4 January 2005

Company Announcements Office Australian Stock Exchange Limited

Dear Sirs

Off-market bid by Primary Health Care Limited ABN 24 064 530 516 to acquire all ordinary shares in Health Communication Network Limited ABN 76 068 458 515

In accordance with section 633(1) item 14 of the Corporations Act 2001 (Cth), we enclose a copy of Health Communication Network Limited's Target's Statement dated 4 January 2005 in response to Primary Health Care Limited's Bidder's Statement dated 13 December 2004.

The Target's Statement was sent to Primary Health Care Limited and lodged with the Australian Securities and Investments Commission today.

Yours faithfully

Richard Ulrick Company Secretary

Health Communication Network Limited as an action

a martin

Targer's Statement in response to the Bidder's Statement by PHOSE IS CONSTANTION AND THE RESIDENCE OF

Directors unanimously recommend that you ennapolitik
Martin mello

Princi y Súdier in teatra i serviza su relativamento

This Target's Statement is an IMPORTANT DOCUMENT and requires your immediate attention. If you are in any doubt as to how to deal with this document, please consult your financial or other professional adviser.

FINANCIAL ADVISER

LEGAL ADVISER

KAVIDATAS

DA GADA A HAGA GALA

Da contanta a localista dell'

Close of Principal Dictaturies control Ardunusida

REGIONAL CONSTRUCTION

Alania Willi

missimaani m Zuben van die ook

Contents

1. Reasons you should ACCEPT Primary's Offer in the absence of a superior proposal
2. Other important considerations for HCN Shareholders
3. Frequently asked questions
4. Additional information
5. Definitions and interpretation

Important Notices

ASIC LOBGEMENT

This Target's Statement was lodged with ASIC on 4 January 2005. Neither ASIC nor any of its officers takes any responsibility for the content of this Target's Statement.

FINANCIAL ADVICE

This Target's Statement does not take into account your individual investment objectives, financial situation or particular needs. You should obtain independent financial, investment, legal and taxation advice before deciding whether or not to accept Primary's Offer.

FORWARD LOOKING STATEMENTS

This Target's Statement contains forward leoking 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 HCN as well as deperal economic conditions and conditions in the financial markets.

Actual events or results may differ materially from the events or results expressed or implied in any forward fooking statement and such deviations are both normal and to be expected. None of HCN, any of its efficers or any person named in this Target's Statement or involved in the preparation of this Target's Statement makes any representation or warranty (either express or implied) as to the accuracy or like@hood of fulfilment of any forward looking statement, or any events or results expressed or implied in any forward looking statement, and you are cautioned not to place undue reliance on those statements.

The forward legking statements in this Target's Statement reflect views held only as at the date of this Target's Statement.

BEFINED TERMS

Certain terms used in this Target's Statement have defined meanings, as set out in Section 5 of this Target's Statement.

Shareholder Information Line

HCN has established a Shareholder Information Line for HCN Shareholders to call if they need assistance in relation to Primary's Offer. The telephone number is 1300 308 423 (toll free within Australia) or +61 3 9415 4238 (outside Australia). It is available Monday to Friday between 8.30am and 6pm Sydney time.

To comply with the requirements of the Corporations Act, all calls to the Shareholder Information Line will be recorded.

4 January 2005

Dear Shareholder.

Recommended Offer by Primary Health Care Limited

On 3 November 2004, IBA Health Limited announced an intention to make a conditional offer to acquire all of the shares in Health Communication Network Limited using IBA Health shares as consideration. Following the announcement. IBA Health purchased HCN Shares on market at prices up to \$1.72.

As a result of this unsolicited proposal, your Board determined it would be in HCN Shareholders' best interests to make inquiries with a number of parties that it considered might be interested in submitting a superior proposal to that from IBA Health.

As a result of those inquiries, on Friday 10 December 2004, Primary Health Care Limited announced its intention to make a takeover offer for all of the HCN Shares at \$1.75 cash per HCN Share. Primary also announced that there are no defeating conditions to its Offer and that it will pay each accepting HCN Shareholder within five business days of their acceptance of its Offer. Immediately prior to its announcement. Primary had acquired a 19.8% relevant interest in HCN. Primary also announced an intention to stand in the market at \$1.75 per HCN Share during the bid period.

You should have received by now Primary's Bidder's Statement. This Target's Statement contains the formal response of the Board to the Offer. After careful consideration of Primary's Offer, as well as the potential issues and risks that could affect HCN Shareholders, your Directors have made the following recommendation:

• the Board unanimously recommends that you ACCEPT THE OFFER in the absence of a superior proposal: and
• each Director also intends to ACCEPT THE OFFER in respect of his or her own shareholding in the absence of a superior proposal.

The Board believes that Primary's Offer should be recommended because, among other factors:

• ▒ Primary's Offer is superior to the previously proposed offer from IBA Health;
• you will receive cash consideration, which provides certainty when accepting Primary's Offer, and will be paid within five business days after you accept;
• Primary's Offer is not subject to any defeating conditions;
• the price offered by Primary represents a premium of 45% over \$1.21, the closing price for HCN Shares on 2 November 2004, the day before the announcement of IBA Health's proposed takeover offer for HCN: and
• the Offer represents fair value to HCN Shareholders.

Further detail on the reasons for the Directors' recommendation is provided in this Target's Statement.

On 14 December 2004, IBA Health announced it would not proceed with its bid for HCN.

We encourage Shareholders to read the full Target's Statement carefully and seek their own financial and other professional advice. A Shareholder Information line is available during usual business hours on 1300 308 423 (toll free within Australia) or on +61 3 9415 4238 (outside Australia).

The Board will keep you informed of any further development and action you may need to take in relation to your HCN Shares.

Yours sincerely

bur Fallerton

Christopher Fullerton Chairman

Summary of

The following provides an overview of Primary's Offer which the Directors recommend Shareholders accept in the absence of a superior proposal. You should read this Target's Statement before making any decision whether to accept the Offer.

The Offer	Primary is offering to acquire all of your HCN Shares.
Offer Consideration	Primary is offering you \$1.75 cash for each HCN Share you own.
Conditions of the Offer	Primary's Offer is not subject to any defeating conditions.
When will you receive payment	Primary will pay each accepting HCN Shareholder within five business days of their acceptance of its Offer.
Directors' recommendation	The Directors recommend that you ACCEPT Primary's Offer in the absence of a superior proposal.
Closing date	Primary's Offer is scheduled to close at 7pm Sydney time on 20 January 2005, unless it is withdrawn or extended

How to accept
Primary's Offer

You should read this Target's Statement. It contains your Directors' recommendation to ACCEPT the Offer in the absence of a superior proposal, and the reasons for this recommendation.

How do I ACCEPT Primary's Offer?

There are a number of ways to accept Primary's Offer.

If your HCN Shares are held on an

issuer-sponsored sub-register, complete and sign the acceptance form enclosed with Primary's Bidder's Statement and:

mail it in the reply paid envelope Primary sent to vou to:

Computershare Investor Services Pty Limited GPO Box 7045 Sydney NSW 2001 Australia

or hand deliver it to:

Computershare Investor Services Pty Limited Level 3 60 Carrington Street Sydney NSW 2000 Australia

If your HCN Shares are held on a CHESS sub-register,

• contact your controlling participant (normally 繎 your stockbroker) to arrange acceptance on vour behalf: or
• complete, sign and send the CHESS 戮 acceptance form that accompanied Primary's Bidder's Statement to your controlling participant; or
• 繎 complete, sign and send the CHESS acceptance form that accompanied Primary's Bidder's Statement to either of the addresses in the previous column.

Foreign Shareholders should return their acceptance form by airmail.

Acceptance forms must be received by 7pm Sydney time on 20 January 2005, unless the Offer is extended. Further details about how to accept are set out in Section 10.4 of Primary's Bidder's Statement.

an an am an am an am an am an an an an an an

Further information

a series and the contract of the contract of the contract of the contract of the contract of the contract of

HCN Shareholders who have questions regarding Primary's Offer may contact the Shareholder Information Line Monday to Friday between 8.30am and 6pm Sydney time (toll free within Australia) on 1300 308 423 or on +61 3 9415 4238 (outside Australia).

To comply with the requirements of the Corporations Act, all calls to the Shareholder Information Line will be recorded.

1. Reasons vou should ACCEPT Princiv's Offer in the absence of a superior proposal

1.1 The Directors recommend that Shareholders accept

Primary's Offer in the absence of a superior proposal

The Directors recommend that HCN Shareholders accept Primary's Offer in the absence of a superior proposal for the following reasons:

• the Offer is superior to the previously proposed offer by IBA Health;
• you will receive cash consideration; 獥
• 丝 there are no defeating conditions;
• ▒ the Offer Consideration represents a significant premium;
• the Offer represents fair value for HCN Shareholders; 鑗
• ※ Primary already holds a 25.45% shareholding in HCN;
• 缀 there are risks in not accepting the Offer:
• the state of the party has indicated to the Board an intention to make a takeover offer; and
• ▒ you will not incur any brokerage fees.

In making their recommendation, the Directors are required by their fiduciary duties to take into account a wide range of factors, including the value and certainty of the Offer and the likelihood that any superior proposal may be subsequently made.

Each of the Directors intends to accept Primary's Offer for those HCN Shares held by them or on their behalf in the absence of a superior proposal.

Further detail on the reasons for the Directors' recommendation is contained below in Sections 1.2 - 1.10 of this Target's Statement.

1.2 The Offer is superior to the previously proposed offer by IBA Health

On 3 November 2004, IBA Health announced its intention to make an unsolicited takeover offer for HCN. IBA Health stated that it would offer 1.73 fully paid ordinary IBA Health shares for each HCN Share, which effectively valued HCN at approximately \$83 million on an equity value basis (equivalent to \$1.31 per HCN Share based on IBA Health's closing sale price on 2 November 2004).

A chronology of key events that occurred in relation to IBA Health's announced proposal prior to the announcement of Primary's Offer is summarised below:

• ▒ on 11 November 2004, IBA Health acquired 6.9 million HCN Shares at \$1.40 per HCN Share taking its stake to 10.9%. The terms of IBA Health's proposed takeover offer were automatically varied such that IBA Health was required to offer the equivalent of \$1.40 in IBA Health shares per HCN Share;
• on 6 December 2004, IBA Health acquired 5.7 million HCN Shares at \$1.72 per HCN Share taking its stake to 19.9%. The terms of IBA Health's proposed takeover offer were automatically varied such that IBA Health was required to offer the equivalent of \$1.72 in IBA Health shares per HCN Share; and
• to 7 December 2004, IBA Health lodged its bidder's statement and declared its offer final and that it would not be increased.

IBA Health's announced proposal was subject to a number of conditions including:

• ▒ 50.1% minimum acceptance;
• 3 IBA Health's share price not trading below \$0.70 on ASX between 3 November 2004 and the date of its offer (IBA Health announced on 17 November 2004 it would not rely on this condition provided the VWAP of its scrip was not less than \$0.70 per IBA Health share during the pricing period for its offer under section 621 of the Corporations Act);
• ▒ no regulatory action;
• mo prescribed occurrences occurring;
• the more material adverse change to the financial performance of HCN occurring; and
• 38 no material acquisitions, disposals or changes in the conduct of the HCN business occurrina.

Given these conditions, the Board considered that the proposed offer from IBA Health was inherently uncertain. For example, from 17 November 2004 to 9 December 2004 the daily VWAP of IBA Health shares was less than 70 cents and the IBA Health share price closed at \$0.66 on 9 December 2004, the day prior to Primary's announcement. Therefore, at the time of announcement of Primary's Offer, there was no certainty that the IBA Health proposal would be put to HCN Shareholders.

The proposal announced by IBA Health was also unsolicited, based on IBA Health scrip (the value of which was necessarily less certain than cash) and was declared final.

As a result of this unsolicited proposal, the Board determined it would be in HCN Shareholders' best interests to make inquiries of a number of parties that it considered might be interested in submitting a superior proposal.

Primary's Offer is a 100% cash offer that is valued at \$1.75 per HCN Share with no defeating conditions. Primary's Offer is superior to the previously proposed offer by IBA Health, giving HCN Shareholders greater certainty of the offer proceeding and clarity to value. HCN Shareholders will be paid within five business days of acceptance of the Offer.

On 14 December 2004, IBA Health announced that it would not proceed with its takeover bid for HCN given Primary's all cash offer at \$1.75 per HCN Share announced on 10 December 2004.

1.3 You will receive cash consideration

If you accept Primary's Offer, you will receive cash consideration of \$1.75 per HCN Share. You will receive payment for your HCN Shares within five business days of acceptance of the Offer. The Directors believe that as the Offer consists of cash consideration, it has greater certainty and clarity to value than the previously proposed offer from IBA Health.

1.4 There are no defeating conditions

Primary's Offer is not subject to any defeating conditions. Therefore, the Offer provides you with certainty that you will receive cash payment for your HCN Shares within five business days of acceptance of the Offer.

As noted above in Section 1.2, the previously proposed offer from IBA Health was subject to a number of conditions.

1. Reasons you should ACCEPT Primary's Offer in the absence of a superior proposal

1.5 The Offer Consideration represents a significant premium

On 3 November 2004. IBA Health announced its intention to make an unsolicited takeover offer for HCN. The closing share price on 2 November 2004, the last trading day prior to IBA Health's announcement, was \$1.21 per HCN Share.

The price offered by Primary of \$1.75 per HCN Share reflects a premium of:

• ※ 45% over \$1.21, the closing price for HCN Shares on 2 November 2004;
• 47% over \$1.19. HCN's one month VWAP prior to the announcement of IBA Health's bid; 鐖
• 46% over \$1.20, HCN's three month VWAP prior to the announcement of IBA Health's bid; 繎 and
• 48% over \$1.18, HCN's six month VWAP prior to the announcement of IBA Health's bid.

Offer Consideration of \$1.75 per Share

Notes:

• One month VWAP is the volume weighted average price for one month up to and including 2 November 2004. 1. Three month VWAP is the volume weighted average price for three months up to and including 2 November 2004. $2.$
• 1. Six month VWAP is the volume weighted average price for six months up to and including 2 November 2004.

• Premium calculations have been based on HCN's closing price and VWAPs rounded to two decimal places.

1.6 The Offer represents fair value for HCN Shareholders

The Directors consider the Offer is within the range of values they regard as fair. This has included consideration of:

• the Offer Consideration, which is at a substantial premium to the trading price prior to 鐖 the announcement by IBA Health of its proposed bid for HCN; and
• 鐖 Primary's Offer being 100% cash.

1.7 Primary already holds a 25.45% shareholding in HCN

As at 23 December 2004, the date of Primary's last substantial shareholder notice. Primary had a relevant interest in 25.45% of HCN, which was acquired on market. Although Primary's Offer will be made under an off-market bid, Primary also intends to stand in the market at \$1.75 an HCN Share during the bid period, which commenced with the service of Primary's Bidder's Statement on HCN on 13 December 2004.

The Board believes this is relevant to determining whether it is likely that Primary could achieve control of HCN. The Board does note IBA Health's relevant interest of 19.9% in this context. As at 29 December 2004, IBA Health had reserved its position on what it intends to do with its shareholding in HCN.

1.8 There are risks in not accepting the Offer

The Directors believe that in the absence of the Offer, or takeover speculation, HCN Shares may trade below their current level in the near term and may decline to a level at or around the price prior to the announcement of IBA Health's proposed takeover offer on 3 November 2004.

In this context, it should be noted that since 3 November 2004, HCN has announced the following initiatives:

• stablishment of a long term alliance with Ascribe Computer Software Ltd (announced 25 November 2004):
• the roll out of IRIS radiology software to another 55 I-MED clinics (announced 25 November 2004); and
• a strategic alliance with PCA NU Systems Pty Ltd (announced 18 November 2004).

Further, from the close of trading on 2 November 2004 to the close of trading on 29 December 2004, the ASX All Ordinaries index has increased by 6.3%.

1.9 No other party has indicated to the Board an intention to make a takeover offer

As a result of the unsolicited proposal from IBA Health announced on 3 November 2004, your Board determined it would be in Shareholders' best interests to make inquiries with a number of parties that it considered might be interested in submitting a superior proposal to that from IBA Health.

While other parties have communicated with HCN, at this stage, no parties, other than Primary and IBA Health, have indicated to the Board an intention to make a takeover offer for HCN Shares. IBA Health has subsequently announced its intention not to proceed with its offer. leaving Primary as the only party that has made a takeover bid for HCN Shares.

1.10 You will not incur any brokerage fees

Primary has announced an intention to stand in the market at \$1.75 per HCN Share during the bid period. If you accept the Offer, you will not incur any brokerage fees that you would otherwisebe likely to pay if you sold your HCN Shares on market. Further, if you accept the Offer you will be entitled to any increase in the Offer Consideration.

If you sell your HCN Shares on market, you will receive payment in the ordinary course, which would typically be on the third business day. If you accept the Offer, you will be paid within five business days of acceptance.

24 Other Innochtent considerations for HANSHAMOIQGIS

2.1 You will not participate in any potential future increase in HCN's share price

If you accept the Offer, you will forego any potential increase in HCN's share price that may occur in the future.

HCN's share price may improve due to future operational performance exceeding current market expectations or as a result of successful execution of HCN's stated business initiatives, as referred to in the Chairman's Address to the Annual General Meeting held on 9 November 2004.

2.2 You may be subject to capital gains tax or income tax If you accept the Offer, you may be liable to pay capital gains tax or income tax. The Directors recommend that you obtain professional taxation advice in relation to your specific circumstances.

2.3 Dividends and other rights

Under the terms of the Offer, Primary is entitled to all rights (including the right to any dividend that is declared) that accrue after 9 December 2004 in respect of those HCN Shares that Primary acquires under the Offer. Primary also reserves the right to reduce the consideration offered by the value of such rights if you do not provide all documents necessary to transfer those rights to Primary or if you have already received the benefit of the rights.

As a result of recommending the Offer, in the absence of a superior proposal, the Board does not currently intend to declare or pay any dividend or capital distribution during the Offer Period.

3. Frequently asked questions

Set out below is a list of questions commonly asked by shareholders in relation to takeover offers generally and applicable answers in relation to Primary's Offer.

What is Primary offering for my Shares?

Primary is offering to acquire all of your HCN Shares. The consideration that Primary is offering for your HCN Shares is \$1.75 cash per HCN Share.

What do your Directors recommend?

Each Director recommends that you ACCEPT Primary's Offer in the absence of a superior proposal.

The summary of reasons for your Directors' recommendation is on page 4.

What should I do?

You should seek legal, financial or taxation advice from your professional adviser on the action that you should take in relation to Primary's Offer.

To follow your Directors' recommendation to ACCEPT Primary's Offer in the absence of a superior proposal, you should follow the instructions contained in Section 10.4 of Primary's Bidder's Statement.

How do I ACCEPT Primary's Offer?

To ACCEPT Primary's Offer, follow the instructions contained in Section 10.4 of Primary's Bidder's Statement.

3. Frequently asked questions

Are there any tax issues?

A general description of the taxation treatment for HCN Shareholders accepting Primary's Offer is set out in Section 8 of Primary's Bidder's Statement. However, you should consult vour taxation adviser or financial adviser for detailed taxation advice.

When do I have to make a decision?

If you wish to accept Primary's Offer, you must do this before its scheduled closing date. Primary has stated that the Offer remains open until 7pm Sydney time on 20 January 2005. It is possible that Primary may choose to extend the Offer Period in accordance with the Corporations Act. However, Primary cannot close the Offer earlier than this date, except in accordance with the Corporations Act.

If you do not wish to accept Primary's Offer, you do not need to do anything.

What will happen if Primary increases its Offer Consideration?

If Primary increases its Offer Consideration, all HCN Shareholders who accept the Offer will be entitled to the benefit of that increase in the Offer Consideration even if they have already accepted Primary's Offer before that increase in the Offer Consideration.

If you sell your HCN Shares on ASX, you will lose the opportunity to participate in any increased Offer Consideration.

Can my HCN Shares be compulsorily acquired?

Your HCN Shares cannot be compulsorily acquired unless Primary becomes entitled to compulsorily acquire your HCN Shares under the Corporations Act. Further details are set out in Section 4.6 of this Target's Statement.

What is a bidder's statement?

The documents sent to you by Primary include a document called a bidder's statement. It contains information about Primary's Offer.

What is a target's statement?

This document is a target's statement. It contains information prepared by your Directors to help you determine whether to accept or reject Primary's Offer.

Your Directors unanimously recommend that you ACCEPT Primary's Offer in the absence of a superior proposal.

What happened to IBA Health's Bid?

Following the announcement of Primary's Offer, IBA Health's Bid was withdrawn on 14 December 2004.

What if I have further questions?

To further assist Shareholders, HCN has established a Shareholder Information Line in relation to Primary's Offer. The telephone number is 1300 308 423 (toll free within Australia) or +61 3 9415 4238 (outside Australia). It is available Monday to Friday between 8.30am and 6pm Sydney time.

Shareholders should note that, as required by the Corporations Act, all calls to the Shareholder Information Line will be recorded.

Announcements made to ASX by HCN and other important information can be obtained from HCN's website at www.hcn.com.au or from the ASX website at www.asx.com

4. Additional information

4.1 Interests of Directors, related bodies corporate and associates

Interests in HCN Shares and HCN Options

The Directors have the power to exercise control over and/or have relevant interests in the HCN Shares and HCN Options shown below:

NIRECTOR	HCN SHARFS	HEN APTIANS	NATURE OF POWER TO EXERCISE CONTRO
Dr Jennifer A Alexander	100,000	O	Held in own name
	540,100	n	Held jointly by Jennifer Alexander and
			Inn Alexander
	20,000	Û	Held in the name of Muskbill Pty Ltd
			(in respect of which Jennifer Alexander
			has an interest as shareholder and
			director) as trustee of the Alexander
			Family Super Fund of which Jennifer
			Alexander is a member
Neil R Cullimore	500,954	100.000	Held in own name
Christopher M Fullerton	8	150,000 2	Held in own name
	3,000,000	0	Held in the name of Mandalay Capital
			Pty Limited in respect of which
			Christopher Fullerton has a controlling
			interest as shareholder and director
Charles L Gibbon	3,821,820	Û	Held in the name of Fabernu (No 2)
			Pty Limited in respect of which Charles
			Gibbon has a controlling interest as
			shareholder and director
Michael J Gregg	2,598,769	748,3333	Held in own name
	200,000	0	Held by MSG Holdings Pty Limited
			(MJ & SJ Gregg Superannuation Fund
			Account)
Total	10.781.643	998.333

Notes.

1. Issued on the same terms as apply under the HCN Executive Option Scheme.

2. Issued on the same terms as apply under the HCN Executive Option Scheme.

3. Issued under the HCN Executive Option Scheme.

No dealings in HCN Shares

Except as described below, there have been no acquisitions or disposals of HCN Shares by any Director, related body corporate of HCN or associate of HCN in the four months prior to the date of this Target's Statement.

On 15 December 2004:

100,000 HCN Shares held in Christopher Fullerton's own name were sold on market to Primary for \$1.75 per HCN Share; and

400,000 HCN Shares held in the name of Mandalay Capital Pty Limited, in respect of which Christopher Fullerton has a controlling interest as shareholder and director, were sold on market to Primary for \$1.75 per HCN Share.

No interests in Primary securities

No Director, related body corporate of HCN or associate of HCN has any interest whatsoever in any securities of Primary or any related body corporate or associate of Primary.

No dealings in Primary securities

There have been no acquisitions or disposals of Primary securities by HCN or any Director, related body corporate of HCN or associate of HCN in the four months prior to the date of this Target's Statement.

No agreements conditional on Offer

There is no agreement or arrangement made between any Director, related body corporate of HCN or associate of HCN and any other person in connection with, or conditional on, the outcome of Primary's Offer.

No interest in contracts with Primary

No Director, related body corporate of HCN or associate of HCN has any interest in any contract entered into by Primary or any director, related body corporate or associate of Primary.

No agreement to receive any benefit from Primary

No Director, related body corporate of HCN or associate of HCN has agreed, or is entitled, to receive any benefit whatsoever from Primary or any director, related body corporate or associate of Primary.

Benefits on retirement from office

Except as described below, no benefit will or may be given to any Director in connection with his or her retirement from office in HCN.

The employment contract for Michael Gregg contains provisions for payments to be made to him if his position as Managing Director is made redundant. Primary has indicated in its Bidder's Statement that, subject to the percentage of HCN Shares Primary acquires relevant interests in, it intends to conduct a review of HCN's personnel and that, as a result of that review, it may be necessary to make some HCN employees redundant. Primary has indicated that it has no current intention in that regard.

4.2 Directors' intentions

Each of the Directors who has an interest in HCN Shares intends to accept Primary's Offer in relation to his or her HCN Shares in the absence of a superior proposal.

ASX will be notified of any change in any Director's interests in HCN Shares in accordance with the requirements of the ASX Listing Rules.

4. Additional information

4.3 Change to financial position since last financial report

HCN's audited financial statements for the financial year ended 30 June 2004 were released to ASX on 8 October 2004.

On 10 August 2004 HCN announced that the Company's profit after tax for the 2004/2005 financial year is expected to approximate \$5.5 million. That announcement also set out the key assumptions, upsides and risks associated with that profit quidance. That profit guidance remains unchanged apart from the impact of:

• ▒ takeover costs:
• the takeover on the operations of the Company;
• the management of the Company by Primary should Primary's Offer be successful; and 缀
• ▒ two substantial shareholders. IBA Health and Primary.

The Directors are not aware of any material change to the financial position of HCN from what has been publicly disclosed.

4.4 Effect of Primary's Offer on HCN Shares issued under Employee Share Plan and on HCN Options

HCN Shares issued under Employee Share Plan As at 29 December 2004, approximately 114 HCN employees held approximately 232,747 HCN Shares under the HCN Employee Share Plan (ESP).

In general, HCN Shares issued under the ESP cannot be transferred until three years after the HCN Shares were issued. HCN employees who hold HCN Shares subject to this restriction cannot accept Primary's Offer in respect of those HCN Shares.

If, however, Primary proceeds to compulsory acquisition, each HCN Share issued under the ESP may be compulsorily acquired despite this restriction. Further information about compulsory acquisition is set out in Section 4.6 of this Target's Statement.

HCN Options

As at 29 December 2004, approximately 27 HCN executives held approximately 3,690,333 HCN Options under the HCN Executive Option Scheme (EOS) and two non-executive Directors held 250,000 HCN Options issued on the same terms as apply under the EOS. 150,000 HCN Options have also been issued to a contractor on substantially the same terms as apply under the EOS in consideration for the performance of services for HCN.

The exercise prices of these HCN Options range from \$0.66 to \$2.00 per HCN Share. The HCN Options are usually exercisable only between two and five years after their issue and, if subject to exercise conditions, if those exercise conditions have been satisfied.

However, where a takeover bid is publicly announced, HCN Options may be exercised at any time after the announcement and before the end of the offer period. Consequently, all HCN Options may be exercised at any time before the end of the Offer Period.

Primary's Offer extends to HCN Shares that come into existence during the Offer Period as a result of the exercise of any of the HCN Options. Accordingly, the holders of HCN Options who are issued HCN Shares on the exercise of their HCN Options during the Offer Period may accept Primary's Offer in respect of those HCN Shares.

If Primary and its associates have relevant interests in at least 90% of the HCN Shares at the end of the Offer Period, Primary must offer to buy out the holders of HCN Options under Division 3 of Part 6A.1 of the Corporations Act.

4.5 Tax considerations for HCN Shareholders

Section 8 of Primary's Bidder's Statement provides a general overview of the Australian taxation implications for Australian residents on the disposal of their HCN Shares by accepting the Offer. That overview is not exhaustive and does not take into account the specific circumstances of any particular HCN Shareholder. HCN Shareholders should seek their own independent advice on the taxation consequences relevant to their circumstances.

4.6 Compulsory acquisition and buy-out of HCN Shares

Compulsory acquisition

According to Primary's Bidder's Statement, if Primary becomes entitled to compulsorily acquire HCN Shares, it intends to do so.

Primary may compulsorily acquire all remaining HCN Shares under Division 1 of Part 6A.1 of the Corporations Act if Primary and its associates have relevant interests in at least 90% of the HCN Shares during or at the end of the Offer Period. If Primary wishes to proceed with compulsory acquisition, it must lodge a compulsory acquisition notice with ASIC during or within one month after the end of the Offer Period and send the notice to ASX and all HCN Shareholders. The consideration per HCN Share payable by Primary on compulsory acquisition must be the same as that payable under Primary's Offer.

The Corporations Act provides HCN Shareholders with rights to challenge compulsory acquisition in Court. The Court may only prevent the compulsory acquisition from proceeding if the Court is satisfied that the consideration is not fair value for the securities.

If compulsory acquisition takes place, HCN Shareholders who have their HCN Shares compulsorily acquired are unlikely to receive the consideration for them for over a month after the compulsory acquisition notice is issued.

Compulsory buy-out

If Primary and its associates have relevant interests in at least 90% of the HCN Shares at the end of the Offer Period, Primary must offer to buy out the remaining holders of HCN Shares under Division 2 of Part 6A.1 of the Corporations Act.

4.7 Agreement with Primary

On 10 December 2004, HCN entered into an agreement with Primary (Agreement).

It was a pre-condition of Primary's Offer that HCN enter into the Agreement.

4. Additional information

Under the key terms of the Agreement:

• 丝 HCN agreed that until the end of the Offer Period it would not do, and it would procure that none of its subsidiaries did, any of the things described in section 652C(1) of the Corporations Act (other than to issue HCN Shares on the exercise of HCN Options) or cause any of the circumstances described in section 652C(2) of the Corporations Act to occur:
• M HCN agreed to reimburse Primary its actual external advisory costs in relation to Primary's Offer up to a maximum of \$1.5 million (Costs) if at any time before 30 June 2005:
• any Director does not make or withdraws their recommendation to HCN Shareholders to accept Primary's Offer in the absence of a superior proposal; or
• any Director does not make or withdraws their recommendation to HCN Shareholders to reject IBA Health's Bid; or
• a person other than Primary acquires voting power (as defined under section 610 of the Corporations Act) in more than 45% of HCN; or
• any Director makes a recommendation to HCN Shareholders in favour of any proposal or offer that would, if completed substantially in accordance with its terms, result in a person other than Primary acquiring voting power in more than 45% of HCN, including IBA Health's Bid (Competing Takeover Bid);
• ※ HCN is not required to reimburse the Costs or they are refundable if:
• Primary acquires voting power in more than 45% of HCN; or
• reimbursement would involve a breach of fiduciary or other legal duties, or is unlawful or unenforceable on any other basis, or the Takeovers Panel makes an order against such reimbursement;
• ▒ HCN agrees that Primary's Offer documentation may be sent to HCN Shareholders on a date nominated by Primary that is earlier than the date for sending under item 6 of section 633(1) of the Corporations Act;
• Primary agrees that its Offer will provide that HCN Shareholders will receive the Offer Consideration within five business days after they accept the Offer; and
• for 60 days after 10 December 2004, HCN must not solicit, initiate or encourage any expression of interest, offer or proposal by any person to make a Competing Takeover Bid.

4.8 Rejecting Primary's Offer and remaining an HCN Shareholder Primary's Offer is not subject to any minimum acceptance condition.

If Primary and its associates have relevant interests in at least 90% of the HCN Shares during or at the end of the Offer Period, Primary may compulsorily acquire all remaining HCN Shares under Division 1 of Part 6A.1 of the Corporations Act. According to Primary's Bidder's Statement, if Primary becomes entitled to compulsorily acquire HCN Shares, it intends to do so. Section 4.6 of this Target's Statement contains further details about compulsory acquisition.

There are risks associated with rejecting Primary's Offer. It is possible that Primary may obtain majority ownership of HCN but will not be entitled to compulsorily acquire HCN Shares. This would give Primary significant influence over the outcome of decisions about HCN's financial and operating policies. Primary would then be in a position to determine the level of dividends to be paid on HCN Shares having regard to the ongoing capital requirements of HCN and Primary's views on capital management, among other considerations.

If Primary obtains majority ownership of HCN, it is possible that the market price of HCN Shares will fail after the close of the Offer. This may occur because control of HCN will have passed to Primary. Accordingly, any premium contained in the HCN Share price during the Offer Period that represents a reward for control (the so called "control premium") will cease to exist. In addition, the free-float and liquidity in HCN Shares may be reduced. This may also have a negative impact on the HCN Share price.

Primary's intentions regarding HCN are set out in Section 5 of the Bidder's Statement.

4.9 Litication

Except as referred to in this Target's Statement, the Board is not aware of any material litigation or dispute involving HCN or any of its subsidiaries.

HCN had instigated action against Pro Medicus Limited claiming infringement of HCN's copyright in its clinical management software program known as Medical Director. However, on 11 August 2004, HCN announced that it had instituted steps to discontinue its action. The taxing of costs in relation to this action has yet to be carried out.

4.10 Consents to statements included in Target's Statement

This Target's Statement contains statements which are made, or are based on statements which are made, in documents lodged by Primary and by IBA Health with ASIC or given to ASX. In accordance with ASIC Class Order 01/1543, the consent of Primary and IBA Health is not required for the inclusion of such statements. Any Shareholder who would like a copy of any of those documents may obtain a copy (free of charge) during the Offer Period by writing to HCN (Attention: Company Secretary), 39-41 Chandos Street, St Leonards NSW 2065.

Caliburn Partnership Pty Ltd has given, and has not withdrawn before the date of this Target's Statement, its consent to being named as the financial adviser to HCN in this Target's Statement in the form and context in which it is named.

Minter Ellison have given, and have not withdrawn before the date of this Target's Statement, their consent to being named as legal adviser to HCN in this Target's Statement in the form and context in which they are named.

4. Additional information

4.11 Disclaimers

The information on Primary and the Bidder's Statement in this Target's Statement has been obtained by HCN from the Bidder's Statement and other publicly available information, except where disclosed otherwise. HCN and its Directors are unable to verify the accuracy or completeness of the information on Primary or the Bidder's Statement.

4.12 Other sources of information

You may wish to review information contained in the following other documents in deciding whether or not to accept Primary's Offer:

• ※ HCN's 2004 Annual Report;
• information regarding HCN which is available on HCN's website: www.hcn.com.au; and
• the Bidder's Statement. You should already have a copy of this document. If you do not, a copy can be obtained from ASX's website: www.asx.com.au.

4.13 Approval of Target's Statement

This Target's Statement has been approved by a resolution passed by the Directors.

Signed by a Director, pursuant to section 351 of the Corporations Act:

Cur Fallerton

Christopher M Fullerton Chairman Health Communication Network Limited

By DeilillionSteiner Halle

5.1 Definitions

In this Target's Statement:

ASIC means the Australian Securities and Investments Commission.

ASX means Australian Stock Exchange Limited or, as the context requires, the financial market operated by it.

Bidder's Statement or Primary's Bidder's Statement means Primary's bidder's statement dated 13 December 2004.

Board means the board of directors of HCN.

Corporations Act means the Corporations Act 2001 (Cwith).

Director means a director of HCN.

HCN or Company means Health Communication Network Limited ABN 76 068 458 515.

HCN Options means the options to subscribe for HCN Shares issued to:

• s executives under the HCN Executive Option Scheme (the terms of which are set out in a document entitled "The Terms and Conditions of Health Communication Network Limited Executive Option Scheme");
• the son-executive Directors on the same terms as apply under the HCN Executive Option Scheme; and
• a contractor of HCN on substantially the same terms as apply under the HCN Executive Option Scheme,

on issue as at the date set by Primary under section 633(2) of the Corporations Act in relation to the Offer.

HCN Shareholder or Shareholder means a person registered in the register of members of HCN as a holder of HCN Shares.

HCN Shares or Shares means fully paid ordinary shares in HCN.

IBA Health means IBA Health Limited ABN 66 063 539 702.

IBA Health's Bid means the offer announced by IBA Health on 3 November 2004 and to be made by IBA Health set out in Section 9 of IBA Health's bidder's statement dated 7 December 2004. Under that offer, IBA Health was to offer for each HCN Share that number of shares in IBA Health, the value of which was to equal \$1.72. That offer by IBA Health was subject to a number of defeating conditions.

Offer Consideration means \$1.75 cash per HCN Share.

Offer Period means from 19 December 2004 to 20 January 2005, unless extended.

Primary means Primary Health Care Limited ABN 24 064 530 516.

Primary's Offer or Offer means the unconditional off-market takeover bid constituted by each offer Primary has made to purchase all HCN Shares for \$1.75 cash per HCN Share.

Target's Statement means this Target's Statement.

VWAP means volume weighted average price.

5. Definitions and interpretation

5.2 Interpretation

In this Target's Statement, unless the context otherwise requires:

• the singular includes the plural and vice versa and words importing one gender include other genders;
• terms defined in the Corporations Act as at the date of this statement have the meanings ascribed to them in the Corporations Act at that date;
• a reference to any currency is a reference to Australian currency unless otherwise stated;
• a reference to a statute of any parliament or any section, provision or schedule of a statute of any parliament includes a reference to any statutory amendment, variation or consolidation of the statute, section, provision or schedule and includes all statutory instruments issued under the statute, section, provision or schedule;
• a reference to a paragraph, section, schedule, appendix or annexure is a reference to a part of this statement and a reference to this statement includes any schedules, appendices and annexures; and
• 丝 headings are used for reference only.

Corporate directory

Directors

Christopher M Fullerton, Chairman Commission and Christopher Christopher Miller Michael J Gregg, Managing Director Contract of American Contract of America Dr Jennifer A Alexander Neil R Cullimore Charles L Gibbon

Company secretary Richard Ulrick

Registered office Level 4 39-41 Chandos Street St Leonards NSW 2065

Financial adviser

Caliburn Partnership Pty Ltd ACN 086 678 346 Level 34, Chifley Tower 2 Chifley Square Sydney NSW 2000

Legal adviser and the contract of the contract of the contract of the contract of the contract of the contract

Minter Ellison Aurora Place 88 Phillip Street Sydney NSW 2000