Timing of Distribution Payments

Change to Record Date

The Board of APA Group (“APA”) has changed the record date for the final distribution for the 2008 financial year to 30 June. For future final distributions, the record date will be the last business day before the end of that financial year. This is consistent with the practice of many other listed entities which are also stapled trust structures.

The Board has also decided to bring forward the date for payment of the final distribution to 10 September 2008. This is approximately two weeks earlier than the date the distribution has been paid in previous years.

These changes have been made in order to provide the best financial outcome for APA securityholders. In particular, the change to the record date will ensure securityholders are taxed at the appropriate rate with respect to distribution income they receive from APA.

How this change will affect securityholders

Securityholders are not required to take any action in response to this change.

Later this month, APA will provide an estimate of its final distribution for the year ending 30 June 2008. This estimate will be reviewed and the actual amount of the final distribution will be determined as part of the finalisation of APA’s 2008 financial results, due for release on 26 August 2008.

When the final distribution is paid on 10 September, securityholders will receive a detailed annual tax statement setting out the various components of APA distributions for the 2008 financial year. In addition, securityholders will also receive a tax guide to assist in preparing 2008 tax returns.

If you have questions in relation to this change you can call the Registry, Link Services, toll free on 1800 992 312, or from outside Australia on +61 2 8280 7132, or contact your tax adviser.

Background to Change to APA Group Record Date

APA Group Trust structure

The two trusts that comprise APA Group are the Australian Pipeline Trust (APT) and the APT Investment Trust (APTIT). Securities in these two trusts are “stapled” together, and are collectively referred to as APA Group securities. The securities cannot be separated from each other and can only be traded together.

Due to different tax treatments for the two trusts, the record date needs to occur during the relevant tax year to ensure securityholders do not pay more tax on their distributions than they need to. Accordingly, the Board has resolved to bring forward to 30 June 2008 the record date for the APA Group final distribution in respect of the year ending 30 June 2008. For future years, the record date for final distributions will be the last business day before the end of the financial year.

Tax treatment of APT and APTIT

APT is a public trading trust and is therefore taxed as a company for tax purposes. That is, APT pays tax on its earnings, and makes after tax income distributions to securityholders. Consequently securityholders are taxed on their APT income distributions in the tax year in which the distribution is received.

APTIT is a pass-through trust for tax purposes. This means the net taxable income APTIT earns is taxable in the hands of securityholders in the year the income is earned, provided that securityholders are “presently entitled” to the income at the end of the tax year. If securityholders are not presently entitled to the income in the same tax year, tax will be payable by APTIT at the top marginal rate of 46.5%, which is a rate that exceeds what is payable by many securityholders. Securityholders generally become presently entitled to income on the record date. Accordingly, it is appropriate that the record date occurs in the same financial year as the income is earned.

Prior to the establishment of the stapled structure in 2007, distributions were made only by APT. Accordingly, there was no disadvantage to securityholders in having the record date occurring after the end of the relevant distribution period, and in a different financial year.

The decision to establish the record date at or about 30 June 2008 is consistent with other stapled trust structures in the market.

How this change will affect securityholders

Later in June, APA will provide an estimate of its final distribution for the year ending 30 June 2008. This estimate will be reviewed and the actual amount of the distribution determined as part of the finalisation of APA’s 2008 financial results, which are due for release on 26 August 2008.

With the move to the earlier record date, the Board has also resolved to bring forward payment of the final distribution by approximately two weeks to mid September.

Income from APTIT which securityholders become presently entitled to on the record date must be included in securityholders’ tax returns for the year in which the record date occurs. Income from APT is taxable in the year which the distribution is paid. For example, in respect of financial year 2008:

• Income from APTIT is “earned” on 30 June 2008 and must be included in the securityholder’s tax return for that year. The information to enable preparation of the 2008 return will be included in the Tax Statement sent to securityholders in mid-September when the distribution is paid
• Income from APT is earned in mid-September 2008 when the distribution is paid, and must be included in the securityholder’s 2009 tax return. The relevant information will be included in the Tax Statement sent to securityholders in mid-September 2008 when the distribution is paid.

Q&A

1. What is the record date for a distribution?

The record date is effectively the close off date for a distribution entitlement. If you own an APA security as at 5.00pm (AEST) on the record date you are entitled to the distribution even if you sell your security before the distribution is due to be paid.

2. Why is the record date being changed?

The record date for the final distribution is being changed to ensure that securityholders are not effectively taxed on distributions from APT Investment Trust (APTIT) at a higher rate than necessary.

APTIT is a pass through trust and as such net taxable income is taxable in the hands of securityholders in the year the income is earned, provided the holder is “entitled”. Entitlement to the income is deemed to be on the record date.

Where the record date is after the end of the financial year any undistributed income in APTIT will be taxed in the hands of the Trustee at a rate that exceeds what would be payable by many securityholders (46.5%).

To ensure the Trustee does not have to pay the top marginal tax rate, and securityholders benefit from the pass through trust structure, the APA Board decided to bring forward the record date for all future final distributions.

3. Why is the record date for an APA Group security being changed when it is only the APTIT part of the staple that is affected?

An APA Group security comprises a unit in Australian Pipeline Trust (APT) and a unit in APT Investment Trust (APTIT). These units are stapled together to form an APA Group security which is listed on the ASX.

A securityholder cannot deal separately with the individual units comprising an APA stapled security and each unit must have the same distribution record date.

4. What effect will the change to record date have on the tax I pay on my distribution?

Previously distributions from APA have been taxed in the year in which you received your distribution. This will continue in respect of distributions you receive from the APT part of the stapled security. You will include that part of your distribution in your tax return for the year in which you receive the distribution.

However any income distribution from the APTIT part of the stapled security will be taxed in the year in which you become presently entitled to that income, that is, on the Record Date. For the final distribution for the 2008 financial year this will mean you will be taxed on any APTIT income in the 2008 tax year even though you will not receive the distribution until the 2009 tax year.

There will be no change to your receipt of tax deferred income or returns of capital. These will only affect the cost base of your security and will generally not be taxable in your hands.

5. Why is this change being made now?

APTIT was capitalised in the 2007 financial year and made only one distribution in the 2007 financial year, in March 2007. All income earned by APTIT in 2007 was passed to securityholders in that March 2007 distribution. As a result there was no present entitlement problems at the end of the financial year as all income had been physically distributed.

This will not be the case in the 2008 financial year when there will be income in APTIT that will not have been physically distributed by 30 June 2008. If securityholders are not presently entitled to that income at 30 June 2008 the Trustee of APTIT will be taxed on the income at 46.5%. For this reason, this distribution and all future distribution, the record date will be at the end of the relevant distribution period.

6. When will I receive my annual tax statement for the 2008 financial year?

You will receive your annual tax statement with your distribution in September. This will set out all the tax components required for you to complete your income tax return. APA will also provide a Tax Guide to assist you in preparing your 2008 income tax return.

7. Will I be able to complete my tax return before I receive the annual tax statement?

No. The tax components of the APA distributions for 2008 will only be disclosed in the annual tax statement. This is consistent with other listed stapled trust securities. This means you will only be able to complete your tax return in September 2008. Generally income tax returns for individuals are only due at the end of October.

8. Why is APA providing an estimate of the final distribution for 2008 now?

With the change of record date to 30 June 2008 APA must give the market an estimation of the final distribution so that an APA Group security can be priced in the market after it goes ex dividend. The actual amount of the final distribution for 2008 will be confirmed as part of the completion of the APA financial results for 2008. The tax components of the final distribution will also be determined at that time.

9. When will the final distribution for 2008 be paid?

The final distribution is expected to be paid on or around 10 September 2008. This is approximately two weeks earlier than in previous years and is the earliest date the APA share registry can make the payment after confirmation of the amount and components of the final distribution is made.

Further information

Further information on the tax treatment of stapled securities can be found on the Australian Taxation Office website.

You should not rely on this information as taxation or financial advice as it may not be relevant to your particular circumstances. You should seek independent advice from a qualified person to determine the taxation consequences applicable to your circumstances.

Franking Policy

Franking credits will be paid to the extent that they are available.

Tax Status of Distributions
Dividend distribution	This component is distributed out of after tax profit and as such is treated as dividend for tax purposes and will be taxed at the securityholder's marginal tax rate.
Capital distribution	For securityholders who hold their investment on capital account, this component is not assessable as it represents a distribution which exceeds the accounting profit and as such is treated as return of capital for tax purposes. Although the capital component is not assessable it does reduce the securityholder's APT cost base in calculating the capital gains tax liability when the APT units are sold. Over time the cost base is expected to diminish as illustrated in the table above.
Trust Distribution Interest	This component is distributed from profits/interest earned by APTIT. As APTIT is a pass through trusts this component will be taxed at the securityholders marginal tax rate.
Tax Deferred Distribution	This component is not accessable as it represents a distribution from APTIT which exceeds taxable profit and as such is taxed as a tax deferred distribution. Although the tax deferred component is not assessable it does reduce the securityholders APTIT cost base in calculating the capital gain tax liability when APTIT units are sold. Over time the cost base of an APTIT unit is expected to diminish as illustrated in the table above.

Distribution Reinvestment Plan

The Distribution Reinvestment Plan has now been reactivated, commencing from the distribution announced on 30 May 2006.

Managed Investment Trust Notice

Notice for Custodian and Nominee Investors

Both APT and APTIT declare that they are managed investment trusts for the purposes of Subdivision 12-H of the Taxation Administration Act 1953.

APA Group Distribution Information for the Financial Year ending 30 June 2008.

Distributions Payable 14 Dec 2007.