all of these instruments and facilities are refinanced, they may be on less favourable terms than is currently the case.
Foreign exchange risk: HDF acquires goods and services such as capital equipment in foreign denominated currencies and from companies outside Australia. The impact of such exchange rate risk cannot be predicted reliably. HDF manages its exchange rate risks to minimise any adverse effect on its financial position and performance. HDF’s foreign exchange hedging policy permits the use of, and HDF does use, derivative instruments such as forwards, swaps, currency options and foreign currency borrowings as hedges of foreign currency. HDF may have residual exposure, which may have a material adverse effect on HDF’s future financial performance and position.
Continued access to credit markets: Developments in global financial markets may adversely affect the liquidity of global credit markets. This may result in an increase in the cost of funding and in some cases a reduction in the availability of some funding sources throughout global markets, including Australia. Access to credit markets on less favourable terms will affect HDF’s ability to refinance existing facilities on maturity and to fund its operations, undertake future projects, develop new business initiatives or respond to competitive pressures, and this may have a material adverse effect on HDF’s future financial performance and position.
Capital expenditure: The business carried on by HDF is capital intensive. HDF’s operating and financial performance will be partly reliant on HDF’s ability to effectively manage significant capital projects within required budgets and timeframes and on sufficient funding being available for the capital expenditure requirements of the business, including the maintenance and replacement of equipment to meet operational requirements. Capital expenditure requirements may impact HDF’s cash flow available to service financing obligations and make distributions.
Licences and permits: Epic Energy has a number of licences and permits which it is required to maintain in order to continue to operate its assets. There is a risk that they may be lost in future, having the effect that service cannot be provided.
General equity market investment risk: There are general risks associated with an investment in securities markets. Such risks may affect the value of the HDF Stapled Securities. The trading price of the HDF Stapled Securities may rise above or fall below the Offer price, depending on the financial position and operating performance of HDF.
The trading price of the HDF Stapled Securities may also fluctuate with movements in equity capital markets in Australia and overseas. Such movements may be caused by, amongst other things, the economic conditions in Australia and overseas, investor sentiment in the local and international stock markets, consumer sentiment, changes in fiscal, monetary, regulatory and other government policies, global political and economic stability, interest and inflation rates and foreign exchange rates.

There is no guarantee that the HDF Stapled Securities will trade at or above the Offer price. Investors should note that the past performance of the HDF Stapled Securities on ASX provides no guidance as to the future performance of the HDF Stapled Securities on ASX.

Page 46 Target’s Statement

Taxation risk: Changes in tax law (including in goods and services taxes and stamp duties) or changes in the way taxation laws are interpreted in the various jurisdictions in which HDF operates may impact the future tax liabilities of HDF. Under current income tax legislation, HDF is generally not liable for Australian income tax, including capital gains tax, provided HDF distributes all of its income. Should the actions or activities of HDF or its controlled entities cause HDF to fall within the operative provisions of Division 6B or 6C of the Income Tax Assessment Act 1936 (Cth), HDF may be taxed on its net income at a rate which is currently the equivalent to the corporate income tax rate of 30%.
Environmental risk: National and local environmental laws and regulations may affect HDF’s operations. Standards are set by these laws and regulations regarding certain aspects of health and environmental quality, and they provide for penalties and other liabilities if such standards are breached, and establish, in certain circumstances, obligations to remediate and rehabilitate current and former facilities and locations where operations are, or were, conducted. HDF incurs costs to comply with these environmental laws and regulations and in respect of violation of them, and changes to such laws and regulations, including changes to operating licence conditions, could result in penalties and other liabilities, which may have a material adverse effect on HDF’s future financial performance and position.
Occupational health and safety risk: HDF’s employees undertake a range of operational and administrative tasks. Any failure by HDF to safely conduct its operations or otherwise to comply with the necessary occupational health and safety requirements across the jurisdictions HDF operates in could result in death or injury to personnel, contractors and/or members of the public, criminal prosecution, fines, penalties and compensation for damages as well as reputational damage to HDF, which may have a material adverse effect on HDF’s future financial performance and position.

Target’s Statement Page 47

Financial information and related matters

Page 48 Target’s Statement

6.1 Introduction

This section contains certain financial information of HDF which comprises pro forma historical summarised income statements for years ended 31 December 2008, 2009, 2010 and 2011 (the Pro Forma Historical Financial Information ).

The Pro Forma Historical Financial Information (set out in Section 6.2 of this Target’s Statement) has been reviewed by PricewaterhouseCoopers Securities Ltd, as set out in the Investigating Accountant’s Report in Attachment 2. HDF Securityholders should note the scope and limitations of the Investigating Accountant’s Report. The Pro Forma Historical Financial Information in Section 6.2 of this Target’s Statement has been prepared in accordance with the recognition and measurement principles prescribed by Australian Accounting Standards and other mandatory professional reporting requirements in Australia and the accounting policies adopted by HDF (as disclosed in the HDF annual report available from the Hastings website, www.hfm.com.au/hdf, or from the ASX’s website, www.asx.com.au). The Pro Forma Historical Financial Information is presented in an abbreviated form and does not contain all of the disclosures required by Australian Accounting Standards in an annual financial report prepared in accordance with the Corporations Act.

For the purposes of preparing consolidated financial statements for HDF, AASB Interpretation 1002 applies for which HDF Epic Trust is identified as the parent entity.

(a) Basis of preparation of Pro Forma Historical Financial Information

The pro forma summarised income statements for years ended 31 December 2008, 2009 and 2010 have been derived from HDF Epic Trust’s audited consolidated financial statements for years ended 31 December 2008, 2009 (as restated) and 2010 respectively comprising HDF Epic Trust, HDF Finance Trust and HDF Further Investments Trust (together “HDF”).

The audited consolidated financial statements for 31 December 2009 were restated to reflect amendments to the fair valuation mark to market of derivative securities. The restatement is reflected in the comparative information contained in HDF Epic Trust’s annual consolidated financial statements for the year ended 31 December 2010. HDF Epic Trust’s annual consolidated financial statements for years ended 31 December 2008, 2009 (as restated) and 2010 were audited by PricewaterhouseCoopers in accordance with Australian Auditing Standards. The audit opinions issued to HDF Epic Trust in relation to these financial statements were unqualified.

The pro forma summarised income statement for the year ended 31 December 2011 is based on the actual results of HDF for the 6 months to 30 June 2011 derived from the reviewed consolidated financial statements for the six month period ended 30 June 2011, and the unaudited management accounts of HDF for the six month period ending 31 December 2011. The Pro Forma Historical Financial Information has been prepared by the Directors. In preparing the Pro Forma Historical Financial Information, adjustments (as set out in Section 6.3 of this Target’s Statement) were made to the audited results of HDF Epic Trust to reflect HDF’s current operations.

On 20 December 2010, HDF sold its 38.7% economic interest in South East Water. The Pro Forma Historical Financial Information illustrates the historical performance of HDF as if the sale was effective on 31 December 2007. No adjustment for notional interest income or alternate investment of the sale proceeds has been included. Up until 31 December 2010, TAPS Trust was a subsidiary of HDF Finance Trust. TAPS Trust was established for the purpose of financing water acquisitions including South East Water. The Pro Forma Historical Financial Information illustrates the historical performance of HDF excluding TAPS Trust.

The pro forma income statements do not purport to represent the actual financial performance that would have occurred had HDF sold its interest in South East Water on that date or established the associated TAPS Trust, principally because HDF may have employed an alternate strategy and been exposed to different financial and business risks had it disposed of its interest in South East Water earlier.

Target’s Statement Page 49

6 Financial information and related matters

6.2 Income statements

HDF’s pro forma summarised income statements for years ended 31 December 2008, 2009, 2010 and 2011 are set out in the table below.

A reconciliation of the pro forma summarised income statements to reported income statements for the years ended 31 December 2008, 2009 and 2010 and the unaudited income statement for the year ended 31 December 2011 is provided in Section 6.3 of this Target’s Statement.

Pro forma summarised income statements

~~Pro forma summarised income statements~~
	Pro forma	Pro forma	Pro forma	Pro forma
Financial year ended 31 December ($ million)	2008	2009	2010	2011(6)
Revenue	95.5	119.6	135.0	143.4
Operating expenses(1)	(33.6)	(36.6)	(44.8)	(45.7)
EBITDA	61.9	83.0	90.2	97.7
Depreciation & amortisation	(16.4)	(20.2)	(21.9)	(21.9)
EBIT	45.5	62.8	68.3	75.8
Net finance costs(7)	(14.5)	(25.0)	(25.2)	(21.7)
Operating profit/(loss) before income tax and specified items	31.0	37.8	43.1	54.1
Specified items:
Responsible entity performance fees(3)	(18.4)	–	(22.4)	(33.9)
Responsible entity performance fees deferred(3)	–	–	–	(23.4)
Unrealised gains/(loss) on Warrants(4)	–	–	(19.5)	(16.7)
Other(5)	–	–	1.1	–
Operating profit/(loss) before income tax	12.6	37.8	2.3	(19.9)
Income tax (expense)/benefit	(5.6)	(5.6)	(10.7)	(11.2)
Pro forma operating profit/(loss) after income tax(2)	7.0	32.2	(8.4)	(31.1)

Source: HDF.

Notes:

(1) Includes Hastings management fee.
(2) Pro forma operating profit/(loss) after income tax is presented before distributions attributable to HDF Securityholders.
(3) Hastings is entitled to a performance fee in situations where the total return on HDF Stapled Securities exceeds the return on the S&P/ASX 200 Industrials Accumulation Index. Hastings was entitled to performance fees in 2008 and 2010. A performance fee of $57.3 million (inclusive of non-recoverable GST) has been recognised for the year ended 31 December 2011, consisting of $2.4 million for the six months ended 30 June 2011 and $54.9 million for the six months ended 31 December 2011. Hastings has determined that $31.5 million of the 31 December 2011 performance fee be paid in cash and has deferred its decision regarding the payment of the balance of $23.4 million in view of the Offer. Refer to Section 5.8 for further detail.
(4) A warrant deed (effective from 5 February 2010) was entered into by HDF Responsible Entity in conjunction with a mezzanine loan note subscription agreement entered into by Epic Australia Pty Limited ( Warrant Deed ). Under the Warrant Deed, the counterparty qualifies for a sharing mechanism via the potential for an additional payment from HDF for two tranches of HDF price linked cash settled ‘warrants’ issued by HDF (the Warrants ). The Warrants will become exercisable in accordance with the terms of the Warrant Deed from the technical completion of the SWQP Stage 3 Expansion (which is expected to occur in 2012) until 5 February 2017. The movement in the fair value of the Warrant liability was $19.5 million for year ended 31 December 2010 and $16.7 million for the year ended 31 December 2011. A +/- 1 cent movement in the 30 day VWAP HDF Stapled Security price leading up to a warrant call date results in a +/- $486,223 movement in the unrealised liability value of the Warrants.
(5) The pro forma adjustments for the year ended 31 December 2010 include the following items which net to a gain of $1.1 million:
HDF finalised a lease transaction with a shipper resulting in the partial disposal of the Burrup extension pipeline and the recognition of a finance lease on HDF’s statement of financial position. A gain of $10.4 million was recognised.
HDF recognised an impairment of $9.3 million in the carrying value of certain equipment comprising the Pilbara Energy Pipeline end of line facilities.
(6) The pro forma summarised income statement for the year ended 31 December 2011 is based on the actual results of HDF for the 6 months to 30 June 2011 derived from the financial statements for the half year ended 30 June 2011 and the unaudited consolidated management accounts of HDF Epic Trust for the six month period ending 31 December 2011.

(7) Net finance costs do not include interest costs which are directly related to capital expenditure programs which have been capitalised to the balance sheet in accordance with applicable accounting standard AASB 116. Capitalised interest in these years was $5.4 million, $1.2 million, $64.8 million and $100.8 million for the years ended 31 December 2008, 2009, 2010 and 2011 respectively. Upon technical completion of the SWQP Stage 3 Expansion, which is expected to occur in 2012, interest costs will be recognised in the income statement in accordance with applicable accounting standards.

Page 50 Target’s Statement

6.3 Reconciliation of pro forma historic income statements to historical income statements

A reconciliation of HDF’s pro forma operating profit/(loss) after income tax to HDF’s reported operating profit/(loss) after income tax for years ended 31 December 2008, 2009 and 2010 and HDF’s unaudited operating profit/(loss) for the year ended 31 December 2011 is set out in the table below.

~~Reconciliation of pro forma historic income statement to reported income statement (2008–2010)~~
~~and unaudited income statement (2011)~~
Financial year ended 31 December ($ million)
2008
2009
2010
2011
Pro forma operating profit/(loss) after income tax(1)
7.0
32.2
(8.4)
(31.1)
Profit/(loss) after income tax attributable to investment
in South East Water(2)
(6.8)
(53.8)
(22.4)
1.0
Profit/(loss) after income tax attributable to TAPS Trust(3)
(12.0)
(7.0)
(6.2)
–
Reported/unaudited operating profit/(loss) after income tax(4)
(11.8)
(28.6)
(37.0)
(30.1)

Source: HDF.

Notes:

(1) Operating profit/(loss) after income tax is presented before distributions and the increase or decrease in net assets attributable to HDF Securityholders.

(2) The pro forma adjustment removes income items relating to the investment in South East Water of $0.1 million, $(51.6) million (as restated in the 31 December 2010 financial statements) and $(23.7) million for years ended 31 December 2008, 2009 and 2010 respectively (as disclosed in the segment information note to the HDF financial statements), plus further South East Water related items including interest and gains/(losses) on derivatives securities, borrowing costs, gains/(losses) on British pound sterling denominated bank accounts and investment expenses.

(3) The pro forma adjustment removes the TAPS Trust related items after tax for the years ended 31 December 2008, 2009 and 2010, as disclosed in the TAPS Trust financial statements (adjusted for any inter-entity transactions with HDF).

(4) Extracted from HDF Epic Trust’s audited consolidated financial statements for the years ended 31 December 2008, 31 December 2009 (as restated in the 31 December 2010 financial statements) and 31 December 2010 and HDF Epic Trust’s unaudited consolidated management accounts for the year ended 31 December 2011.

Target’s Statement Page 51

6 Financial information and related matters

6.4 Forecast contracted revenue

(a) Overview

HDF is currently positioned to realise the benefit of its completed expansion projects and material new gas supply contracts which will significantly increase the contracted revenue profile of its pipelines in the short term and beyond. Contracted annual pipeline revenue is expected to increase over the period FY2012 to FY2015 at a compound average annual growth rate of 10.4% per annum.

This forecast contracted revenue growth is driven by the following:

The commencement of gas flows in January 2012 on the recently completed SWQP Stage 3 Expansion;[(28)]
The Easternhaul GTA with Santos commencing in 2015; and
The recently announced $460 million take or pay contract on the SWQP over a period of up to 15 years commencing in 2015.

These expansions will extend HDF’s track record of strong pipeline revenue growth, which has seen pipeline revenue increase at a compound average growth rate of 14.5% per annum over the period FY2008 to FY2011. In total, HDF has contracted for in excess of $4 billion of revenue to be earned over the next 23 years. HDF reasonably expects to earn further revenues in excess of these amounts which were not contracted as at 31 December 2011 but are considered highly probable of arising in the future.

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HDF historical and forecast contracted revenue ($ million)
300 Historical actual revenues Forecast contracted revenues
250
200
150
100
50
0
2008 2009 2010 2011 2012 2013 2014 2015
Source: HDF.
Notes:
CAGR 14.5%
CAGR 10.4%
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(1) Historical revenue includes contracted, intermittent and lease revenue. Historical revenue for year ended 31 December 2011 is based on the unaudited consolidated management accounts of HDF Epic Trust.
(2) Forecast revenues include only those future revenues contracted to be earned under agreements in place as at 31 December 2011. Forecast contracted revenues have been prepared on the basis of the assumptions noted in Section 6.4 of this Target’s Statement.
(3) Includes Easternhaul revenue as contracted from 1 January 2015.

Forecast revenues in the above chart depict HDF’s current contracted revenue. Revenues are only one of many factors affecting the amount of cash flow that may be available for distribution to HDF Securityholders. Cash flow available for distribution is also affected by factors such as interest rate costs and the ability to refinance in the future. You should refer to Section 5.9 of this Target’s Statement for further discussion of risks that may affect HDF’s objectives or prospects, or any cash flow available for distribution.

(28) Subject to final administrative sign off processes that are expected to occur in 2012.

Page 52 Target’s Statement

(b) Basis of preparation

The forecast contracted revenue has been prepared by the Directors based on an assessment of present economic and operating conditions and a number of best estimate assumptions regarding future events and actions as set out below. This information is intended to assist HDF Securityholders in assessing the reasonableness and likelihood of the assumptions occurring, and is not intended to be a representation that the assumptions will occur.

The Directors believe the best estimate assumptions, when taken as a whole, to be reasonable at the time of preparing this Target’s Statement.

HDF Securityholders are advised to review the key best estimate assumptions set out below, and in conjunction with the risks set out in Section 5.9, inflation sensitivity analysis set out in this Section 6.4 and other information in the Target’s Statement.

In preparing the forecast contracted revenue for the years ended 31 December 2012 to 31 December 2015, the Directors have made the following key best estimate assumptions.

(c) Specific assumptions

Revenue forecasts reflect existing contracts in place as at 31 December 2011. Revenues are earned according to contracted gas transportation tariffs, third party services agreements and lease agreements.
Revenue forecasts reflect the impact of average annual increases in the Consumer Price Index of 2.5% per annum over the forecast period, taking into account the basis for tariff escalation set out in the various revenue contracts.
Revenue forecasts exclude estimates of non-contracted revenues and the potential revenue impact of contract renewals that may occur after 31 December 2011.
Revenue forecasts exclude new gas transportation agreements that are considered highly probable to be entered into after 31 December 2011.

(d) General assumptions

The Directors have also made the following general assumptions for the forecasts in addition to those outlined above:

No material industrial, contractual, competitive or political disturbances impacting HDF or the supply or demand for gas, and the continuity of its operations; and
No cancellation, annulment or default of material operating or revenue contracts by HDF, Epic Energy or their contractual counterparties. It should be noted that each GTA entered into is a bespoke agreement and typically has termination provisions, which do not normally include force majeure as a termination event. Accordingly, there is a risk that a GTA could be terminated in accordance with the provisions of the agreement. However, based upon HDF’s historical dealings, the Directors consider this to be a low risk.

(e) Inflation sensitivity

Financial forecasts may be sensitive to variations in a number of key assumptions. Many of HDF’s revenue contracts include provisions that allow for the indexation of revenue tariffs based on indices such as the Consumer Price Index. The table below highlights the impact of variation in underlying inflation trends on forecasts of contracted revenue for the period FY2012 to FY2015. As demonstrated, any significant increase (decrease) in inflation would result in only a marginal increase (decrease) in contracted revenues in the forecast periods.

Contracted revenue inflation sensitivity

			Impact on contracted	revenue forecasts
			Inflation+1%	Inflation-1%
Financial year ending	31	December	($ million)	($ million)
2012			1.4	(1.4)
2013			3.4	(3.3)
2014			5.1	(5.0)
2015			9.1	(8.9)

Source: HDF

Target’s Statement Page 53

6 Financial information and related matters

6.5 Capital structure

HDF has significant cash reserves and does not have any refinancing requirements prior to January 2013. Your Directors continue to seek the most efficient capital structure and financing solutions to match the long term, contracted revenue profile of HDF’s assets.

As noted in Section 5.4 of this Target’s Statement, prior to the announcement of the Offer, Epic Energy and HDF had commenced a process to refinance Epic Energy’s debt facilities. This potential refinancing is reasonably expected to result in the early repayment of the debt facilities in advance of their maturity dates, the earliest of which arises in January 2013 (refer table below). HDF reasonably considers that, on the basis of engagement with potential financers to date, Epic Energy is capable of implementing a new funding framework that, once in place, has the potential to improve operating cash flow in the short term.

	~~HDF capital structure as at 31 December 2011~~ HDF capitalisation Value ($m) Total debt drawn 1,189.2 Group cash(1) 299.8 Net debt 889.4 Market capitalisation(2) 1,086.5 Enterprise value(3) 1,975.9 HDF gearing (%)(4) 45.0%

Source: Unaudited HDF Epic Trust consolidated management accounts as at 31 December 2011.

Notes:

(1) Unaudited HDF consolidated cash balance as at 31 December 2011 before payment of material accrued liabilities as at 31 December 2011 including Hastings’ 2011 quarter 4 management fees ($2.6 million), HDF’s 2011 quarter 4 distribution ($13.3 million), Hastings’ performance fee (pre GST) to be taken in cash ($30.7 million) and the liability recognised in relation to the fair value of the Warrants ($36.2 million).

(2) Based on HDF closing price of $2.05 per security at 30 December 2011.

(3) Enterprise value defined as net debt plus market capitalisation.

(4) Gearing is defined as net debt/(net debt + market capitalisation), where market capitalisation is HDF’s closing market capitalisation as at 31 December 2011. If material accrued liabilities as listed in note 1 above were to be subtracted from the cash balance of $299.8 million, this would result in an HDF gearing (%) of 47.2%. If this calculation was based on the market capitalisation based on the 5 day VWAP on 13 December 2011 after deducting material accrued liabilities as listed in note 1, this would equate to a gearing of 51.2%.

The following table summarises HDF’s debt facilities as at 31 December 2011. HDF’s debt facilities are held by Epic Energy and there is currently no fund level external debt in place.

~~HDF debt facilities as at 31 December 2011~~
Committed
Debt drawn
($m)
($m)
Ranking
Maturity
Term facility
333.0
333.0
Senior
Jan 2013
Revolving facility
63.3
34.0
Senior
Jan 2013
SWQP Stage 3 Expansion facility
560.0
545.0
Senior
Jan 2014/2015
Lease facility
51.1
51.1
Senior
Various to 2019
Total senior debt facilities
1,007.4
963.1
Mezzanine debt facility(1)
226.1
226.1
Subordinated
Dec 2019
Total debt facilities
1,233.5
1,189.2
Debt
Debt covenant
HDF credit metrics as at 30 September 2011
Metric
covenant
headroom
Epic Energy senior debt to book asset ratio(2)
56.0%
65% (default)
9.0%
Epic Energy senior debt service cover ratio(3)
3.27x
1.20x (default)
2.07x

Source: HDF.

Notes:

(1) $226.1 million includes capitalised interest on mezzanine debt facility.

(2) Senior debt to book asset ratio represents the ratio of total tangible assets to total senior borrowings, as defined within the various financing agreements.

(3) Senior debt service coverage ratio represents, for the relevant 12 month period, the ratio of cash available for debt service to debt service obligations on senior debt facilities, as defined within various financing agreements.

Page 54 Target’s Statement

Taxation consequences

Target’s Statement Page 55

7 Taxation consequences

The Directors 15 January 2012 Hastings Funds Management Limited as responsible entity for

HDUF Epic Trust Level 27 35 Collins Street Melbourne VIC 3000

HDUF Finance Trust Level 27 35 Collins Street Melbourne VIC 3000

HDUF Further Investments Trust Level 27 35 Collins Street Melbourne VIC 3000

Dear Directors

Summary of tax consequences for HDF Securityholders

We have been instructed by HDF to prepare a tax summary for inclusion in the Target’s Statement dated on or about the date of this letter in relation to the proposed acquisition of all the HDF Stapled Securities by APA under the Offer.

Greenwoods & Freehills Pty Limited has given its consent to the inclusion of this letter in the Target’s Statement. Freehills has provided the stamp duty advice and has given its consent to being named in this letter.

Unless defined in this summary or the context indicates otherwise, all capitalised terms in this summary have the same meaning as those contained in the Target’s Statement.

Scope

This summary is a general statement of the Australian income tax, CGT, goods and services tax ( “GST” ) and stamp duty implications in connection with the Offer for HDF Securityholders that are Australian tax residents who hold their HDF Stapled Securities on capital account. It does not apply to HDF Securityholders who hold their HDF Stapled Securities as revenue assets or as trading stock.

The summary is based on the Australian tax law and administrative practice currently in force as at the date of this letter. It is necessarily general in nature and is not intended to be definitive tax advice. Accordingly, each HDF Securityholder should seek their own tax advice that is specific to their particular circumstances.

The representatives of Greenwoods & Freehills Pty Limited involved in preparing this summary are not licensed to provide financial product advice in relation to dealing in securities. HDF Securityholders should consider seeking advice from a suitably qualified

101 Collins Street Melbourne Vic 3000 Australia GPO Box 396 Melbourne Vic 3001 Australia Liability limited by a scheme approved under Professional Standards Legislation

Telephone +61 3 9288 1881 Facsimile +61 3 9288 1828 www.gf.com.au DX 240 Melbourne Greenwoods & Freehills Pty Limited ABN 60 003 146 852

Page 56 Target’s Statement

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Australian Financial Services Licence holder before making any decision in relation to the
Offer. HDF Securityholders should also note that taxation is only one of the matters that
may need to be considered when making a decision in respect of their HDF Stapled
Securities.
2 Taxation on disposal of HDF Stapled Securities
2.1 No CGT rollover relief
The Bidder’s Statement and the First Supplementary Bidder’s Statement expressly state
that HDF Securityholders who accept the Offer ( “Participating Securityholders” ) will
not be eligible to claim CGT rollover relief. As a result, the taxation consequences for
Participating Securityholders will be as follows.
2.2 CGT consequences
If the conditions of the Offer are satisfied, Participating Securityholders will dispose of
each of their HDF Stapled Securities in exchange for 0.326 APA Stapled Securities and
cash of $0.475. [1] The disposal will constitute a CGT event.
Each HDF Stapled Security consists of one unit in each of HDUF Epic Trust, HDUF
Finance Trust and HDUF Further Investments Trust. Accordingly, each Participating
Securityholder will make 3 separate disposals for CGT purposes and 3 separate CGT
calculations will be required. In undertaking these calculations, Participating
Securityholders will be required to calculate the cost base or reduced cost base and the
capital proceeds attributable to their units in each trust (as explained in paragraphs 2.3
and 2.4).
Participating Securityholders will, in respect of their units in each of HDUF Epic Trust,
HDUF Finance Trust and HDUF Further Investments Trust, make:
 a capital gain if the capital proceeds received for their units are greater than the
cost base of those units; or
 a capital loss if the reduced cost base of their units is greater than the capital
proceeds received for those units.
Capital gains and capital losses of a Participating Securityholder in an income year from
all sources will be aggregated to determine whether there is a net capital gain or net
capital loss for that income year.
A net capital gain for the income year is included in the Participating Securityholder’s
assessable income and is subject to income tax at the Participating Securityholder’s
applicable tax rate. A net capital loss for the income year cannot be deducted against a
Participating Securityholder’s other assessable income for tax purposes, but may be
carried forward to be offset against capital gains derived in future income years.
Specific capital loss carry forward rules apply to Participating Securityholders that are
companies.
2.3 Cost base and reduced cost base
In broad terms, the cost base and reduced cost base of a Participating Securityholder’s
HDF Stapled Securities will equal:
 the amount that the Participating Securityholder paid (or gave as consideration)
to acquire the HDF Stapled Securities (including certain incidental costs of
acquisition, holding and disposal); less
 the tax deferred component of any distributions received from HDF whilst the
Participating Securityholder held their HDF Stapled Securities. [2]
1 As noted in the First Supplementary Bidder’s Statement, the value of the Offer will be reduced by 2.5 cents as a result of
the HDF interim distribution announced on 19 December 2011. To effect this reduction in the value of the Offer, APA will
either reduce the cash component of the Offer or the number of APA Stapled Securities to be issued. We have assumed for
the purposes of this letter that the cash component of the Offer will be reduced from $0.50 to $0.475.
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Target’s Statement Page 57

7 Taxation consequences

Historically, distributions made by HDF to HDF Securityholders have comprised a significant tax deferred component. Participating Securityholders must therefore take such tax deferred distributions into account when determining the tax consequences of accepting the Offer. Further information on historical tax deferred distributions can be found on the HDF website (http://www.hfm.com.au/funds/hduf/). Participating Securityholders will be required to apportion the cost base or reduced cost base of their HDF Stapled Securities between their units in each of HDUF Epic Trust, HDUF Finance Trust and HDUF Further Investments Trust. The Commissioner of Taxation will generally accept an apportionment that has been done on a reasonable basis. However, Participating Securityholders will need to make their own decision regarding the reasonable basis they will apply in their own particular circumstances. 2.4 Capital proceeds The capital proceeds received by the Participating Securityholders for their HDF Stapled Securities should be the market value of the APA Stapled Securities received on the date of disposal plus the cash consideration received. The Participating Securityholder will be required to apportion the capital proceeds received between their units in each of HDUF Epic Trust, HDUF Finance Trust and HDUF Further Investments Trust on a reasonable basis. As noted above, Participating Securityholders will need to make their own decision regarding the reasonable basis they will apply in their own particular circumstances. 2.5 CGT discount Individuals, complying superannuation entities or trustees who have held the HDF Stapled Securities for more than 12 months at the date of disposal (see below) should generally be entitled to discount the amount of a capital gain that arises upon disposal (after the application of any current year or carry forward capital losses). For Participating Securityholders, the date of disposal of the HDF Stapled Securities for these purposes will be the date the contract to dispose of the HDF Stapled Securities is formed. If the Offer is accepted before the FIRB Condition is satisfied, the date the contract to dispose of the HDF Stapled Securities is formed will be the date that FIRB approval is granted. If, on the other hand, the Offer is accepted after the FIRB Condition is satisfied, the date the contract to dispose of the HDF Stapled Securities is formed will be the date that the Offer is accepted. The date of disposal for those HDF Securityholders whose HDF Stapled Securities are compulsorily acquired in accordance with Part 6A.1 of the Corporations Act will be the date that APA becomes the owner of the HDF Stapled Securities. The amount of the discount is 50% in the case of individuals and trustees and 33⅓% for complying superannuation entities. This is referred to as the “CGT discount”. The CGT discount is not available for Participating Securityholders that are companies. Where the Participating Securityholder is a trustee of a trust, the CGT discount may flow through to the beneficiaries in that trust, other than beneficiaries that are companies. Participating Securityholders that are trustees should seek specific advice regarding the tax consequences of distributions to beneficiaries attributable to discount capital gains. For the avoidance of doubt and as explained below in paragraph 3, Participating Securityholders will be obliged to hold their APA Stapled Securities for a further 12 months from the date of receiving the APA Stapled Securities (not including the date of acquisition or disposal) before being eligible to claim the CGT discount on any further capital gains that may arise.

2 If a Participating Securityholder has received tax deferred distributions in respect of their units in any of HDUF Epic Trust, HDUF Finance Trust and HDUF Further Investments Trust that equal or exceed the cost base of their units in the relevant trust, then the cost base of those units will have been reduced to nil (but not below nil).

page 3

Page 58 Target’s Statement

2.6 CGT worked examples

The following table provides worked examples of the CGT consequences for Participating Securityholders in differing circumstances. The table has been prepared based on financial information provided by HDF and the CGT consequences are set out for indicative purposes only. For the avoidance of doubt, the table assumes that the Participating Securityholders are Australian residents for tax purposes and that the Participating Securityholders hold their HDF Stapled Securities on capital account.

CGT Example

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Example Hold Indicative Example APA Assumed CGT CGT Post-tax cash
participating period acquisition cost implied marginal discount liability [5] consideration [6]
HDF (months) price base [1] Offer tax rate [3]
Securityholder price [2]
Resident >12 $2.60 $1.44 $1.95 47.5% Yes $0.12 $0.35
----- End of picture text -----

HDF Securityholder (months) Resident >12	HDF Securityholder (months) Resident >12	price $2.60	base1 $1.44	Offer price2 $1.95	tax rate3 47.5%	Yes	$0.12	$0.35
individual – 13
December 20044
Resident	>12	$0.35	$0.06	$1.95	47.5%	Yes	$0.45	$0.03
individual – 9
March 2009
Resident	<12	$1.47	$1.42	$1.95	47.5%	No	$0.25	$0.22
individual – 9
August 2011
Resident	>12	$2.60	$1.44	$1.95	15.0%	Yes	$0.05	$0.42
complying
superfund – 13 December 20044
Resident	>12	$0.35	$0.06	$1.95	15.0%	Yes	$0.19	$0.29
complying
superfund – 9
March 2009
Resident	<12	$1.47	$1.42	$1.95	15.0%	No	$0.08	$0.40
complying
superfund – 9
August 2011
Resident	>12	$2.60	$1.44	$1.95	30.0%	No	$0.15	$0.32
company – 13 December 20044
Resident	>12	$0.35	$0.06	$1.95	30.0%	No	$0.57	($0.09)
company – 9
March 2009
Resident	<12	$1.47	$1.42	$1.95	30.0%	No	$0.16	$0.32
company – 9
August 2011
	Note 1For ease of understanding, the example cost base represents the aggregated cost base of the units in
	HDUF Epic Trust, HDUF Finance Trust and HDUF			Further Investments Trust. The example			cost base includes
	an adjustment for the 2011 distributions that are expected to				be 100% tax deferred. This is consistent with
	HDF’s 2010 distribution being 100% tax deferred. In addition				we have been instructed that it is in accordance
	with HDF’s reasonable expectations. We have been advised				that HDF will confirm this treatment prior to the
	close of the Offer and will keep HDF Securityholders informed if HDF’s expectations change.
	Note 2Under the CGT rules, the capital proceeds received in respect of the HDF Stapled Securities will be the
	market value of the APA Stapled Securities on the			date of disposal and the cash component of the Offer. For
	the purposes of this table the assumed total capital proceeds in respect of each					HDF Stapled Security is $1.95.
	Note 3The assumed marginal tax rate for resident			individuals is the top marginal tax rate on the date of this
	letter plus the Medicare levy of 1.5% and the maximum Temporary Flood and Cyclone Reconstruction Levy of
	1%.

Note 4 This row outlines the CGT consequences for participating HDF Securityholders who participated in the HDF IPO. It demonstrates the CGT consequences in relation to the HDF Stapled Securities they acquired under the IPO. Different CGT consequences may apply for other HDF Stapled Securities they have acquired since the IPO (for example, under the HDF Distribution Reinvestment Plan).

page 4

Target’s Statement Page 59

7 Taxation consequences

Note 5 The CGT liability has been calculated on the assumption that the participating HDF Securityholder has not incurred any capital losses in the income year and does not have any capital losses or tax losses carried forward from previous income years.

Note 6 As noted in the First Supplementary Bidder’s Statement, the value of the Offer will be reduced by 2.5 cents as a result of the HDF interim distribution announced on 19 December 2011. To effect this reduction in the value of the Offer, APA will either reduce the cash component of the Offer or the number of APA Stapled Securities to be issued. The post-tax cash consideration in this table has been calculated on the basis that the cash component of the Offer will be reduced from $0.50 to $0.475.

As noted above, this table is for indicative purposes only and HDF Securityholders should seek their own personal, independent financial and taxation advice before making a decision as to whether or not to accept the Offer.

In accordance with the above CGT examples, it may be the case that the CGT liability that arises upon acceptance of the Offer is a significant proportion of, or in the case of corporate investors that acquired securities at certain levels, in excess of the cash component of the Offer. If this is the case, those corporate HDF Securityholders will need to fund part of their CGT liability from independent cash resources. 3 Taxation of APA Stapled Securities

Participating Securityholders will receive APA Stapled Securities as part of the consideration under the Offer. The cost base and reduced cost base of the Participating Securityholder’s APA Stapled Securities should equal the market value of the HDF Stapled Securities disposed of under the Offer that are reasonably attributable to the APA Stapled Securities received. The cost base of any APA Stapled Securities received will be the market value of all of the HDF Stapled Securities disposed of under the Offer less the cash consideration received. That is, contrary to paragraph 2 of section 7 of the Bidder’s Statement, HDF Securityholders should be aware that the cost base of the APA Stapled Securities received will not equal the market value of the HDF Stapled Securities disposed of under the Offer (as apportioned on a reasonable basis).

As each APA Stapled Security consists of one unit in each of APT Pipeline Trust and APT Investment Trust, a Participating Securityholder will be required to apportion the cost base or reduced cost base of their APA Stapled Security between their units in each of APT Pipeline Trust and APT Investment Trust on a reasonable basis.

For the purposes of determining a Participating Securityholder’s eligibility for the CGT discount on any future disposals of the APA Stapled Securities received under the Offer, the APA Stapled Securities will be treated as being acquired on the day of disposal of the HDF Stapled Securities. That is, the period during which a Participating Securityholder has held their HDF Stapled Securities will not be taken into account for the purposes of applying the CGT discount on disposal of their APA Stapled Securities.

The PricewaterhouseCoopers letter in section 7 of the Bidder’s Statement contains a discussion of the taxation treatment of distributions in respect of APA Stapled Securities. We are not in a position to comment on the taxation treatment of those distributions. Participating Securityholders should have regard to the PricewaterhouseCoopers letter and should seek specific advice regarding the tax consequences of those distributions. 4 Tax losses of HDF

We have been instructed that carried forward tax losses currently exist within the HDF structure. HDF has instructed us that these losses have arisen due to deductible costs being incurred during the construction and early operation phases of the underlying assets and that the losses are currently available to shelter income during the income producing phases of the projects.

The utilisation of these losses in future periods is dependent on the satisfaction of certain legislative tests. In the event that the Offer is successful it will trigger a change of underlying ownership of HDF which may impact the availability of these losses or result in restrictions being imposed on their rate of utilisation.

page 5

Page 60 Target’s Statement

5 GST

In the event that the Offer is successful , GST should not generally be payable in respect of the disposal of HDF Stapled Securities and the issue of APA Stapled Securities under the Offer.

6 Stamp duty

In the event that the Offer is successful , stamp duty will be payable by APA in relation to the acquisition of HDF Stapled Securities under the Offer. APA has provided an estimate of this transaction cost in section 11.4 of the Bidder’s Statement.

However, stamp duty will not be payable by the Participating Securityholders in respect of the Offer.

7 Taxation of HDF Stapled Securities

In the event that the Offer is unsuccessful , the Offer should not cause the taxation treatment of the HDF Stapled Securities to change.

The HDF website (http://www.hfm.com.au/funds/hduf/) contains information regarding the taxation treatment of distributions made by HDF on HDF Stapled Securities.

Yours faithfully

GREENWOODS & FREEHILLS PTY LIMITED

per:

Richard Buchanan Director Greenwoods & Freehills +61 3 9288 1903 +61 448 039 192 [email protected]

Toby Eggleston Director Greenwoods & Freehills

+61 3 9288 1454 +61 413 151 183 [email protected]

page 6

Target’s Statement Page 61

Additional information

Page 62 Target’s Statement

8.1 Directors of HDF Responsible Entity

As at the date of this Target’s Statement, the Directors of the HDF Responsible Entity are:

~~Name~~
~~Position~~
Alan Cameron AO
Chairman,
Non-executive Director
and Independent
Andrew Day
Chief Executive,
Executive Director
(Not Independent)
James Evans
Non-executive Director
and Independent
Liam Forde
Non-executive Director
and Independent
Stephen Gibbs
Non-executive Director
and Independent
James McDonald
Non-executive Director
and Independent
Victoria Poole
Non-executive Director
(Not Independent)

Source: HDF.

8.2 Directors’ recommendation

In considering whether to accept the Offer, your Directors encourage you to:

read the whole of this Target’s Statement, the Bidder’s Statement and the First Supplementary Bidder’s Statement;
have regard to your individual risk profile, portfolio strategy, tax position and financial circumstances; and
obtain financial advice from your broker or financial adviser on the Offer and obtain taxation advice on the effect of accepting the Offer.

8.3 Your Directors’ reasons for their recommendation

The reasons for your Directors’ recommendations are set out in Section 1 of this Target’s Statement.

8.4 Interests and dealings in HDF Stapled Securities

(a) Interests in HDF Stapled Securities

As at the date of this Target’s Statement, no Director had a relevant interest in any HDF Stapled Securities, other than James McDonald who has a relevant interest in 20,000 HDF Stapled Securities.

(b) Dealings in HDF Stapled Securities

No Director has acquired or disposed of a relevant interest in any HDF Stapled Securities in the 4 month period ending on the date immediately before the date of this Target’s Statement.

(c) Intentions of your Directors in relation to the Offer

James McDonald is the only Director of the HDF Responsible Entity who has a relevant interest in HDF Stapled Securities and he presently intends to REJECT the Offer in relation to those HDF Stapled Securities.

8.5 Interests and dealings in APA Stapled Securities

(a) Interests in APA Stapled Securities

As at the date immediately before the date of this Target’s Statement, no Director had a relevant interest in any APA Stapled Securities, other than James McDonald who has a relevant interest in 43,276 APA Stapled Securities.

(b) Dealings in APA Stapled Securities

No Director acquired or disposed of a relevant interest in any APA Stapled Securities in the 4 month period ending on the date immediately before the date of this Target’s Statement, other than James McDonald, who, via a related superannuation fund, was issued APA Stapled Securities under APA’s distribution reinvestment plan in September 2011.

8.6 Benefits and agreements

(a) Benefits in connection with retirement from office

As a result of the Offer, no person has been or will be given any benefit (other than a benefit which can be given without member approval under the Corporations Act) in connection with the retirement of that person, or someone else, from a board or managerial office of the HDF Responsible Entity.

(b) Agreements connected with or conditional on the Offer

There are no agreements made between any Director of the HDF Responsible Entity and any other person in connection with, or conditional upon, the outcome of the Offer other than in their capacity as a holder of HDF Stapled Securities.

Target’s Statement Page 63

8 Additional information

(c) Benefits from APA

None of the Directors has agreed to receive, or is entitled to receive, any benefit from APA which is conditional on, or is related to, the Offer, other than in their capacity as a holder of HDF Stapled Securities as outlined in Section 8.4(a) of this Target’s Statement.

(d) Material interests of Directors in contracts with APA

None of the Directors has any interest in any contract entered into by APA, other than as a securityholder or option holder in APA.

8.7 Material litigation

HDF does not believe that it is involved in any litigation or dispute which is material in the context of HDF and HDF Group taken as a whole.

If the Offer Period is extended by a period before the time by which the Notice of Status of Conditions is to be given, the date for giving the Notice of Status of Conditions will be taken to be postponed for the same period. In the event of such an extension, the Bidder is required, as soon as practicable after the extension, to give a notice to the ASX and HDF that states the new date for the giving of the Notice of Status of Conditions.

If a condition is fulfilled (so that the Offer becomes free of that condition) during the Offer Period but before the date on which the Notice of Status of Conditions is required to be given, the Bidder must, as soon as practicable, give the ASX and HDF a notice that states that the particular condition has been fulfilled.

As at 13 January 2012, the Bidder had not given notice that any of the conditions had been fulfilled.

8.11 Offer Period

8.8 Issued capital

As at 13 January 2012, being the last practicable date prior to lodgement of this Target’s Statement, HDF’s issued capital consisted of 530,001,072 HDF Stapled Securities.

8.9 Substantial holders

As at 13 January 2012, being the last practicable date prior to lodgement of this Target’s Statement, the following persons are substantial holders of HDF Stapled Securities as disclosed pursuant to substantial holding notices provided to ASX:

	~~Number~~ ~~Percentage~~ ~~of HDF~~ ~~of HDF~~ ~~Stapled~~ ~~Stapled~~ ~~HDF Securityholder~~ ~~Securities~~ ~~Securities~~ APA 109,767,286 20.71% Orbis Investment Management (Australia) Pty Ltd and its related bodies corporate 57,082,092 11.01% BT Investment Management Limited, Westpac Banking Corporation and their associates 47,472,494 8.97%

Unless the Offer is extended or withdrawn, it is open for acceptance from 3 January 2012 until 7.00 pm (Sydney time) on 31 March 2012.

The circumstances in which the Bidder may extend or withdraw the Offer are set out in Section 8.12 and Section 8.13 respectively of this Target’s Statement.

8.12 Extension of the Offer Period

The Bidder may extend the Offer Period at any time before giving the Notice of Status of Conditions (referred to in Section 8.10 in this Target’s Statement) while the Offer is subject to conditions. However, if the Offer is unconditional (that is, all the conditions are fulfilled or freed), the Bidder may extend the Offer Period at any time before the end of the Offer Period.

In addition, there will be an automatic extension of the Offer Period if, within the last 7 days of the Offer Period:

the Bidder improves the consideration offered under the Offer; or
the Bidder’s voting power in HDF increases to more than 50%.

If either of these 2 events occurs, the Offer Period is automatically extended so that it ends 14 days after the relevant event occurs.

Source: HDF.

8.13 Withdrawal of Offer

8.10 Notice of Status of Conditions

Section 9.6.6 of the Bidder’s Statement indicates that the Bidder will give a Notice of Status of Conditions to the ASX and HDF on 23 March 2012.

The Bidder may not withdraw the Offer if you have already accepted it. Before you accept the Offer, the Bidder may withdraw the Offer with the written consent of ASIC and subject to the conditions (if any) specified in such consent.

The Bidder is required to set out in its Notice of Status of Conditions:

whether the Offer is free of any or all of the conditions;
whether, so far as the Bidder knows, any of the conditions have been fulfilled; and
APA’s voting power in HDF.

Page 64 Target’s Statement

8.14 Effect of acceptance

If you accept the Offer, then, unless withdrawal rights are available (see Section 8.15 of this Target’s Statement below) and you exercise these rights, you will give up your right to sell HDF Stapled Securities on market or to any other person that may make a takeover bid, or deal with them in any manner, provided that FIRB has approved the Offer.

The effect of acceptance of the Offer is set out in Section 9.7 of the Bidder’s Statement. HDF Securityholders should read these provisions in full to understand the effect that acceptance will have on their ability to exercise the Rights attaching to their HDF Stapled Securities and the representations and warranties which they give by accepting the Offer.

In particular, HDF Securityholders should note that on the Offer, or any contract resulting from the acceptance of the Offer, becoming unconditional, APA will be entitled to attend meetings of HDF and vote on their behalf in respect of their HDF Stapled Securities in order to defeat resolutions relating to competing offers which may adversely affect the success of the Offer.

8.15 Your ability to withdraw your acceptance

You only have limited rights to withdraw your acceptance of the Offer.

You may only withdraw your acceptance of the Offer if:

the Bidder’s FIRB Condition has not, at the time of your purported withdrawal, been fulfilled; or
the Bidder varies the Offer in a way that postpones, for more than one month, the time when the Bidder needs to meet its obligations under the Offer. This will occur if the Bidder extends the Offer Period by more than one month and the Offer is still subject to conditions.

8.16 When you will receive your consideration if you accept the Offer

You will be issued your consideration on or before the later of:

one month after the date the Offer becomes or is declared unconditional; and
one month after the date you accept the Offer if the Offer is, at the time of acceptance, unconditional,

but, in any event (assuming the Offer becomes or is declared unconditional), no later than 21 days after the end of the Offer Period.

However, there are certain exceptions to the above timetable for the issuing of consideration. Full details of when you will be issued your consideration are set out in Section 9.5 of the Bidder’s Statement.

8.17 Effect of an improvement in consideration on HDF Securityholders who have already accepted the Offer

If the Bidder improves the consideration offered under its takeover bid, all HDF Securityholders, whether or not they have accepted the Offer before that improvement in consideration, will be entitled to the benefit of that improved consideration.

8.18 Lapse of Offer

The Offer will lapse if the Offer conditions are not freed or fulfilled by the end of the Offer Period; in which case, all contracts resulting from acceptance of the Offer and all acceptances that have not resulted in binding contracts are void. In that situation, you will be free to deal with your HDF Stapled Securities as you see fit.

8.19 Compulsory acquisition

(a) Compulsory acquisition following takeover

The Bidder has indicated in Section 5.2 of its Bidder’s Statement that if it satisfies the required thresholds it intends to compulsorily acquire any outstanding HDF Stapled Securities.

The Bidder will be entitled to compulsorily acquire any HDF Stapled Securities in respect of which it has not received an acceptance of its Offer on the same terms as the Offer if, during or at the end of the Offer Period, the Bidder and its associates have a relevant interest in at least 90% (by number) of the HDF Stapled Securities.

If this threshold is met, the Bidder will have one month after the end of the Offer Period within which to give compulsory acquisition notices to HDF Securityholders who have not accepted the Offer. HDF Securityholders have statutory rights to challenge the compulsory acquisition, but a successful challenge will require the relevant HDF Securityholder to establish to the satisfaction of a court that the terms of the Offer do not represent ‘fair value’ for their HDF Stapled Securities. If compulsory acquisition occurs, HDF Securityholders who have their HDF Stapled Securities compulsorily acquired are likely to be issued their consideration approximately 5 to 6 weeks after the compulsory acquisition notices are dispatched to them.

(b) Later compulsory acquisition by 90% holder

Even if the Bidder does not satisfy the compulsory acquisition threshold, it is possible that the Bidder will, at some time after the end of the Offer Period, become the beneficial holder of 90% of the HDF Stapled Securities. The Bidder would then have rights to compulsorily acquire HDF Stapled Securities not owned by it within 6 months of becoming the holder of 90% of HDF Stapled Securities. The Bidder’s offered price for compulsory acquisition under this procedure would have to be considered in a report of an independent expert.

Target’s Statement Page 65

8 Additional information

8.20 Consents

This Target’s Statement contains statements made by, or statements said to be based on statements made by, Freehills (legal adviser to HDF in relation to the Offer), J.P. Morgan Australia Limited ( J.P. Morgan ) and Royal Bank of Canada ( RBC Capital Markets ) (financial advisers to HDF in relation to the Offer), Computershare Investor Services Pty Limited ( Computershare ) (HDF’s share registrar), Greenwoods & Freehills Pty Ltd ( Greenwoods & Freehills ) (tax adviser to HDF in relation to the Offer), PricewaterhouseCoopers Securities Ltd (the investigating accountant in relation to the Offer), PricewaterhouseCoopers (HDF’s auditor), Mercer (Australia) Pty Ltd ( Mercer ) and Grant Thornton Corporate Finance Pty Ltd ( Grant Thornton ). Freehills, J.P. Morgan, RBC Capital Markets, Greenwoods & Freehills, Computershare, PricewaterhouseCoopers Securities Ltd, PricewaterhouseCoopers, Mercer and Grant Thornton have each consented to being named in this Target’s Statement in the form and context in which each is named, but should not be regarded as authorising the issue of this Target’s Statement or any statements in it.

As permitted by ASIC Class Order 01/1543 this Target’s Statement contains statements which are made, or based on statements made, in documents lodged by APA with ASIC or given to the ASX, or announced on the Company Announcements Platform of the ASX, by APA. Pursuant to the Class Order, the consent of APA is not required for the inclusion of such statements in this Target’s Statement. Any HDF Securityholder who would like to receive a copy of any of those documents may obtain a copy (free of charge) during the Offer Period by contacting the HDF Information Line on 1800 815 610 (for calls made from within Australia) or +61 2 8256 3357 (for calls made from outside Australia). (Any telephone calls to these numbers will, as required by the Corporations Act, be tape recorded, indexed and stored.)

As permitted by ASIC Class Order 03/635, this Target’s Statement may include or be accompanied by certain statements:

fairly representing a statement by an official person; or
from a public official document or a published book, journal or comparable publication.

In addition, as permitted by ASIC Class Order 07/429, this Target’s Statement contains security price trading data sourced from IRESS and Bloomberg without their consent.

8.22 No other material information

This Target’s Statement is required to include all the information that HDF Securityholders and their professional advisers would reasonably require to make an informed assessment whether to accept the Offer, but:

only to the extent to which it is reasonable for investors and their professional advisers to expect to find this information in this Target’s Statement; and
only if the information is known to any Director.

The Directors are of the opinion that the information that HDF Securityholders and their professional advisers would reasonably require to make an informed assessment whether to accept the Offer is:

the information contained in the Bidder’s Statement and First Supplementary Bidder’s Statement (to the extent that the information is not inconsistent or superseded by information in this Target’s Statement);
the information contained in HDF’s releases to the ASX, and in the documents lodged by HDF with ASIC before the date of this Target’s Statement; and
the information contained in this Target’s Statement.

The Directors have assumed, for the purposes of preparing this Target’s Statement, that the information in the Bidder’s Statement and First Supplementary Bidder’s Statement is accurate (unless they have expressly indicated otherwise in this Target’s Statement, in particular in Section 1 of this Target’s Statement). However, the Directors do not take any responsibility for the contents of the Bidder’s Statement and First Supplementary Bidder’s Statement and are not to be taken as endorsing, in any way, any or all statements contained in them. References to APA information in this Target’s Statement have been extracted from the Bidder’s Statement and First Supplementary Bidder’s Statement unless otherwise stated.

In deciding what information should be included in this Target’s Statement, the Directors have had regard to:

the nature of the HDF Stapled Securities;
the matters that HDF Securityholders may reasonably be expected to know in relation to HDF, APA and the Offer;
the fact that certain matters may reasonably be expected to be known to HDF Securityholders’ professional advisers; and
the time available to HDF to prepare this Target’s Statement.

8.21 ASIC declaration

On 4 January 2012, ASIC granted HDF a modification of items 11 and 12 of section 633(1) of the Corporations Act in connection with the Offer. The effect of this modification was that this Target’s Statement was able to be despatched no later than 23 January 2012, rather than 18 January 2012 as would otherwise have been required.

A copy of the instrument from ASIC giving effect to the modification is attached as Attachment 3 to this Target’s Statement.

Page 66 Target’s Statement

Glossary and interpretation

Target’s Statement Page 67

9 Glossary and interpretation

9.1 Glossary

The meanings of the terms used in this Target’s Statement are set out below.

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Term Meaning
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$, A$ or AUD	Australian dollar.
ACCC	Australian Competition and Consumer Commission.
AER	Australian EnergyRegulator.
AGL	AGL EnergyLimited(ABN 74 115 061 375).
Announcement Date	14 December 2011, beingthe date of the announcement of the Offer.
APA	Australian Pipeline Trust(ARSN 091 678 778)and APT Investment Trust(ARSN 115 585 441).
APA Group	APA and each of the entities controlled bythe APA Responsible Entity.
APA Group Entity	anymember of the APA Group.
APA Responsible Entity	APL in its capacity as responsible entity of Australian Pipeline Trust (ARSN 091 678 778)
	and APT Investment Trust(ARSN 115 585 441).
APA Securityholder	the registered holder of an APA Stapled Security.
APA Stapled Security	one ordinary unit in Australian Pipeline Trust (ARSN 091 678 778) and one ordinary unit
	in APT Investment Trust (ARSN 115 585 441), stapled together such that they must only
	be transferred together.
APL	Australian Pipeline Limited(ABN 99 091 344 704).
ASIC	Australian Securities and Investments Commission.
ASX	ASX Limited.
ATO	Australian Taxation Office.
Beach Energy	Beach EnergyLimited(ABN 20 007 617 969).
Bidder	APT Pipelines Limited (ABN 89 009 666 700), a company wholly owned by Australian
	Pipeline Trust(ARSN 091 678 778).
Bidder’s Statement	the bidder’s statement of the Bidder dated 15 December 2011.
Board	the board of directors of the HDF Responsible Entity.
Business Day	Monday to Friday inclusive, except New Year’s Day, Good Friday, Easter Monday,
	Christmas Day,BoxingDay,and anyother daythat ASX declares is not a business day.
CAGR	compound annualgrowth rate.
CGT	capitalgains tax.
CHESS Holding	a number of HDF Stapled Securities which are registered on HDF’s register being a register
	administered by ASX Settlement Pty Limited and which records uncertificated holdings
	of HDF Stapled Securities.
Corporations Act	the_Corporations Act 2001_(Cth) (as modified or varied byASIC).
CSG	coal seamgas.
Defeating Conditions Date	23 March 2012 being the date specified in Section 9.6.6 of the Bidder’s Statement for giving
	notice as to the status of the conditions set out in Attachment 1 to this Target’s Statement
	as required by subsection 630(1) of the Corporations Act (subject to variation in accordance
	with section 630(2)of the Corporations Act if the Offer is extended).
Director	a director of the HDF Responsible Entity.
Easternhaul	haulage ofgas in an eastern direction on the SWQP.
Easternhaul GTA	Easternhaul Gas Transmission Agreement with Santos to provide 147 TJ/day of firm capacity
	on HDF’s SWQP for 15years from 2015 as announced to ASX on 25 October 2010.
EBIT	earnings before interest and income tax.
EBITDA	earnings before interest, income tax, depreciation and amortisation.
EIA	U.S. EnergyInformation Administration.
Epic Energy	the Epic Energy groupof companies, which are wholly-owned byHDF.
FIRB	Foreign Investment Review Board.
FIRB Condition	the condition contained in Section 10(b)of the Bidder’s Statement.
First Supplementary	the first supplementary bidder’s statement of the Bidder dated 3 January 2012.
Bidder’s Statement
Foreign Investment Policy	the Australian Federal Government’s Foreign Investment Policy.

Page 68 Target’s Statement

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Term Meaning
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Foreign Securityholder	an HDF Securityholder whose address shown in the register of HDF Securityholders is a place
	outside Australia and its external territories or New Zealand, unless the APA Responsible
	Entity is satisfied that it is not precluded from lawfully issuing APA Stapled Securities either
	unconditionally or after compliance with conditions which the APA Responsible Entity
	regards as acceptable and not unduly onerous.
	For these purposes, Foreign Securityholder includes, among others, a resident of, or a person
	in, the United States (or a person that holds HDF Stapled Securities on behalf of a resident or
	a person in the United States) who beneficially owns HDF Stapled Securities. For the avoidance
	of doubt, such a holder will not be a Foreign Securityholder in respect of any other holding
	of HDF Stapled Security that is separately noted on the register of HDF Securityholders if
	a resident of, or a person in, the United States does not beneficially own any HDF Stapled
	Securityin that separatelynoted holding.
GTA	gas transmission agreement.
Hastings	Hastings Funds Management Limited(ABN 27 058 693 388).
HDF	Hastings Diversified Utilities Fund comprising HDF Epic Trust, HDF Finance Trust and HDF
	Further Investments Trust. Where the context requires the term also includes HDF’s assets.
HDF Constitutions	the constitutions of each of HDF Finance Trust, HDF Epic Trust and HDF Further
	Investments Trust.
HDF Epic Trust	HDUF Epic Trust(ARSN 109 770 961).
HDF Finance Trust	HDUF Finance Trust(ARSN 109 770 765).
HDF Further Investments Trust	HDUF Further Investments Trust(ARSN 109 897 921).
HDF Group	HDF, the HDF Responsible Entity and each of the entities controlled by the HDF Responsible
	Entity or any replacement responsible entity in such capacity and, where the context requires,
	the HDF Responsible Entityand anyreplacement responsible entityof HDF.
HDF Group Entity	anymember of the HDF Group.
HDF Responsible Entity	Hastings as responsible entityof HDF.
HDF Securityholder	the registered holder of an HDF Stapled Security.
HDF Stapled Security	one unit in each of HDF Epic Trust, HDF Finance Trust and HDF Further Investments Trust,
	stapled together such that theymust onlybe transferred together.
HDF Units	units in each of HDF Finance Trust,HDF Epic Trust and HDF Further Investments Trust.
Investigating Accountant’s Report	the report set out in Attachment 2.
IPO	initialpublic offering.
LNG	liquefied naturalgas.
MAPS	Moomba to Adelaide Pipeline System.
Mercer	Mercer(Australia)PtyLtd.
MW	megawatts.
Notice of Status of Conditions	the Bidder’s notice disclosing the status of the conditions to the Offer which is required
	to begiven bysection 630(3)of the Corporations Act.
Offer	the offer by the Bidder to each HDF Securityholder to acquire all of their HDF Stapled
	Securities on the terms and conditions set out in the Bidder’s Statement.
Offer Period	the period during which the Offer will remain open for acceptance in accordance with
	Section 9 of the Bidder’s Statement.
Origin	Origin EnergyLimited(ABN 30 000 051 696).
Performance Fee	the “Incentive Fee” as defined in the HDF Constitutions.
PJ	petajoules.
PPS	Pilbara Pipeline System.
Public Authority	any governmental, semi-governmental, administrative, fiscal, judicial or quasi-judicial body,
	department,commission,authority,tribunal,agencyor entity.
Pro Forma Historical Financial	pro forma historical summarised income statements for HDF for years ended 31 December
Information	2008,2009,2010 and 2011.

Target’s Statement Page 69

9 Glossary and interpretation

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Term Meaning
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QSN Link	an extension of the SWQP, connecting Ballera to Moomba and thereby enabling the
	transportation of coal seamgas from south eastQueensland to southern markets.
Rights	has the meaning given in Section 13 of the Bidder’s Statement.
S&P	Standard and Poor’s.
S&P/ASX 200	the S&P/ASX 200 indexpublished byStandard & Poor’s.
Santos	Santos Limited(ABN 80 007 550 923).
Senex	Senex EnergyLimited(ABN 50 008 942 827).
SWQP	the pipeline (incorporating the QSN Link) which provides a connection between gas
	producers in Bowen/Surat Basin in south eastern Queensland and customers in Mount Isa
	(through its connection to the Carpentaria Gas Pipeline) and south eastern Australian markets
	through the Moomba to Adelaidepipeline system and the Moomba SydneyPipeline.
SWQP Stage 3 Expansion	looping expansion of the SWQP by constructing a new 450mm diameter pipeline adjacent
	to the existing pipeline as well as the installation of further compression at Wallumbilla.
Takeovers Panel	the body called the Takeovers Panel continuing in existence under section 261 of the
	Australian Securities and Investments Commission Act 2001(Cth) and given various
	powers under Part 6.10 of the Corporations Act.
TAPS Trust	a trust that was a subsidiary of HDF Finance Trust, which was established for the purpose
	of financingwater acquisitions includingSouth East Water.
Target’s Statement	this document (including the attachments), being the statement of HDF under Part 6.5
	Division 3 of the Corporations Act.
TJ	terajoules.
VWAP	volume weighted averageprice.
Warrants	the two tranches of HDFprice linked cash settled warrants issued byHDF.
Westernhaul	haulage ofgas in a western direction on the SWQP.

9.2 Interpretation

In this Target’s Statement:

(1) Other words and phrases have the same meaning (if any) given to them in the Corporations Act.
(2) Words of any gender include all genders.
(3) Words importing the singular include the plural and vice versa.
(4) An expression importing a person includes any company, partnership, joint venture, association, corporation or other body corporate and vice versa.
(5) A reference to a section, clause, attachment and schedule is a reference to a section of, clause of and an attachment and schedule to this Target’s Statement as relevant.
(6) A reference to any legislation includes all delegated legislation made under it and amendments, consolidations, replacements or re-enactments of any of them.
(7) Headings and bold type are for convenience only and do not affect the interpretation of this Target’s Statement.
(8) A reference to time is a reference to time in Sydney, Australia.
(9) A reference to dollars, $, A$, AUD, cents, ¢ and currency is a reference to the lawful currency of the Commonwealth of Australia.
(10) A reference to “short term” means the period one to three years from the date of this Target’s Statement.
(11) A reference to “medium term” means the period three to five years from the date of this Target’s Statement.
(12) A reference to “long term” means the period more than five years from the date of this Target’s Statement.
(13) A reference to “operating cash flow” means operating cash flow as determined by operating asset revenue plus interest earned on HDF’s cash balances less operating expenses (including management fees, but excluding performance fees), interest costs paid in relation to financing facilities (other than interest costs relating to capital expenditure projects that are not yet ready for use), maintenance capital expenditure, tax paid and working capital adjustments.
(14) In the event of any inconsistency between this Section 9.2 and Section 13.2 of the Bidder’s Statement in relation to the interpretation of Attachment 1 to this Target’s Statement, Section 13.2 of the Bidder’s Statement prevails only to the extent of the inconsistency.

Page 70 Target’s Statement

Authorisation

Target’s Statement Page 71

10 Authorisation

This Target’s Statement has been approved by a resolution passed by the Directors of the HDF Responsible Entity.

Alan Cameron was not present to vote on the resolution, because he was unavailable overseas at the time. However, Alan Cameron has confirmed as follows:

he recommends that HDF Securityholders REJECT the Offer, for the reasons set out in this Target’s Statement;
he approves of the form of the Chairman’s letter which is included in this Target’s Statement; and
he consents to the inclusion of statements said to be made by him, or which are expressed as being based on statements made by him, in this Target’s Statement (including the statements in this Section 10 of this Target’s Statement).

Signed for and on behalf of HDF Responsible Entity:

date 20 January 2012 sign here print name Andrew Day position Director

Page 72 Target’s Statement

Attachments

Target’s Statement Page 73

Attachment 1

Conditions of the Offer

The Offer and any contracts resulting from acceptance of the Offer is subject to fulfilment of the following conditions:

(a) (minimum ownership) that during, or at the end of, the Offer Period, the number of HDF Stapled Securities in which the Bidder and its associates together have relevant interests (disregarding any relevant interest that the Bidder has merely because of the operation of section 608(3) of the Corporations Act) is at least 90% of all the HDF Stapled Securities;
(b) (Foreign Acquisitions and Takeovers Act) that prior to the end of the Offer Period, the Treasurer does not object under the Foreign Investment Policy to the proposed acquisition by the Bidder of HDF. The Treasurer is taken to have not objected if the Bidder receives written notification from or on behalf of the Treasurer to the effect that there are no objections to the acquisition of HDF under the Foreign Investment Policy on an unconditional basis;
(c) (ACCC approval) that before the end of the Offer Period, the Bidder has received written notification from the ACCC on an unconditional basis that it does not propose to take any action to intervene in the Offer;
(d) (other regulatory approvals) that before the end of the Offer Period, all appropriate waiting and other time periods (including any extensions of such waiting and other time periods) under applicable laws or regulations of any relevant jurisdiction having expired, lapsed or been terminated (as appropriate) and all regulatory obligations in any relevant jurisdiction having been complied with in each case in respect of the Offer or any matter arising from the proposed acquisition of HDF by the Bidder;
(e) (no restraining orders) that between the Announcement Date and the end of the Offer Period:
(1) there is not in effect any preliminary or final decision, order or decree issued by a Public Authority; and
(2) no application is made to any Public Authority (other than by any APA Group Entity), or action or investigation is announced, threatened or commenced by a Public Authority,

in consequence of, or in connection with, the Offer (other than a determination by ASIC or the Takeovers Panel in exercise of the powers and discretions conferred by the Corporations Act), which:

(3) restrains or prohibits (or if granted could restrain or prohibit), or otherwise materially adversely impacts on, the making of the Offer or the completion of any transaction contemplated by the Offer (whether subject to conditions or not) or the rights of the Bidder in respect of HDF, HDF Group or the HDF Stapled Securities to be acquired under the Offer; or
(4) requires the divestiture by the Bidder of any HDF Stapled Securities, or the divestiture of any assets of HDF Group, APA Group or otherwise;
(f) (no material adverse effect) that no specified event occurs that will or is reasonably likely to have a material adverse effect on the assets and liabilities, financial position and performance, profits and losses or prospects of HDF Group, including as a result of making the Offer or the acquisition of HDF Stapled Securities pursuant to the Offer. For these purposes, a “specified event” is:
(1) an event or occurrence that occurs during the Offer Period;
(2) an event or occurrence that occurs prior to the Offer Period but is only announced by HDF to the ASX or in relation to which the Bidder otherwise becomes aware during or after the Announcement Date; or
(3) an event or occurrence that will or is likely to occur following the Offer Period and which has not been announced by HDF to the ASX prior to the Announcement Date;
(g) (no material acquisitions, disposals or new commitments) that except for any proposed transaction announced by HDF to the ASX before the Announcement Date, none of the following events occurs during the period from the Announcement Date to the end of the Offer Period:
(1) any HDF Group Entity acquires, offers to acquire or lease or agrees to acquire or lease one or more companies, entities, securities, businesses or assets (or any interest in one or more companies, entities, securities, businesses or assets) for an amount in aggregate greater than $20 million, other than in the ordinary course of business, or makes an announcement in relation to such an acquisition, offer or agreement;
(2) any HDF Group Entity disposes of or leases, offers to dispose of or lease or agrees to dispose of or lease one or more companies, entities, securities, businesses or assets (or any interest in one or more companies, entities, securities, businesses or assets) for an amount, or in respect of which the book value (as recorded in HDF Group’s statement of financial position as at 30 June 2011) is, in aggregate, more than $20 million other than in the ordinary course of business, or makes an announcement in relation to such a disposition, offer or agreement;

Page 74 Target’s Statement

(3) any HDF Group Entity enters into, or offers to enter into or agrees to enter into, any agreement, joint venture, partnership, asset or profit sharing arrangement, management agreement, merger of businesses or of corporate entities or commitment which would require expenditure, or the foregoing of revenue, involving a commitment of or securities, assets or liabilities by any HDF Group Entity of an amount which is, in aggregate, more than $20 million, other than in the ordinary course of business, or makes an announcement in relation to such an entry, offer or agreement;
(4) any HDF Group Entity enters into any corporate transaction which would or would be likely to involve a material change in the manner in which any HDF Group Entity conducts its business, the nature (including balance sheet classification), extent or value of any HDF Group Entity’s assets, or the nature (including balance sheet classification), extent or value of the liabilities of HDF Group;
(5) any HDF Group Entity incurs, commits to, or brings forward the time for incurring or committing, or grants to another person a right the exercise of which would involve any HDF Group Entity member incurring or committing to any capital expenditure or liability, or foregoing any revenue, for one or more related items or amounts of in aggregate more than $20 million, except for the incurrence of any capital expenditure in accordance with the day to day operating activities of HDF Group as conducted prior to the Announcement Date;
(6) any HDF Group Entity waives any material third party default or accepts as a settlement or compromise of a material matter less than the full compensation due to any HDF Group Entity; or
(7) any HDF Group Entity enters, agrees to enter into or renews any contract of service or varies or agrees to vary any existing contract of service with any current or proposed responsible entity, director or manager or makes or agrees to make any substantial change to the basis or amount of remuneration except as required to satisfy the condition set out in paragraph (s) of this Attachment 1;
(h) (remuneration payment) that after the Announcement Date and before the end of the Offer Period, no HDF Group Entity pays or agrees to pay any retirement benefit or allowance to any responsible entity, current or proposed director, executive officer, manager or other employee, or makes or agrees to make any substantial change to the basis or amount of remuneration or the terms of redundancy or other employee entitlements of any current or proposed director, executive officer, manager or other employee (except as required by law or provided under any superannuation, provident or retirement scheme in effect on the Announcement Date or except as required to satisfy the condition set out in paragraph (s) of this Attachment 1);
(i) (HDF announcement re security constraints in financing arrangements) that no later than three Business Days before the Defeating Conditions Date, HDF makes an announcement to the ASX that each:
(1) financing agreement or instrument, money borrowing or raising arrangement or other financing arrangement, liability, encumbrance or other security, guarantee, indemnity or other credit support arrangement; or
(2) derivative or treasury transaction, agreement or arrangement,

(in each case regardless of form and including any similar arrangement) ( Financial Arrangement ) to which any HDF Group Entity is a party, or by or to which any HDF Group Entity or any of its assets may be bound or be subject, may be repaid, terminated or otherwise closed-out in full with a complete release and discharge of all obligations and property of all HDF Group Entities at any time by the relevant HDF Group Entity with an aggregate repayment premium, break cost or close-out payment for all such Financial Arrangements of no more than $50 million and, from such repayment, termination or closeout, there would be no material impediment to every HDF Group Entity being able to:

(3) provide guarantees to the providers of Financial Arrangements and to entities of APA Group if the Bidder acquires all of HDF;
(4) enter into a deed of cross guarantee with some or all of the entities of APA Group if the Bidder acquires all of HDF; or
(5) form or be a member of a different tax consolidated group or enter into a tax sharing agreement or similar arrangement with respect to such a tax consolidated group;
(j) (HDF announcement re change of control in financing arrangements) that no later than three Business Days before the Defeating Conditions Date, HDF makes an announcement on the ASX that no person may exercise or purport to exercise, or has stated an intention to exercise, any rights (whether subject to conditions or not) under any provision of any Financial Arrangement to which any HDF Group Entity is a party, or by or to which any HDF Group Entity or any of its assets may be bound or be subject, which could result in:
(1) any monies borrowed or raised by or any other monetary obligations of any HDF Group Entity being or becoming payable or repayable or being capable of being declared payable or repayable immediately or earlier than the payment date stated in such Financial Arrangement or otherwise accelerated or any transaction being closed out or becoming capable of being closed out before the maturity date stated in such Financial Arrangement; or
(2) the terms of any such Financial Arrangement being varied, modified, denied or terminated or operating in a manner that is adverse to the commercial interests of HDF Group,

as a result of the Offer, the acquisition of HDF Stapled Securities by the Bidder, the HDF Responsible Entity ceasing to be the responsible entity of HDF, or the appointment of APL or another entity as the new responsible entity of HDF;

Target’s Statement Page 75

Attachment 1

(k) (change of control in financing arrangements) that after the Announcement Date and before the end of the Offer Period, no person exercises or purports to exercise, has stated an intention to exercise, or has any rights (whether subject to conditions or not) under any provision of any Financial Arrangement to which any HDF Group Entity is a party, or by or to which any HDF Group Entity or any of its assets may be bound or be subject, which could result in:
(1) any monies borrowed or raised by or any other monetary obligations of any HDF Group Entity being or becoming payable or repayable or being capable of being declared payable or repayable immediately or earlier than the payment date stated in such Financial Arrangement or otherwise accelerated or any transaction being closed out or becoming capable of being closed out before the maturity date stated in such Financial Arrangement; or
(2) the terms of any such Financial Arrangement being varied, modified, denied or terminated or operating in a manner that is adverse to the commercial interests of HDF Group,

(l) (HDF announcement re change of control) that no later than three Business Days before the Defeating Conditions Date, HDF makes an announcement on the ASX that no person may exercise or purport to exercise, or has stated an intention to exercise, any rights (whether subject to conditions or not) under any provision of any agreement or other instrument, including an agreement for transportation of gas, to which any HDF Group Entity is a party, or by or to which any HDF Group Entity or any of its assets may be bound or be subject, which could result, to an extent which is material in the context of HDF Group taken as a whole, in:

(1) any such agreement or other instrument being terminated, varied or modified or any action being taken or arising thereunder;
(2) the interest of any HDF Group Entity in any firm, joint venture, trust, corporation or other entity (or any arrangements relating to such interest) being terminated, varied or modified; or
(3) the business of any HDF Group Entity with any other person being adversely affected,

(m) (change of control) that after the Announcement Date and before the end of the Offer Period, no person exercises or purports to exercise, has stated an intention to exercise, or has any rights (whether subject to conditions or not) under any provision of any agreement or other instrument, including an agreement for transportation of gas, to which any HDF Group Entity is a party, or by or to which any HDF Group Entity or any of its assets may be bound or be subject, which could result, to an extent which is material in the context of HDF Group taken as a whole, in:
(1) any such agreement or other instrument being terminated, varied or modified or any action being taken or arising thereunder;
(2) the interest of any HDF Group Entity in any firm, joint venture, trust, corporation or other entity (or any arrangements relating to such interest) being terminated, varied or modified; or
(3) the business of any HDF Group Entity with any other person being adversely affected,

(n) (HDF announcement re contractual milestones) that no later than three Business Days before the Defeating Conditions Date, HDF makes an announcement on the ASX to the effect that expansion of the SWQP is progressing on time and on budget in line with statements previously announced by HDF to the ASX on 29 August 2011 and is likely to meet or has met January 2012 contractual gas commitments as announced by HDF to the ASX on 15 December 2009;
(o) (HDF announcement re commencement of AGL gas transportation agreement) that no later than three Business Days before the Defeating Conditions Date, HDF makes an announcement on the ASX to the effect that the gas transportation agreement entered into between Epic Energy Holdings Pty Ltd and AGL described in the HDF announcement to the ASX on 13 July 2007 is expected to commence no later than January 2013 in line with HDF’s announcement to ASX on 17 December 2007;
(p) (index decline) that between the Announcement Date and the end of the Offer Period, the S&P/ASX 200 Index does not fall to 3,800 or below and remain at or below that 3,800 level for at least three consecutive Business Days or until the Business Day immediately prior to the end of the Offer Period;

Page 76 Target’s Statement

(q) (other occurrences) that during the period beginning on the Announcement Date and ending at the end of the Offer Period, none of the following events occur:
(1) HDF converts all or any of the HDF Units into a larger or smaller number of HDF Units;
(2) HDF or any other member of HDF Group resolves to reduce its capital in any way or reclassifies, combines, splits, redeems or repurchases directly or indirectly any securities;
(3) any HDF Group Entity:
- (A) enters into a withdrawal offer or buy-back agreement; or
- (B) resolves to approve the terms of a withdrawal offer under the Corporations Act or the terms of a buy-back agreement under sections 257C(1) or 257D(1) of the Corporations Act;
(4) any HDF Group Entity issues HDF Units or other securities other than the issue of HDF Units to the HDF Responsible Entity in respect of any Performance Fee payable to the HDF Responsible Entity, or grants an option over HDF Units or other securities, or agrees to make such an issue or grant such an option;
(5) any HDF Group Entity issues, or agrees to issue, convertible notes or convertible units;
(6) any HDF Group Entity disposes, or agrees to dispose, of the whole, or a substantial part, of its business or property;
(7) any HDF Group Entity charges, or agrees to charge, the whole, or a substantial part, of its business or property;
(8) any HDF Group Entity resolves to be wound up;
(9) a liquidator or provisional liquidator of any HDF Group Entity is appointed;
(10) a court makes an order for the winding up of any HDF Group Entity;
(11) an administrator of any HDF Group Entity is appointed under sections 436A, 436B or 436C of the Corporations Act (or its equivalent under any foreign law);
(12) any HDF Group Entity executes a deed of company arrangement (or its equivalent under any foreign law);
(13) a receiver or a receiver and manager (or their equivalents under any foreign law) is appointed in relation to the whole, or a substantial part, of the property of any HDF Group Entity;
(14) any HDF Group Entity makes any change to its constitution or other constituent documents or a meeting being convened to consider a resolution to change a constitution or any other constituent document of any HDF Group Entity;
(15) any HDF Group Entity passes any special resolution;
(16) any of HDF Finance Trust, HDF Epic Trust or HDF Further Investments Trust are terminated; or
(17) the HDF Responsible Entity effects or facilitates the resettlement of the property of any of HDF Finance Trust, HDF Epic Trust or HDF Further Investments Trust.

For the purposes of the condition in this paragraph (q), a reference to an HDF Group Entity acting or agreeing to act in a particular way is to be read, in relation to the HDF Finance Trust, HDF Epic Trust or HDF Further Investments Trust, as either the HDF Responsible Entity, in its capacity as responsible entity of the relevant trust, or (if relevant) the HDF members acting or agreeing to act in that way.

(r) (litigation) that during the period beginning on the Announcement Date and ending at the end of the Offer Period no person announces, commences or threatens any litigation against an HDF Group Entity (whether in aggregate or for any single litigation) which may or may reasonably result in a judgement against an HDF Group Entity of more than $5 million;
(s) (payments to and undertakings by the HDF Responsible Entity) that no later than three Business Days before the Defeating Conditions Date, the HDF Responsible Entity makes an announcement on the ASX to the effect that:
(1) the Performance Fee which will be accepted by the HDF Responsible Entity for the period ended 31 December 2011 will be:
- (A) no more than $57.4 million provided on the following conditions:
  - (i) no more than $26.6 million in accordance with the payment arrangements in the HDF Constitutions; and
  - (ii) no more than $30.8 million if, and only if, the Offer becomes unconditional; and
- (B) satisfied wholly by the issue of HDF Stapled Securities issued at a minimum price of $2.56 per HDF Stapled Security in lieu of cash payment; and
(2) no other Performance Fee will be accepted by the HDF Responsible Entity in relation to any period subsequent to the period ending 31 December 2011 (including but not limited to a Performance Fee payable in connection with the HDF Responsible Entity ceasing to be the responsible entity of HDF) while:
- (A) the Offer remains open; or
- (B) any APA Group Entity has a relevant interest in more than 50% of the HDF Stapled Securities.

Target’s Statement Page 77

Attachment 2

Investigating Accountant’s Report

The Directors Hastings Funds Management Limited as Responsible Entity for Hastings Diversified Utilities Fund Level 27, 35 Collins Street Melbourne VIC 3000 Australia

16[th] January 2012

Dear Directors

Subject: Investigating Accountant’s Report on Historical Financial Information and Financial Services Guide

We have prepared this report on certain historical financial information of HDF Epic Trust ( HDF Epic Trust ), HDUF Finance Trust and HDUF Further Investments Trust, comprising Hastings Diversified Utilities Fund ( HDF or the Client ) for inclusion in a Target’s Statement dated on or about 20[th] January 2012 (the Target’s Statement ) prepared in response to a bidder’s statement issued in relation to the acquisition of HDF stapled securities (the Transaction ).

Expressions defined in the Target’s Statement have the same meaning in this report.

The nature of this report is such that it should be given by an entity which holds an Australian financial services licence under the Corporations Act 2001. PricewaterhouseCoopers Securities Ltd, which is wholly owned by PricewaterhouseCoopers, holds the appropriate Australian financial services licence. This report is both an Investigating Accountant’s Report, the scope of which is set out below, and a Financial Services Guide, as attached at Appendix A.

Scope

The Client has requested PricewaterhouseCoopers Securities Ltd to prepare this investigating accountant’s report (the Report ) covering the HDF pro forma historical summarised income statements for years ended 31 December 2008, 2009, 2010 and 2011 as disclosed in section 6.2 of the Target’s Statement (collectively, the Pro Forma Historical Financial Information ).

This Report has been prepared for inclusion in the Target’s Statement. We disclaim any assumption of responsibility for any reliance on this Report or on the Pro Forma Historical Financial Information to which this Report relates for any purposes other than the purpose for which it was prepared.

PricewaterhouseCoopers Securities Ltd, ACN 003 311 617, ABN 54 003 311 617, Holder of Australian Financial, Services Licence No 244572, Freshwater Place, 2 Southbank Boulevard, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001

T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au

Page 78 Target’s Statement

Scope of review of Pro Forma Historical Financial Information For the purposes of preparing consolidated financial statements for the HDF stapled group, AASB 1002 applies for which HDF Epic Trust is identified as the parent entity. The pro forma summarised income statements for years ended 31 December 2008, 2009 and 2010 has been derived from the audited financial statements of HDF Epic Trust for years ended 31 December 2008, 2009 (as restated) and 2010. The financial statements for the year ended 31 December 2009 were restated in the comparative information of the 31 December 2010 financial statements. The consolidated financial statements for the years ended 31 December 2008, 2009 (as restated) and 2010 were audited by PricewaterhouseCoopers who issued unqualified audit opinions on them. The proforma summarised income statement for the year ended 31 December 2011 is based on the actual results of HDF for the 6 months to 30 June 2011 derived from the financial statements for the half year ended 30 June 2011, and the unaudited management accounts of HDF for the six month period ending 31 December 2011. The consolidated financial statements for the six months ended 30 June 2011 were reviewed by PricewaterhouseCoopers who issued an unqualified review opinion on them. The Pro Forma Historical Financial Information incorporates such pro forma transactions and adjustments as described in sections 6.2 of the Target’s Statement (the Pro Forma Adjustments) as the Directors of the Responsible Entity considered necessary to present the Pro Forma Historical Financial Information on a consistent basis. The Directors of the Responsible Entity are responsible for the preparation of the Pro Forma Historical Financial Information, including the determination of the Pro Forma Adjustments. We have conducted our review of the Pro Forma Historical Financial Information in accordance with Australian Auditing Standards applicable to review engagements. We made such inquiries and performed such procedures as we, in our professional judgement, considered reasonable in the circumstances including:  an analytical review of the audited and reviewed financial performance of the Client for the relevant historical period  a review of work papers, accounting records including management accounts for the six months ended 31 December 2011, and other documents  a review of the Pro Forma Adjustments made to the Pro Forma Historical Financial Information  a comparison of consistency in application of the recognition and measurement principles under Australian Accounting Standards and other mandatory professional reporting requirements in Australia, and the accounting policies adopted by the Client as disclosed in the HDF Epic Trust financial statements, and  enquiry of Directors, management and others. These procedures do not provide all the evidence that would be required in an audit, thus the level of assurance provided is less than given in an audit. We have not performed an audit and, accordingly, we do not express an audit opinion on the Pro Forma Historical Financial Information.

Target’s Statement Page 79

Attachment 2

Review statement on Pro Forma Historical Financial Information Based on our review, which is not an audit, nothing has come to our attention which causes us to believe that the Pro Forma Historical Financial Information, does not present fairly the HDF pro forma historical summarised income statement for years ended 31 December 2008, 2009, 2010 and 2011 as disclosed in section 6.2 of the Target’s Statement; in accordance with the recognition and measurement principles prescribed under Australian Accounting Standards and other mandatory professional reporting requirements in Australia, and the accounting policies adopted by the Client as disclosed in the HDF Epic Trust financial statements. Subsequent events Apart from the matters dealt with in this Report, and having regard to the scope of our Report, to the best of our knowledge and belief no material transactions or events outside of the ordinary course of business of the Client have come to our attention that would require comment on, or adjustment to, the information referred to in our Report or that would cause such information to be misleading or deceptive. Independence or disclosure of interest PricewaterhouseCoopers Securities Ltd does not have any interest in the outcome of the Issue other than the preparation of this Report and participation in due diligence procedures for which normal professional fees will be received. Liability PricewaterhouseCoopers Securities Ltd has consented to the inclusion of this Report in the Target’s Statement in the form and context in which it is included. The liability of PricewaterhouseCoopers Securities Ltd is limited to the inclusion of this Report in the Target’s Statement. PricewaterhouseCoopers Securities Ltd makes no representation regarding, and has no liability for, any other statements or other material in, or any omissions from, the Target’s Statement. Financial Services Guide We have included our Financial Services Guide as Appendix A to our Report. The Financial Services Guide is designed to assist retail clients in their use of any general financial product advice in our Report. Yours faithfully Andy Welsh Authorised Representative PricewaterhouseCoopers Securities Ltd 3

Page 80 Target’s Statement

Appendix A – Financial Services Guide

PRICEWATERHOUSECOOPERS SECURITIES LTD

FINANCIAL SERVICES GUIDE

This Financial Services Guide is dated 20[th] January 2011

1. About us

PricewaterhouseCoopers Securities Ltd (ABN 54 003 311 617, Australian Financial Services Licence no 244572) (" PwC Securities ") has been engaged by Hastings Funds Management Limited as Responsible Entity for Hastings Diversified Utilities Fund (“ HDF “) to provide a report in the form of an Investigating Accountant's Report in relation to the Pro Forma Historical Financial Information ( the “Report ”) for inclusion in the Target’s Statement dated 20[th] January 2012.

You have not engaged us directly but have been provided with a copy of the Report as a retail client because of your connection to the matters set out in the Report.

2. This Financial Services Guide

This Financial Services Guide (" FSG ") is designed to assist retail clients in their use of any general financial product advice contained in the Report. This FSG contains information about PwC Securities generally, the financial services we are licensed to provide, the remuneration we may receive in connection with the preparation of the Report, and how complaints against us will be dealt with.

3. Financial services we are licensed to provide

Our Australian financial services licence allows us to provide a broad range of services, including providing financial product advice in relation to various financial products such as securities, interests in managed investment schemes, derivatives, superannuation products, foreign exchange contracts, insurance products, life products, managed investment schemes, government debentures, stocks or bonds, and deposit products.

4. General financial product advice

The Report contains only general financial product advice. It was prepared without taking into account your personal objectives, financial situation or needs.

You should consider your own objectives, financial situation and needs when assessing the suitability of the Report to your situation. You may wish to obtain personal financial product advice from the holder of an Australian Financial Services Licence

to assist you in this assessment.

5. Fees, commissions and other benefits we may receive

PwC Securities charges fees to produce reports, including this Report. These fees are negotiated and agreed with the entity who engages PwC Securities to provide a report. Fees are charged on an hourly basis or as a fixed amount depending on the terms of the agreement with the person who engages us. In the preparation of this Report our fees are charged on an hourly basis. Directors or employees of PwC Securities, PricewaterhouseCoopers, or other associated entities, may receive partnership distributions, salary or wages from PricewaterhouseCoopers.

6. Associations with issuers of financial products

PwC Securities and its authorised representatives, employees and associates may from time to time have relationships with the issuers of financial products. For example, PricewaterhouseCoopers may be the auditor of, or provide financial services to, the issuer of a financial product and PwC Securities may provide financial services to the issuer of a financial product in the ordinary course of its business. PricewaterhouseCoopers is auditor to HDF.

7. Complaints If you have a complaint, please raise it with us first, using the contact details listed below. We will endeavour to satisfactorily resolve your complaint in a timely manner. In addition, a copy of our internal complaints handling procedure is available upon request.

If we are not able to resolve your complaint to your satisfaction within 45 days of your written notification, you are entitled to have your matter referred to the Financial Ombudsman Service (" FOS "), an external complaints resolution service. FOS can be contacted by calling 1300 780 808. You will not be charged for using the FOS service.

8. Contact Details PwC Securities can be contacted by sending a letter to the following address:

Andy Welsh Authorised Representative PricewaterhouseCoopers Securities Ltd 2 Southbank Blvd Southbank Vic 3006

Target’s Statement Page 81

Attachment 3

ASIC declaration

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Page 82 Target’s Statement

Corporate directory

HDUF Epic Trust ARSN 109 770 961

HDUF Finance Trust ARSN 109 770 765

HDUF Further Investments Trust ARSN 109 897 921

Responsible Entity Hastings Funds Management Limited ABN 27 058 693 388 Holder of Australian Financial Services Licence No. 238309

Hastings’ Board of Directors Alan Cameron AO, Chairman Andrew Day, Chief Executive James Evans Liam Forde Stephen Gibbs James McDonald Victoria Poole

Company Secretaries Jane Frawley Jefferson Petch

Registered Office Level 27 35 Collins Street Melbourne VIC 3000 Australia Telephone +61 3 8650 3600 Facsimile +61 3 8650 3701 Email [email protected] Website www.hfm.com.au

Sydney Level 10 55 Market Street Sydney NSW 2000 Australia Telephone +61 2 9287 8700 Facsimile +61 2 9287 8801

London

Camomile Court 23 Camomile Street London EC3A 7LL, UK Telephone +44 20 7337 6720 Facsimile +44 20 7929 2502

San Antonio Suite 301 12625 Wetmore Road San Antonio TX 78247, USA Telephone +1 210 871 3814 Facsimile +1 210 871 6922

Target’s Statement Page 83

HDF Securityholder information

HDF has established a securityholder information line which HDF Securityholders may call if they have any queries in relation to the Offer. The telephone number for the HDF Securityholder Information Line is 1800 815 610 (a toll-free line for calls made from within Australia) or +61 2 8256 3357 (for calls made from outside Australia). Calls to the HDF Securityholder Information Line may be recorded.

For further information about HDF and Hastings please view our website www.hfm.com.au.

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Manage your investment (including change of address, banking and TFN details) and view statements by visiting www.hfm.com.au/investors and following the link to log into the Computershare Investor Centre with your SRN/HIN and postcode (or country of residence if outside Australia).

Stay informed

Subscribe to updates: Receive announcements as they are released to the market by registering at www.hfm.com.au/subscribe

Page 84 Target’s Statement

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HDF Securityholders can call the HDF Securityholder Information Line on 1800 815 610 (a toll-free line for calls made from within Australia) or +61 2 8256 3357 (for calls made from outside Australia)

HDF

www.hfm.com.au/hdf

Hastings Funds Management is a subsidiary of the Westpac Banking Corporation. Hastings is a specialist manager of infrastructure equity and alternative debt investments. As at 30 September 2011 Hastings had approximately $6.3 billion in funds under management.

AI assistant

APA GROUP — Merger & Acquisition 2012

64398_rns_2012-01-19_79b00d71-097f-448d-b887-28152ac76242.pdf

Hastings Diversified Utilities Fund (ASX: HDF) – takeover bid by APT Pipelines Limited Target’s Statement

Yours faithfully

REJECT

Important notices

Nature of this document

Defined terms

No account of personal circumstances

Disclaimer as to forward looking statements

Disclaimer as to information

Foreign jurisdictions

Maps and diagrams

Privacy

Key dates

Chairman’s letter

Dear HDF Securityholder,

Take NO ACTION and REJECT the bid for Hastings Diversified Utilities Fund (HDF) by APA

Your Board has carefully considered the Offer and unanimously recommends that HDF Securityholders REJECT the Offer .

Key reasons to REJECT the Offer

1 The Offer undervalues HDF

2 The timing of the Offer is highly opportunistic as HDF is about to commence delivering strong revenue growth

3 The Offer does not recognise the value of HDF’s strategically positioned pipelines

4 HDF is delivering on its stated strategy

5 Acceptance of the Offer may trigger a CGT liability

6 The Offer is highly conditional and uncertain

7 If you accept the Offer you will become an APA Securityholder, which will change the risk/return profile of your investment

Further details in relation to the Key Reasons to REJECT the Offer are set out in Section 1 of this Target’s Statement.

Directors’ recommendation

Your Board’s response to APA’s claims

1 The Offer undervalues HDF

You should REJECT the Offer because it does not appropriately value HDF’s growing contracted revenue profile

The Offer does not provide full value for the benefit that HDF’s assets would provide to APA

The effective value of the Offer was only $1.92 at the Announcement Date

The Offer does not reflect an adequate premium for control

2 The timing of the Offer is highly opportunistic as HDF is about to commence delivering strong contracted revenue growth

Overview of the SWQP and SWQP Stage 3 Expansion

3 The Offer does not recognise the value of HDF’s strategically positioned pipelines

Australian gas demand is expected to increase

Demand for natural gas

HDF’s pipelines are well placed to benefit from growth in east coast gas reserves

HDF’s pipelines: the essential link to market

Further growth opportunities from LNG

4 HDF is delivering on its stated strategy

HDF is successfully pursuing its stated strategy of focusing on energy infrastructure investments

HDF has identified revenue growth potential which is not recognised by the Offer

HDF has identified improved operating cash flow opportunities via debt refinancing which are not recognised by the Offer

5 Acceptance of the Offer may trigger a CGT liability

6 The Offer is highly conditional and uncertain

7 If you accept the Offer you will become an APA Securityholder, which will change the risk/return profile of your investment

Reduced exposure to HDF revenue growth prospects

~~Forecast revenue comparison ($ million)~~

Different tax distribution profile

ACCC restrictions

APA ownership restrictions

Price regulation

APA financing considerations

Your choices as an HDF Securityholder

Your choices as an HDF Securityholder

The Directors unanimously recommend that you REJECT the Offer

(a) REJECT the Offer

(b) Sell your HDF Stapled Securities on market

(c) Accept the Offer

4.1 Summary of Offer

4.2 Value of the Offer

(a) APA’s implied Offer value has been amended for the payment of interim distributions

(b) The value of the Offer is dependent on the trading performance of APA Stapled Securities over the Offer Period

4.3 Conditions of the Offer

4.4 Implications of the Offer for Epic Energy’s current financing arrangements

4.5 Consequences of APA acquiring less than 90% of HDF

4.6 Treatment of Foreign Securityholders

HDF profile

5.1 Background information on HDF

5.2 Current business activities of HDF

5.3 Epic Energy

(a) South West Queensland Pipeline (SWQP)

(b) Moomba to Adelaide Pipeline System (MAPS)

(c) Pilbara Pipeline System (PPS)

5.4 Potential refinance of Epic Energy’s debt facilities

APA GROUP Merger & Acquisition 2012

Forecast revenue comparison ($ million)

Pro forma summarised income statements

Contracted revenue inflation sensitivity