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Chorus Limited Level 10, 1 Willis Street P O Box 632 Wellington 6140 New Zealand

STOCK EXCHANGE ANNOUNCEMENT

24 August 2015

2015 full year results & annual report – supplementary documents

Further to the filing of Chorus’ Appendix 4E, the following supplementary documents are attached in relation to Chorus’ FY15 full year results and annual report:

Media Release
Investor Presentation (including FY16 outlook and guidance)
NZX Appendix 1
Corporate Governance Statement
Appendix 4G
Section 209 Notice

ENDS

For further information:

Nathan Beaumont Media and PR Manager Phone: +64 4 896 4352 Mobile: +64 (21) 243 8412 Email: [email protected]

Brett Jackson Investor Relations Manager Phone: +64 4 896 4039 Mobile: +64 (27) 488 7808 Email: [email protected]

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Chorus Limited Level 10, 1 Willis Street P O Box 632 Wellington 6140

Email: [email protected]

STOCK EXCHANGE ANNOUNCEMENT

24 August 2015

Chorus full year result for FY15

FY15 impacted substantially by regulatory pricing decisions

Net profit after tax $91m (FY14: $148m ), no dividend
EBITDA $602m (FY14: $649m)
Operating revenue of $1,006m (FY14: $1,058m)
Chorus’ UFB rollout now 44% complete (FY14: 31%)
Broadband uptake grew 4% to 1,207,000

Chorus has today reported a net profit after tax (NPAT) of $91m (FY14: $148m) and earnings before interest, tax, depreciation and amortisation (EBITDA) of $602m (FY14: $649m) for the year ended 30 June 2015.

Operating revenue for the period was $1,006m (FY14: $1,058m) and operating expenses were $404m (FY14: $409m). Depreciation and amortisation for the period was $324m (FY14: $322m) , delivering earnings before interest and tax (EBIT) of $278m (FY14: $327m ).

Chorus’ financial result for FY15 was substantially impacted by the requirement to implement initial regulatory pricing decisions based on international benchmarking, with EBITDA down $47m when compared to FY14.

The regulatory pricing remains under review and the ongoing uncertainty has overshadowed positive increases in fixed line and broadband connections, as well as Chorus’ work on the Ultra-Fast and rural broadband rollouts that continue to deliver better broadband ahead of schedule.

"The business initiatives we implemented in managing for cash have delivered results ahead of target for the year, going some way towards offsetting the very significant reduction in regulated pricing. This together with the slightly improved draft copper pricing, has helped the share price recover some value, although we remain unable to pay a dividend,” said Mark Ratcliffe, Chorus CEO.

“Chorus is well placed to help New Zealand realise the socio-economic benefits of broadband as demand for digital connectivity grows. We are seeing growing demand for better broadband for educational, business and entertainment purposes, - - reinforcing Chorus’ role as an essential utility provider. A fit for purpose regulatory framework will help New Zealand realise even greater broadband potential,” he said.

Operating performance

Broadband connections grew by four percent to 1,207,000 during FY15 and for the second consecutive year, fibre broadband connections more than doubled to 88,000.

Forty-four percent of Chorus’ Ultra-Fast Broadband (UFB) rollout is now complete taking fibre past 368,000 premises. The UFB build is complete in five towns – Ashburton, Blenheim, Oamaru, Taupo and Timaru – with a further five towns expected to be completed in FY16.

Rural New Zealand is also a benefitting. The first phase of the Government’s Rural Broadband Initiative (RBI) is nearly complete with new or upgraded broadband coverage extended to 93,000 rural lines, with just 10,500 more to be covered in FY16.

Regulation

Regulatory developments continued to be the single most important factor affecting Chorus and its shareholders during the year. Revenues from Chorus’ copper network provide the basis for Chorus’ ongoing investment in better broadband infrastructure, particularly the multi-billion dollar investment to build and connect New Zealanders in Chorus UFB areas.

While the Commerce Commission’s recent regulatory decisions support an increase in copper pricing relative to its prior benchmarked price, until the final pricing decision is announced later this year Chorus must continue to operate on the reduced pricing introduced on 1 December 2014. Chorus continues to believe that the draft pricing significantly undervalues the true cost of network investment in New Zealand.

Longer term investment decisions also remain challenging in this context, exacerbated by the absence of a post-2020 regulatory framework.

Chorus remains focused on improving returns to shareholders and securing a regulatory environment that enables shareholders to earn a fair return on the investment they are making in bringing better broadband to New Zealand.

Dividend

Chorus remains unable to update investors on dividend policy until the Commerce Commission’s final pricing review is complete. This has been delayed until December.

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FY16 outlook

FY16 Gross Capex: $580m—$630m FY16 EDITDA: A modest decline relative to adjusted* FY15 EBITDA of $546m

*Adjusted EBITDA is a non-GAAP profit measure which provides comparable period on period information. Please refer to page 27 of the Chorus 2015 annual report for more detail on the adjustments made.

ENDS

Chorus Chief Executive, Mark Ratcliffe, and Chief Financial Officer, Andrew Carroll, will discuss the final results at a briefing in Wellington from 10.00am (NZ time). The webcast will be available at www.chorus.co.nz/webcast.

For further information:

Nathan Beaumont Brett Jackson Stakeholder Communications Manager Investor Relations Manager Phone: +64 4 896 4352 Phone: +64 4 896 4039 Mobile: +64 (21) 243 8412 Mobile: +64 (27) 488 7808 Email: [email protected] Email: [email protected]

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/ PAGE 1/ PAGE 1

Disclaimer

This presentation may contain forward-looking statements regarding future events and the future financial performance of Chorus, including forward looking statements regarding industry trends, regulation and the regulatory environment, strategies, capital expenditure, the construction of the UFB network, possible business initiatives, credit ratings and future financial and operational performance. These forward-looking statements are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond Chorus’ control, and which may cause actual results to differ materially from those expressed in the statements contained in this presentation. No representation, warranty or undertaking, express or implied, is made as to the fairness, accuracy or completeness of the information contained, referred to or reflected in this presentation, or any information provided orally or in writing in connection with it. Please read this presentation in the wider context of material published by Chorus and released through the NZX and ASX.
Except as required by law or the NZX Main Board and ASX listing rules, Chorus is not under any obligation to update this presentation at any time after its release, whether as a result of new information, future events or otherwise.
The information in this presentation should be read in conjunction with Chorus’ audited consolidated financial statements for the year ended 30 June 2015. This presentation includes a number of non-GAAP financial measures, including "EBITDA”. These measures may differ from similarly titled measures used by other companies because they are not defined by GAAP or IFRS. Although Chorus considers those measures provide useful information they should not be used in substitution for, or isolation of, Chorus' audited financial statements. Refer to the presentation appendices for further detail relating to EBITDA measures.
This presentation does not constitute investment advice or a securities recommendation and has not taken into account any particular investor’s investment objectives or other circumstances. Investors are encouraged to make an independent assessment of Chorus.

/ PAGE 2

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Agenda

Mark Ratcliffe, CEO

Business performance overview
Connections trends
UFB and RBI programmes

Andrew Carroll, CFO

Financial results
Capex, CPPP and CPPC
Guidance update
Net debt and capital management
FPP update

Mark Ratcliffe, CEO

Bringing NZ better broadband
Improving the fibre process
Outlook
Q and A

/ PAGE 4

OVERVIEW

Regulatory impact overshadows investment

FY15 v FY14 change > Net Profit After Tax of $91 million 39% > EBITDA of $602 million 7% > Revenue of $1,006 million 5% > Total fixed line connections increased to 1,794,000 1% > Broadband connections increased to 1,207,000 4% > Better broadband rollouts on track ▪ UFB premises 44% complete 13% ▪ RBI lines 90% complete 20% ▪ 588,000 end-users within reach of better broadband 38%

/ PAGE 5

Fixed line connections

Fixed line connections		30 June 2015	30 June 2014
Baseband copper		1,408,000	1,471,000
UCLL		123,000	127,000
SLU/SLES		3,000	4,000
Naked Basic/Enhanced UBA and Naked VDSL		159,000	117,000
Data services over copper		13,000	16,000
Fibre		88,000	42,000
Total fixed line connections		1,794,000	1,777,000
-80 -60 -40 -20 0 20 40 60 Total connections up by17,000 lines ▪ includes 16,000 baseband copper lines previously unbilled Shift from baseband copper to other connection types continues ▪ 110%increase in fibre lines ▪ 36%growth in ‘Naked’ lines UCLL dlii UFB fi	Change in connections



	Baseband UCLL/SLU Data services Naked lines Fibre
	copper over copper

Total connections up by 17,000 lines
Shift from baseband copper to other connection types continues
UCLL declining as UFB footprint grows

/ PAGE 6

Continuin broadband rowth g g

Broadband connections	30 June 2015	30 June 2014
Basic UBA	96,000	164,000
Naked Basic UBA	10,000	9,000
Enhanced UBA	792,000	802,000
Naked Enhanced UBA	118,000	93,000
VDSL	85,000	49,000
Naked VDSL	31,000	15,000
Fibre(mass market)	75,000	31,000
Total broadband connections	1,207,000	1,163,000

Increase of 44,000 total broadband connections
strong growth in VDSL and fibre as end-users transition from UBA connections
16% of connections now high-speed VDSL or fibre

Change in broadband connections

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60
40
20
0
Basic EUBA Naked Naked Naked VDSL Fibre
-20
UBA Basic EUBA VDSL
-40
UBA
-60
-80
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/ PAGE 7

Chorus connections drivers

Maintaining connections Reducing connections 1 Dec billing changes identified 16,000 baseband copper lines Expect decline over time of ~20,000 dual copper-fibre lines now being billed. previously retained for voice services for some RSP end-users. Fixed to mobile substitution: households with landline access Record net gain of 58,300 migrants in the June 2015 year. More decreased from 92% (2006 census) to 86% (2013 census). homes were consented in the first six months of 2015 than a year previously. ( Statistics NZ data ) RSPs leveraging enhanced rural broadband coverage and Local fibre companies expanding footprint: Chorus estimates performance; ~85% uptake on RBI network. ~250,000 end-users passed and uptake of ~35,000 lines.

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CNU demerger
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NZ fixed line market

> Significant changes in FY15: video content, RSP consolidation and new entrants

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

Sky TV Electricity
Deploying IP sector
set-top boxes
Neon Lightbox Netflix Quickflix
Launched in NZ in March 2015
Vodafone 2 [o] Spark M2 Others Trustpower
+ Callplus My Republic
+ Worldxchange + Snap + Orcon Now $49 intro plan
+ Woosh
HFC cable: Local Fibre Companies
Chorus
Wellington +
Enable Northpower
Christchurch • Copper broadband coverage to 97% lines (VDSL 60%)
~60k end-users • Fibre to x% lines by 2020; 14% uptake at 30 June 2015 Fibre past ~250k end-users and ~35,000 Ultrafast Fibre
connections at 30 June 2015
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Pay TV

Subscription

video on demand

Retail

service provider

Fixed line

access network

/ PAGE 9

Fibre market

88,000 fibre connections nationwide (FY14: 42,000)
68,000 fibre connections within UFB deployed footprint (FY14: 27,000)

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30%
22%
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~2,000 mass market connections added outside Chorus planned UFB
smaller RSPs continue to gain greater proportion of fibre market

> More RSPs promoting 100Mbps as standard fibre plan

July 2015: ~75% of net adds and changes 100Mbps+
100/20Mbps fibre ( Accelerate ) now $41 per month
30/10Mbps fibre now $38.50 per month

> Demand for premium business fibre continues

Premium business fibre

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14,000
12,000
30%
10,000
8,000
6,000
4,000
2,000
0
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FY14 FY15
Bandwidth Fibre + HSNS Direct/dark fibre
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UFB build on track

44% of way through rollout
495,000 end-users now within reach of Chorus UFB
total build complete for 368,000 premises
FY15 build complete for 107,000 premises vs target 106,000

Cumulative rollout plan FY15-FY20

Annual rollout plan FY15-FY20

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1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
FY15 FY16 FY17 FY18 FY19 FY20
Premises uptake - contract target Premises passed
UFB End-users connected End-users within reach
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160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
-
FY15 FY16 FY17 FY18 FY19 FY20
Premises passed End-users passed
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Note: Indicative plan only. Includes 45k greenfields premises

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UFB rollout progress

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Regional fibre uptake vs build

Chorus UFB Uptake by Candidate Area – June 2015

20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0%

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

UFB Uptake June % build complete June

 Chart shows end-user uptake as a proportion of UFB capable addresses (i.e. network is commissioned for service) ranked according to proportion of build complete premises in each area

/ PAGE 13

Rural Broadband rollout

Highly successful programme, tracking to lower end of expected range of $280-$295 million

$257m invested to 30 June

1,015 schools and 39 hospitals passed by fibre

93,000 lines within reach of better broadband; ~85% uptake

Average synch speed increased from less than 6Mbps to 9.3 Mbps

/ PAGE 14

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Income statement

	FY15 $m	FY14 $m
Operatingrevenue	1,006	1,058
Operatingexpenses	404	409
Earnings before interest, tax, depreciation and amortisation(EBITDA)	602	649
Depreciation and amortisation	324	322
Earnings before interest and income tax	278	327
Net interest expense	151	121
Net earnings before income tax	127	206
Income tax expense	36	58
Net earnings for theperiod	91	148

Non-statutory measure: FY15 adjusted EBITDA $546m relative to FY14 adjusted EBITDA of $518m (see Appendix 1 management commentary)

/ PAGE 16

Revenue

	FY15	FY14
	$m	$m
Basic copper	491*	543
Enhanced	268*	293
copper
Fibre	98	75
Value Added	36	38
Network
Services
Field Services	84	75
Infrastructure	21	19
Other	8	15
Total	1,006	1,058

reflects 7 months impact of the final benchmarked price for UBA

Expenses

	FY15 $m	FY14 $m
Labour costs	73	72
Provisioning	58	58
Network maintenance	91	99
Other network costs	34	38
IT costs	65	55
Rents, rates and property maintenance	25	24
Regulatory levies	15	10
Electricity	14	13
Consultants	3	4
Insurance	4	4
Other	22	32
Total	404	409

~~Note: prior period reclassifications disclosed at H1 have re-~~ presented some FY14 expense lines – see Appendix B

/ PAGE 17

Reshaping business

Expenses change year-on-year

> Initiatives ahead of target in FY15

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8 860
840
6
Employees
820
4
800
2 780
760
0
740
FY13 FY14 FY15
-2 720
compared to annualised FY12
% change
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Focus on cash rather than value
capex savings greater than anticipated: proactive maintenance and IT separation capex deferred
FY15 revenue and cost benefits ahead of plan (above ~$30m); costs declined relative to FY15
still no dividend possible
Capex savings creating expected EBITDA pressures

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Employees
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deferred IT capex = higher opex

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Capex
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reduced maintenance = more faults

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

40
$m
30
20
10
0
Network Copper IT
sustain connections
FY13 FY14 FY15
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cost recovery on copper = reduced demand
Longer term programme initiatives on track overall
must continue to operate consistent with IPP financial constraints until final FPP determination
limited incremental reshaping cost benefits
some initiatives would be reviewed subject to FPP outcomes

/ PAGE 18

FY16 EBITDA outlook

Unable to provide traditional earnings guidance as FPP decision expected in December and outcome uncertain.
Chorus continues to believe FPP modelling does not support pricing below demerger levels

FY15 EBITDA FY15 EBITDA FY16 EBITDA outlook (actual) (adjusted) (for the period that IPP pricing prevails)

$602m $546m Modest decline relative to adjusted FY15 EBITDA of $546 million

> Factors affecting EBITDA outlook:

cost inflation due to incremental costs of growth in VDSL, baseband IP and fibre connections
second order cost impact of cash management initiatives
ongoing customer migration from legacy services potentially offsetting other revenue growth

/ PAGE 19

FY15 gross capex summary

Total gross capex of $597m (FY14: $679m)
Capex spend below FY15 guidance of $625m - 650m due to:
less MDU/RoW build (timing)
RBI delivery (timing)
fibre growth spend below forecast
continued deferral of all discretionary/non-critical investment

Fibre capex	FY15	FY14
UFB communal	236	338
UFB connections & fibre layer 2	140	74
Fibre products & systems	26	38
Other fibre connections & growth	63	63
RBI	39	53
Subtotal	504	566
Copper capex
Network sustain	34	35
Copper connections	11	15
Copper layer 2	11	10
Product	4	1
Subtotal	60	61
Common capex
Information technology	19	35
Building & engineering services	13	12
Other	1	5
Subtotal	33	52
TOTAL GROSS CAPEX	$597m	$679m

/ PAGE 20

FY15 UFB communal capex

Communal deployment progressing well; transition in build mix as move from CBDs into more suburban areas
$236m with build complete for 107,000 premises
$2,134 average cost per premises passed (CPPP) below $2,150-$2,400 target
FY16 CPPP guidance range of $1,700 - $1,770
No change to UFB communal guidance of $1.75 - $1.80bn

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$3,500
Year 5 Range
$1,700 - $1,770
H1 FY13 View Results to date/FY16 outlook
$0
2012 2016
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FY15 UFB connection capex

$140m total spend below guidance as a result of demand mix in H2 ▪ 49k connections built (all NZ) and ~6% of ultimate UFB footprint now connected
4,700 backbone builds vs ~6,400 forecast (2,300 MDU; 2,400 Rights of way)
MDU build mix included more large MDUs implying annual average backbone cost (both MDUs and RoWs) ~$11,000 vs ~$10k in H1

UFB connections & layer 2 capex	FY15 $140m	FY14 $74m
Layer 2 (long run programme average of $100 per connection)	$16m	$9m
Schools wiring (Crown funded)	-	$4m
Connections: single dwelling units, apartments	$61m	$40m
Backbone build: multi-dwelling units and rights of way	$63m	$21m

Average CPPC of $1,233 excluding layer 2 (includes standard installations and some non-standard single dwelling unit installations) vs FY15 guidance of $1,150 to $1,350

/ PAGE 22

Backbone and non-standard capex

Growing volumes and evolving build tactics are helping inform estimates of the proportion of MDUs and RoWs that may require backbone build to connect
In Chorus’ assessment, with growing fibre uptake plus increasing deployment in rights of way and multi-dwelling units, Chorus’ non-standard installation fund is likely to expire at some point in 2016.
Chorus and CFH are currently discussing opportunities to potentially extend the fund’s life as well as its optimal future scope.

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Require backbone
MDUs ~25% of circa 135k Rights of way ~20% of circa 125k Business Point-
to-
MDUs = ~30-35k RoWs = ~25-30k
point
premises backbone RoWs backbone reqd
reqd 13-16% RoW
11-13% MDU backbone builds
backbone builds complete
complete
Residential
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1,050,000 end-users

Notes:

~160k business end users based on priority premises
• Total excludes greenfields premises
Assessment based on Chorus network records and current build tactics and remains subject to change

Note: illustrative only, not to scale

/ PAGE 23

FY16 fibre connections capex

> FY16 CPPC guidance: $1,050 to $1,250 (excluding layer 2)

No change to total programme view of $900 to $1,100 real (circa $1,000 to $1,200 in FY15 dollars) average cost to connect standard residential premises
Current estimate is FY16 Fibre connections & layer 2 capex $195m - $225m based on:
80,000 mass market connections
8,750 backbone build (MDUs and RoWs) with backbone build mix anticipated to be less expensive than FY15
3,500 premium business fibre connections*
- *Note: these were previously included in Growth fibre capex (~$30m in FY15)

> Forecasting annual volume and mix remains challenging

connections grew significantly in FY15
demand influenced by RSP marketing and online content
FY16 backbone capex highly dependent on mix. Average estimated cost of ~$8,000 based on new code pricing and similar mix to FY15.

/ PAGE 24

FY16 capex guidance

	FY16 guidance $m	FY15 actuals $m
Copper capex	60-80	60
Common capex	35-45	33
Fibre capex	480-510	504
Gross capex	580-630	597

Note: The individual ranges presented above are not necessarily additive

Fibre capex reflects earlier assumptions around CPPP and CPPC, connection mix, and mass market and premium business fibre volumes

/ PAGE 25

Guidance summary

	FY16 guidance	FY15 guidance
Cost Per Premises Connected (CPPC)	$1,050 - $1,250 (excluding layer 2 and including standard installations and some non-standard single dwellings)	$1,150 - $1,350 (excluding layer 2 and including standard installations and some non-standard single dwellings)
Cost Per Premises Passed (CPPP)	$1,700-$1,770	$2,150-$2,400
UFB communal guidance	No change	$1.75 - $1.80bn The bottom of the range reflects fixed price plus a limited number of variations; the top of the range allows for a greater range of build variations (mix of aerial, replacement of poles, access to Chorus infrastructure etc).
UFB connections & layer 2 capex	$195 – $225m (based on mass market 80,000 NGA connections and 8,750 backbone builds (FY16 backbone build mix anticipated to be less expensive than FY15 for the same mix); ~3,500 premium business fibre connections).	$145 – $155m (based on 50,000 connections and 6,400 backbone builds; FY15 backbone build mix anticipated to be more expensive than FY14)
Copper capex	$60 – 80m	$60 – 75m
Common capex	$35 – 45m	$30 – 40m
Fibre capex	$480 – 510m	$530 – 550m
Gross capex	$580 – 630m	$625 – $650m
EBITDA	For the period that IPP pricing prevails, Chorus expects a modest decline in EBITDA relative to adjusted FY15 EBITDA of $546 million.	$590-$605m

Note: The individual capex ranges presented above are not necessarily additive

/ PAGE 26

Net Debt / EBITDA

Key financial covenants require senior debt ratio to be no greater than the applicable senior debt ratio, which is currently 3.75 times

	As at 30 June 2015 $m	As at 30 June 2015 $m
Borrowings	1,742
+ PV of CFH debt securities(senior)		53
+ Net Finance leases		127
Sub total	1,922
- Cash	(80)
Total net debt	1,842
Net debt/EBITDA	3.1 times

Note: Standard & Poor’s treatment includes Operating leases

/ PAGE 27

Capital management

Chorus will address July 2016 debt tranche post FPP outcome
Consistent with previous advice, Chorus will update investors on dividend policy once the Commission’s final pricing review is complete. ▪ Commerce Commission has indicated December for final determination
At 30 June, debt of $1,742m comprised:
$1,065m long term bank facilities
$677m (NZ$ equivalent at hedged rates) Euro Medium Term Note

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April
2020
July
2016
Nov
2017
May
2019
----- End of picture text -----

/ PAGE 28

FPP UPDATE

Final Pricing Principle – July draft

Chorus’ view remains that the draft pricing significantly undervalues the true cost of network investment in New Zealand and the TSLRIC price should be at or above 2011 levels. For example:

Monthly charges	Commission July draft position	Chorus assessment	Chorus view
Trenching costs	Reduced cost of digging by ~20% $38 average trenching cost Key network components (e.g. laterals) excluded	50% below actual cost and impossible to achieve. Model assumes Auckland costs less than Arthur’s Pass!	Use actual costs – Chorus’ UFB + RBI costs are the same costs any hypothetical operator would face in building a network today. Include all network components (e.g. laterals)
Operating expenditure	40% efficiency adjustment	40% fibre efficiency adjustment not appropriate, nor should it be applied to non-technology costs	40% efficiency factor at odds with real world data and regulatory precedent.
WACC	Reduced by 44 basis points since December, 50th percentile	Lowest WACC estimate produced by Commission. Doesn’t reflect risks. Methodology also means Chorus receives lower monthly rental after Commission delays	Take a longer-term approach to reduce volatility Electricity set at 67th percentile - future investment incentives or risk not accounted for

/ PAGE 29

FPP UPDATE

Jul draft cont. y ( )

	Commission draft position	Chorus assessment	Chorus view
Transaction charges	Adopted lowest observation of benchmark set: 30% overall reduction	30% efficiency factor impossible to achieve and at odds with actual service company costs secured via competitive tender	Use Chorus’ 3rd party tendered costs
Replacement price	No backdating (split decision)	Opposite position to that argued by the Commission in the Court of Appeal	Inconsistent and unpredictable Commission approaches do not provide incentives to invest
UBA+UCLL network valuation	TSLRIC draft of $6.6 billion	At a 1/3rd discount to Commission valuation of electricity lines businesses and 50% discount to Chorus’ own valuation based on real world data	Inconsistent and unpredictable Commission approaches do not provide incentives to invest
Copper vs fibre pricing	Draft FPP urban UCLL price of $18.72 + UBA $10.84 = implied aggregate urban price of $29.56	35% below mainstream 100Mbps product in 2020. Entry level UFB pricing set below cost to encourage uptake and also reflects subsidy effect of government funding	Draft copper pricing inconsistent with real world data established via a competitive process. Draft pricing undermines fibre uptake

/ PAGE 30

FPP UPDATE

Correcting the initial price

> The Commission has acknowledged benchmarking is flawed:

“…New Zealand’s local loop network is unique when compared to overseas benchmarks…Simplistic comparisons of international wholesale broadband prices do not tell the true story.” (Commerce Commission media release 2 July 2015)

> The Commission submitted to the Court of Appeal in 2006 that:

“…the s18 aim of promoting competition for the long term benefit of end-users will be advanced if the efficient price is actually imposed, at a minimum, for the period of the initial determination."

“…a wind fall from the non application of a reviewed price is a situation that would clearly offend against the purposes of this part of the act, set out in s18. The converse also applies if benchmarking has set the initial price too low…”

The principle is simple. If the original price was wrong, it should be corrected.

/ PAGE 31

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Bringing NZ better broadband

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$1.9 billion invested in fibre networks and capability since demerger
588,000 end-users able to benefit from UFB/RBI
60% able to access better broadband than they use today
fibre available at ~2,000 schools across New Zealand
FY16: expect to complete Waiuku, Rotorua, Masterton, Greymouth, Queenstown
NZ 1[st] in OECD for fibre growth

/ PAGE 33

Improving the fibre process

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40 retail 1 million + service end-users providers order scope consent build connect Multiple sercos + Chorus contractors

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/ PAGE 34

Current challenges

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RSP orders in
Verify availability
Consent required?
Schedule visit
Reschedules
Cancellations
Average time to connect subject
to agreeing deployment method
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/ PAGE 35

Chorus taking on larger role

We need to make installations a sustainable and scalable production line that provides a positive experience for all end-users.

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Taking fibre
mainstream
Current phase
External review
Customer workshops
‘Cottage
industry’ Chorus team changes
phase
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/ PAGE 36

FY16 Outlook

Improve end-user Leverage open fibre connections access network

Government Final price review framework review

Focus on improving returns to shareholders and securing a regulatory environment that enables shareholders to earn a fair return on the investment they are making to bring better broadband to New Zealand

/ PAGE 37

Any questions?

/ PAGE 38

Appendices

Pages

	Pages
A: Adjusted EBITDA	40
B: Revised FY14 expenses re-presentation	41
C: Capex, expenses, revenue trends FY13-FY15	42-43
D: Regulatory history vs share price	44
E: Chorus mass market fibre products and pricing	45
F: NZ market and network trends	46-51
G: UFB premises types, installation types and funding	52-53
H: CFH securities summary	54
I: Revenue categories	55
J: Capex categories	56
K: Contributions to capex	59

/ PAGE 39

Appendix A : Non statutory measure – adjusted EBITDA

This appendix provides a high level summary of adjusted EBITDA. It has been prepared on the basis of prevailing regulatory pricing.

The initial benchmarked pricing changed on 1 December 2014 and for comparative purposes this flows the pricing through both FY14 and FY15 as though the pricing had changed on 1 July 2013. In addition, FY14 has been adjusted for the non-recurring insurance proceeds and UCLFS backdating.

				Adjusted FY15 $m	Adjusted FY14 $m	% change
Adjusted operating revenue				950	927	2.5%
Operating expenses				404	409	-1.2%
Adjusted EBITDA				546	518	5.4%
	Statutory results $m	Less: UBA and UCLL price change $m	Less: insurance proceeds $m	Add: UCLFS $m	Add UBA transaction charges $m	Adjusted $m
FY15 operating revenue	1,006	-60	-	-	4	950
FY14 operating revenue	1,058	-141	-2	3	9	927

Details of the adjustments to the FY15 numbers can be found in Appendix One to the 30 June 2015 management commentary

/ PAGE 40

Appendix B : Revised FY14 Expenses representation

This appendix provides a summary of what has been re-presented between FY14 expense categories following Chorus’ SAP migration.

Operating Expenses	Original FY14 presentation $m	Adjustment $m	Revised FY14 presentation $m
Labour costs	79	-7	72
Provisioning	56	2	58
Network maintenance	99		99
Other network costs	38		38
IT costs	55		55
Rents, rates and property maintenance	24		24
Regulatory levies	0	10	10
Electricity	13		13
Consultants	5	-1	4
Insurance	4		4
Other	36	-4	32
Total	409		409

/ PAGE 41

Appendix C : Capex, Expenses, Revenue trends FY13-FY15

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/ PAGE 42

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/ PAGE 43

Appendix D : Regulatory history vs share price

Chorus’ share price performance since demerger in 2011 has been dominated by regulatory decisions and processes

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

Commission
draft UCLL
benchmarking
Commission Commission Commission
final UCLL + final UBA releases draft
draft UBA benchmarking FPP decision
benchmarking decision
decision
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/ PAGE 44

Appendix E : Chorus mass market fibre products and pricing

Mass market fibre product pricing

$70.00

Accelerate: 200/200Mbps $65.00 Accelerate: 200/100Mbps $60.00

Accelerate: 200/20Mbps $55.00 Accelerate: 100/100Mbps $50.00 Accelerate: 100/50Mbps $45.00

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

Evolve 4: 100/50Mbps
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Accelerate: 100/20Mbps $40.00 Evolve 1: 30/10Mbps $35.00

$30.00

Note: Evolve products shown are the core UFB contracted products introduced in 2012. Accelerate products are commercial products introduced by Chorus in mid 2014.

/ PAGE 45

Appendix F : NZ market and network trends

Fixed line connections have proved relatively stable, while broadband growth has continued
Market has been dominated by 3 larger internet service providers.

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Source : Commerce Commission Annual Telecommunications Monitoring Report 2014, p10 and p18

/ PAGE 46

Regional fibre uptake – June 2015

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Chart shows end-user uptake as a proportion of UFB capable addresses (i.e. network is commissioned for service)
Uptake may decrease from period to period as more network is commissioned in an area

/ PAGE 47

Fibre adoption curve to date

Technology adoption in NZ (% of households)

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

Fibre uptake based on % addresses covered, given incremental build
DSL/broadband
75%
Sky TV
51%
Fibre
Dial up 4%
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----- Start of picture text -----

Years from launch
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Sources: Statistics NZ Household Use of ICT survey 2009, 2012 (household dial-up/broadband uptake), ISCR estimates of DSL diffusion (DSL/broadband uptake), SKY annual reports (Sky TV uptake), MBIE quarterly reporting (UFB fibre uptake)

/ PAGE 48

Online TV performance

3 minute snapshots of traffic over a 100Mbps fibre connection while streaming online TV

1 Ultra High Definition stream from Netflix

Data bursting due to adaptive streaming
Throughput peaking around 50Mbps

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

58.7Mbps
50Mbps
48.9Mbps
39.2Mbps
29.4Mbps
19.6Mbps
9.6Mbps
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4 simultaneous streams

1 x UHD stream (on a 4K Smart TV)
3 x HD streams (2 on laptops, 1 on a tablet)

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

100Mbps
108Mbps
90Mbps
72Mbps
54Mbps
36Mbps
18Mbps
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/ PAGE 49

Bandwidth demand

Annual bandwidth growth has traditionally been 50% > Chorus saw 50% growth in just 6 months

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

50%
growth in
six months
Spark
Lightbox free Netflix launch
launch
Data captured at 1 [st] of each month
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/ PAGE 50

VDSL and fibre redefine broadband experience

Current connection Speed Distribution Chart

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

100,000
90,000
80,000
70,000 59% of VDSL users can get 30-70Mbps .
This % will increase following bandplan changes
60,000 30Mbps
100Mbps fibre provides a ‘Wow’ factor
fibre
50,000
40,000
30,000
100Mbps
fibre
20,000 VDSL
10,000
0
0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100
Connection Speed (Mbps)
ADSL ADSL2+ VDSL2 NGA Fibre
Number of Connections
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/ PAGE 51

Appendix G : UFB premises types, installation types and funding

Premises type estimates from UFB deployment premises count methodology


Premises	649,000	123,000	10,000	4,000	1,000	787,000*
End user connections	649,000	267,000	43,000	34,000	57,000	1,050,000

*Total UFB premises in Candidate Area, excluding greenfields

Note: Rights of way may occur in any of the above premises type categories

/ PAGE 52

	Rights of way	Single dwelling units	Simple Multi-dwelling units (up to 3 stories)	Complex Multi-dwelling units (>3 stories)
Chorus funded Note: funding policy will change at end of UFB build contract in 2020	Residential/business standard lead-in from street to building entry point at time of connection: 1. New underground – up to 15m 2. Existing conduit or open trench – up to 100m 3. Aerial – 1 span 4. In-home wiring to the ONT Internal cabling limited to 5m once NSI fund ends.
			Entry point to Apartment (‘backbone riser’):Chorus funds up to $1k per residential/business tenancy
Non-standard install Fund Note: capped at $28m funding from Chorus	Residential non-standard RoW installation: 1.New underground 15m to 200m 2.Existing Conduit open trench >100m to 200m 3.Aerial > 1 span	Residential non-standard installation: NSI fund available for: 1.New underground 15m to 200m 2.Existing conduit or open trench up to 200m 3.Aerial >1 span
			Entry point to residential apartment (‘backbone riser’):NSI fund for >$1k cost
Other funding required	Residential >200mcharged via RSP			Building owner to pay for lead-in and backbone riser costs if exceeds Chorus funding
	Business non-standard RoW installation: charged via RSP 1. New underground >15m 2. Existing conduit or open trench >200m 3. Aerial > 1 span	Business non-standard install lead-in: charged via RSP	Simple business install: charged via RSP (or building owner) to fund lead-in and backbone riser costs if exceeds Chorus funding.

Note: Installation is different from connection, which may be charged for business plans.

/ PAGE 53

Appendix H : CFH securities summary

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/ PAGE 54

I : Appendix Revenue categories

core regulated products that are earlier technology or products
Basic Copper with limited scope for further development e.g Baseband copper (UCLFS), Basic UBA, Naked UBA, UCLL, SLU, SLES
• products enhanced to deliver higher speed capability and better
Enhanced Copper customer experience e.g. Enhanced UBA, VDSL2, Baseband IP, HSNS Lite Copper
• existing business fibre and new UFB services. Also includes UFB
Fibre backhaul and direct, or ‘dark’, fibre
Value Added • products and expertise for higher value or specialist services. Includes carrier network services which provide connectivity across
Network Services backhaul links • field force in provisioning, maintaining and installing copper or fibre
Field Services products
• services that provide access to Chorus’ network assets, principally
Infrastructure exchange co-location space.

/ PAGE 55

Appendix J : Capex categories

Fibre capex categories

UFB •cost of building UFB network along street to pass communal premises

Connections •connections are subject to demand via RSPs
& fibre layer 2 •Layer 2 electronics

Fibre products & •Fibre- related product and system development systems

Other fibre •Demand driven by greenfield growth
connections & •Regional backhaul to enable RSP traffic growth •Fibre lifecycle investment
•Layers 0, 1 - network duct and fibre; Layer 2 cabinet electronics
RBI •Expect total 5 year programme to cost around $280 - 295 million. Spend weighted to front end of programme

/ PAGE 56

Copper capex categories

•Upgrading or replacing plant (e.g. poles, cabinets, cables) where risk of failure or degraded service
Network sustain •Proactive network replacement more cost effective than reactive maintenance

Copper •Demand for copper connections for residential / connections business customers (e.g. infill housing, new buildings)

•Demand driven layer 2 investment in broadband
Copper layer 2 capacity and growth. Expected to reduce slowly as customers migrate to fibre
•Largely RSP driven investment in copper-related
Product fixed products

/ PAGE 57

Common capex categories

•Investment in future Chorus IT platforms, in part to Information meet June 2014 deadline to move from Telecom technology enterprise systems

Building and •Spend for growth and plant replacement (e.g. power, engineering air conditioning) at Chorus exchange, building and services remote sites
Other •Items such as office accommodation and equipment

/ PAGE 58

Appendix K : Contributions to capex

•CFH funds up to $929 million over course of programme, at a
UFB rate of $1,118 per premises
•Government grant funding of ~$236 million over 5 years to cover most layer 0 and 1 capex spend
RBI •Layer 2 is not covered by the grant •Grant is payable on completion of build work
•Annual grant around 80 - 85% of annual RBI capex spend
•Central & local government contribute to cost (often 100%)
Other when requesting Chorus to relocate or rebuild existing network.

/ PAGE 59

Chorus Limited Results for announcement to the market

Chorus Limited	Chorus Limited	Chorus Limited
Results for announcement to the market
Reporting Period	Year ended 30 June 2015
Previous Reporting Period	Year ended 30 June 2014

	Amount (000s)	Percentage change
Revenue from ordinary activities	$1,006,000	Down 4.9%
Profit (loss) from ordinary activities after tax attributable to security holders.	$91,000	Down 38.5%
Net profit (loss) attributable to security holders.	$91,000	Down 38.5%

Interim/Final Dividend	Amount per security	Imputed amount per security
No dividends will be paid in respect of the year ended 30 June 2015.

Record Date	N/A
Dividend Payment Date	N/A

Comments:	This announcement should be read in conjunction with the attached annual report for the year ended 30 June 2015, media release and investor presentation. In particular refer to appendix one of the management commentary which identifies non-recurring items incurred in the ordinary course of business.

PRELIMINARY ANNOUNCEMENT - FULL YEAR RESULTS For the year ended 30 June 2015

1.1 Reporting Period and Previous Reporting Period

The reporting period is the year ended 30 June 2015 and the previous corresponding period the year ended 30 June 2014.

1.3 (a) Statement of Financial Performance

Refer to the financial statements included in the attached annual report.

1.3 (b) Statement of Financial Position

Refer to the financial statements included in the attached annual report.

1.3 (c) Statement of Cash Flows

Refer to the financial statements included in the attached annual report.

1.3 (d) Dividends

No dividends have been paid or declared in respect of the year ended 30 June 2015.

No dividends have been paid or declared in respect of the year ended 30 June 2014.

1.3 (e) Dividend Reinvestment Plan

Chorus’ dividend reinvestment plan was suspended on 11 April 2014.

1.3 (f) Statement of Movements in Equity

Refer to the financial statements included in the attached annual report.

1.3 (g) Net tangible assets per security

There are $1.62 net tangible assets per security (30 June 2014: $1.43).

1.3(h) Control of Entities gained or lost during year

Chorus LTI Trustee Limited was incorporated on 11 December 2014 and has undertaken no transactions since incorporation. Chorus Limited is its sole shareholder.

1.3(i) Details of associates or joint ventures

N/A

1.3 (j) Any other significant information

Refer to attached annual report, investor presentation and media release. In particular refer to appendix one of the

management commentary which identifies non-recurring items incurred in the ordinary course of business.

1.3 (k) Commentary on the results of the period

Refer to the management commentary included in the annual report, investor presentation and media release. In particular refer to appendix one of the management commentary which identifies non-recurring items incurred in the ordinary course of business.

1.3 (l) Audit

This report is based on financial statements which have been audited. Chorus’ auditors have issued an unqualified audit opinion which includes the following emphasis of matter: “We draw your attention to pages 36 – 37 of the financial statements which explain that significant uncertainties exist in relation to future regulatory, legal and political outcomes that may impact the assessment of the carrying value of Chorus’ assets. Our opinion is not qualified in respect of this matter”.

1.3 (m) Subsequent events

Refer to the financial statements included in the attached annual report.

1.3 (n) Revaluation of Assets and unrealised gains from net changes in values or development margins of investment assets N/A
3.1 Accounting Standards

The financial statements have been prepared in accordance with generally accepted accounting practice in New Zealand and the Financial Reporting Act 2013. They comply with New Zealand equivalents to International Financial Reporting Standards (NZ IFRS) as appropriate for profit-oriented entities and with International Financial Reporting Standards.

3.2 Critical accounting policies

Refer to the financial statements included in the attached annual report.
3.3 Changes in accounting policies

There have been no changes in accounting policies. All policies have been consistently applied throughout the period.

Audit Report

3.4 Audit Report Refer to the financial statements included in the attached annual report.

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Chorus Corporate Governance Statement

==> picture [48 x 48] intentionally omitted <==

This statement outlines the key aspects of Chorus’ corporate governance framework, has been approved by the Chorus Board and is current as at 23 August 2015.

Chorus is incorporated in New Zealand and listed on the New Zealand and Australian stock exchanges.

Chorus’ governance practices and policies therefore reflect and are consistent with the:

NZX Main Board Listing Rules and NZX Corporate Governance Best Practice Code;
ASX Listing Rules and the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (ASX Corporate Governance Code); and
Financial Markets Authority’s Corporate Governance Principles and Guidelines (FMA Corporate Governance Code).

The Board regularly reviews and assesses Chorus’ governance policies, processes and practices to identify opportunities for enhancement and to ensure they reflect Chorus’ operations and culture.

Compliance with corporate governance codes

Chorus considers that during the year ended 30 June 2015:

It followed each of the recommendations set out in the ASX Corporate Governance Code;
The corporate governance principles adopted and followed by it did not materially differ from NZX’s Corporate Governance Best Practice Code; and
It met the principles set out in the FMA Corporate Governance Code.

Corporate Governance Statement

The Chorus Board

The Board is appointed by shareholders and has overall responsibility for Chorus’ strategy, culture, governance and performance.

Role of the Board & management

The Board’s roles and responsibilities are set out in its charter available at www.chorus.co.nz/governance. Those roles and responsibilities include:

Approving, and monitoring performance against, Chorus’ corporate business strategy, plan and budget.
Approving major capital expenditure and business activities outside the limits delegated to management.
Ensuring an appropriate risk management framework has been established, setting Chorus’ risk appetite, reviewing principal risks regularly and overseeing the management of material business risks.
Monitoring the integrity of, and where appropriate approving, Chorus’ financial and corporate reporting (including external audit).
Overseeing Chorus’ corporate governance, including reviewing its key governance documents at least annually.
Reviewing and evaluating the performance of the Board, Board Committees and individual directors.
Reviewing and approving Chorus’ remuneration and people strategies, structures and policies.
Assessing the measurable objectives set for, and Chorus’ progress towards achieving, its diversity and inclusiveness goals.
Appointing and removing the CEO, CFO and General Counsel & Company Secretary.
Monitoring compliance with Chorus’ continuous disclosure obligations.
Appointing members to Board Committees.
Carrying out the functions specifically reserved to the Board and its Committees under Board approved policies and Committee charters.

Delegation of authority

The Board has delegated authority, in part, to the CEO through the Delegated Authority (DA) Policy to allow for the effective day to day management and leadership of Chorus, including the implementation of its strategic objectives, within the risk appetite set by the Board.

This DA Policy is designed to:

Ensure decision making is controlled, accountable, transparent and informed; and
Empower employees to create shareholder value in a legal, efficient, clear and auditable manner.

The Board reviews Chorus’ DA Policy at least annually.

The Board has also appointed three standing Board Committees to assist it in carrying out its responsibilities and has delegated some of its responsibilities, powers and authorities to those Committees. More information on those Committees is set out below.

The Board may also establish other ad-hoc or standing committees and delegate specific responsibilities, powers and authorities to those committees and to particular directors.

Chorus’ management are responsible for providing accurate, timely and clear information to the Board to enable it to discharge its obligations and responsibilities.

Board membership

Chorus’ constitution provides for a minimum of five, and maximum of 12, directors.

The Board currently has seven directors (six independent directors and a managing director)[1] with a broad range of skills and experience. More information on the skills and experience of Chorus’ directors is set out below, in Chorus’ annual report and on its website at www.chorus.co.nz/governance/our-board/directors.

No person who is an ‘associated person’ of a telecommunication services provider in New Zealand may be appointed or hold office as a director.

Chairman

Chorus’ interim chairman is an independent director.

The chairman’s role is to provide leadership and manage the Board effectively. The chairman is separate from the CEO. The chairman and CEO must have a strong and effective working relationship as it facilitates effective working relationships between the Board and management.

In accordance with the DA Policy, the CEO has sub-delegated authority to other members of management, and certain other Chorus people, within specified financial and non-financial limits.

1 Murray Jordan will join the Chorus Board from 1 September 2015.

P. 3

Corporate Governance Statement

Appointment

Subject to the limits on Board size noted above, the Board may appoint additional directors to the Board or to fill a casual vacancy.

Candidates are recommended by the Nominations and Corporate Governance Committee (NCGC) based on a range of factors including the independence, qualification, skills and experience needs of the Board at the time.

To be eligible for selection, candidates must demonstrate appropriate qualities and satisfy the Board that they will commit the time needed to be fully effective in their role.

The Board reviews the skills and competency needs of Chorus and those of existing Board members before appointing a new director.

External advisors are also engaged to identify a wide range of potential candidates.

Shareholders may also nominate candidates for appointment to the Board. In addition, under the agreement entered into with Crown Fibre Holdings (CFH) relating to Chorus’ new fibre network, CFH is entitled to nominate one person as an independent director. The Board must consider this nomination in good faith, but the appointment (and removal) of any such person as a director is to be made by Chorus’ shareholders in the same way as other directors.

Appropriate checks are undertaken before a candidate is appointed by the Board or recommended for election as a director, including as to the person’s character, experience, education, criminal record and bankruptcy history.

Chorus has a written agreement with each director setting out the terms of their appointment, including obligations and responsibilities, compliance with Chorus policies (including codes of ethics and share trading), continuing education, and commitment.

Chorus also has written agreements with each of its senior executives setting out the terms and conditions of their employment.

Term & tenure

Chorus directors are not appointed for specified terms. However, Chorus’ constitution and the NZX Main Board and ASX Listing Rules require:

At least one third of Chorus’ directors to retire at each annual shareholders’ meeting (ASM) (those holding office the longest since last standing for election/re-election being those required to retire);[2] and
Each director to stand for re-election at least once every three years.

Mark Ratcliffe, as managing director, is exempt from the above requirements but must stand for re-election at least once every five years.

A director appointed by the Board as an additional Board member, or to fill a casual vacancy, must stand for election at the following ASM.

Chorus includes, in its notices of meeting for each ASM, all material information in its possession relevant to a decision on whether or not to elect or re-elect a director.

DIRECTOR	APPOINTED	LAST ELECTED AT ASM
Jon Hartley	2011	2012
Prue Flacks	2011	2012
Mark Ratcliffe	2011	2012
Clayton Wakefield	2011	2013
Anne Urlwin	2011	2014
Keith Turner	2011	2014
Patrick Strange	2015	-

Murray Jordan will be appointed by the Board as an additional director from 1 September 2015.

Jon Hartley and Prue Flacks, having last stood in 2012, will stand for re-election at Chorus’ 2015 ASM. Having been appointed by the Board since Chorus’ last ASM, Patrick Strange and Murray Jordan will also stand for election at Chorus’ 2015 ASM.

Director induction and education

Chorus’ induction programme for new directors is designed to introduce management and the Chorus business, acquaint directors with relevant industry knowledge and economics and familiarise them with key governance documents and stakeholder relationships.

All directors are expected to continuously educate themselves to ensure they maintain appropriate expertise to effectively perform their duties.

In addition, visits to Chorus operations, briefings from key management, industry experts and key advisers to Chorus, together with educational and stakeholder visits, briefings or meetings are arranged for the Board.

Director skills and experience

The skills, experience and qualifications of current directors are set out in Chorus’ annual report and on its website at www.chorus.co.nz/governance/our-board/directors.

The directors have a broad range of accounting, finance, engineering, construction, technology, legal and governance skills and experience. Patrick Strange joined the Chorus Board on 6 April 2015 strengthening the Board’s engineering, health and safety and regulated industry skill set. Murray Jordan will further strengthen this skill set bringing deep customer and stakeholder management experience on his appointment on 1 September 2015.

2 Retiring directors may stand for re-election.

P. 4

Corporate Governance Statement

The Board currently comprises directors with primary skills in each of the following areas:

Accounting
Audit
CEO experience
Engineering
Finance
Governance (including non-executive director experience on other listed entities)
Health and safety
Infrastructure build, operations and investment
Innovation and partnering
Legal and regulation
Regulated infrastructure utilities and their economics
Risk management
Securities and capital markets
Service excellence

Independence

To be considered independent, the Board must affirmatively determine that a director does not have a disqualifying relationship as set out in the Board Charter (other than solely as a consequence of being a director).

The Board has not set financial materiality thresholds for determining independence but considers the materiality basis of all relationships having regard to the materiality to Chorus, the director and the relevant person or organisation (e.g. customer, supplier or adviser) with which the director is related. Materiality is assessed in the context of each relationship and from the perspective of both parties to that relationship.

Independent advice

A director may, with the chairman’s prior approval, take independent professional advice (including legal advice) and request the attendance of such an adviser at a Board or Board Committee meeting where this is necessary to fulfil their role and responsibilities for Chorus. The costs of any such adviser is paid for by Chorus.

Strategy
Stakeholder relations
Technology
Telecommunications.

In a number of areas skills and experience is across Australasia.

Board performance

The chairman meets with directors to discuss individual performance.

The Board has carried out, in the reporting period, a review of the Board’s performance, that of individual directors and Board Committees utilising evaluation processes developed and overseen by the NCGC.

The Board also formally engages in annual:

Reviews of the chairman of the Board and chairmen of Board Committees; and
Performance discussions of individual directors standing for re-election each year.

The Board has used either externally facilitated or internally facilitated performance processes and will continue to evolve its approach over time utilising annual board evaluation processes overseen by the NCGC.

P. 5

Corporate Governance Statement

Board Committees

Each standing Board Committee has a Board approved charter and chairman. Board Committees assist the Board by focusing on specific responsibilities in greater detail than is possible for the Board as a whole. Committee recommendations are reported to the Board by Committee chairmen.

Committee members are appointed by the Board.

Each standing Board Committee comprised three independent directors in the year ended 30 June 2015.

Audit and Risk Management Committee (ARMC)

Role	The ARMC assists the Board in ensuring oversight of all matters relating to risk management, financial management and
	controls and the financial accounting, audit and reporting of Chorus.
Members	Anne Urlwin (chairman), Jon Hartley, Patrick Strange.
Independence	All Committee members are independent directors.
Responsibilities	• Overseeing the quality and integrity of Chorus’ external financial reporting.
	• Considering the adequacy of Chorus’ internal controls.
	• Regularly reviewing Chorus’ principal risks and risk, compliance and fraud reporting.
	• Recommending to the Board the appointment, and if necessary removal, of the external auditor.
	• Assessing the adequacy of the external audit and independence of the external auditor.
	• Reviewing and monitoring the internal audit plan and reporting.
	• Overseeing the independence and objectivity of the internal audit function.
	• Reviewing Chorus’ compliance with applicable laws, regulations and standards.

Human Resources and Compensation Committee (HRCC)

Role	The HRCC assists the Board in overseeing people policies and strategies, including:
	• Chorus’ remuneration frameworks; and
	• Reviewing candidates for, and the performance and remuneration of, the CEO.
Members	Clayton Wakefield (chairman), Prue Flacks, Keith Turner.
Independence	All Committee members are independent directors.
Responsibilities	• Reviewing Chorus’ remuneration and human resources strategy, structure and policies.
	• Approving annual remuneration increase guides and budgets.
	• Approving the employment terms of the CEO’s executive direct reports.
	• Approving, on the recommendation of the CEO, the appointment of the CEO’s executive direct reports (except the CFO
	and General Counsel & Company Secretary whose appointment is approved by the Board).
	• Reviewing candidates for, and the performance and remuneration of, the CEO.
	• Developing and annually reviewing and assessing diversity within Chorus and its reporting.
	• Reviewing the CEO’s performance evaluation of the CEO’s executive direct reports.
	• Overseeing recruitment, retention and termination policies and procedures for senior management.
	• Making recommendations (including proposing amendments) to the Board with respect to senior executive (including
	CEO) incentive remuneration plans.

Nominations and Corporate Governance Committee (NCGC)

Role	The NCGC assists the Board in promoting and overseeing continuous improvement of good corporate governance.
Members	Jon Hartley (chairman), Prue Flacks, Keith Turner.
Independence	All Committee members are independent directors.
Responsibilities	• Identifying and recommending suitable candidates for appointment to the Board and Board Committees.
	• Considering the size, skills mix and composition of the Board.
	• Developing, reviewing and making recommendations to the Board on corporate governance principles.
	• Establishing, developing and overseeing a process for the annual review and evaluation of Board, Board Committee,
	and individual director performance.
	• Developing and reviewing Board succession planning (including for the chairman).
	• Monitoring compliance with Chorus’ codes of ethics.
	• Reviewing and overseeing the induction of new directors and the continuous education of the Board.

P. 6

Corporate Governance Statement

Managing Risk

Chorus has a Managing Risk Policy that mandates one framework for the management of risk in Chorus to:

Ensure the Board sets the risk appetite and reviews principal risks annually;
Integrate risk management in line with the Board’s risk appetite into structures, policies, processes and procedures; and
Deliver regular principal risk reviews and monitoring.

A copy of Chorus’ Managing Risk Policy is available at www.chorus.co.nz/governance.

Chorus’ Board also sets, and annually reviews, Chorus’ risk management framework. The Board undertook such a review in the year to 30 June 2015.

As part of its role, the ARMC is responsible for overseeing and monitoring risk and ensuring compliance with Chorus’ risk management framework. The ARMC receives regular reporting on risk management, including the management of material business risks and the effectiveness of Chorus’ internal controls.

Before it approves Chorus’ financial statements, the Board requires the CEO and CFO to declare that:

In their opinion Chorus’:
Financial records have been properly maintained;
Financial statements comply with the appropriate accounting standards and give a true and fair view of Chorus’ financial position and performance; and
Their opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively.

Internal audit

Chorus operates a co-sourced internal audit model with a Manager Risk & Business Assurance supported by external advisors (principally PricewaterhouseCoopers) to provide additional resource and specialist expertise as required.

External auditor

The Board and ARMC monitor the ongoing independence and quality of Chorus’ external auditor. The ARMC also meets with the external auditor without management present prior to Chorus’ half year and annual financial statements being finalised.

Chorus’ ARMC Charter and External Auditor Independence Policy amongst other things:

Prohibit the provision of certain non-audit services by the external auditor;
Require ARMC pre-approval of all audit and permitted non-audit services;
Require the external auditor lead/engagement partner to be rotated every five years (with a five year cooling off period) and other audit partners to be rotated every seven years (with a two year cooling off period);
Require the ARMC to review the external auditor’s fees half yearly (including the ratio of fees for audit vs. non-audit services); and
Impose restrictions on the employment of former external audit personnel.

The non-audit services undertaken by Chorus’ external auditor KPMG in the year to 30 June 2015 are set out in Chorus’ annual report. Those services were provided in accordance with Chorus’ ARMC Charter and External Auditor Independence Policy and did not affect KPMG’s independence, including because:

They were approved only where Chorus was satisfied they would not have a material bearing on KPMG’s external audit procedures;
They did not involve KPMG acting in a managerial or decisionmaking capacity; and
KPMG provide Chorus with independence declarations every six months.

Chorus’ external auditors attend its ASM each year.

The responsibilities of Chorus’ internal audit function include:

Assisting the ARMC and Board in their assessment of Chorus’ internal controls and risk management;
Developing an audit plan for review and approval by the ARMC each year;
Undertaking the plan and reporting progress against it, significant changes, results and issues identified; and
Escalating issues as appropriate (including to the ARMC and/or Board chairmen).

Chorus’ Manager Risk & Business Assurance has a management reporting line to the General Counsel & Company Secretary and a direct reporting line to the ARMC. The ARMC reviews the remuneration and incentive arrangements, and reviews and approves the performance objectives and measures, of the Manager Risk & Business Assurance each year.

P. 7

Corporate Governance Statement

Economic, environmental and social sustainability risks

The risks set out below are provided in accordance with the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (3rd edition) and should be viewed in that context. They do not purport to identify all risks relevant to Chorus.

Regulatory environment

The Commerce Commission (the Commission) is responsible for regulating the price and non-price terms of key services offered over Chorus’ copper network. Around 75% of Chorus’ revenues currently come from those regulated services. The prices set by the Commission apply until 2020. Accordingly, there is no certainty regarding prices for Chorus’ regulated copper services from 2020.

The Government is, however, required to commence a review of the broader regulatory framework by 2016 (with a best endeavours obligation to complete it by the end of 2019) which is expected to establish the framework in which prices are set from 2020. This review was initiated in 2013 and is expected to commence in earnest this year.

The prices Chorus can charge for two key services (UCLL and UBA) are currently being reviewed by the Commission. Under the Commission’s reviews the price Chorus can currently charge for those services has dropped significantly since Chorus demerged from Telecom (as it then was) in 2011. The Commission is expected to release its final determination in respect of those prices in December 2015. Chorus’ view is that those prices should be at or above the prices prevailing at the time of demerger. However, there is a risk that the Commission’s final prices will be below those prices and below the prices Chorus can currently charge, which could have a material adverse effect on Chorus. As Chorus does not know what the final prices will be it cannot quantify the impact.

Refer to Chorus’ annual reports and market announcements for more information.

Fibre

Fibre services are currently unregulated. The prices Chorus can charge for UFB are, however, set by contract with the Crown and apply until 2020. Prices that Chorus can charge for its fibre services may be regulated from 2020 under a framework considered by the Government review noted above. Those prices may be lower than the current contractually agreed prices, and there is a risk that the prices will be set at levels that do not provide Chorus with an adequate return on its investment. It is also uncertain whether, and if so how, fibre unbundling may be regulated after 2020, how it may be priced or what uptake might be.

UBA review

In addition to the price review noted above, the Commission has also commenced a review of the regulated terms (including service specifications) of Chorus’ UBA service. Details of the scope of the review, and interim steps are not known.

Chorus response

Chorus’ involvement in these regulatory processes is a key business priority. Chorus is actively engaged in making submissions (which are available on the Commission’s website) and has engaged leading international experts to assist it in this regard.

UFB build, fibre demand & network substitution

Chorus is a cornerstone partner in the New Zealand Government’s Ultra-fast Broadband (UFB) initiative building a new fibre network in approximately 70% of the Government’s first stage programme to 75% of New Zealanders. This is a substantial infrastructure project over an eight-year build period and is subject to a number of risks typical to large scale, long duration infrastructure and construction projects, including unforeseen costs, and delay.

There are also remedies available to CFH under the agreements relating to the UFB build in the event that Chorus breaches its design, build, delivery or UFB operation obligations, including:

Default payments;
Financial penalties;
Liquidated damages; and
Management step in and termination rights.

More information on these risks is available in the scheme booklet relating to the demerger of Chorus from Telecom (as it then was) available on Chorus’ website at www.chorus.co.nz/investorinformation/annual-reports/annual-reports.

Local fibre companies, fibre demand & network substitution Other “local fibre companies” (LFCs) are building fibre networks in the other 30% of the Government’s first stage UFB programme. This will expose Chorus to increased fixed line competition in those areas as LFCs seek to migrate end-users from Chorus’ copper lines to LFC fibre lines.

Connection demand for fibre is also unpredictable. Growth in fibre connections may drive additional capital expenditure. Conversely, other factors, such as the regulated prices set for Chorus’ copper services, or reduced demand for online content, may also adversely impact demand for fibre services (e.g. if the price of copper lines is set significantly below fibre pricing).

TSO

Chorus is subject to a universal service obligation (the TSO) requiring it to maintain lines and provide voice input services in residential and local access areas across New Zealand. The Government commenced a review of the TSO in 2013. The timing for completion, and outcome, of that review are not known.

End-users substituting mobile or other fixed line networks for Chorus’ copper and fibre networks could result in a decline in the total number of Chorus’ fixed access lines. This could adversely impact Chorus’ revenues and profitability, as could customers shifting to lower cost Chorus services.

To manage these risks Chorus continues to enhance both its copper and fibre services and forecast connection demand with retail service providers (RSPs).

P. 8

Corporate Governance Statement

Third party contractors

Chorus engages a number of external suppliers to build, operate and maintain its copper and fibre networks and to supply services, equipment and materials. Failure by these parties to perform at acceptable levels could result in additional costs, delays and possibly penalties. While agreements with the third parties generally contain binding service level requirements, and provide for remedies for failure, those remedies may not adequately compensate Chorus.

Network assets and IT

Rapid growth in network traffic could constrain parts of Chorus’ network necessitating further investment to provide additional capacity[3] .

Chorus’ network infrastructure is vulnerable to damage or interruption from a range of risks, including equipment failure, cable cuts, power failures, weather, earthquake, fire and intentional damage.

Interruption to the operations of Chorus’ network could result in lost revenue, capital expenditure, higher operating costs, reputational damage and liability to customers.

Chorus’ own IT systems, and those third party systems on which it relies, are also subject to failure.

Chorus has incident, continuity and emergency management capability to address business disruption events and mitigate associated risks.

The carrying value of Chorus’ network assets are also subject to uncertainty in relation to future regulatory, legal and political outcomes. Refer to the notes to Chorus’ financial statements in its annual report for more information.

Chorus’ IT systems are subject to cyber threats. Chorus has security controls in place to counter known threats and improve data protection. Those controls are reviewed to ensure they remain appropriate. Chorus also has internal security policies in place covering use of its systems by employees.

Financing risk

Chorus has large funding requirements related to its UFB build. Chorus’ ability to maintain an appropriate capital structure for its financial profile going forward, either by refinancing debt on favourable terms or by raising new debt, may be adversely affected if financial market conditions are volatile, if it experiences a decline in its operating performance or if it is unable to operate within the credit metric thresholds applicable to its credit rating.

Credit rating

Chorus currently has an investment grade credit rating. If Chorus’ rating falls below investment grade it will be unable to pay a dividend on its ordinary shares without CFH approval.

A rating downgrade may also increase Chorus’ borrowing costs.

People

Chorus may lose experienced and skilled people and institutional knowledge.

Chorus mitigates this risk by continuing to invest in development and in programmes designed to create a diverse and inclusive, safe, transparent and rewarding workplace.

Chorus’ people remain highly engaged with Chorus being recognised as the “Best of the Best” employer in the 2015 Aon Hewitt Best Employer accreditation involving almost 150 companies across Australia and New Zealand. This is Chorus’ fourth consecutive year as an accredited Aon Hewitt Best Employer, and first as “Best of the Best”.

Other risks

Other risks are noted in Chorus’ annual report.

Acting Ethically & Responsibly

Codes of ethics

Chorus expects its directors and employees to conduct themselves in accordance with the highest ethical standards. Chorus has codes of ethics for its directors and employees that set the expected standards for their professional conduct. These codes are intended to facilitate decisions that are consistent with Chorus’ values, business goals and legal and policy obligations, setting out the standards required in respect of:

Conflicts of interest;
Acceptance of gifts and personal benefits;
Use of Chorus’ property and corporate opportunities;
Confidentiality;
Compliance with laws and policies; and
Reporting unethical behaviour.

Chorus’ director Code of Ethics is available at www.chorus.co.nz/governance.

Chorus has communicated its codes of ethics to directors and employees and has provided training to its employees. Chorus encourages its people to report any unethical behaviour through a compliance function that investigates any such reports.

A whistle blowing policy allows for confidential reporting of serious misconduct or wrongdoing and a fraud policy for the reporting of suspected fraud or corruption. Chorus did not receive any reports of serious instances of unethical behaviour in the year to 30 June 2015.

Chorus’ codes of ethics are reviewed at least annually.

3 The Commission’s UFB and UCLL pricing reviews will be a key determinant of ongoing investment for bandwidth demand growth, particularly as Chorus already delivers network capacity well above the regulated minimum for the broadband service.

P. 9

Corporate Governance Statement

Trading in Chorus shares

All non-executive directors are encouraged to hold Chorus shares.

Directors and Chorus employees are subject to limitations on their ability to deal in Chorus shares and other relevant Chorus securities (Chorus Securities) by Chorus’ Insider Trading Policy, the New Zealand Financial Markets Conduct Act 2013 and the Australian Corporations Act 2001.

These limitations prohibit directors and employees from dealing in Chorus Securities while in possession of inside information.

All trading in Chorus Securities must be in accordance with Chorus’ Insider Trading Policy which requires, amongst other things:

Directors to notify, and obtain consent from, the chairman (or in the chairman’s case, the chair of the ARMC) before dealing in Chorus Securities; and
Employees Chorus has identified as coming across, or potentially coming across, information which may be market sensitive, to obtain consent from the General Counsel & Company Secretary (or in the General Counsel & Company Secretary’s case, the Board chairman) before dealing in Chorus Securities.

All changes in interests in Chorus shares held by directors are required to be disclosed to the Board, NZX and ASX. All changes in interests by Chorus’ “senior managers” are required to be disclosed to the NZX.

Timely and Balanced Disclosures

Chorus is committed to providing timely, consistent and credible information to promote orderly market behaviour and investor confidence. Chorus believes it is imperative that disclosure be evenly balanced during good times and bad and that all parties in the investment community have fair access to this information.

Chorus has a Board approved Disclosure Policy which is reviewed at least annually and which is available on Chorus’ website at www.chorus.co.nz/governance/key-documents/principalgovernance-documents.

Chorus also has a CEO approved Market Disclosure Policy setting out its disclosure responsibilities and processes in more detail.

Chorus’ market disclosure policies are designed to ensure:

The roles of directors, executives and employees are clearly set out.
Appropriate reporting and escalation mechanisms are established to ensure potentially material matters are escalated appropriately.
There are robust and documented confidentiality protocols in place where appropriate.
Only authorised spokespersons comment publicly, within the bounds of information which is either already publicly known or non-material.
Only publicly available or non-material information is disclosed in analyst briefings and in response to investor questions.

Chorus’ Disclosure Officer is responsible for authorising the release of information to the market, monitoring Chorus’ share register, price and media and promoting awareness of Chorus’ disclosure obligations.

Shareholder Communications & Meetings

Chorus is committed to fostering constructive relationships with shareholders that encourage them to engage with Chorus, including by:

Communicating clearly and effectively with them;
Giving ready access to balanced and understandable information about Chorus;
Making it easy for shareholders to participate in Chorus’ general meetings; and
Maintaining an up to date website providing information about Chorus, its business and affairs.

Chorus’ investor relations programme is designed to further facilitate two-way communication with shareholders, provide them and other market participants with an understanding of Chorus’ business, governance and performance and an opportunity to express their views. As part of this programme Chorus enables investors and other interested parties to ask

questions and obtain information, meets with investors and analysts and undertakes formal investor presentations.

Chorus’ annual meetings are held in main centres and webcast to enable shareholders to view and hear proceedings online. Major investor presentations are also webcast.

Chorus enables shareholders to vote by proxy ahead of meetings without having to physically attend or participate in those meetings.

Shareholders are also, prior to and at, annual meetings, able to ask questions of, and express their views in respect of, the Board, management and Chorus’ auditors (including via appointed proxies).

Chorus encourages shareholders to communicate with it and its share registrar electronically, including by providing email communication channels and online contact details and instructions on its website.

P. 10

ARBN 152 485 848

Rules 4.7.3 and 4.10.3[1]

Appendix 4G

Key to Disclosures Corporate Governance Council Principles and Recommendations

Name of entity:
Chorus Limited
ABN / ARBN: 152 485 848	Financial year ended:
152 485 848	30 June 2015

Our corporate governance statement[2] for the above period above can be found at:[3]

☒ This URL on our website: https://www.chorus.co.nz/governance/key-documents/principal-governance-documents

The Corporate Governance Statement is accurate and up to date as at 23 August 2015 and has been approved by the board.

The annexure includes a key to where our corporate governance disclosures can be located.

Date: 23 August 2015 Name of Director or Secretary authorising Vanessa Oakley lodgement: General Counsel & Company Secretary

1 Under Listing Rule 4.7.3, an entity must lodge with ASX a completed Appendix 4G at the same time as it lodges its annual report with ASX. Listing Rule 4.10.3 requires an entity that is included in the official list as an ASX Listing to include in its annual report either a corporate governance statement that meets the requirements of that rule or the URL of the page on its website where such a statement is located. The corporate governance statement must disclose the extent to which the entity has followed the recommendations set by the ASX Corporate Governance Council during the reporting period. If the entity has not followed a recommendation for any part of the reporting period, its corporate governance statement must separately identify that recommendation and the period during which it was not followed and state its reasons for not following the recommendation and what (if any) alternative governance practices it adopted in lieu of the recommendation during that period. Under Listing Rule 4.7.4, if an entity chooses to include its corporate governance statement on its website rather than in its annual report, it must lodge a copy of the corporate governance statement with ASX at the same time as it lodges its annual report with ASX. The corporate governance statement must be current as at the effective date specified in that statement for the purposes of rule 4.10.3.

2 “Corporate governance statement” is defined in Listing Rule 19.12 to mean the statement referred to in Listing Rule 4.10.3 which discloses the extent to which an entity has followed the recommendations set by the ASX Corporate Governance Council during a particular reporting period.

3 Mark whichever option is correct and then complete the page number(s) of the annual report, or the URL of the web page, where the entity’s corporate governance statement can be found. You can, if you wish, delete the option which is not applicable.

Throughout this form, where you are given two or more options to select, you can, if you wish, delete any option which is not applicable and just retain the option that is applicable. If you select an option that includes “OR” at the end of the selection and you delete the other options, you can also, if you wish, delete the “OR” at the end of the selection.

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ANNEXURE – KEY TO CORPORATE GOVERNANCE DISCLOSURES

Corporate Governance Council recommendation	Corporate Governance Council recommendation	We have followed the recommendation in full for the whole of the period above. We have disclosed …
PRINCIPLE 1 – LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT
1.1	A listed entity should disclose: (a) the respective roles and responsibilities of its board and management; and (b) those matters expressly reserved to the board and those delegated to management.	… the fact that we follow this recommendation: `☒`in our Corporate Governance Statement … and information about the respective roles and responsibilities of our board and management (including those matters expressly reserved to the board and those delegated to management): `☒` in our Corporate Governance StatementAND `☒` in our Board Charter athttps://www.chorus.co.nz/governance/key-documents/principal-governance-documents
1.2	A listed entity should: (a) undertake appropriate checks before appointing a person, or putting forward to security holders a candidate for election, as a director; and (b) provide security holders with all material information in its possession relevant to a decision on whether or not to elect or re-elect a director.	… the fact that we follow this recommendation: `☒`in our Corporate Governance Statement
1.3	A listed entity should have a written agreement with each director and senior executive setting out the terms of their appointment.	… the fact that we follow this recommendation: `☒`in our Corporate Governance Statement
1.4	The company secretary of a listed entity should be accountable directly to the board, through the chair, on all matters to do with the proper functioning of the board.	… the fact that we follow this recommendation: `☒` paragraph 22 of our Board Charter athttps://www.chorus.co.nz/governance/key-documents/principal-governance- documents

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Corporate Governance Council recommendation	Corporate Governance Council recommendation	We have followed the recommendation in full for the whole of the period above. We have disclosed …
1.5	A listed entity should: (a) have a diversity policy which includes requirements for the board or a relevant committee of the board to set measurable objectives for achieving gender diversity and to assess annually both the objectives and the entity’s progress in achieving them; (b) disclose that policy or a summary of it; and (c) disclose as at the end of each reporting period the measurable objectives for achieving gender diversity set by the board or a relevant committee of the board in accordance with the entity’s diversity policy and its progress towards achieving them and either: (1) the respective proportions of men and women on the board, in senior executive positions and across the whole organisation (including how the entity has defined “senior executive” for these purposes); or (2) if the entity is a “relevant employer” under the Workplace Gender Equality Act, the entity’s most recent “Gender Equality Indicators”, as defined in and published under that Act.	… the fact that we have a diversity policy that complies with paragraph (a): `☒`refer to our Diversity and Inclusiveness Policy available athttps://www.chorus.co.nz/governance/key- documents/principal-governance-documents … and a copy of our diversity policy or a summary of it: `☒`athttps://www.chorus.co.nz/governance/key-documents/principal-governance-documents … and the measurable objectives for achieving gender diversity set by the board or a relevant committee of the board in accordance with our diversity policy and our progress towards achieving them: `☒`pages 64-65 of our annual report available athttps://www.chorus.co.nz/investor-information/annual-reports/annual- reports … and the information referred to in paragraphs (c)(1) or (2): `☒` page 65 of our annual report available athttps://www.chorus.co.nz/investor-information/annual-reports/annual-reports
1.6	A listed entity should: (a) have and disclose a process for periodically evaluating the performance of the board, its committees and individual directors; and (b) disclose, in relation to each reporting period, whether a performance evaluation was undertaken in the reporting period in accordance with that process.	… the evaluation process referred to in paragraph (a): `☒`in our Corporate Governance Statement … and the information referred to in paragraph (b): `☒`in our Corporate Governance Statement
1.7	A listed entity should: (a) have and disclose a process for periodically evaluating the performance of its senior executives; and (b) disclose, in relation to each reporting period, whether a performance evaluation was undertaken in the reporting period in accordance with that process.	… the evaluation process referred to in paragraph (a): `☒`page 66 of our annual report available athttps://www.chorus.co.nz/investor-information/annual-reports/annual-reports … and the information referred to in paragraph (b): `☒` page 66 of our annual report available athttps://www.chorus.co.nz/investor-information/annual-reports/annual-reports

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Corporate Governance Council recommendation	Corporate Governance Council recommendation	We have followed the recommendation in full for the whole of the period above. We have disclosed …
PRINCIPLE 2 - STRUCTURE THE BOARD TO ADD VALUE
2.1	The board of a listed entity should: (a) have a nomination committee which: (1) has at least three members, a majority of whom are independent directors; and (2) is chaired by an independent director, and disclose: (3) the charter of the committee; (4) the members of the committee; and (5) as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or (b) if it does not have a nomination committee, disclose that fact and the processes it employs to address board succession issues and to ensure that the board has the appropriate balance of skills, knowledge, experience, independence and diversity to enable it to discharge its duties and responsibilities effectively.	[If the entity complies with paragraph (a):] … the fact that we have a nomination committee that complies with paragraphs (1) and (2): `☒`in our Corporate Governance Statement … and a copy of the charter of the committee: `☒`athttps://www.chorus.co.nz/governance/key-documents/principal-governance-documents … and the information referred to in paragraphs (4) and (5): `☒`pages 62-63 of our annual report available athttps://www.chorus.co.nz/investor-information/annual-reports/annual- reports
2.2	A listed entity should have and disclose a board skills matrix setting out the mix of skills and diversity that the board currently has or is looking to achieve in its membership.	… our board skills matrix: `☒`in our Corporate Governance Statement
2.3	A listed entity should disclose: (a) the names of the directors considered by the board to be independent directors; (b) if a director has an interest, position, association or relationship of the type described in Box 2.3 but the board is of the opinion that it does not compromise the independence of the director, the nature of the interest, position, association or relationship in question and an explanation of why the board is of that opinion; and (c) the length of service of each director.	… the names of the directors considered by the board to be independent directors: `☒`page 10 of our annual report available athttps://www.chorus.co.nz/investor-information/annual-reports/annual-reports … and, where applicable, the information referred to in paragraph (b): `☐`(not applicable) … and the length of service of each director: `☒`in our Corporate Governance Statement
2.4	A majority of the board of a listed entity should be independent directors.	… the fact that we follow this recommendation: `☒`in our Corporate Governance Statement
2.5	The chair of the board of a listed entity should be an independent director and, in particular, should not be the same person as the CEO of the entity.	… the fact that we follow this recommendation: `☒`in our Corporate Governance Statement

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Corporate Governance Council recommendation	Corporate Governance Council recommendation	We have followed the recommendation in full for the whole of the period above. We have disclosed …
2.6	A listed entity should have a program for inducting new directors and provide appropriate professional development opportunities for directors to develop and maintain the skills and knowledge needed to perform their role as directors effectively.	… the fact that we follow this recommendation: `☒`in our Corporate Governance Statement
PRINCIPLE 3 – ACT ETHICALLY AND RESPONSIBLY
3.1	A listed entity should: (a) have a code of conduct for its directors, senior executives and employees; and (b) disclose that code or a summary of it.	… our code of conduct or a summary of it: `☒`in our Corporate Governance StatementAND `☒`our Director Code of Ethics athttps://www.chorus.co.nz/governance/key-documents/principal-governance-documents

Page 5

Corporate Governance Council recommendation	Corporate Governance Council recommendation	We have followed the recommendation in full for the whole of the period above. We have disclosed …
PRINCIPLE 4 – SAFEGUARD INTEGRITY IN CORPORATE REPORTING
4.1	The board of a listed entity should: (a) have an audit committee which: (1) has at least three members, all of whom are non-executive directors and a majority of whom are independent directors; and (2) is chaired by an independent director, who is not the chair of the board, and disclose: (3) the charter of the committee; (4) the relevant qualifications and experience of the members of the committee; and (5) in relation to each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or (b) if it does not have an audit committee, disclose that fact and the processes it employs that independently verify and safeguard the integrity of its corporate reporting, including the processes for the appointment and removal of the external auditor and the rotation of the audit engagement partner.	[If the entity complies with paragraph (a):] … the fact that we have an audit committee that complies with paragraphs (1) and (2): `☒`in our Corporate Governance Statement … and a copy of the charter of the committee: `☒`athttps://www.chorus.co.nz/governance/key-documents/principal-governance-documents … and the information referred to in paragraphs (4) and (5): `☒`pages 10 and 63 of our annual report available athttps://www.chorus.co.nz/investor-information/annual-reports/annual- reports
4.2	The board of a listed entity should, before it approves the entity’s financial statements for a financial period, receive from its CEO and CFO a declaration that, in their opinion, the financial records of the entity have been properly maintained and that the financial statements comply with the appropriate accounting standards and give a true and fair view of the financial position and performance of the entity and that the opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively.	… the fact that we follow this recommendation: `☒`in our Corporate Governance Statement
4.3	A listed entity that has an AGM should ensure that its external auditor attends its AGM and is available to answer questions from security holders relevant to the audit.	… the fact that we follow this recommendation: `☒`in our Corporate Governance Statement
PRINCIPLE 5 – MAKE TIMELY AND BALANCED DISCLOSURE
5.1	A listed entity should: (a) have a written policy for complying with its continuous disclosure obligations under the Listing Rules; and (b) disclose that policy or a summary of it.	… our continuous disclosure compliance policy or a summary of it: `☒`in our Corporate Governance StatementAND `☒` our Board approved Disclosure Policy athttps://www.chorus.co.nz/governance/key-documents/principal-governance- documents

Page 6

Corporate Governance Council recommendation	Corporate Governance Council recommendation	We have followed the recommendation in full for the whole of the period above. We have disclosed …
PRINCIPLE 6 – RESPECT THE RIGHTS OF SECURITY HOLDERS
6.1	A listed entity should provide information about itself and its governance to investors via its website.	… information about us and our governance on our website: `☒` athttps://www.chorus.co.nz/investor-centre andhttps://www.chorus.co.nz/home
6.2	A listed entity should design and implement an investor relations program to facilitate effective two-way communication with investors.	… the fact that we follow this recommendation: `☒`in our Corporate Governance Statement
6.3	A listed entity should disclose the policies and processes it has in place to facilitate and encourage participation at meetings of security holders.	… our policies and processes for facilitating and encouraging participation at meetings of security holders: `☒`in our Corporate Governance Statement
6.4	A listed entity should give security holders the option to receive communications from, and send communications to, the entity and its security registry electronically.	… the fact that we follow this recommendation: `☒`in our Corporate Governance Statement
PRINCIPLE 7 – RECOGNISE AND MANAGE RISK
7.1	The board of a listed entity should: (a) have a committee or committees to oversee risk, each of which: (1) has at least three members, a majority of whom are independent directors; and (2) is chaired by an independent director, and disclose: (3) the charter of the committee; (4) the members of the committee; and (5) as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or (b) if it does not have a risk committee or committees that satisfy (a) above, disclose that fact and the processes it employs for overseeing the entity’s risk management framework.	[If the entity complies with paragraph (a):] … the fact that we have a committee or committees to oversee risk that comply with paragraphs (1) and (2): `☒`in our Corporate Governance Statement … and a copy of the charter of the committee: `☒`athttps://www.chorus.co.nz/governance/key-documents/principal-governance-documents … and the information referred to in paragraphs (4) and (5): `☒`pages 62-63 of our annual report available athttps://www.chorus.co.nz/investor-information/annual-reports/annual- reports
7.2	The board or a committee of the board should: (a) review the entity’s risk management framework at least annually to satisfy itself that it continues to be sound; and (b) disclose, in relation to each reporting period, whether such a review has taken place.	… the fact that board or a committee of the board reviews the entity’s risk management framework at least annually to satisfy itself that it continues to be sound: `☒`in our Corporate Governance Statement … and that such a review has taken place in the reporting period covered by this Appendix 4G: `☒`in our Corporate Governance Statement

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Corporate Governance Council recommendation	Corporate Governance Council recommendation	We have followed the recommendation in full for the whole of the period above. We have disclosed …
7.3	A listed entity should disclose: (a) if it has an internal audit function, how the function is structured and what role it performs; or (b) if it does not have an internal audit function, that fact and the processes it employs for evaluating and continually improving the effectiveness of its risk management and internal control processes.	[If the entity complies with paragraph (a):] … how our internal audit function is structured and what role it performs: `☒`in our Corporate Governance Statement
7.4	A listed entity should disclose whether it has any material exposure to economic, environmental and social sustainability risks and, if it does, how it manages or intends to manage those risks.	… whether we have any material exposure to economic, environmental and social sustainability risks and, if we do, how we manage or intend to manage those risks: `☒`in our Corporate Governance Statement

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Corporate Governance Council recommendation	Corporate Governance Council recommendation	We have followed the recommendation in full for the whole of the period above. We have disclosed …
PRINCIPLE 8 – REMUNERATE FAIRLY AND RESPONSIBLY
8.1	The board of a listed entity should: (a) have a remuneration committee which: (1) has at least three members, a majority of whom are independent directors; and (2) is chaired by an independent director, and disclose: (3) the charter of the committee; (4) the members of the committee; and (5) as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or (b) if it does not have a remuneration committee, disclose that fact and the processes it employs for setting the level and composition of remuneration for directors and senior executives and ensuring that such remuneration is appropriate and not excessive.	[If the entity complies with paragraph (a):] … the fact that we have a remuneration committee that complies with paragraphs (1) and (2): `☒`in our Corporate Governance Statement … and a copy of the charter of the committee: `☒`athttps://www.chorus.co.nz/governance/key-documents/principal-governance-documents … and the information referred to in paragraphs (4) and (5): `☒`pages 62-63 of our annual report available athttps://www.chorus.co.nz/investor-information/annual-reports/annual- reports
8.2	A listed entity should separately disclose its policies and practices regarding the remuneration of non-executive directors and the remuneration of executive directors and other senior executives.	… separately our remuneration policies and practices regarding the remuneration of non-executive directors and the remuneration of executive directors and other senior executives: `☒` pages 65-68 of our annual report available athttps://www.chorus.co.nz/investor-information/annual-reports/annual- reports
8.3	A listed entity which has an equity-based remuneration scheme should: (a) have a policy on whether participants are permitted to enter into transactions (whether through the use of derivatives or otherwise) which limit the economic risk of participating in the scheme; and (b) disclose that policy or a summary of it.	… our policy on this issue or a summary of it: `☒` In our Insider Trading Policy athttps://www.chorus.co.nz/governance/key-documents/principal-governance-documents

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Chorus Limited annual report 2015 (section 209 notice)

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CHORUS LIMITED — Annual Report 2015

64680_rns_2015-08-23_03064767-f138-44b9-aae9-f9f7a8da9623.pdf

STOCK EXCHANGE ANNOUNCEMENT

2015 full year results & annual report – supplementary documents

STOCK EXCHANGE ANNOUNCEMENT

Chorus full year result for FY15

FY15 impacted substantially by regulatory pricing decisions

Operating performance

Regulation

Dividend

FY16 outlook

ENDS

For further information:

Disclaimer

Agenda

Mark Ratcliffe, CEO

Andrew Carroll, CFO

Mark Ratcliffe, CEO

Regulatory impact overshadows investment

Fixed line connections

Continuin broadband rowth g g

Change in broadband connections

Chorus connections drivers

NZ fixed line market

> Significant changes in FY15: video content, RSP consolidation and new entrants

Fibre market

> More RSPs promoting 100Mbps as standard fibre plan

> Demand for premium business fibre continues

Premium business fibre

UFB build on track

Annual rollout plan FY15-FY20

UFB rollout progress

Regional fibre uptake vs build

Chorus UFB Uptake by Candidate Area – June 2015

Rural Broadband rollout

Income statement

Revenue

Expenses

Reshaping business

Expenses change year-on-year

> Initiatives ahead of target in FY15

FY16 EBITDA outlook

> Factors affecting EBITDA outlook:

FY15 gross capex summary

FY15 UFB communal capex

FY15 UFB connection capex

Backbone and non-standard capex

1,050,000 end-users

Notes:

FY16 fibre connections capex

> FY16 CPPC guidance: $1,050 to $1,250 (excluding layer 2)

> Forecasting annual volume and mix remains challenging

FY16 capex guidance

Note: The individual ranges presented above are not necessarily additive

Guidance summary

Net Debt / EBITDA

Capital management

Final Pricing Principle – July draft

Jul draft cont. y ( )

Correcting the initial price

> The Commission has acknowledged benchmarking is flawed:

> The Commission submitted to the Court of Appeal in 2006 that:

Bringing NZ better broadband

Improving the fibre process

Current challenges

Chorus taking on larger role

FY16 Outlook

Any questions?

Appendices

Pages

Appendix A : Non statutory measure – adjusted EBITDA

Appendix B : Revised FY14 Expenses representation

Appendix C : Capex, Expenses, Revenue trends FY13-FY15

Appendix D : Regulatory history vs share price

Appendix E : Chorus mass market fibre products and pricing

Mass market fibre product pricing

Appendix F : NZ market and network trends

Regional fibre uptake – June 2015

Fibre adoption curve to date

CHORUS LIMITED Annual Report 2015