CHORUS LIMITED - Annual Report 2023

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

==> picture [201 x 22] intentionally omitted <==

STOCK EXCHANGE ANNOUNCEMENT

21 August 2023

Chorus 2023 full year results, annual report & sustainability report

The following are attached in relation to Chorus’ FY23 full year results:

Media Release
Investor Presentation
Annual Report (including audited financial statements)
NZX Financial Results Announcement
NZX Distribution Notice
Sustainability Report
Letter to investors

Chief Executive Officer JB Rousselot, and Chief Financial Officer Mark Aue, will discuss the FY23 full year results by webcast at 10.00am New Zealand time today. The webcast will be available at www.chorus.co.nz/webcast.

Authorised by:

Mark Aue Chief Financial Officer

ENDS

For further information:

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

Steve Pettigrew Head of External Communications Mobile: +64 (27) 258 6257 Email: [email protected]

==> picture [145 x 24] intentionally omitted <==

21 August 2023

Chorus delivers solid full-year result as Kiwis continue to favour fibre broadband

Highlights

Fibre uptake : 73% in UFB areas, with UFB fibre rollout now complete
Fibre growth: added 72,000 fibre connections in FY23, totalling 1,031,000
Fibre plans: 91% of residential and business connections above 300Mbps
Revenue: grew to $980m from $965m in FY22
EBIT: down to $226m from $248m in FY22
Net profit: down to $25m from $64m in FY22
Dividend: 42.5 cents per share, unimputed for FY23

In FY23, Chorus demonstrated resilience as an essential utility provider amidst economic volatility, inflation, and uncertainty. As recent weather events have shown, Kiwi homes and businesses increasingly rely on fast, reliable broadband connections to live, learn, work and play.

Financial overview

Increased fibre connections, the uptake of high-speed plans and inflation-linked price changes saw underlying revenue grow to $981m from $959m in FY22.

Despite inflationary pressures, underlying operating expenses remained stable at $299m. The operating results led to an underlying FY23 EBITDA of $682m, a $22m increase from the FY22 EBITDA of $660m.

Reported EBITDA was $672m, including $10m in one-off costs for extreme weather events and changes to Chorus’ operating model. Net profit after tax (NPAT) was $25m, down from $64m in FY22.

Continuing growth in data usage

In July, residential and business fibre customers on the Chorus network used an average of 595GB of data. Average data usage is near where it peaked during the Auckland Covid-19 lockdown in September 2021. Forty-five per cent of all traffic on Chorus’ network is streaming video.

Chorus CEO JB Rousselot commented: “There is an apparent pent-up demand for 4K content with nearly a third of households in New Zealand having a main TV that is 4K capable.

“While 4K content offerings in New Zealand lag other markets, especially in live sports, we expect to see a significant impact on broadband network capacity as these higher resolution streams become available.”

Transition to an all-fibre digital infrastructure company

With the ultra-fast broadband rollout finished and the new regulatory regime for fibre established, Chorus is transitioning to focus more on operating the network. “Customers value fibre above other technologies as it offers fast, reliable, and resilient service,” said Rousselot.

“Where the long-term value of the connection justifies the cost, we’re willing to invest in connecting more addresses or locations to fibre, and our new operating model aligns with this strategy.

“This willingness to invest is demonstrated by our upgrading our existing fibre footprint to Hyperfibre multi-gigabit capability and increasing metro data capacity fourfold to ensure New Zealanders continue to have access to world-class digital infrastructure.”

Fibre connections on Chorus’ network grew to 1,031,000 in existing ultra-fast broadband areas and competitively won new property developments. Chorus CEO JB Rousselot commented, “We strongly believe fibre remains the most effective technology choice for most New Zealanders.

“I’m particularly pleased to see our entry-level fibre plan, Home Fibre Starter, growing strongly with 16,000 connections. It is a plan aimed at price-conscious customers with lighter broadband needs.”

Ninety-one per cent of residential and business plans are on speeds of 300Mbps or above.

Call for more transparent consumer choices

Data consumption trends continue to reinforce the competitive positioning and the future-proof nature of fibre compared to other technologies.

“It is disappointing to see some retailers not offering all our products to their customers, especially the low-cost Home Fibre Starter service or our multi-gigabit Hyperfibre range,” said Rousselot.

“It is often too hard for consumers to find our full range of fibre products, which is unfair as ultimately there is no such thing as 'fibre-like'. Either you're on fibre, or you're not.”

Copper retirement

The migration to fibre saw Chorus’ copper broadband and voice connections reduce by about a third, or 104,000. About 240,000 copper connections remain. With copper nearing the end of its technological life New Zealanders without access to fibre will need to consider alternative technologies.

“With the ongoing shift to fibre and the rise of alternative wireless and satellite broadband options in rural areas, we’re now on a clear path toward the full retirement of the copper network in New Zealand,” said Rousselot.

“By the end of 2026, we aim to have fully withdrawn copper voice and broadband services in our fibre areas, paving the way for a more reliable digital experience.

“Copper is increasingly unsuited to customers’ growing broadband needs. We believe fibre could and should extend further to help bridge the digital divide between urban and rural communities. We're currently exploring extending fibre to 10,000 premises beyond UFB areas and considering how Chorus might play a part in a wider extension with the right investment incentives.”

Tracking towards sustainability targets

Chorus is committed to making a positive impact on the environment and society. In FY23, the company achieved a 5% reduction in electricity usage, attributed mainly to our copper withdrawal programme, which saw the retirement of a further 414 broadband cabinets in FY23. Chorus’ Scope 1 and 2 emissions fell by 24% from the year before.

“It was another record year for total data traffic on our network at 7,402 petabytes, up from 7,140 petabytes. Despite this growth, fibre’s efficiency means we can carry more data with less emissions. We’re also exploring renewable energy sources for the network and plan a solar photovoltaics trial on exchange buildings.

“While pleased with our progress, we acknowledge that we are in the early stages of our environmental and social impact journey. We have set ambitious targets for 2030, and although we’ve made strides this year, we recognise that there is much more for us to do in the ongoing pursuit of our sustainability targets,” said Rousselot.

Dividend

Chorus will pay a final dividend of 25.5 cents per share, unimputed, on 10 October 2023, bringing total dividends for FY23 to 42.5 cents per share.

FY24 guidance

FY24 guidance is subject to no material changes in regulatory or competitive outlook.

EBITDA: $680—$700 million
Capital expenditure: $400—$440 million
FY24 dividend: 47.5 cents per share, unimputed

ENDS

Chorus Chief Executive JB Rousselot and Chief Financial Officer Mark Aue will discuss the full-year results from 10.00 am today, NZST, at www.chorus.co.nz/webcast

For further information:

Steve Pettigrew

External Communications Manager +64 27 258 6257 [email protected]

Brett Jackson

Investor Relations Manager +64 27 488 7808 [email protected]

==> picture [960 x 472] intentionally omitted <==

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

FY23 RESULTS
----- End of picture text -----

==> picture [182 x 20] intentionally omitted <==

21 August 2023

Disclaimer

This presentation:

Is provided for general information purposes and does not constitute investment advice or an offer of or invitation to purchase Chorus securities.
Includes forward-looking statements. These statements are not guarantees or predictions of future performance. They 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 contained in this presentation.
Includes statements relating to past performance which should not be regarded as reliable indicators of future performance.
Is current at the date of this presentation, unless otherwise stated. Except as required by law or the NZX Main Board and ASX listing rules, Chorus is not under any obligation to update this presentation, whether as a result of new information, future events or otherwise.
Should be read in conjunction with Chorus’ audited consolidated financial statements for the year to 30 June 2023 and NZX and ASX market releases.
Includes non-GAAP financial measures such as "EBITDA”. These measures do not have a standardised meaning prescribed by GAAP and therefore may not be comparable to similar financial information presented by other entities. They should not be used in substitution for, or isolation of, Chorus' audited consolidated financial statements. We monitor EBITDA as a key performance indicator and we believe it assists investors in assessing the performance of the core operations of our business.
Has been prepared with due care and attention. However, Chorus and its directors and employees accept no liability for any errors or omissions.
Contains information from third parties Chorus believes reliable. However, no representations or warranties (express or implied) are made as to the accuracy or completeness of such information.

Agenda

JB Rousselot, CEO

Mark Aue, CFO

JB Rousselot, CEO

>	FY23 overview	4
>	Fibre uptake and connection trends	5-8
>	Financial results	9-13
>	Capex	14-15
>	FY24 guidance, capital management	16-19
>	Regulatory recap	20
>	NZ runs on fibre	21-23
>	Operating model & strategic priorities	24-27
>	Sustainability in FY23	28
Appendices
	▪ A: Pricing and market data	30-32
	▪ B: Sustainability	33
	▪ C: Additional financial information	34-37
	▪ D: Additional regulatory information	38-40

FY23 overview

==> picture [520 x 294] intentionally omitted <==

==> picture [344 x 296] intentionally omitted <==

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

FY23 FY22
Fibre 1,031,000 959,000
connections
Broadband 1,188,000 1,189,000
connections
Fixed line 1,271,000 1,304,000
connections
Data traffic 7,402 7,140
(petabytes)
Employee 8.7/10 8.5/10
engagement
----- End of picture text -----

Earnings before interest, income tax, depreciation and amortisation (EBITDA) is a non-GAAP profit measure without a standardised meaning for comparison between companies. We monitor EBITDA as a key performance indicator and we believe it assists investors in assessing the performance of the core operations of our business.

Uptake

Solid lift in fibre uptake despite workforce constraints

73% uptake within completed UFB footprint
UFB1 77% (+3%)
UFB2 56.5% (+6.5%)
985,000 connections (FY22: 919,000)*
- *includes business premium and partly subsidised education connections
10% of fibre connection growth outside Chorus UFB zone

Connection growth +72k

==> picture [268 x 154] intentionally omitted <==

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

7,000
26,000 39,000
Chorus UFB1 Chorus UFB2 Non-UFB/LFC
----- End of picture text -----

==> picture [356 x 331] intentionally omitted <==

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

77
74
69
60
56.5
53
50
45
42
35 34
24
14
10
8
3
0
UFB1 UFB2
----- End of picture text -----

Continued broadband growth in our UFB zone

Quarterly change (’000s) by zone*

7 6 3 6 4 -5 -4 -2 -2 -3 -2 -2 -3 -3 -2 -6 -2 -6 -6 -8 -1 -2 -2 -1 -2 -1 -1 -2 -1 -2 -10 -5 0 5 10 Q4 FY23 Q3 FY23 Q2 FY23 Q1 FY23 Q4 FY22 Q4 FY23 Q3 FY23 Q2 FY23 Q1 FY23 Q4 FY22 Q4 FY23 Q3 FY23 Q2 FY23 Q1 FY23 Q4 FY22 Broadband connections Copper (no broadband) connections	7 6 3 6 4 -5 -4 -2 -2 -3 -2 -2 -3 -3 -2 -6 -2 -6 -6 -8 -1 -2 -2 -1 -2 -1 -1 -2 -1 -2 -10 -5 0 5 10 Q4 FY23 Q3 FY23 Q2 FY23 Q1 FY23 Q4 FY22 Q4 FY23 Q3 FY23 Q2 FY23 Q1 FY23 Q4 FY22 Q4 FY23 Q3 FY23 Q2 FY23 Q1 FY23 Q4 FY22 Broadband connections Copper (no broadband) connections	7 6 3 6 4 -5 -4 -2 -2 -3 -2 -2 -3 -3 -2 -6 -2 -6 -6 -8 -1 -2 -2 -1 -2 -1 -1 -2 -1 -2 -10 -5 0 5 10 Q4 FY23 Q3 FY23 Q2 FY23 Q1 FY23 Q4 FY22 Q4 FY23 Q3 FY23 Q2 FY23 Q1 FY23 Q4 FY22 Q4 FY23 Q3 FY23 Q2 FY23 Q1 FY23 Q4 FY22 Broadband connections Copper (no broadband) connections	7 6 3 6 4 -5 -4 -2 -2 -3 -2 -2 -3 -3 -2 -6 -2 -6 -6 -8 -1 -2 -2 -1 -2 -1 -1 -2 -1 -2 -10 -5 0 5 10 Q4 FY23 Q3 FY23 Q2 FY23 Q1 FY23 Q4 FY22 Q4 FY23 Q3 FY23 Q2 FY23 Q1 FY23 Q4 FY22 Q4 FY23 Q3 FY23 Q2 FY23 Q1 FY23 Q4 FY22 Broadband connections Copper (no broadband) connections
7 6 3 6 4 -5 -4 -2 -2 -3 -2 -2 -3 -3 -2 -6 -2 -6 -6 -8 -1 -2 -2 -1 -2 -1 -1 -2 -1 -2 -10 -5 0 5 10 Q4 FY23 Q3 FY23 Q2 FY23 Q1 FY23 Q4 FY22 Q4 FY23 Q3 FY23 Q2 FY23 Q1 FY23 Q4 FY22 Q4 FY23 Q3 FY23 Q2 FY23 Q1 FY23 Q4 FY22
				Other fibre company (LFC) zone	Broadband connections	25,000	Local Fibre Company and fixed wireless provider activity is driving a gradual decline in copper connections.
		-3 -2			Copper line (no broadband)	14,000
		-2 -2 -1 -1
					TOTAL	39,000
Q4 FY23 Q3 FY23 Q2 FY23 Q1 FY23 Q4 FY22	-1 -			Non-UFB zone	Broadband connections	129,000	Ongoing decline in copper connections due to mobile/fixed wireless/satellite footprint expansion. Partly offset by fibre connections growth for greenfield developments.
		-3 -2
		-2 -2 -2 -1
					Copper line (no broadband)	23,000
		-4 2			TOTAL	152,000
		-5
Q4 FY23 Q3 FY23 Q2 FY23 Q1 FY23 Q4 FY22			4	Chorus UFB zone	Broadband connections	1,034,000	Chorus copper withdrawal programme resumed after a pause in Q3 following Cyclone Gabrielle. Increase in technician workforce enabled a resumption of proactive fibre migration activity.
		-8
		-6	6		Copper line (no broadband)	35,000
		-6	3
		-2	6		TOTAL	1,069,000
		-6	7
				Data is indicative as at 30 June

Data is indicative as at 30 June

Broadband connections

Copper (no broadband) connections

Excludes ~2k partly subsidised education connections and 11k fibre premium and data services (copper) connections

Workforce back to sustainable level

Managed migration: installations vs activations

> 92k fibre installations (FY22: 117k)

at lower end of 90k to 110k guidance due to technician shortages
workforce constraints removed by end FY23

> Managed migration programme

contributed 35k of the 92k installations
copper withdrawal drove activation of 19k managed installation addresses
17k activations from offnet addresses

Customer experience	FY23	FY22
Fault restoration	7.8 out of 10 (target 8.2)	8.2 out of 10
Intact provisioning	7.3 out of 10 (target 7.6)	7.3 out of 10

==> picture [480 x 303] intentionally omitted <==

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

70,000
Service activation: from copper
60,000
Service activation: from offnet
Fibre installations
50,000
40,000
30,000
20,000
10,000
0
FY19 FY20 FY21 FY22 FY23
----- End of picture text -----

More residential consumers opting for 1 Gig plans

1Gbps and Hyperfibre connections were 39% of residential connections growth in FY23
300Mbps plans were 50% of residential connections growth
91% of residential and business connections are on plans of 300Mbps and above

==> picture [937 x 317] intentionally omitted <==

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

Residential Business
1,000,000 120,000
900,000
100,000
800,000
700,000
80,000
20%
600,000
500,000 60,000 34%
68% 67%
400,000 43%
40,000
300,000 28%
200,000
20,000
100,000 23% 24% 26% 28%
0 0
June 2022 June 2023 June 2022 June 2023
2Gbps+ 1Gbps 300Mbps 100Mbps <100Mbps Voice 2Gbps+ 1Gbps 500Mbps 300Mbps 200Mbps 100Mbps <100Mbps Voice
----- End of picture text -----

==> picture [960 x 472] intentionally omitted <==

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

Financial performance
Mark Aue, Chief Financial Officer
----- End of picture text -----

==> picture [182 x 20] intentionally omitted <==

FY23 RESULTS

21 August 2023

Income statement

	FY23 $m	FY22 $m
Operating revenue	980	965
Operating expenses	(308)	(290)
Earnings before interest, tax, depreciation and amortisation (EBITDA)	672	675
Depreciation and amortisation	(446)	(427)
Earnings before interest and income tax	226	248
Net interest expense	(195)	(142)
Net earnings before income tax	31	106
Income tax expense	(6)	(42)
Net earnings	25	64

Revenue

	FY23	FY22
	$m	$m
Fibre broadband (GPON)	622	548
Fibre premium (P2P)	68	66
Copper based broadband	117	153
Copper based voice	39	52
Data services copper	4	6
Field services	70	71
Value added network	26	27
services
Infrastructure	31	30
Other	3	12
Total	980	965

growing fibre uptake and ARPU: $53.25 (June FY23) vs $50.67 (June FY22)
growing demand for direct fibre, mobile access and other backhaul
copper revenues declining as customers migrate to Chorus fibre or competing fibre/wireless networks
CPI increase of 7.2% applied to some services from mid-December
greenfields revenue $33m (FY22: $29m); partly offset by reduced roadworks $8m (FY22: $10m)
FY22 included $6m property optimisation and $3m legal settlement

Expenses

	FY23 $m	FY22 $m
Labour	76	64
Network maintenance	60	59
IT	42	50
Other network costs	37	29
Rent, rates and property maintenance	26	28
Electricity	19	17
Provisioning	1	1
Insurance	5	4
Consultants	9	8
Regulatory levies	9	9
Other	24	21
Total	308	290

CPI impact and increased employee numbers; FY22 included $9m holiday pay benefit and $2m COVID impact of reduced labour capitalisation

reduced fault volumes offset by $3m of extreme weather costs, CPI impact and more expensive fault mix

savings from migration off legacy systems and release of $2m software provision

$3m extreme weather costs; $3m network and property optimisation costs

$1m extreme weather costs; FY22 included one-off costs for office relocation and rationalisation

advertising spend up $2m with increased activity post-COVID

Underlying EBITDA & asset revaluation

	Adjustment	FY23 adjusted $m	Adjustment	FY22 adjusted $m
Reported operating revenue Underlying operating revenue	▪ Extreme weather credit	980 __1 981	▪ Lease change ▪ Legal settlement	965 (3) _(3) 959
Reported operating expenditure Underlying operating expenditure	▪ Extreme weather costs ▪ Operating model change	308 (6) (3) 299	▪ Holiday pay provision	290 9 299
UNDERLYING EBITDA		682		660
Reported EBITDA		672		675

Asset revaluation: Land & buildings

Land & buildings assets increased by $282 million following adoption of revaluation policy ▪ valuation increase from $75m to $357m
net effect on annual depreciation expected to be ~$1m per annum

Gross capex: $454 million (FY22 $492m)

Sustaining capex of $207m (FY22: $161m) see p35 for summary

Fibre capex	FY23 $m	FY22 $m
UFB communal	5	77
Fibre installations & layer 2	193	195
Fibre products & systems	10	12
Other fibre & growth	105	79
Fibre sustain	12	13
Customer retention costs	30	27
Subtotal	355	403

▪ Average cost per UFB premises installation: $1,067 vs $1,000 - $1,115 guidance*

*excludes layer 2 and includes standard installations, some non-standard single dwellings and service desk costs

Ca ex: Co er and Common p pp

Copper capex	FY23 $m	FY22 $m
Network sustain	27	27
Copper connections	1	1
Copper layer 2	1	3
Customer retention costs	4	7
Subtotal	33	38

FY23 included ~$7m rural cabinet upgrade project (largely grant funded)
reducing with stop sell now in place in fibre areas

Common capex	FY23 $m	FY22 $m
Information technology	44	32
Building & engineering services	22	19
Subtotal	66	51

IT lifecycle projects and investment to support exit from legacy systems
building projects resumed after COVID delays; FY22 included office relocation costs

FY24 guidance

> EBITDA: $680m to $700m

subject to no material changes in circumstances or outlook

Capital expenditure components

objective of modest EBITDA growth

==> picture [396 x 293] intentionally omitted <==

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

700
Sustaining
600
Discretionary growth
$m 500 $400m to
$440m
492
400
331 247
300
200
100 207
180 161
0
FY21 FY22 FY23 FY24
Sustaining network capex is investment to
maintain, replace or improve an existing copper or
fibre asset.
----- End of picture text -----**

expect costs to be ~$10m higher given deferral of some costs into FY24, CPI increases, additional regulatory and compliance costs, and operating model changes due in Q2

> GROSS CAPEX: $400m to $440m

Copper $25m to $35m
Common $55m to $75m
Fibre $320m to $340m: includes $180m-$190m fibre installations & layer 2 capex: based on mass market 80,000 – 100,000 fibre connections (cost per installation: $1,100 - $1,250*), and 1,500 – 2,500 backbone builds

Note: ranges are not necessarily additive

▪ FY24 sustaining capex lifts to $220m-$240m with CPI effects, catchup on property projects delayed by COVID, equipment upgrades to enable Hyperfibre, increased transport spend to support greater capacity and rural layer 2 lifecycle replacement.

*excluding layer 2 and including standard installations and some non-standard single dwellings and service desk costs

Net debt/EBITDA

> ND/EBITDA increased from 4.08x (FY22) to 4.39x

borrowings increased from $2,389 million (FY22)
ratings agency thresholds: Moody’s 5.25x, S&P 5.0x
the Board considers that a ‘BBB’ credit rating or equivalent is appropriate for a company such as Chorus
intention that in normal circumstances the ratio of net debt to EBITDA will not materially exceed 4.75x
financial covenants require senior debt ratio to be no greater than 5.5x

	As at 30 June 2023 ($m)	As at 30 June 2023 ($m)
Borrowings	2,561
+ PV of CIP debt securities (senior)		279
+ Net leases payable		181
Sub total	3,021
- Cash	76
Total net debt	2,945
Net debt/EBITDA*	4.39x

*Based on S&P and bank covenant methodologies

> ~65% of CNU interest rate exposure was fixed at 30 June

expect to be ~70% fixed over next 3 years with net ~$750m forward start fixed interest rate swaps starting in first half of FY24
see slide 37 in Appendix for summary of bond rates

==> picture [351 x 224] intentionally omitted <==

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

Average effective interest rate
3000 6
%
$m
2500 5
2000 4
1500 3
1000 2
500 1
0 0
FY18 FY19 FY20 FY21 FY22 FY23
EoY Net Debt Weighted average interest rate
----- End of picture text -----*

includes all interest on borrowings, bank commitment fees and non-cash accounting adjustments related to financing

NZ $M

Crown financing and debt profile

> At 30 June, debt of $2,561m comprised:

Long term bank facilities of $450m (Undrawn)
NZ bonds: $900m
Euro Medium Term Notes $1,661m (NZ$ equivalent at hedged rates)

==> picture [473 x 294] intentionally omitted <==

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

NZ Bond EUR EMTN Face value of CIP debt securities issued
900
800
700
600
500
400 820
300
514 500 105
200
328
100 200 200 210
167
85
0
----- End of picture text -----

Crown securities $m	30 June 2025	30 June 2030	30 June 2033	30 June 2036	TOTAL
Equity securities (cumulative total)	85.3	197.1	377.7	766.4	766.4
Debt securities (maturity profile)	85.3	104.7	166.7	210.2	566.9

Crown equity securities

unique class of security with no voting rights but a repayment preference on liquidation
an increasing portion attract dividend payments from 30 June 2025 onwards based on 180 day NZ bank bill rate, plus 6% p.a. margin
redeemable by cash payment of total issue price or the issue of Chorus shares (at a 5% discount to the 20-day VWAP for Chorus shares)

Crown debt securities

unsecured, non-interest bearing and carry no voting rights
• to be redeemed in tranches from 30 June 2025 to 2036 by repaying the issue price to the holder

Dividend and share buyback

Dividend guidance

> FY23 final dividend

25.5cps, unimputed
record date : 12 September 2023
payment date : 10 October 2023
no Dividend Reinvestment Plan available

> FY24 dividend guidance*

47.5cps in FY24
dividends unimputed in medium term
subject to no material adverse changes in circumstances or outlook

> ~$139m of $150m share buyback complete

17.5m shares purchased since February 2022
435 million shares on issue at 30 June

==> picture [390 x 270] intentionally omitted <==

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

50
45
40
35
30
cps 25
20
15
10
5
0
FY22 FY23 FY24
FY22 increase to prior guidance
----- End of picture text -----

Chorus’ policy is to pay an ordinary dividend of 60% to 80% of free cash flow (i.e. net cash flow from operating activities less sustaining capital expenditure)

Regulatory recap

2022 RAB movement ($m)

> Information Disclosure in May 2023:

RAB grew to $5,710m in 2022 (calendar)
MAR 2022 wash-up balance of ~$47m carried forward to RP2

> Next regulatory period - RP2 (Jan 2025 to Dec 2028)

Chorus expenditure proposal due 31 October
WACC due to be confirmed in July 2024

==> picture [395 x 315] intentionally omitted <==

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

356 28 5,710
5,448 -511 389
1,284
1,416
4,426
4,032
Core RAB Financial Loss Asset
----- End of picture text -----

==> picture [960 x 472] intentionally omitted <==

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

JB Rousselot, Chief Executive Officer
----- End of picture text -----

FY23 RESULTS

==> picture [182 x 20] intentionally omitted <==

21 August 2023

Data usage back at COVID levels; 4K to come

==> picture [419 x 317] intentionally omitted <==

4K EFFECT ON DATA DEMAND

==> picture [355 x 246] intentionally omitted <==

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

Data usage (GB)
2500
2000
1500
1000
500
0
Monthly fibre All streaming All TV
data usage in 4K streamed in
today 4K
----- End of picture text -----

Evolution of services driving greater data needs

applications driving greater bursts of data download and upload (e.g. video, games, software updates)
▪ growing number of connected devices per household and multiple simultaneous users requires more bandwidth

	Today	Near term	Future
Residential speed	Up to 1Gbps	Up to 10Gbps	Up to 50Gbps
Enterprise speed	Up to 100Gbps	Up to 400-800Gbps	Up to 1.6-3.2Tbps
Intelligence	Conditionally autonomous	Highly autonomous, fast provisioning times	Fully autonomous
Reliability & Latency	99.999%/ 5ms consistent latency / low jitter	99.999% / 1ms latency (hard guarantee) / very low jitter	Deterministic reliability/ <1ms latency (hard guarantee) / very low jitter
Trustworthy & Green	5x better per bit energy efficient	10x better per bit energy efficient, fast problem detection and response (minutes)	10x-plus better per bit energy efficient, very fast problem detection and response (seconds)

Source: World Broadband Association, Omdia

A nimbler Chorus

==> picture [410 x 358] intentionally omitted <==

Operating model transition from build to operate

> Unlocking value through a matrix model

including three value streams with sharp strategies and end-to-end approaches

==> picture [84 x 84] intentionally omitted <==

historical functional units (Customer & Network Operations; Product, Sales & Marketing) realigned to drive strategic outcomes
and enabling a thriving culture

==> picture [300 x 118] intentionally omitted <==

Targeting 80% fibre uptake

> Market dynamics remain positive

Home Fibre Starter 50Mbps traction: ~60% of July net adds from offnet
1Gig share of net adds ~40% vs 24% share of connections
large retailers promoting Hyperfibre (2-8Gbps)
continued winback in Wellington cable areas

> FY24 focus

NZ runs on fibre campaign driving fibre awareness
leveraging copper withdrawal programme for fibre demand
increased emphasis on UFB2 uptake
strategic approach to CPI adjustments from 1 October

==> picture [404 x 473] intentionally omitted <==

==> picture [300 x 118] intentionally omitted <==

Bringing more focus to opportunity

PowerSense: extreme weather events proved product value
Edge Centre: strong pre-orders for extra Auckland capacity
Backhaul: fibre nodes in 7 data centres; cellsite demand growing
Smart locations: +19% growth in FY23 as smart city and utility requirements expand (e.g. traffic cameras, digital billboards)
New property development: build completed (ready to connect) for 33k lots in FY23; current pipeline of work suggests slightly lower completions in FY24
Fibre expansion: tender issued for 10k premises (~60% offnet) adjacent to UFB; decision in H1 FY24 with build expected FY25. Further expansion subject to business casing and regulatory and policy settings

==> picture [281 x 258] intentionally omitted <==

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

New Property Pipeline
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
FY20 FY21 FY22 FY23
Orders (lots) Completed
----- End of picture text -----

Other opportunities: exploring digital infrastructure options

==> picture [301 x 118] intentionally omitted <==

Becoming an all-fibre digital infrastructure company

Chorus UFB area

35k copper voice lines
▪ 55k copper broadband lines
FY23: 544 cabinets closed and ~30k consumer notices
▪ FY24 target: 750+ cabinets closed, 30k+ consumer notices, 88% broadband retention rate

Local fibre co. area

14k copper voice lines
▪ 20k copper broadband lines
targeted copper withdrawal where remaining connections are uneconomic
▪ first trial notices issued
Non-fibre area
▪ 23k copper voice lines
▪ 90k copper broadband lines
▪ Chorus market share <50% ▪ <50% of remaining connections are TSO qualifying
▪ testing satellite options
▪ regulatory review 2025

Retired by end 2026

Retired by early 2030s

Significant sustainability gains in FY23

==> picture [454 x 395] intentionally omitted <==

Copper shut down is beginning to drive electricity reduction (target: 25% reduction by 2030)
Record data traffic (7,400 petabytes) with 91% carried more energy efficiently by fibre

Data vs Electricity usage

==> picture [415 x 256] intentionally omitted <==

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

8,000 100,000
95,000
7,000
90,000
6,000
85,000
5,000
80,000
4,000 75,000
70,000
3,000
65,000
2,000
60,000
1,000
55,000
0 50,000
FY21 FY22 FY23
Copper data usage (PB) Fibre data usage (PB)
Electricity usage (MwH)
----- End of picture text -----

==> picture [960 x 476] intentionally omitted <==

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

Questions?
----- End of picture text -----

==> picture [182 x 20] intentionally omitted <==

21 August 2023

Appendix A: Pricing and market data

Fibre plan - consumer	Current wholesale price	Price from 1 Oct 2023	Notes
Voice line	$27.45	$29.11
Home starter 50/10Mbps	$35	$35	Applies where retail price is $60. Price reduced to $35 from 1 Feb 2022
50/10Mbps	$47.28	$50.43
100/20Mbps 300/100Mbps	$50.50	$53.54	100Mbps is anchor service. 300Mbps plan introduced late 2021.
1Gbps	$58	$61.86
Hyperfibre 2Gbps	$70	$70
Hyperfibre 4Gbps	$85	$85
Hyperfibre 8Gbps	$110	$110

Copper pricing Current wholesale price Price before 16 Dec 2022 Notes	Copper pricing Current wholesale price Price before 16 Dec 2022 Notes	Copper pricing Current wholesale price Price before 16 Dec 2022 Notes	Copper pricing Current wholesale price Price before 16 Dec 2022 Notes
Copper line	$36.17	$33.73	Annual CPI adjustment mid- December 2023
Copper broadband	$48.35	$45.09

Fibre comprises 81% of Chorus connections

Fibre comprises 81% of Cho	Fibre comprises 81% of Cho	Fibre comprises 81% of Cho	Fibre comprises 81% of Cho	Fibre comprises 81% of Cho	Fibre comprises 81% of Cho	Fibre comprises 81% of Cho

	30 June 2022	30 Sept 2022	31 Dec 2022	31 March 2023	30 June 2023	0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 30-Jun-22 30-Sep-22 31-Dec-22 31-Mar-23 30-Jun-23 Fibre (GPON) VDSL Copper ADSL Baseband copper ~~Business premium~~
Unbundled copper (no broadband)	1,000	1,000	not material	not material	not material
Baseband copper (no broadband)	102,000	94,000	85,000	80,000	72,000
Copper ADSL (includes naked)	122,000	112,000	102,000	94,000	84,000
VDSL (includes naked)	118,000	109,000	100,000	92,000	83,000
Fibre broadband (GPON)	949,000	969,000	986,000	1,002,000	1,021,000
Data services (copper)	2,000	1,000	1,000	1,000	1,000
Fibre premium (P2P)	10,000	11,000	11,000	10,000	10,000
Total connections	1,304,000	1,297,000	1,285,000	1,279,000	1,271,000

> 1,188,000 broadband connections comprises:

1,021,000 fibre (GPON) connections
167,000 VDSL/ADSL (copper) connections

Note : ~2,000 partly subsidised education connections are excluded from this data

NZ broadband market – by retailer

NZ broadband market – by technology

==> picture [903 x 350] intentionally omitted <==

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

2,000,000 2,000,000
1,800,000 1,800,000
1,600,000
1,600,000
1,400,000
1,400,000
1,200,000
1,200,000
1,000,000
1,000,000
800,000
800,000
600,000
600,000
400,000
400,000
200,000
200,000
-
-
----- End of picture text -----

Spark One 2degrees (incl Vocus) Mercury (incl Trustpower) Contact Others Source: IDC

Chorus xDSL Chorus mass market fibre Chorus premium fibre Local fibre companies (UFB) Other fibre networks One cable Fixed (mobile) wireless Legacy fixed wireless, satellite

Appendix B: Sustainability

See also https://company.chorus.co.nz/sustainability

==> picture [258 x 145] intentionally omitted <==

==> picture [248 x 129] intentionally omitted <==

==> picture [263 x 77] intentionally omitted <==

==> picture [205 x 188] intentionally omitted <==

==> picture [214 x 153] intentionally omitted <==

==> picture [198 x 30] intentionally omitted <==

==> picture [488 x 181] intentionally omitted <==

==> picture [236 x 185] intentionally omitted <==

==> picture [235 x 165] intentionally omitted <==

Appendix C: Additional financial information

Maintenance trends

copper faults continue to fall in Chorus fibre areas as we withdraw copper services
non-fibre areas (~13% of population) make up the majority of copper network faults and reactive costs
▪ H2 FY23 copper reactive fault spend included Cyclone Gabrielle costs

Note:

reactive maintenance excludes spend on proactive maintenance and customer networks (i.e. premises wiring, no fault found, cancellations)

# of faults

==> picture [806 x 222] intentionally omitted <==

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

Copper - reactive fault spend
Copper – fault volumes by area
by area
25,000
12
20,000 10
$m
15,000 8
H1 FY22 6
10,000
H2 FY22 4
5,000
H1 FY23 2
0 H2 FY23 0
Chorus UFB LFC UFB RoNZ (non- Chorus UFB LFC UFB Rest of NZ (non
UFB) UFB)
----- End of picture text -----

Sustaining vs non-sustaining capex

sustaining network capex is investment to maintain, replace or improve an existing copper or fibre asset
$207m of FY23 capex was sustaining vs $247m nonsustaining
fibre sustaining capex is expected to increase over time as the asset ages

Non-sustaining capex	FY23 $m	FY22 $m
UFB communal	5	77
Fibre installations	142	166
Greenfield growth* and product development	74	59
Footprint expansion*	11	15
Customer retention (incentives)	15	14
Subtotal	247	331

*majority funded by third party contributions

Fibre capex: sustaining	FY23 $m	FY22 $m
Layer 2	51	29
Fibre products & systems	6	7
Network sustain	12	13
Other fibre	31	10
Customer retention costs**	15	13
Subtotal	115	72
Copper capex: sustaining	FY23 $m	FY22 $m
Network sustain	20	27
Copper connections	1	1
Copper layer 2	1	3
Customer retention costs**	4	7
Subtotal	26	38
Common capex: sustaining	FY23 $m	FY22 $m
Information technology	44	32
Building & engineering services	22	19
Subtotal	66	51

**Relates to provisioning, systems and service desk costs

Indicative long-term investment opportunities

> Below are examples of RAB and non-RAB investment being evaluated for 10-year planning:

dollar ranges are indicative only and reflect a 10-year total in 2023 dollars
opportunities to invest in discretionary long-term growth capex could range up to ~$300 million per annum, subject to consumer demand (e.g. installations and greenfields), business casing and regulatory settings/approvals

==> picture [734 x 222] intentionally omitted <==

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

KEY: S Small: <$100m M Medium: $100m to $400m Large: $400m+L
RAB investment opportunities
SUSTAINING CAPEX – NEW PROJECTS
XGS-PON electronics (1): L Rural fibre electronics: S Sustainability: S
migration to multi-gigabit capability lifecycle update for RBI network (e.g. solar power options)
DISCRETIONARY GROWTH CAPEX
Fibre installations: L Greenfields (2): L Smart locations: M
connect fibre to premises communal fibre to new premises non-building installations (e.g.CCTV)
Network resilience : M Rural fibre(3): L
enhance network robustness fibre up to 90% population
----- End of picture text -----*

Non-RAB investment

==> picture [154 x 164] intentionally omitted <==

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

(assessed on a risk-adjusted
return basis vs other capital
allocation/investment options)
S [_] M
New products
Edge Centre
Regional backhaul
Other
----- End of picture text -----

*RBI is Rural Broadband Initiative

Limited XGS-PON investment in RP1. Broader rollout as technology matures. 2. Greenfields investment is gross amount including customer contributions. 3. Communal rollout cost only.

Hedging profile

Bond	Amount (NZ$m)	Current hedge profile	Forward looking profile	Fixed hedging movements 1HY24 ($m)
EMTN 2023	328	100% Fixed at 5.15%	Matures Oct 23	-350
EMTN 2026	514	100% Fixed at 3.39%	Fixed for life of bond
NZD 2027	200	100% Fixed at 1.98%	Fixed for life of bond
NZD 2028	500	100% Fixed at 4.35%	Coupon to be reset in Dec 23, will be 100% fixed from this date at a margin of 1.8% over 4.41%	500
EMTN 2029	820	Swapped to a margin over floating (BKBM) through cross currency interest rate swaps	Will be ~50% fixed at margin of 2.2% over 4.1% from Dec 23	400
NZD 2030	200	Swapped to a margin over floating (BKBM) through receiver interest rate swaps	Will be 100% fixed at margin of 1.7% over 0.8% from Oct 23	200
Total				750

Appendix D: Additional regulatory information

RAB movements for 2022 ID year

Closing RAB of $5,710m

Component	Core RAB $m (nominal)	Financial Loss Asset (FLA) $m (nominal)	Notes
~~Table that shows startin~~ Opening RAB (1 January 2022)	~~RAB (slit C~~ 4,032	~~re vs FLA?)~~ 1,416	~~and a waterfall for movements in eriod (e~~ October 2022 final RAB decision total of $5,413m (core $3,997m and FLA $1,416m) updated for 2022 allocation factors.
~~g~~ final RAB, depreciation, n less Depreciation	~~p~~ ew assets (n (277)	et of contrib (234)	~~p .g.~~ ?), CPI = end of 2022 RAB FLA depreciation is diminishing value and the core RAB is straight-line. Assets start depreciating the regulatory year after commissioning.
plus Revaluations	287	102	7.22% actual inflation in the December quarter versus forecast 1.8% used in the initial 2022 MAR. The ID RAB rolls forward into RP2 and will be reflected in the RP2 MAR.
plus Assets commissioned	356		Amount is net of $52m capital contributions
plus Adjustment resulting from asset allocation	28		An upwards adjustment reflects a greater proportion of shared assets being attributable to fibre (due to differences in allocations drivers such as revenues and connections) than was forecast for the opening RAB in 2023.
Total closing RAB value (31 Dec 2022)	4,426	1,284

NOTE:

RAB movements do not affect the RP1 MAR. The ID RAB closing value will be the basis of the opening RAB for RP2.
RAB movement calculations are subject to Commerce Commission review and approval.

2022 MAR wash-up balance of $46.8m

Description	Revenue $m (nominal)	Wash-up $m (nominal)	Notes
Building blocks revenue Pass-through costs Forecast total allowable revenue 2022	676.1 14.2 690.2		2022 MAR was set on the basis of 2021 forecasts.
_Less_2022 FFLAS revenue received	(667.2)	23.0	Chorus under-earnt initial MAR allowance by $23m.
Plus Initial RAB true-up		8.5	MAR adjustment to reflect increased allocation of shared assets in the final RAB decision: expect ~$30m smoothed across RP1.
Plus Pass-through costs		1.5	Actual pass-through cost of $15.7m versus forecast $14.2m.
Plus Crown financing benefit		0.1	Reflects lower Crown financing balance than forecast.
Plus Cost allocators		13.7	Previously forecast cost inputs (e.g. totex, connections and data traffic) have been updated for actuals in the period.
Total wash-up balance for 2022		46.8	The wash-up balance is rolled forward each year using the post-tax WACC as the time-value of money to preserve NPV neutrality. The RP1 balance will be added to the RP2 MAR.
Updated total allowable revenue 2022		714

NOTE :

The regulations omitted a 2022 wash-up for actual CPI. The 2023 and 2024 MAR will be updated for forecast CPI changes as part of in-period smoothing. The 2023 MAR used 2.17% forecast CPI and will be updated for 3.37% (June 2022 forecast) with actual CPI applied via the wash-up process for RP2.
There was no wash-up required for individual capex proposals in 2022.
A wash-up for connection capex differences vs forecast will occur at the end of 2024.
All wash-up estimates are subject to Commerce Commission review and approval.

Maximum Allowable Revenue (MAR)

> Pass-through costs 14.2 14.5 15.5 TOTAL $690.2 $747.4 $789.5 > > > > > > > >	> Pass-through costs 14.2 14.5 15.5 TOTAL $690.2 $747.4 $789.5 > > > > > > > >	> Pass-through costs 14.2 14.5 15.5 TOTAL $690.2 $747.4 $789.5 > > > > > > > >	> Pass-through costs 14.2 14.5 15.5 TOTAL $690.2 $747.4 $789.5 > > > > > > > >
Pass-through costs	14.2	14.5	15.5
TOTAL	$690.2	$747.4	$789.5

Source: Commerce Commission, price-quality path final decision, 16 Dec 2021

RP1 post-tax WACC of 4.72% (used 0.51% risk-free rate) would be 7.38% if recalculated at 1 Jan 2023 using recent rates. forecast CPI used for revaluations in 2022 was 1.8% vs 7.22% actual in December quarter. 2023 forecast used 2.2% and 2024 is 2.13%. Higher revaluation rates during RP1 will be reflected in the opening RAB for RP2. regulator only allows ~2% return on funded assets. Crown financing deduction subject to WACC.

cost allocations will need to be addressed in RP2 given the increasing dominance of fibre in Chorus’ business operations. reflects an implied 14-year asset life through regulatory process. reflects asset life of 14.2 years and tilted annuity depreciation (-13% tilt rate) tax building block commences from ~FY27 and grows to ~$100m CPI forecast assumptions were 2.71% in 2022, 2.17% in 2023, 2.04% in 2024. The 2023 and 2024 MAR will be updated for preceding June forecasts and then for actual CPI as part of the RP2 wash-up process. Chorus has made a submission to the Commission on the status of the 2022 CPI wash-up. MAR totals reflect draft starting RAB and allocations in 2021. Changes in the final RAB announced in October 2022 will be reflected in the next regulatory period wash-up.

==> picture [596 x 670] intentionally omitted <==

Annual Report 2023

01 Chorus Board and management overview
10 Management commentary
20 Financial statements
58 Governance and disclosures

==> picture [199 x 22] intentionally omitted <==

92 Glossary

FY23 results overview

==> picture [489 x 378] intentionally omitted <==

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

Operating revenue EBITDA [1]
FY23 FY22 FY23 FY22
$980m $965m $672m $675m
Net profit after tax Dividend
FY23 FY22 FY23 FY22
$25m $64m 42.5cps 35cps
Share price
FY23 FY22
$8.425 $7.22
----- End of picture text -----

About this report

Our 2023 Annual Report covers the financial year ended 30 June 2023 and includes aspects of our environment, social and governance (ESG) performance. For additional ESG reporting, including emissions and climate-related information, please refer to our separate 2023 Sustainability Report available at www.chorus.co.nz/reports.

This report is dated 21 August 2023 and is signed on behalf of the Board of Chorus Limited by Mark Cross, Board Chair, and Kate Jorgensen, Chair of the Audit & Risk Management Committee.

==> picture [135 x 32] intentionally omitted <==

Mark Cross Chair

==> picture [137 x 33] intentionally omitted <==

Kate Jorgensen Chair Audit & Risk Management Committee

1 Earnings before interest, income tax, depreciation and amortisation (EBITDA) is a non-GAAP profit measure. We monitor this as a key performance indicator and we believe it assists investors in assessing the core operations of our business.

Dear investors

On behalf of your Board, I’m pleased to report that Chorus has delivered another strong financial result in a year of operating challenges and change.

Over a period of economic volatility, inflationary pressures and uncertainty, Chorus continued to prove its resilience as an essential utility provider. As the recent pandemic and extreme weather events have shown, Kiwi homes and businesses are more reliant than ever on our fast and reliable broadband connections to live, learn, work and play.

We’ve announced a final unimputed dividend for the year of 25.5 cents per share, bringing total dividends for FY23 to 42.5 cents per share. The dividend reinvestment plan remains paused.

This is my first annual report as Chair after six years on the Board as a director. I’m excited to be part of Chorus’ transition from a successful era of building one of the world’s most advanced fixed broadband networks to now operating as a digital infrastructure company that can power New Zealand’s digital future.

Strategy and Core Beliefs

I think it’s important for shareholders to understand what our beliefs as a board are for your company. These beliefs underpin Chorus’ three strategic pillars: to win in core fibre, to optimise the non-fibre asset base and to grow new revenues.

Empowering our people: One of the best investments we can make is in having the right people, empowered and appropriately incentivised. Our aspiration is for Chorus to be a diverse and inclusive employer of choice.
Fibre is future-proofed: We believe fibre is the most effective technology choice for the vast majority of New Zealanders because it provides a dedicated connection that delivers fast and extremely reliable connectivity. While alternative technologies have a place in the market, fibre has a clear and easily scalable upgrade path to meet the expected growth in consumer needs far into the future.
Connections, connections, connections: Chorus’ longterm value is inextricably linked to fibre connections. Now that we’ve built a world-class network, in partnership with government, the greatest benefit to the country is to harness its potential. We’ve begun retiring the copper network in our urban fibre areas and this will drive fibre uptake even higher. Consumers value fibre above other technologies as a high-quality dependable service and we’re willing to invest in connecting more addresses and devices (e.g. traffic cameras) where the acquisition cost is justified by the long-term value of that connection.
Managed exit from copper: Our copper network is nearing the end of its technological life and alternative technologies will be needed beyond the reach of fibre. Our focus is on managing our copper costs down while deploying fibre to the maximum extent and ensuring regulation supports consumers to get the best possible services.
Be an active wholesaler: As an open access wholesaler we treat all our retailer customers equally. Yet, our largest customers are also our network competitors and have direct consumer relationships where we don’t. This means we need to be an active wholesaler, promoting our network services and ensuring that the regulatory regime supports a level playing field between network providers and keeps consumers fully informed.
Promote digital equity: We’re the provider of an essential utility service that enables New Zealanders to access an increasingly digitised world. This means Chorus can and should play its part in improving digital equity. Because we’re a wholesale only provider, this requires a collaborative effort with government agencies and retail service providers.
Prioritise long-term value: Capital allocation is one of our most important responsibilities. We’re making investment decisions for long-term value, not short-term profit. We’ll prioritise the efficient allocation of capital that grows shareholder value and supports a growing sustainable dividend through time. Our assessment of the necessary level of returns, the impact on consumer pricing, competitive market conditions, and the parameters of our dividend policy and debt limits, will guide our approach to discretionary investment.
A considered approach to new opportunities: We believe generating non-regulated income streams is important, but they must pay their way. We would need to have, or build, the capability to run these businesses well. We’ll tread carefully and generally steer away from businesses that our shareholders can invest in directly, unless there is a compelling adjacency to, and synergies with, our core business.
An appropriate capital structure: We’re committed to maintaining a capital structure reflective of a utility business. At the heart of this is the maintenance of an investment-grade credit rating (BBB or equivalent) and financial policies that support this. We’ve begun turning our minds to the first tranche of Crown funding that will be due in mid-2025.

Reshaping Chorus for its next phase

We’ve spoken in the past about the transition from a fibre rollout organisation to one that is focused more on operating that network. With the UFB rollout finished and the new regulatory regime for fibre established, Chorus is entering this new phase of its evolution.

In May, we announced the beginning of changes to our operating model to better execute our strategy, reflect the new regulatory framework and respond to a changing market environment. That environment includes the progressive withdrawal of our copper network, the emergence of new technologies and changing consumer needs.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

This new operating model includes the introduction of three end-to-end value streams that are aligned to the core focus areas of our strategy: win in fibre, grow new revenues and optimise non-fibre assets. New capabilities, tools and ways of working are also being introduced so our people can deliver key initiatives with better focus and prioritisation, and ultimately provide improved consumer outcomes. This is a significant change from our historical operating model that had been built around delivering a 12-year fibre rollout and the mass uptake of fibre.

Unfortunately, it has meant the disestablishment of some executive roles.I would like to acknowledge Andrew Carroll (GM Customer & Network Operations) and Ed Hyde (Chief Customer Officer) for the significant contributions they made to Chorus. Andrew was a member of the leadership team since Chorus was listed and helped us navigate a number of significant challenges over many years. Ed was instrumental in developing our fibre proposition for consumers and ultimately reaching our target of one million connections in FY23.

Governance

Two directors, Jack Matthews and Kate Jorgensen, are scheduled to be up for re-election at this year’s annual shareholders meeting, with no retirements. We’ve had two director changes during the year, with the retirement of Patrick Strange as Chair and the subsequent appointment of Will Irving as a director. Will has been an excellent addition to the Board, bringing a combination of regulatory, technology and operational telco experience from his roles at Telstra and the National Broadband Network in Australia.

I’d like to acknowledge Patrick for his leadership over a long period at Chorus and for the smooth handover to me. I extend that appreciation to my fellow Board members for their support to me in the Chair role and their valuable contributions.

As directors we’re energised by the goals we have set for the company. I believe the Board has the right blend of experience and diversity in the broadest sense to drive the strategy of the company, and to support and challenge our management.

Becoming an all‑fibre digital infrastructure company

We've provided dividend guidance of 47.5 cents per share, unimputed, for FY24. There is approximately $11 million remaining to be returned to shareholders through the $150 million share buyback programme. To date, more than 17 million shares have been bought back.

In April, we were pleased to see UniSuper receive government approval to increase its shareholding in Chorus up to 20%, should it choose to do so. We see this as a positive endorsement both of Chorus’ strategy and growing investor recognition of our value as a provider of essential digital infrastructure.

The global boom in fibre rollouts gives us great confidence that we’ve invested in the right infrastructure for the future. Recent OECD data shows fibre already accounting for 38% of all fixed broadband subscriptions at the end of 2022, surpassing cable on 32% and copper broadband on 24%.

This shift to fibre, and the emergence of alternative wireless and satellite broadband networks in rural areas, has started the countdown on the usefulness of copper networks. Norway and Sweden, for example, are well advanced in the retirement of copper. We expect this to occur here in the next decade and we believe fibre should be extended further to help bridge the digital divide between urban and rural communities. We’re exploring how we could play a part with the right investment incentives.

At the same time, we’re enhancing our existing fibre footprint with upgrades to multi-gigabit Hyperfibre capability. We know we’re on the right path when Singapore’s latest Digital Connectivity Blueprint calls for seamless 10Gbps connectivity to be enabled within the next five years. The trends all point to exponential data growth in the coming years and the rapid rise of artificial intelligence services in the past year shows just how fast and far-reaching changes in our industry can be.

I’d like to thank our chief executive JB Rousselot, our executive team and the wider Chorus team for their outstanding efforts over the past year, particularly the way they dealt with significant operating challenges, including Cyclone Gabrielle and the ongoing technician shortages.

Finally, I would like to thank you, our shareholders, for your continued support of Chorus and we look forward to updating you at our annual meeting in November.

==> picture [146 x 33] intentionally omitted <==

Mark Cross Chair

==> picture [130 x 131] intentionally omitted <==

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

1.0

Operating highlights

==> picture [241 x 110] intentionally omitted <==

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

FY22 FY23
Fixed line connections [2] 1,304,000 1,271,000
Broadband connections [2] 1,189,000 1,188,000
Data traffic 7,140 petabytes 7,402 petabytes
Employee engagement 8.5 out of 10 8.7 out of 10
score [3]
----- End of picture text -----

The completion of the government backed ultra-fast broadband (UFB) rollout provided the foundation for another strong financial performance, despite workforce constraints and extreme weather events bringing new operational challenges. Fibre connections continued to grow and were up 72,000 in the year. The migration of consumers to fibre and alternative networks saw copper connections reduce by 105,000. Overall, total fixed line connections reduced by 33,000 compared to 36,000 in the prior year.

The increase in fibre connections and ongoing growth in the uptake of high-speed fibre plans, together with inflationlinked price changes, underpinned underlying revenue growth from $959 million to $981 million.

Despite inflationary pressure on various cost lines, underlying operating expenses were held flat at $299 million.

These operating results produced underlying FY23 EBITDA of $682 million, a $22 million increase on underlying FY22 EBITDA of $660 million[4] . This was within our updated half year EBITDA guidance range of $675 million to $690 million that had excluded allowance for flood and cyclone-related impacts. Reported EBITDA was $672 million when including $10 million of one-off costs for the extreme weather events and operating model changes.

Net profit after tax (NPAT) was $25 million, down from $64 million in FY22. This reflects the effects of increasing interest rates, and higher depreciation as we progress the shutdown of our copper network in fibre areas.

Capital expenditure reduced to $454 million, down from $492 million in FY22. This was slightly above our guidance of $410 million to $450 million and reflects a record year of work completed for new property developments. Our borrowings at the end of FY23 were 4.39 times net debt to EBITDA and well within our business tolerance level of 4.75 times.

1.1 Winning in our core fibre business

==> picture [242 x 137] intentionally omitted <==

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

FY22 FY23
Fibre connections 959,000 1,031,000
Fibre uptake (UFB areas) 69% 73%
Average data usage (June) 567GB 585GB
Customer satisfaction – 8.2 out of 10 7.8 out of 10
fault restoration (target 8.2)
Customer satisfaction – 7.3 out of 10 7.3 out of 10
intact provisioning (target 7.6)
----- End of picture text -----

We reached a significant milestone in December when we connected the last community, Opononi in the Northland region, to fibre under our 11-year public-private partnership with the government. By the end of June, fibre uptake had reached 73% in the completed UFB rollout areas, up from 69% in FY22.

Across our wider fibre network (i.e. including fibre deployment outside the original UFB rollout footprint), fibre connections grew to 1,031,000. This surpassed our long-held target of one million connections by December 2022.

About 250,000, or 24%, of our mass market connections are on speeds of 1 gigabit per second (Gbps) or Hyperfibre (2, 4 or 8 Gbps) plans. About 620,000, or 67%, of residential connections are on our popular 300Mbps plan.

Our entry level 50 megabits per second (Mbps) Home Fibre Starter plan, intended for price conscious consumers with basic broadband needs, grew strongly to number 16,000 connections by the end of FY23. We were pleased to see some large retailers begin offering the plan at $50, compared to the $60 retail price required to attract the $35 wholesale line fee.

Workforce challenges

Like many industries, one of the unforeseen challenges we had to grapple with in FY23 was a shortage of skilled workers. Visa changes for migrant workers meant many of the technicians who carried us through the pandemic either took the opportunity to reconnect with family and friends overseas, or moved to other local industries. Strong global competition for fibre technicians was another contributor.

This saw a workforce gap of about 380 technicians emerge in the first half of FY23. Although our recruitment and training initiatives had largely bridged this gap by the end of FY23, the workforce constraints we experienced through the year meant we weren’t able to meet consumer demand for installations. This shortage was compounded by the need to prioritise fault restoration work in the wake of Cyclone Gabrielle. In the second half of FY23, for example, we had more than 60 days in which field activity was subject to force majeure conditions.

2 Excludes partly subsidised education connections provided as part of Chorus’ COVID-19 response.

3 Based on the average response to four key engagement questions.

4 Refer to page 13 of the FY23 investor presentation for the detailed reconciliation to EBITDA.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

These workforce challenges had a negative effect on our customer experience measures. Our fibre fault restoration score dropped from 8.2 last year to 7.8 in June (rolling threemonth average). This reflected the increase in the length of time taken to resolve faults. Improvements have been made that should support better outcomes in FY24. For example, we’ve reconfigured systems and processes through the industry so consumers can be given a four-hour timeslot for a technician visit. This is a big step forward from our longstanding practice of providing the consumer with a date and no indication of time.

Consumer satisfaction for intact connections, where consumers are seeking to activate a fibre service in premises where a fibre socket is already installed, was steady at 7.3 year on year. Workforce constraints and weather events delayed some planned improvements. Retailer automation initiatives and improvements to our network records are expected to support better outcomes in FY24.

Data demand and future-proof fibre

When we began building our fibre network just over a decade ago, average data usage was 13 gigabytes a month. Today, the average on our fibre connections is 585GB and almost 15% of consumers are using 1,000GB a month. In the United States; AT&T estimates their monthly average will grow from 900GB to 4,600GB by 2025.

What’s going to make people consume so much data? Think back to the rapid rise of streaming services we’ve seen in the last five years. These services now drive 45% of traffic on our network.

As 4K quality content becomes more common, bandwidth demand is expected to grow exponentially. If all current streaming usage was in 4K quality, for example, monthly usage would double to about 1,200GB a month. For now, we’re lagging other countries when it comes to the broadcast of mainstream sports in 4K. Sports events drive substantial peak time usage and are still largely delivered in Aotearoa via satellite or terrestrial broadcast. If all TV broadcast content was delivered online, monthly usage would be in the order of 2,000GB.

We’ve already had an indication of this kind of effect with the online gaming phenomenon Fortnite regularly setting data traffic records on our network. Imagine how this could snowball as video and latency requirements grow in tandem.

We’re starting to see examples of augmented reality (AR) and virtual reality (VR) services being adopted by consumers. The recent pandemic spurred gym providers to develop VR body combat training options that you can do in your living room, while music fans can now join some of their favourite bands on-stage.

Apple has now joined Meta in developing the glasses technology that is critical to the user experience. The ‘metaverse’ promises virtual 3D worlds where high-quality video will be mixed with AR and VR. Fortnite provides an insight into how this could evolve, with friends meeting online in Fortnite ‘world’ to play games together and attend one-off events like concerts.

For Chorus’ part, these emerging digital applications and services are going to need varying combinations of high bandwidth or speed, low latency and rock-solid reliability and consistency. With 99.999% reliability and latency below five milliseconds, fibre is considered the leading technology to enable this ultra-digital future.

We’re already investing in this future by upgrading to 8Gbps capability. For fibre, this can be achieved by changing the electronics on either end of the fibre cable to a home or business. We’ve also trialled the simultaneous delivery of 25Gbps services on the same cable. Beyond 2030, the World Broadband Association is suggesting networks will need to plan for residential speeds of up to 50Gbps and enterprise speeds of up to 3.2Tbps.

Figure 1:

4K effect on data demand

==> picture [235 x 212] intentionally omitted <==

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

2,500
2.000
1,500
1,000
500
0
Monthly fibre data All streaming All TV streamed
usage today in 4K in 4K
Data usage (GB) per month
4K streaming would use about 8GB per hour, versus 2GB per hour for Full High Definition
or 1GB per hour for High Definition content.
Gigabytes
----- End of picture text -----

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Figure 2:

Monthly average data usage for fibre grew from 567GB to 585GB across FY23 and is almost back at peak levels seen during the COVID pandemic lockdowns.

==> picture [494 x 227] intentionally omitted <==

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

700
600
500
400
300
200
100
0
Jun-18 Dec-18 Jun-19 Dec-19 Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 Dec-22 Jun-23
Downstream Upstream (shown from June 2020 onwards)
Average monthly usage (gigabytes)
----- End of picture text -----

Fibre proves its resilience

Flooding events and cyclones caused substantial damage to North Island infrastructure and homes in early 2023. At its peak, about 55,000 Chorus fixed line connections were affected by the widespread loss of electricity and network damage in the immediate aftermath of Cyclone Gabrielle. This was the largest weather event to affect our network. Five regional fibre routes were damaged by bridge washouts, or road slips, and we used helicopters to lay about five kilometres of temporary fibre cable so we could restore services.

Although the EBITDA impact of these events was $7 million, the events proved the benefits of the substantial investment we’ve made in fibre. Cyclone Gabrielle’s effects saw copper network customers up to 10 times more likely to lose service than those on fibre and fibre services were able to be restored twice as fast as those on copper. This is because the copper network relies on powered equipment in suburban streets to transmit signals, whereas fibre is a passive network with data transmitted via light. The copper network is therefore much more susceptible to water and lightning damage.

There are lessons to be learnt from Cyclone Gabrielle and we’ve contributed to a telecommunications industry plan, led by the New Zealand Telecommunications Forum, to identify opportunities for enhanced network resilience and collaboration with government.

We have an ongoing programme of network resilience projects, including regional backhaul deployments supported by government.

Our asset management plans are also being shaped by the detailed assessment of flooding and sea level rise risks we’ve undertaken as part of our physical climate change risk analysis. For more information see the Appendix in our Sustainability Report. Consistent with this assessment, no significant exchange buildings were affected by the extreme weather events.

Earthquakes remain the primary focus for our resiliency planning and we have an ongoing programme to strengthen critical network sites. Seismologists are taking advantage of our new West Coast fibre route to analyse the South Island’s Alpine Fault by using the network itself as a sensor. This study will provide valuable information to local communities and organisations so they can be better prepared.

==> picture [230 x 157] intentionally omitted <==

Damage to the regional fibre route on the bridge crossing the Hikuwai River, north of Gisborne, required 800 metres of fibre to be overlaid.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

1.2 Growing new revenues

FY23 Smart locations: +19% Data centre connectivity: 7 sites Direct fibre connections: +3%

We made good progress in our push to grow new revenues.

Our PowerSense service, launched in FY22, proved its value through the extreme weather events in early 2023. The service collects ‘last gasp’ signals from fibre terminals to identify when a premises loses electricity. This gave electricity lines companies real-time visibility of the weather’s impact on their networks and helped support their own restoration efforts.

Direct, or dark, fibre connections continue to increase and now number more than 6,000 connections. Backhaul connections grew after we revised our Relay Connect offering for urban centres and our Data Centre Connect product now covers seven sites. Work is underway to double the number of Edge Centre racks available in our Auckland exchange and we’ve already received pre-orders for almost a third of this additional capacity.

Smart locations are another opportunity to increase utilisation of our network. We already have several thousand connections to non-building locations, such as traffic cameras, digital billboards and electric charging stations. This category grew by 19% in the year and demand for Internet of Things (IoT) connectivity is expected to flourish as smart city and utility requirements expand.

1.3 Optimising our non‑fibre assets

==> picture [242 x 150] intentionally omitted <==

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

FY22 FY23
345,000 copper 240,000 copper
connections remaining connections remaining
10,100 withdrawal notices 30,000 withdrawal notices
(cumulative)
130 broadband cabinets 544 broadband cabinets
closed closed (cumulative)
14 properties and surplus 8 properties and surplus
leases exited leases exited
----- End of picture text -----

With the UFB rollout completed, we’ve stepped up our efforts to optimise our copper network in areas where fibre is available to consumers.

In March 2023, we announced we were stopping the sale of new copper broadband services in both Chorus and local fibre company areas. This was extended to copper baseband voice services from June 2023. Some exceptions remain for services transferred between broadband retailers, or where a fibre connection isn’t immediately available.

In Chorus’ fibre areas we provided about 20,000 more consumers with at least six months’ notice, as required by the Copper Withdrawal Code, that we were ending copper services to their address. This enabled us to close another 414 broadband cabinets during the year.

By the end of FY23 we had about 240,000 connections remaining on our copper network. This was down from 345,000 at the end of FY22. Of these connections, approximately 115,000 are in areas where fibre isn’t available. About half of those premises have a historical Telecommunications Service Obligation (TSO) that requires us, along with Spark, to maintain telephone services. The TSO Deed recognises that additional funding may be sought from government for commercially non-viable customers.

The reality is that copper broadband is increasingly unsuited to consumers’ growing bandwidth needs. Consumers are already voting with their feet and paying higher fees to satellite or government-subsidised fixed wireless providers for improved services. Mobile network operators are also partnering with low-earth-orbit satellite providers with a view to delivering mobile services well beyond current cellsite coverage. Clearly, the TSO for copper is fast approaching its use by date.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

1.4 Developing our long‑term future

==> picture [241 x 138] intentionally omitted <==

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

FY22 FY23
Electricity 81 77.4
(gigawatt hours)
Emissions (Scope 1 & 2) 13,957 10,661
Waste in tonnes 287 (63%) 368 (90%)
(% recycled)
Gender diversity 41%F / 59%M 42%F / 58%M
(all Chorus)
----- End of picture text -----

We aim to ‘connect Aotearoa so that we can all live, learn, work and play’. This means Chorus will invest and innovate to deliver the best possible connectivity services to help enable the environmental, economic, and social transformation ahead. Our focus on Sustainability is guided by our purpose, by Kaitiakitanga (environmental guardianship) and Manaakitanga (acts of giving and caring for).

We believe fibre can make a great contribution to reducing emissions because it can transport large volumes of data while requiring lower electricity usage than other technologies such as our copper network. In FY23, we joined the Climate Leaders Coalition and finalised our science-based target of a 62% reduction in our Scope 1 and 2 emissions by 2030, from 2020 levels.

A high proportion of renewable electricity generation in the national grid, together with growing momentum in the shutdown of our copper network electronics, helped reduce our emissions by 24% compared to FY22. Electricity usage was down 5%, even with our network carrying 4% more data traffic than the year before.

The conclusion of the UFB rollout and reduced fibre installation activity meant the number of hours worked by service companies reduced. This in turn contributed to a reduction in recordable injuries, despite having to manage Health and Safety risks in the aftermath of extreme weather events. The total number of recordable injuries for Chorus and service company people was just eight, down from 17 in FY22, and these were minor strains, sprains and lacerations.

Every person and every whanau (family) should be able to unlock the full potential of being a digital citizen. The reality today is that a significant digital divide still exists. We know that we can’t solve this social issue alone and we continue to support government agency initiatives focused on digital equity. We gave close to half a million dollars to organisations and charities working within their communities to help close the digital divide.

Our people remain highly engaged. Overall engagement rose to 8.7 out of ten, up from 8.5 in FY22. This puts us within the top 10% of the international technology company sector we benchmark ourselves against. Our Net Promoter Score increased from 64 to 70, keeping us in the top 5% of the technology sector. About a third of our people took up the opportunity to participate in education programmes to increase awareness of Te Ao and Te Reo Maori during the year.

The Board sets measurable objectives to promote diversity and inclusion. Women represented 42% of employees in April 2023, up from 41% the year before. The biggest change was in the people leaders’ population, with women increasing 3% to represent 39%. This is close to our objective of a 40:40:20 split of people leaders by 2023[5] .

For more detail on our environmental, social and governance (ESG) performance during FY23 please see our standalone Sustainability Report at https://company.chorus.co.nz/sustainability

Shifting to a nimbler Chorus

As consumers’ needs evolve, Chorus needs to change too. Our previous operating model was focused on cost effectively delivering large, long term, stable programmes and won’t be as effective in the future as it has been to date.

With the fibre rollout completed and the regulatory framework now in place, we’re adopting a new operating structure that will help us streamline the way we respond to our retailer customers and deliver better consumer outcomes. This involves changing our vertically integrated network and product business units to drive greater crossfunctional collaboration.

We’ve created three new teams focused on key ‘value streams’:

Access - responsible for our high-volume products and tasked with maximising fibre uptake
Infrastructure – charged with leveraging our network and assets to grow new revenues
Fibre Frontier – directing the extension of our fibre coverage and eventual retirement of our regional copper network

In addition, accountability for strategy, enterprise performance, customer experience and marketing has been combined with Finance under an expanded Chief Operating Officer role. This is led by Mark Aue. He joined us in April and was previously chief executive of retail service provider and mobile network operator 2degrees. Other senior executives will continue to lead our Technology, Network Operations, People and Culture, Legal, Regulatory and Stakeholder Engagement functions.

==> picture [69 x 8] intentionally omitted <==

5 40% men, 40% women, 20% of any/either gender.

Annual Report 2023

Outlook

Market dynamics

We’re focused on continuing to grow uptake of our network so its socio-economic benefits can help power Aotearoa’s digital future. Our copper withdrawal programme will keep driving fibre uptake in our urban areas and we’re continuing to be an active wholesaler. Our latest New Zealand runs on fibre advertising campaign showcases some of the ways fibre is now used by about three million Kiwis. Market data shows that consumers value fibre’s reliability and speeds.

We’re cognisant that there are shadows over the wider economy. We see inflationary pressures across our business through direct labour costs and our service companies. There are signs too that our housing development pipeline is slowing from its recent peak. We know consumers face economic pressures and, although we’re increasing prices on some fibre plans by inflation from 1 October, we’ll again hold the wholesale price of our entry level 50Mbps Home Fibre Starter plan at its current level.

While Commerce Commission reporting shows no other technology beats fibre for reliability and capability, we know that the evolution of 5G fixed wireless will bring more competition from mobile network operators. The Commission’s oversight of marketing practices will be integral to ensuring that vertically integrated providers don’t use their direct consumer relationships to unfairly undermine the open access fibre regime the government created in 2011.

The gap between network capability and in-home Wi-Fi performance is another area that requires ongoing focus from the industry and government. The age and quality of home Wi-Fi devices is a potential handbrake on consumers enjoying the full benefits of the investment made in fibre. While some retailers are providing Wi-Fi 6 capable mesh devices, the next generation of Wi-Fi 6E devices could enable peak speeds of 2Gbps by using 6GHz spectrum to provide greater bandwidth.

Leading tech countries have already taken the step to release the entire 6GHz band for this purpose, because they recognise Wi-Fi is critical to the consumer experience and ongoing technology innovation. However, to date, the New Zealand government has opted to release only the lower 6GHz band for Wi-Fi and other unlicensed use.

Regulatory framework

We’re now halfway through our first three-year regulatory period under a utility-style framework for fibre. In May, we lodged our Information Disclosure reporting for the 2022 calendar year showing the regulated asset base had grown from $5.4 billion to $5.7 billion and that we under-earned our allowable revenue by about $47 million.

In October 2023, we’ll submit our proposal for the expenditure and investment we anticipate for the next four-year regulatory period from 2025 to 2029. This is a significant undertaking as we seek to forecast consumer demands and expectations.

As we know from the effect of Netflix and Fortnite on peaktime bandwidth, it only takes one new application to change consumer behaviour almost overnight.

That’s why we’ve been surveying consumers as part of our proposal development and to help evaluate longer-term opportunities for investment.

Long-term planning about the management of our assets is also a key consideration. We’re enhancing our asset management capability and practices to provide a strong focus on network operation and lifecycle management. At the same time, the extreme weather events in early 2023 have given our network planning team some valuable insights into how we could develop our approach to network resilience.

An opportunity to take fibre further

In December, the Government released its Lifting Connectivity in Aotearoa New Zealand paper, setting out their intent to improve digital connectivity over the next decade. The paper highlights the need to provide enduring solutions that can meet future growth in demand for increased speed and capacity.

A report we commissioned from the New Zealand Institute of Economic Research calculated a $16.5 billion benefit for rural homes and businesses over the next decade if they had highcapacity broadband. That equates to a $6,500 annual benefit to households better able to access broader employment opportunities and the ability to use online services for telemedicine, banking and government agencies.

Europe’s ambition is gigabit coverage for all households by 2030, with some countries targeting 99% population coverage with fibre. That’s probably too high for New Zealand given our challenging topography and generally lower population density, but we believe we could reach at least 90% of Kiwis with fibre under the right regulatory and policy settings. That would require an investment in the order of $500 million to reach 75,000 premises.

We believe it’s time for a broader discussion about the right mix of private and public investment that can achieve the government’s goals and close the digital divide for more Kiwis.

==> picture [130 x 131] intentionally omitted <==

==> picture [111 x 77] intentionally omitted <==

JB Rousselot Chief Executive

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Our strategic focus

==> picture [494 x 471] intentionally omitted <==

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

Sustainability is integrated into our business strategy, with three pillars representing
our commitment to improving environmental, social, and governance performance:
Thriving Environment; Sustainable Digital Futures; and Thriving People.
While the three pillars of our Sustainability strategy are enduring, the activities within them will evolve over time
to ensure we continue to be responsive to changing operating environment and the needs of our stakeholders.
Our Sustainability strategy sits alongside our Diversity, Equity and Inclusion Strategy which informs how we develop
strong connections with Māori and builds our understanding of Te Ao Māori.
----- End of picture text -----

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

==> picture [596 x 842] intentionally omitted <==

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

10 Annual Report 2023
----- End of picture text -----

Management commentary

12 In summary

13 Revenue commentary

14 Expenditure commentary

17 Capital expenditure commentary

19 Long term capital management

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Management commentary

	2023 $M 2022 $M
Operating revenue	980 965
Operating expenses	(308) (290)
Earnings before interest, income tax, depreciation and amortisation	672 675
Depreciation and amortisation	(446) (427)
Earnings before interest and income tax	226 248
Net finance expense	(195) (142)
Net earnings before income tax	31 106
Income tax expense	(6) (42)
Net earnings for the year	25 64

In summary

We report earnings before interest, income tax, depreciation, and amortisation (EBITDA) of $672 million for the year ended 30 June 2023 (FY23), a decrease of $3 million from FY22 EBITDA of $675 million. When $10 million of costs for extreme weather events and operating model change are excluded, underlying EBITDA for FY23 was $682 million. This was a $22 million increase on underlying FY22 EBITDA of $660 million.

Revenues increased by $15m to $980 million. This was driven by an inflation-related price increase to some services in October 2022 and growing uptake of higher value Hyperfibre and 1Gbps services. Consumers were provided with $1 million of credits for disrupted service due to Cyclone Gabrielle.

Operating expenses of $308 million were $18 million greater than FY22. FY22 included the benefit of a $9 million release of a holiday pay provision. FY23 costs for extreme weather events were $6 million and operating model change costs were $3 million.

Net profit after tax was $25 million compared to $64 million in FY22. This decrease reflected interest rate rises and increased depreciation expense due to the accelerated depreciation of copper cables in areas where fibre is available.

Capex spend was $454 million for FY23. This was a $38 million decrease from FY22, largely due to the end of the UFB rollout.

We will pay a final unimputed dividend of 25.5 cents per share on 10 October 2023 resulting in a full-year dividend of 42.5 cents per share.

	Connections 2023 Connections 2022 Connections 2021
Fibre broadband (GPON)	1,021,000 949,000 860,000
Fibre premium (P2P)	10,000 10,000 11,000
Copper VDSL	83,000 118,000 157,000
Copper ADSL	84,000 122,000 163,000
Data services over copper	1,000 2,000 2,000
Unbundled copper	- 1,000 10,000
Baseband copper	72,000 102,000 137,000
Total fixed line connections1	1,271,000 1,304,000 1,340,000

==> picture [69 x 8] intentionally omitted <==

1 Partly subsidised education connections are excluded from this data.

Annual Report 2023

Revenue commentary

Revenue commentary
	2023 $M 2022 $M
Fibre broadband (GPON)	622 548
Copper based broadband	117 153
Fibre premium (P2P)	68 66
Copper based voice	39 52
Field services products	70 71
Value added network services	26 27
Infrastructure	31 30
Data services over copper	4 6
Other	3 12
Total revenue	980 965

Revenue overview

Chorus’ product portfolio encompasses a range of wholesale broadband, data and voice services across a mix of regulated and commercial products. Revenues of $980 million increased by $15 million from $965 million in FY22. This increase reflects a growing base of fibre connections and inflation-related price increases.

In our fibre areas broadband connections grew by 22,000, with total broadband connections nationally remaining steady at 1,188,000. We ended the year with 1,271,000 fixed line connections, down 33,000 lines compared with a reduction of 36,000 lines in FY22. Most of this reduction is in areas where Chorus does not have fibre available.

Fibre broadband (GPON)

Fibre broadband revenues continue to grow as customers migrate to our fibre network. Fibre broadband connections grew by 72,000 to 1,021,000, with 91% of residential and business connections on plans of 300Mbps and above. Average fibre monthly revenue per user grew from $50.67 to $53.25 in FY23. This was driven by an inflation related price increase to some services in October 2022 and uptake of the higher value 1Gbps service, which is now 24% of our fibre connection base.

Value added network services

Value added network services revenue was slightly lower in FY23 due to reduced demand for legacy backhaul products.

Infrastructure

Demand for new equipment space in exchanges contributed to a $1 million increase in revenues. This offset the decline in demand for legacy copper-related space.

Data services over copper

Data services over copper connections continue to decline as consumers migrate from legacy services to cheaper fibre based or alternative services.

Other

Other income was lower in FY23 because FY22 included $9 million of favourable one-off transactions.

Field services products

Field services revenue remained stable in FY23, decreasing by $1 million relative to $71 million in FY22. New property revenues grew from $28 million in FY22 to $33 million in FY23. This was offset by a reduction in roadworks, installation and chargeable maintenance activity.

Fibre premium (P2P)

Fibre premium (point to point) revenues increased slightly in FY23 as demand grew for Direct Fibre Access Service, mobile access and other backhaul connections.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Expenditure commentary

Operating expenses

Operating expenses
	2023 $M 2022 $M
Labour	76 64
Network maintenance	60 59
Information technology	42 50
Other network costs	37 29
Rent, rates and property maintenance	26 28
Electricity	19 17
Advertising	13 11
Provisioning	1 1
Insurance	5 4
Consultants	9 8
Regulatory levies	9 9
Other	11 10
Total operating expenses	308 290

Total operating expenses of $308 million in FY23 increased by $18 million compared to $290 million in FY22. This difference largely reflects a $6m impact from extreme weather events in FY23, $3 million of operating model change costs and a $9m holiday pay provision recognised in FY22.

Labour

Labour costs increased by $12 million in FY23 from $64 million in FY22. FY22 included a one-off benefit of $9 million after a judicial ruling on the interpretation on the Holidays Act.

At 30 June 2023, we had 846 permanent and fixed term employees representing a 6% increase from 799 employees at 30 June 2022. The increase largely reflects additional resourcing to support the implementation of the new fibre regulatory framework and IT contractors becoming full-time employees.

We capitalise labour costs and the associated overheads in relation to build and connection activity.

Network maintenance

Other network costs

Other network costs were $8 million higher than FY22. This was due to costs for extreme weather events and network and property optimisation costs as we exit copper assets. Other network costs include costs associated with service partner contracts, fibre access from third parties, roadworks and other network relocation projects, fibre order cancellations, network spares, and network and property optimisation costs.

Electricity

Electricity costs were up $2 million in FY23 from $17 million in FY22.

Rent, rates and property maintenance

Extreme weather event costs of $1m were incurred for property maintenance.

Advertising

Advertising costs were $13 million in FY23, up from $11 million in FY22 when COVID-19 reduced in-market activity.

Network maintenance costs increased by $1 million from FY22. FY23 includes $3 million of expenditure in relation to extreme weather events. Overall fault volumes continued to trend down as customers migrate to the fibre network, while average fault costs increased with changes in mix to more expensive faults and inflationary cost increases.

Information technology

Information technology costs were $42 million, down $8 million compared to FY22. This largely reflects the release of a software provision initially recognised in FY22 and savings from migration off legacy systems.

==> picture [69 x 8] intentionally omitted <==

14 Annual Report 2023

Depreciation and amortisation expense

Depreciation and amortisation expense
	2023 $M 2022 $M Estimated useful life (years) Weighted average useful life (years)
Depreciation
Fibre cables	128 122 20–30 20
Ducts, poles and manholes	64 61 20–50 49
Copper cables	76 61 10–25 22
Cabinets	18 22 5–20 19
Network electronics	67 62 2–25 10
Right of use assets	13 15 4–50 28
Other	14 15 4–25 15
Buildings	4 4 50 50
Less: Crown funding	(29) (27) 355 335
Total depreciation
Amortisation expense
Software	61 62 2-10 4
Customer retention	30 30 1-4 4
Total amortisation expense	91 92 446 427
Total depreciation and amortisation expense

During FY23, $454 million of expenditure on network assets and software was capitalised. The ‘UFB communal’ and ‘Fibre connections and fibre layer 2’ included in ‘fibre’ capital expenditure was largely capitalised against the network assets categories of fibre cables (30%) and ducts, poles and manholes (26%). The average depreciation rate for UFB communal infrastructure spend is based on an estimated life of 41 years, reflecting the very high proportion of long-life assets constructed.

The offset of Crown funding against depreciation will continue to amortise as a credit to the associated depreciation expense.

The weighted average useful life represents the useful life in each category weighted by the net book value of the assets.

With the commencement of Chorus’ copper withdrawal programme, Chorus has revised the depreciation profile for copper assets in areas where fibre is available. Depreciation of copper cables is accelerated so those in Chorus UFB areas will be fully depreciated by June 2025, and those in local fibre company areas by June 2026. Depreciation of copper related ducts in local fibre company areas is accelerated from FY24 so they will be fully depreciated by June 2026.

Software and other intangibles largely consist of the software components of billing, provisioning and operational systems, including spend on Spark owned systems.

Chorus expects that incremental costs incurred in acquiring new contracts with new and existing customers are recoverable. These costs are capitalised as customer retention assets and amortised against revenue or within amortisation expense, depending on their nature. In the period to 30 June 2023, $30 million was recognised to amortisation expense.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Finance income and expense

Finance income and expense
(Income)/expense	2023 $M 2022 $M
Finance income	(4) –
Finance expense
Interest on syndicated bank facility	2 6
Interest on Euro Medium Term Notes (EMTN)	93 51
Interest on fixed rate NZD bonds	32 32
Other interest expense	35 23
Capitalised interest	(1) (2)
Interest costs	161 110
Ineffective portion of changes in fair value of cash flow hedges	(7) (7)
Total finance expenses excluding securities (notional) interest	154 103
CIP securities (notional) interest	45 39
Total finance expense	199 142

Finance expense increased by $57 million from FY22 due to increasing interest rates and refinancing activities during FY23.

Interest costs increased by $51 million year on year with the weighted effective interest rate on debt increasing to 5.40% from 3.77% in FY22.

EUR 291 million of the 2023 EMTN was repurchased in September 2022 and a EUR 500 million EMTN, maturing in 2029, was issued. Chorus fully hedges the foreign exchange exposure on all EMTN with cross-currency interest rate swaps. Approximately two-thirds of floating interest rate exposure is hedged using interest rate swaps.

Other interest expense includes lease interest of $11 million (FY22: $15 million) and amortisation arising from the difference between fair value and proceeds realised from interest rate swap resets of $7 million (FY22: $7 million).

Taxation

The FY23 effective tax rate is 19% (FY22: 39%). The decrease reflects a deferred tax re-assessment in relation to Chorus’ buildings, following the implementation of a revaluation policy. Excluding the deferred tax re-assessment, the normalised effective tax rate for FY23 was 51%, higher than the statutory tax rate of 28% due to permanent differences between tax and accounting arising from the tax treatment of the CIP securities, Crown funding for the Rural Broadband Initiative (RBI) and the West Coast and Southland Network (WCSN).

The interest expense and depreciation credit recognised in the profit and loss in relation to CIP securities are nontaxable as confirmed via binding rulings issued by the IRD. RBI and WCSN assets are funded by non-taxable government grants and the amortisation of the government grants along with the accounting depreciation recognised in the profit and loss are non-taxable and no tax depreciation is claimed on the assets.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Capital expenditure commentary

Capital expenditure commentary
	2023 $M 2022 $M
Fibre	355 403
Copper	33 38
Common	66 51
Gross capital expenditure	454 492

Gross capital expenditure for FY23 was $454 million, down $38 million from FY22. Fibre spend decreased $48 million largely due to the completion of the UFB rollout. Copper related expenditure reduced by $5 million from FY22 as

copper connections continue to reduce. Crown funding of $39 million was recognised for the UFB rollout and $2 million for the WCSN build.

Fibre capital expenditure

Fibre capital expenditure
	2023 $M 2022 $M
UFB communal	5 77
Fibre installations and fibre layer 22	193 195
Fibre products and systems	10 12
Other fibre and growth	105 79
Network sustain	12 13
Customer retention costs	30 27
Total fibre capital expenditure	355 403

UFB communal network spend was $5 million in FY23, down from $77 million in FY22.

Fibre installations and layer 2 expenditure was $193 million. About 92,000 fibre installations were completed nationwide. The average cost per premises installation in UFB areas was $1,067[3] , which was within the FY23 guidance range of $1,000 to $1,115.

Other fibre and growth increased $26 million compared to FY22, mainly due to strong new property development demand and upgrades to core and metro transport electronics.

Customer retention costs increased by $3 million due to more market activity in FY23 than the prior year.

$32 million was invested in ‘backbone’ network to enable the connection of multiple customers located along rights of way and multi dwelling units.

2 Layer 2 equipment, such as gigabit capable passive optical network ports, is installed ahead of demand as the UFB footprint expands.

3 Excluding layer 2 and backbone costs for multi dwelling units and rights of way and including standard installations and some non-standard single dwellings and service desk costs.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Copper capital expenditure

Copper capital expenditure
	2023 $M 2022 $M
Network sustain	27 27
Copper connections	1 1
Copper layer 2	1 3
Customer retention costs	4 7
Total copper capital expenditure	33 38

Copper capital expenditure decreased by $5 million in FY23, largely due to lower customer retention costs.

Common capital expenditure

Common capital expenditure
	2023 $M 2022 $M
Information technology	44 32
Building and engineering services	22 19
Total common capital expenditure	66 51

Information technology spend increased by $12 million in FY23 due to lifecycle upgrade of equipment and investment enabling reduced reliance on third party legacy systems.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Long term capital management

We will pay a final unimputed dividend of 25.5 cents per share on 10 October 2023 to all shareholders registered at 5.00pm 12 September 2023. The shares will be quoted on an ex-dividend basis from 11 September 2023. As the dividend is unimputed, there will be no supplementary dividend payable to shareholders outside of New Zealand.

The dividend reinvestment plan will not be available for the final dividend.

Dividend guidance for FY24 has been set at 47.5 cents per share, subject to no material adverse changes in circumstance or outlook. The FY24 dividend will be unimputed.

The Board considers that a ‘BBB’ or equivalent credit rating is appropriate for a company such as Chorus. It intends to maintain capital management and financial policies consistent with these credit ratings. It is Chorus’ intention that in normal circumstances the ratio of net debt to EBITDA will not materially exceed 4.75 times.

At 30 June 2023, we had a long-term credit rating of BBB/ stable outlook by Standard & Poor’s and Baa2/stable by Moody’s Investors Service.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

20 Annual Report 2023

==> picture [69 x 8] intentionally omitted <==

Consolidated financial statements

22 Independent auditor’s report
25 Consolidated income statement
25 Consolidated statement of comprehensive income
26 Consolidated statement of financial position
27 Consolidated statement of changes in equity
28 Consolidated statement of cash flows
30 Notes to the consolidated financial statements

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Independent auditor’s report

To the shareholders of Chorus Limited

Report on the consolidated financial statements

Opinion

In our opinion, the accompanying consolidated financial statements of Chorus Limited (the ’company’) and its subsidiaries (the ‘Group’) on pages 25 to 57 present fairly, in all material respects:

i. the Group’s financial position as at 30 June 2023 and its financial performance and cash flows for the year ended on that date;
ii. in accordance with New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS) and International Financial Reporting Standards issued by the New Zealand Accounting Standards Board.

We have audited the accompanying consolidated financial statements which comprise:

the consolidated statement of financial position as at 30 June 2023;
the consolidated income statement, statements of other comprehensive income, changes in equity and cash flows for the year then ended;and
notes, including a summary of significant accounting policies.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (New Zealand) (‘ISAs (NZ)’). We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

We are independent of the Group in accordance with Professional and Ethical Standard 1 International Code of Ethics for Assurance Practitioners (Including International Independence Standards) (New Zealand) issued by the New Zealand Auditing and Assurance Standards Board and the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) (‘IESBA Code’), and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code.

Our responsibilities under ISAs (NZ) are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report.

Our firm has also provided other services to the group in relation to regulatory assurance. Subject to certain restrictions, partners and employees of our firm may also deal with the group on normal terms within the ordinary course of trading activities of the business of the group. These matters have not impaired our independence as auditor of the group. The firm has no other relationship with, or interest in, the group.

Materiality

The scope of our audit was influenced by our application of materiality. Materiality helped us to determine the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and on the consolidated financial statements as a whole. The materiality for the consolidated financial statements as a whole was set at $8.5 million determined with reference to a benchmark of Group revenue. We chose the benchmark because, in our view, this is a key measure of the Group’s performance.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements in the current period. We summarise below those matters and our key audit procedures to address those matters in order that the shareholders as a body may better understand the process by which we arrived at our audit opinion. Our procedures were undertaken in the context of and solely for the purpose of our statutory audit opinion on the consolidated financial statements as a whole and we do not express discrete opinions on separate elements of the consolidated financial statements.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

The key audit matter	How the matter was addressed in our audit
Recoverability of assets
Refer to Note 1 and 2 to the Financial Statements.	Our audit procedures included:
Capitalisation and the carrying value of assets are a key	— examining that the controls to recognise capital projects in the fixed asset register
audit matter due to the significance of assets to the	and to monitor labour costs capitalised throughout the year and the approval of
Group’s consolidated statement of financial position,	the asset life annual review are effective.
and due to the judgement involved in determining the	— assessing the nature of costs incurred in capital projects by checking a sample of
carrying value of the assets, principally:	costs to invoice to determine whether the description of the expenditure met the
— decision to capitalise or expense costs relating	capitalisation criteria.
to the network. This depends on whether the	— assessing, on a sample basis, whether labour rates applied in capitalising employee
expenditure is to enhance the network (capitalise)	and contractor time were consistent with employee career level and contracts or
or to maintain the current operating capability of	invoices.
the network (expense);	— examining, on a sample basis, that labour costs capitalised, at an individual
— estimation of the stage of completion of assets	employee/contractor level did not exceed an individual’s salary or invoiced time.
under construction;	Evaluating a sample of assets under construction in which no costs had been
— estimation of the useful life of the asset once the	incurred in the final six months of the financial reporting period. We challenged
costs are capitalised;	the status of those assets under construction to determine whether they remained
— obsolescence and impairment risk; and	appropriately capitalised.
— uncertainty of the impact of ongoing technological change,transitioning to a new regulated model, movement towards a fibre	— assessing, on a sample basis, whether the accruals recorded for assets under construction were calculated in accordance with the progress of construction and the arrangements with external suppliers.
future and RSP/LFC behaviour.	— assessing the useful economic lives of the assets, by comparing to our knowledge
	of the business and its operations and industry benchmarks.
Revaluation of land and buildings
Refer to Note 1 to the Financial Statements.	Our audit procedures included:
Chorus has adopted a change in accounting policy,	— assessing the support for the change in accounting policy.
effective 30 June 2023, whereby land and buildings	— assessing the competency, objectivity, and independence of external valuer
are recorded at fair value.	engaged by management.
As at 30 June 2023 the fair value of the revalued	— assessing that the valuation methodology applied is in accordance with valuation
assets was $357 million (30 June 2022 carrying value	and accounting standards and suitable for determining the fair value of the assets,
at cost: $75 million).	by comparing to our understanding of the business and industry practices.
The change in accounting policy and valuation of these assets is considered a key audit matter due to the magnitude, complexity and judgement involved	— reconciling the asset holdings in the Group’s fixed asset register to the listing of assets valued by external valuer to confirm all relevant land and buildings have been included in the valuation exercise.
in the determining the assets current fair value	— evaluating the valuation of a sample of assets and assessing the inputs used in the
and the significance of the assets to the Group’s	valuation of the assets. On a sample basis we compared key assumptions to market
consolidated statement of financial position.	evidence and applicable source data.
	— examining that the valuation adjustments have been correctly accounted for within
	the Revaluation Reserve and Statement of Comprehensive Income.
	— assessing the disclosures in the financial statements to determine whether these
	are in accordance with the applicable accounting standard.
Chorus Funding
Refer to Note 4, 6, 7 and 19 to the Financial Statements.	Our audit procedures to assess the valuation and accounting treatment for the
At 30 June 2023, Chorus had external borrowings of	Group’s interest rate derivatives and CIP securities included:
$2,528 million (30 June 2022: $2,322 million), Crown	— Our financial instrument specialists re‑valuing all interest rate derivatives using
funding of $948 million (30 June 2022: $936 million),	valuation models and inputs independent from those utilised by management.
CIP securities of $697 million (30 June 2022:	— Agreeing the terms of the derivatives to the confirmation provided by the derivative
$613 million) and net derivative financial assets of	counterparty.
$65 million (30 June 2022: Net derivative financial assets of $19 million).	— Examining the hedge documentation for new debt instruments and associated derivatives against the requirements of IFRS 9.
The external borrowings, CIP securities,	— Evaluating the hedge effectiveness of the interest rate derivatives hedging the EUR
cross‑currency and interest rate derivatives are a key	denominated Euro Medium Term Notes, the NZD Bond 2028 and the NZD Bond 2030.
audit matter due to their significance to the Group’s	In all instances, our financial instrument specialists assessed the effectiveness of
consolidated statement of financial position and the	these hedges by independently modelling the future changes in the value of these
complexity and judgement involved in determining	instruments to assess whether the underlying derivatives were effective.
the appropriate valuation and accounting treatment	— Assessing the accounting treatment of the CIP securities. We read the underlying
for the CIP securities and cross‑currency and interest	loan agreement and analysed the various features of the loan agreement to
rate derivatives.	determine whether the CIP securities were a debt or equity instrument.
	— Evaluating the valuation of the CIP securities. Our valuation specialists assessed the
	methodology used by management for determining the amounts allocated to debt
	and government grant.
	— Assessing the inputs used in the valuation of the CIP securities. On a sample
	basis we compared interest rates and credit spreads to independent sources of
	information to determine an acceptable range of valuation inputs.
	— Confirming debt to external support, sighting repayments and reviewing
	compliance with covenant requirements.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Other information

The Directors, on behalf of the Group, are responsible for the other information included in the entity’s Annual Report information includes Chorus’ operating, marking and regulatory overviews, management commentary and disclosure relating to corporate governance and statutory information. Our opinion on the consolidated financial statements does not cover any other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Use of this independent auditor’s report

This independent auditor’s report is made solely to the shareholders as a body. Our audit work has been undertaken so that we might state to the shareholders those matters we are required to state to them in the independent auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the shareholders as a body for our audit work, this independent auditor’s report, or any of the opinions we have formed.

Responsibilities of the Directors for the consolidated financial statements

The Directors, on behalf of the Group, are responsible for:

the preparation and fair presentation of the consolidated financial statements in accordance with generally accepted accounting practice in New Zealand (being New Zealand Equivalents to International Financial Reporting Standards) and International Financial Reporting Standards issued by the New Zealand Accounting Standards Board;

Auditor’s responsibilities for the audit of the consolidated financial statements

Our objective is:

to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error; and
to issue an independent auditor’s report that includes our opinion.

Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs NZ will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

A further description of our responsibilities for the audit of these consolidated financial statements is located at the External Reporting Board (XRB) website at:

http://www.xrb.govt.nz/standards-for-assurancepractitioners/auditors-responsibilities/audit-report-1/

This description forms part of our independent auditor’s report.

The engagement partner on the audit resulting in this independent auditor’s report is David Gates.

For and on behalf of

==> picture [89 x 49] intentionally omitted <==

KPMG Wellington 21 August 2023

implementing necessary internal control to enable the preparation of a consolidated set of financial statements that is free from material misstatement, whether due to fraud or error; and
assessing the ability to continue as a going concern. This includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to liquidate or to cease operations or have no realistic alternative but to do so.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Consolidated income statement

For the year ended 30 June 2023

For the year ended 30 June 2023
Notes	2023 $M 2022 $M
Operating revenue 9	980 965
Operating expenses 10	(308) (290)
Earnings before interest, income tax, depreciation and amortisation	672 675
Depreciation 1,7	(355) (335)
Amortisation 2,3	(91) (92)
Earnings before interest and income tax	226 248
Finance income	4 –
Finance expense 4	(199) (142)
Net earnings before income tax	31 106
Income tax expense 14	(6) (42)
Net earnings for the year Earnings per share	25 64

Basic earnings per share (dollars) 17	0.06 0.14
Diluted earnings per share (dollars) 17	0.05 0.11

Consolidated statement of comprehensive income

For the year ended 30 June 2023

Notes	2023 $M 2022 $M
Net earnings for the year	25 64
Other comprehensive income
Movements in effective cash flow hedges 19	3 96
Amortisation of de‑designated cash flow hedges transferred to consolidated income statement 19	5 5
Movement in cost of hedging reserve 19	(3) 10
Items that will be reclassified subsequently to Income statement when specific conditions are met net of tax	5 111
Net revaluation of land and buildings	265 –
Items that will not be reclassified subsequently to Income statement when specific conditions are met net of tax	265 –
Total comprehensive income for the year net of tax	295 175

The accompanying notes are an integral part of these consolidated financial statements.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Consolidated statement of financial position

As at 30 June 2023

Notes	2023 $M 2022 $M
Current assets
Cash and call deposits 15	76 88
Trade and other receivables 11	153 125
Derivative financial instruments 19	43 9
Assets held for sale	1 –
Total current assets	273 222
Non-current assets
Derivative financial instruments 19	116 120
Trade and other receivables 11	– 1
Customer retention assets 3	60 59
Software and other intangible assets 2	146 152
Network assets 1	5,213 5,190
Land and buildings 1	357 75
Total non-current assets	5,892 5,597
Total assets	6,165 5,819
Current liabilities
Trade and other payables 12	280 264
Lease payable 5	13 13
Derivative financial instruments 19	1 –
Debt 4	368 190
Total current liabilities excluding Crown funding	662 467
Crown funding 7	28 27
Total current liabilities	690 494
Non-current liabilities
Trade and other payables 12	11 16
Deferred tax liability 14	363 342
Derivative financial instruments 19	93 110
Lease payable 5	168 174
Debt 4	2,160 2,132
Total non-current liabilities excluding CIP and Crown funding	2,795 2,774
Crown Infrastructure Partners (CIP) securities 6	697 613
Crown funding 7	920 909
Total non-current liabilities	4,412 4,296
Total liabilities	5,102 4,790
Equity
Share capital 16	589 682
Reserves	331 60
Retained earnings	143 287
Total equity	1,063 1,029
Total liabilities and equity	6,165 5,819

The accompanying notes are an integral part of these consolidated financial statements.

The consolidated financial statements are approved and signed on behalf of the Board.

==> picture [147 x 33] intentionally omitted <==

==> picture [141 x 31] intentionally omitted <==

Mark Cross Chair Authorised for issue on 21 August 2023

Kate Jorgensen

Chair, Audit and Risk Management Committee

==> picture [69 x 8] intentionally omitted <==

26 Annual Report 2023

Consolidated statement of changes in equity

For the year ended 30 June 2023

Notes	Share capital $M Revaluation reserve $M Other reserves $M Retained earnings $M Total $M
Balance at 1 July 2021	689 – (51) 351 989
Comprehensive income
Net earnings for the year	– – – 64 64
Other comprehensive income
Movement in cash flow hedge reserve 19	– – 96 – 96
Amortisation of de‑designated cash flow hedges transferred to Income statement 19	– – 5 – 5
Movement in cost of hedging reserve 19	– – 10 – 10
Total comprehensive income	– – 111 64 175
Contributions by and (distributions to) owners:
Dividends 16	– – – (128) (128)
Supplementary dividends	– – – (14) (14)
Tax credit on supplementary dividends	– – – 14 14
Dividend reinvestment plan 16	31 – – – 31
Share buy‑back 16	(38) – – – (38)
Total transactions with owners	(7) – – (128) (135)
Balance at 30 June 2022	682 – 60 287 1,029
Comprehensive income
Net earnings for the year	– – – 25 25
Other comprehensive income
Movement in cash flow hedge reserve 19	– – 3 – 3
Amortisation of de‑designated cash flow hedges transferred to Income statement 19	– – 5 – 5
Movement in cost of hedging reserve 19	– – (3) – (3)
Movement in revaluation reserve 1,14	– 265 – – 265
Total comprehensive income	– 265 5 25 295
Contributions by and (distributions to) owners:
Dividends 16	– – – (169) (169)
Dividend reinvestment plan 16	9 – – – 9
Share buy‑back 16	(101) – – – (101)
Shares issued under LTI scheme 16	(1) – 1 – –
Total transactions with owners	(93) – 1 (169) (261)
Balance at 30 June 2023	589 265 66 143 1,063

The accompanying notes are an integral part of these consolidated financial statements.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Consolidated statement of cash flows

For the year ended 30 June 2023

For the year ended 30 June 2023
Notes	2023 $M 2022 $M
Cash flows from operatingactivities
Cash wasprovided from/(applied to):
Receipts from customers	973 977
Payment to suppliers and employees	(311) (295)
Interestpaid	(138) (98)
Interest received	4 –
Taxationpaid	(4) (14)
Net cash flows provided from operating activities Cash flows applied to investingactivities	524 570

Cash wasprovided from/(applied to):
Purchase of network and intangible assets	(495) (518)
Disposal of network and intangible assets	– 3
Capitalised interestpaid	(1) (2)
Net cash flows applied to investing activities Cash flows from financingactivities	(496) (517)

Cash wasprovided from/(applied to):
Payment of lease liabilities	(15) (14)
Crown funding(includingCIP securities)	84 81
Proceeds from debt	811 50
Repayment of debt	(659) –
Repurchase of shares	(101) (38)
Dividendspaid	(160) (97)
Net cash flows applied to financingactivities	(40) (18)
Net cash flows Cash at the beginningof theyear	(12) 35
	88 53
Cash at the end of the year 15	76 88

Reconciliation of net earnings to net cash flows from operating activities

Reconciliation of net earnings to net cash flows from operating activities
Notes	2023 $M 2022 $M
Net earnings for theyear	25 64
Adjustment for:
Depreciation of network assets 1	384 362
Amortisation of Crown funding 7	(29) (27)
Amortisation of software and other intangible assets 2	61 62
Amortisation of customer retention assets 3	33 34
Deferred income tax 14	2 45
Ineffectiveportion of changes in fair value of cash flow hedges 4	(7) (7)
Amortisation of non‑cash finance expenses	10 10
CIP securities (notional) interest 4	45 39
Other	5 (3)
Change in current assets and liabilities:	529 579

Increase in trade and other receivables 11	(27) (2)
Increase in operatingtradepayables 12	22 10
Increase in income tax receivable	– (4)
Decrease in income taxpayable	– (13)
	(5) (9)
Net cash flows from operating activities	524 570

The accompanying notes are an integral part of these consolidated financial statements.

==> picture [69 x 8] intentionally omitted <==

28 Annual Report 2023

Reconciliation of movements of liabilities to cash flows arising from financing activities

	Debt $M Crown funding $M CIP securities $M Lease payable $M Share capital $M Retained earnings $M
Balance at 1 July 2021	2,373 906 545 264 689 351
Movements from financing cash flows
Payment of lease liabilities	– – – (14) – –
Proceeds from debt	50 54 27 – – –
Repurchase of shares	– – – – (38) –
Dividends paid	– – – – – (97)
Total changes from financing cash flows	50 54 27 (14) (38) (97)
Other cash flows
Interest paid on leases	– – – (15) – –
Non-cash movements
Movements in fair value (including foreign exchange rates)	(105) – – – – –
Transaction costs and amortisation related to financing	(4) (27) 39 – – –
Accruals	– 3 2 – – –
Dividend reinvestment plan	– – – – 31 (31)
Lease movements	– – – (48) – –
Net earnings for the year ended 30 June 2022	– – – – – 64
Balance at 30 June 2022	2,322 936 613 187 682 287
Movements from cash flows
Payment of lease liabilities	– – – (15) – –
Proceeds from debt	811 45 39 – – –
Repayment of debt	(659) – – – – –
Repurchase of shares	– – – – (101) –
Dividends paid	– – – – – (160)
Total changes from financing cash flows	152 45 39 (15) (101) (160)
Other cash flows
Interest paid on leases	– – – (11) – –
Non-cash movements
Movements in fair value (including foreign exchange rates)	50 – – – – –
Transaction costs and amortisation related to financing	4 (29) 45 – – –
Accruals	– (4) – – (1) –
Dividend reinvestment plan	– – – – 9 (9)
Lease movements	– – – 20 – –
Net earnings for the year ended 30 June 2023	– – – – – 25
Balance at 30 June 2023	2,528 948 697 181 589 143

The accompanying notes are an integral part of these consolidated financial statements.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023 29

Notes to the consolidated financial statements

Reporting entity and statutory base

Chorus includes Chorus Limited together with its subsidiaries.

Chorus is New Zealand’s largest fixed line communications infrastructure business. It maintains and builds a network predominantly made up of fibre and copper cables, local telephone exchanges and cabinets.

Chorus Limited is a profit‑oriented company registered in New Zealand under the Companies Act 1993 and is a FMC Reporting Entity for the purposes of the Financial Markets Conduct Act 2013. Chorus Limited was established as a standalone, publicly listed entity on 1 December 2011, upon its demerger from Spark New Zealand Limited (Spark, previously Telecom Corporation of New Zealand Limited). The demerger was a condition of an agreement with Crown Infrastructure Partners Limited (previously Crown Fibre Holdings) to enable Chorus Limited to provide the majority of the Crown’s Ultra‑Fast Broadband (UFB) network. Chorus Limited is listed and its ordinary shares are quoted on the NZX main board equity security market (NZX Main Board) and on the Australian Stock Exchange (ASX) and has bonds quoted on the NZX and ASX debt markets. American Depositary Shares, each representing five ordinary shares (and evidenced by American Depositary Receipts), are not listed but are traded on the over‑the‑counter market in the United States.

These consolidated financial statements (“financial statements”) have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand (NZ GAAP) and Part 7 of the Financial Markets Conduct 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.

These financial statements are expressed in New Zealand dollars. All financial information has been rounded to the nearest million, unless otherwise stated.

The measurement basis adopted in the preparation of these financial statements is historical cost, modified by the revaluation of financial instruments and land and buildings as identified in the specific accounting policies below and the accompanying notes.

Accounting policies and standards

Change in accounting policy

Chorus has adopted a revaluation policy for measuring land and building at fair value, as at 30 June 2023. Previously, Chorus measured land and buildings at depreciated historical cost. This change in accounting policy applies prospectively and the revaluation movement has been recognised in the current year in the Consolidated statement of comprehensive income (refer to note 1).

Climate impact

In preparing the financial statements, management has considered climate‑related matters and disclosed as required when the effect of those matters is material in the context of the financial statements taken as a whole. In the year ended 30 June 2023 there was no material impact of climate related matters. Although there was no material impact in the year, extreme weather events occurred. Individually, these events did not have a material impact on the financial statements.

Accounting estimates and judgements

In preparing the financial statements, management has made estimates and assumptions about the future that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates.

Estimates and assumptions are continually evaluated and are based on experience and other factors, including macro‑ economic and market factors, and expectations of future events that may have an impact on Chorus. All judgements, estimates, and assumptions are believed to be reasonable based on the most current set of circumstances available to Chorus. The principal areas of judgement in preparing these financial statements are set out below.

Network assets (note 1)

Assessing the carrying value of network assets for impairment considerations which includes assessing the appropriateness of useful life and residual value estimates of network assets, the physical condition of the asset, technological advances, regulation and expected disposal proceeds from the future sale of the asset.

Accounting policies that summarise the measurement basis used which are relevant to the understanding of the financial statements are provided throughout the accompanying notes.

The accounting policies adopted and methods of computation have been applied consistently throughout the periods presented in these financial statements, except for the below change in accounting policy.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Land and buildings (note 1)

Land and buildings are recorded at fair value. Fair value relating to land and buildings is determined based on a periodic independent valuation using a combination of an optimised depreciated replacement cost, capitalised income, and a market valuation approach. The valuation technique applied to each asset is determined by the independent valuer, with input and review by Chorus management who are familiar with the nature of the assets. Valuations are performed every three years, or more frequently where indicators exist that the carrying amount of the asset materially differs from its fair value at the end of the reporting period. This may be the result of external factors (e.g. a volatile property market) or internal factors. In these instances where indicators of material difference exist, a desktop valuation may be obtained to appropriately adjust the carrying value of the assets. The underlying assumptions used in the valuation are reviewed at each reporting date to ensure the carrying value is not materially different from the fair value.

Customer retention assets (note 3)

Assessing the carrying value of customer retention assets for impairment considerations which includes assessing the appropriateness of useful life, contract terms, revenue and customer connections data.

Leases (note 5)

A significant portion of lease contracts contain options for extension, which in turn require management to apply judgement in assessing if these extensions are likely to be exercised.

Financial risk management (note 19 and 20)

Accounting judgements have been made in determining hedge designation and the fair value of derivatives and borrowings. The fair value of derivatives and borrowing are determined based on valuation models that use forward‑looking estimates and market observable data, to the extent that it is available.

Non-GAAP measures

Chorus use non‑GAAP measures that are not prepared in accordance with NZ IFRS. Chorus believes these non‑GAAP measures provide useful information to users of the financial statements to assist in understanding the financial performance of Chorus. These measures are also used internally to evaluate the performance of Chorus and monitored for compliance against debt covenants.

These measures should not be viewed in isolation or as a substitute for measures reported in accordance with NZ IFRS as they are not uniformly defined or utilised by all companies in New Zealand or the telecommunications industry.

Earnings before interest and income tax (EBIT) and earnings before interest, income tax, depreciation and amortisation (EBITDA)

Chorus calculate EBIT by adding back finance expense and income tax to, and subtracting finance income from, net earnings. EBITDA adds back depreciation and amortisation expense to EBIT. A reconciliation of EBIT and EBITDA is provided below and based on amounts taken from, and consistent with, those presented in the financial statements.

Crown Infrastructure Partners (CIP) securities (note 6)

Determining the fair value of the CIP securities requires assumptions on expected future cash flows and discount rates based on future long dated swap curves.

Year ended 30 June	2023 $M 2022 $M
Net earnings for the year reported under NZ IFRS	25 64
Add back: income tax expense	6 42
Add back: finance expense	199 142
Subtract: finance income	(4) –
EBIT	226 248
Add back: depreciation	355 335
Add back: amortisation	91 92
EBITDA	672 675

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Note 1 – Network assets, land and buildings

In the Consolidated statement of financial position, network assets, except land and buildings, are stated at cost less accumulated depreciation and any accumulated impairment losses. The cost of additions to network assets and work in progress constructed by Chorus includes the cost of all materials used in construction, direct labour costs specifically associated with construction, interest costs that are attributable to the asset, resource management consent costs and attributable overheads.

Repairs and maintenance costs are recognised in the Consolidated income statement as incurred. If the useful life of the asset is extended or the asset is enhanced then the associated costs are capitalised.

Land and buildings

Land and buildings are carried at a revalued amount. The revalued amount represents the fair value of each land and building asset at the date of revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. If an asset’s carrying amount is increased as a result of a revaluation, the increase is recognised in the Consolidated statement of comprehensive income and accumulated within the revaluation reserve in equity. An increase shall be recognised in the Consolidated income statement to the extent it reverses a revaluation decrease of the same asset previously recognised in profit or loss. If an asset’s carrying amount is decreased as a result of a revaluation, the decrease is first recognised in the Consolidated statement of comprehensive income (and the revaluation reserve) to the extent any credit balance exists in relation to that asset. Any additional decrease in the asset’s carrying amount is recognised in the Consolidated income statement as an expense. The attributable revaluation surplus remaining in the asset revaluation reserve relating to land or buildings disposed of, net of any related deferred taxes, is transferred directly to retained earnings on the derecognition of the relevant asset. Deferred tax, if any, resulting from the revaluation of land and buildings are recognised and disclosed in accordance with NZ IAS 12 Income Taxes.

Depreciation is charged on a straight‑line basis to write down the cost of network assets and buildings to their estimated residual value over their estimated useful life. Estimated useful lives are as follows:

==> picture [244 x 122] intentionally omitted <==

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

Fibre cables 20–30 years
Ducts, manholes and poles 20–50 years
Copper cables 10–25 years
Cabinets 5–20 years
Buildings 50 years
Network electronics 2–25 years
Right of use assets 4–50 years
Other 4–25 years
----- End of picture text -----

Other network assets include motor vehicles, test instruments, furniture and fittings, tools and plant.

An item of network assets and any significant part is derecognised upon disposal or when no future economic benefits are expected from its use. Where network assets are disposed of, the profit or loss recognised in the Consolidated income statement is calculated as the difference between the sale price and the carrying value of the asset.

Non‑monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions.

Land and work in progress are not depreciated. Work in progress is reviewed on a regular basis to ensure that costs represent future assets.

The Company adopted fair value approach on 30 June 2023. The movement in fair value of $282 million (excluding deferred tax) has been recognised as at that date. The prior year comparatives are recognised at historical cost less accumulated depreciation.

Estimating useful lives and residual values of network assets and buildings

The determination of the appropriate useful life for a particular asset requires management to make judgements about, amongst other factors, the expected period of service potential of the asset, the likelihood of the asset becoming obsolete as a result of technological advances, and the likelihood of Chorus ceasing to use the asset in business operations.

Where an item of network assets or buildings comprises major components having different useful lives, the components are accounted for as separate items of network assets or buildings.

Where the remaining useful lives or recoverable values have diminished due to technological, regulatory or market condition changes, depreciation is accelerated. The assets’ residual values, useful lives, and methods of depreciation are reviewed annually and adjusted prospectively, if appropriate.

==> picture [69 x 8] intentionally omitted <==

32 Annual Report 2023

30 June 2023 Fibre cables $M Ducts, manholes, and poles $M Copper cables $M Cabinets $M Network electronics $M Right of use assets $M Other $M Work in progress $M Land and buildings $M Total $M	30 June 2023 Fibre cables $M Ducts, manholes, and poles $M Copper cables $M Cabinets $M Network electronics $M Right of use assets $M Other $M Work in progress $M Land and buildings $M Total $M
Gross carrying amount
Balance at 1 July 2022 2,663 3,160 2,424 731 1,762 234 295 141 184 11,594
Additions 134 119 2 17 78 7 7 158 5 527
Disposals – – – – (8) (1) (3) – (1) (13)
Transfers from work in progress – – – – – – – (122) – (122)
Net revaluations through other comprehensive income	– – – – – – – – 169 169
Other	– – – – – 4 – – – 4
Balance at 30 June 2023	2,797 3,279 2,426 748 1,832 244 299 177 357 12,159
Accumulated depreciation	–
Balance at 1 July 2022	(964) (778) (2,172) (525) (1,495) (84) (202) – (109) (6,329)
Depreciation	(128) (64) (76) (18) (67) (13) (14) – (4) (384)
Disposals	– – – – 8 1 2 – – 11
Net revaluations through other comprehensive income	– – – – – – – – 113 113
Other	– – – – – – – – – –
Balance at 30 June 2023	(1,092) (842) (2,248) (543) (1,554) (96) (214) – – (6,589)
Net carrying amount	1,705 2,437 178 205 278 148 85 177 357 5,570
30 June 2022
	Fibre cables $M Ducts, manholes, and poles $M Copper cables $M Cabinets $M Network electronics $M Right of use assets $M Other $M Work in progress $M Land and buildings $M Total $M
Cost
Balance at 1 July 2021	2,497 2,965 2,415 715 1,872 301 284 179 179 11,407
Additions	166 195 9 16 50 7 12 181 5 641
Disposals	– – – – (160) (10) (1) – – (171)
Transfers from work in progress – – – – – – – (219) – (219)
Other – – – – – (64) – – – (64)
Balance at 30 June 2022 2,663 3,160 2,424 731 1,762 234 295 141 184 11,594
Accumulated depreciation –
Balance at 1 July 2021 (842) (717) (2,111) (503) (1,593) (79) (188) – (105) (6,138)
Depreciation (122) (61) (61) (22) (62) (15) (15) – (4) (362)
Disposals – – – – 160 10 1 – – 171
Balance at 30 June 2022 (964) (778) (2,172) (525) (1,495) (84) (202) – (109) (6,329)
Net carrying amount 1,699 2,382 252 206 267 150 93 141 75 5,265

There are no restrictions on Chorus’ network assets or any network assets pledged as securities for liabilities.

At 30 June 2023 the contractual commitments for acquisition and construction of the network assets was $50 million (30 June 2022: $79 million).

Land and buildings at historical cost

If land and buildings were stated on an historical cost basis, the amounts would be as follows:

	2023
Year ended 30 June	$000’s
Land and buildings (at cost)	188
Buildings accumulated depreciation	(113)
Net carrying amount	75

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023 33

Note 1 – Network assets, land and buildings (cont.)

Crown funding

Chorus receives funding from the Crown to finance the capital expenditure associated with the development of the UFB network and other services. Where funding is used to construct assets, it is offset against depreciation over the life of the assets constructed.

Refer to note 7 for information on Crown funding.

Impairment

The carrying amounts of non‑financial assets including network assets, land and buildings, software and other intangibles and customer retention assets are reviewed at the end of each reporting period for any indicators of impairment.

If any such indication exists, the recoverable amount of the asset is estimated. An impairment loss is recognised in earnings whenever the carrying amount of an asset exceeds its estimated recoverable amount. Should the conditions that gave rise to the impairment loss no longer exist, and the assets are no longer considered to be impaired, a reversal of an impairment loss would be recognised immediately in earnings. In the period to 30 June 2023, there was no impairment in relation to the costs capitalised (30 June 2022: no impairment).

Capitalised interest

Finance costs are capitalised on qualifying items of network assets and software assets at an annualised rate of 4.00% (30 June 2022: 4.00%). Interest is capitalised over the period required to complete the assets and prepare them for their intended use. In the current year finance costs totalling $1 million (30 June 2022: $2 million) have been capitalised against network assets and software assets.

Right of use assets

A right of use asset is recognised on commencement of a lease. The right of use asset is initially measured at cost, which is made up of the initial lease liability amount adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. The right of use asset is subsequently depreciated using the straight‑line method until the assumed end of the lease term. The right of use asset is periodically adjusted for certain remeasurements of the lease liability.

Movements in right of use assets for the period are presented below:

The recoverable amount is the greater of an assets value in use and fair value less costs to sell. Chorus’ assets do not generate independent cash flows and are therefore assessed from a single cash‑generating unit perspective. In assessing the recoverable amount, the estimates of future cash flows are discounted to their net present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the business.

Right of use assets

		Ducts, manholes,
	Fibre cables	and poles	Property	Total
	$M	$M	$M	$M
Balance 1 July 2021	8	47	167	222
Additions	–	5	2	7
Relinquishments and modifications	–	–	(64)	(64)
Depreciation charge	(1)	(4)	(10)	(15)
Balance at 30 June 2022	7	48	95	150
Additions	–	4	3	7
Disposals	–	–	(1)	(1)
Other	–	–	4	4
Depreciation charge	(1)	(4)	(7)	(12)
Balance at 30 June 2023	6	48	94	148

Property exchanges

Chorus has leased exchange space and commercial co‑location space owned by Spark which is subject to lease arrangements (included within right of use assets). Chorus in turn leases exchange space and commercial co‑location space owned by Chorus to Spark under an operating lease arrangement.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Note 2 – Software and other intangible assets

Software and other intangible assets are initially measured at cost. The direct costs associated with the development of network and business software for internal use are capitalised where project success is probable and the capitalisation criteria is met. Following initial recognition, software and other intangible assets are stated at cost less accumulated amortisation and impairment losses. Software and other intangible assets with a finite life are amortised from the date the asset is ready for use on a straight‑line basis over its estimated useful life which is as follows:

==> picture [244 x 29] intentionally omitted <==

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

Software 2–10 years
Other intangibles 20–35 years
----- End of picture text -----

Other intangibles mainly consist of land easements.

Where estimated useful lives or recoverable values have diminished due to technological change or market conditions, amortisation is accelerated.

There are no restrictions on software and other intangible assets, or any intangible assets pledged as securities for liabilities.

30 June 2023	Software $M Other intangibles $M Work in progress $M Total $M
Cost
Balance at 1 July 2022	918 6 17 941
Additions	44 – 55 99
Disposals	(7) – – (7)
Transfers from work in progress	– – (44) (44)
Balance at 30 June 2023	955 6 28 989
Accumulated amortisation
Balance at 1 July 2022	(788) (1) – (789)
Amortisation	(61) – – (61)
Disposals	7 – – 7
Balance at 30 June 2023	(842) (1) – (843)
Net carrying amount	113 5 28 146
30 June 2022
	Software $M Other intangibles $M Work in progress $M Total $M
Cost
Balance at 1 July 2021	873 6 22 901
Additions	55 – 50 105
Disposals	(10) – – (10)
Transfers from work in progress	– – (55) (55)
Balance at 30 June 2022	918 6 17 941
Accumulated amortisation
Balance at 1 July 2021	(736) (1) – (737)
Amortisation	(62) – – (62)
Disposals	10 – – 10
Balance at 30 June 2022	(788) (1) – (789)
Net carrying amount	130 5 17 152

At 30 June 2023 the contractual commitment for acquisition of software and other intangible assets was $4 million (30 June 2022: $2 million).

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023 35

Note 3 – Customer retention assets

Customer retention costs are incremental costs incurred in acquiring new contracts with new and existing customers that Chorus expects are recoverable and are capitalised as customer retention assets. These represent various costs including commissions and incentives for customers to connect to the fibre network. Following initial recognition, customer retention assets are stated at cost less accumulated amortisation and impairment losses. Customer retention assets have a finite life and are amortised from the month that costs are capitalised on a straight‑ line basis over the average connection life which is as follows:

==> picture [244 x 31] intentionally omitted <==

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

New connections and migrations 1–4 years
Customer incentives 1 year
----- End of picture text -----

Customer retention assets are amortised to the Consolidated income statement, either as amortisation expense or against operating revenue, based on the nature of the specific costs capitalised.

	New connections	Customer
	and migrations	incentives	Total
	$M	$M	$M
Balance at 1 July 2021 (net carrying amount)	57	2	59
Additions	31	3	34
Amortisation to amortisation expense	(30)	–	(30)
Amortisation to operating revenue	–	(4)	(4)
Balance at 30 June 2022 (net carrying amount)	58	1	59
Additions	30	4	34
Amortisation to amortisation expense	(30)	–	(30)
Amortisation to operating revenue	–	(3)	(3)
Balance at 30 June 2023 (net carrying amount)	58	2	60

Note 4 – Debt

Debt is classified as non‑current liabilities except for those with maturities less than 12 months from the reporting date, which are classified as current liabilities.

Debt is initially measured at fair value, less any transaction costs that are directly attributable to the issue of the instruments. Debt is subsequently measured at amortised cost using the effective interest method. Some borrowings are designated in

fair value hedge relationships, which means that any change in market interest and foreign exchange rates result in a change in the fair value adjustment on that debt.

The weighted effective interest rate on debt including the effect of derivative financial instruments and facility fees was 5.40% (30 June 2022: 3.77%).

Due date	2023 $M 2022 $M
Syndicated bank facilities Jul 2022	– 190
Euro medium term notes EUR Oct 2023	368 828
Euro medium term notes EUR Dec 2026	473 464
Euro medium term notes EUR Sep 2029	853 –
Fixed rate NZD Bonds Dec 2027	200 200
Fixed rate NZD Bonds Dec 2028	500 500
Fixed rate NZD Bonds Dec 2030	153 154
Less: facility fees	(19) (14)
Total Debt	2,528 2,322
Current	368 190
Non-current	2,160 2,132

Syndicated bank facilities

As at 30 June 2023 Chorus had a $450 million committed syndicated facility on market standard terms and conditions (30 June 2022: $350 million). The facility is held with banks that are rated A to AA‑, based on Standard & Poor’s ratings. As at 30 June 2023 nil was drawn down (30 June 2022: $190 million).

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Note 4 – Debt (cont.)

Euro Medium Term Note (EMTN)

		2023	2022
Face value	Interest rate	$M	$M
EUR 209 million	1.13%	368	828
EUR 300 million	0.88%	473	464
EUR 500 million	3.63%	853	–

EMTN 2023 tender

In September 2022, Chorus repurchased EUR 291 million ($457 million) of the 2023 EMTN for 99.202% of face value. Concurrently, an equal nominal amount of cross‑currency interest rate swaps (CCIRS) which hedged the debt were exited to ensure the hedging relationship remains fully effective.

Costs incurred in repurchasing the debt and terminating the CCIRS have been recognised in the consolidated income statement within finance expenses, offset by the discount on repurchase of the notes.

EMTN 2029 issuance

Chorus also issued EUR 500 million of EMTN in September 2022 for a term of 7 years at an interest rate of 3.625%. Consistent with the Chorus Treasury Policy, the debt has been fully hedged with CCIRS to hedge the foreign currency exposure, which entitle Chorus to receive EUR 500 million and EUR fixed coupon payments for NZD 820 million principal and NZD floating interest payments.

Transaction costs directly associated with the issuance of the notes have been capitalised and will be amortised over the term of the debt to the consolidated income statement.

Chorus has in place cross currency interest rate swaps to hedge the foreign currency exposure to the EMTN. The cross currency interest rate swaps entitle Chorus to receive EUR principal and EUR fixed coupon payments for NZD principal and NZD floating interest payments. The EUR cross currency interest rate swaps (notional amount EUR 1,009 million) are partially hedged for the NZD interest payments using interest rate swaps.

The EUR 500 EMTN cross currency interest rate swaps (notional amount EUR 500 million) are partially hedged for the NZD interest payments using interest rate swaps. The EUR 300 cross currency interest rate swaps (notional amount EUR 300 million) are fully hedged for the NZD interest payments using interest rates swaps. The EUR 209 cross currency swaps (notional amount EUR 209 million) are fully hedged for the NZD interest payments using interest rate swaps.

The following table reconciles EMTN at hedged rates to EMTN carrying value based on spot rates as reported under NZ IFRS. EMTN at hedged rates is a non‑GAAP measure and is not defined by NZ IFRS:

	2023	2022	2023	2022	2023	2022
	EUR 500	EUR 500	EUR 300	EUR 300	EUR 209	EUR 500
	$M	$M	$M	$M	$M	$M
EMTN (at carrying value)	853	–	473	464	368	828
Impact of fair value hedge	38	–	62	40	4	11
Impact of hedged rates used	(71)	–	(21)	10	(44)	(54)
EMTN at hedged rates (non-GAAP measure)	820	–	514	514	328	785

EMTN at fair value	868	–	475	461	369	837

The fair value of EMTN’s is calculated based on the present value of future principal and interest cash flows, discounted at market interest rates at balance date and is determined using Level 2 of the fair value hierarchy as described in note 20.

Fixed rate NZD bonds

Due date Interest rate	2023 $M 2022 $M
Fixed rate NZD Bonds Dec 2027 1.98%	200 200
Fixed rate NZD Bonds Dec 2028 4.35%	500 500
Fixed rate NZD Bonds Dec 2030 2.51%	153 154
Total fixed rate NZD Bonds	853 854

The fixed rate on the 2030 NZD Bonds has been swapped to a floating rate using interest rate swaps, creating a fair value hedge which has a fair value of $153 million at balance date (notional amount $200 million). This hedging relationship was entered to comply with the Chorus Treasury Policy which does not allow for greater than 70% of term debt to be subject to fixed interest rates beyond a three year time period.

At 30 June 2023, Chorus had $900 million of unsecured, unsubordinated debt securities (30 June 2022: $900 million).

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Note 4 – Debt (cont.)

Schedule of maturities

	2023 $M 2022 $M
Current	368 190
Due one to two years	– 828
Due three to four years	673 –
Due four to five years	– 464
Due over five years	1,506 854
Total due	2,547 2,336
Less: facility fees	(19) (14)
	2,528 2,322

No debt has been secured against assets, however there are financial covenants and event of default triggers as defined in the various debt agreements. During the current year Chorus complied with the requirements set out in its financing agreements (30 June 2022: complied).

Refer to note 20 for information on financial risk management.

Finance expense

	2023 $M 2022 $M
Interest on syndicated bank facility	2 6
Interest on EMTN	93 51
Interest on fixed rate NZD bonds	32 32
Ineffective portion of changes in fair value of cash flow hedges	(7) (7)
Other interest expense	35 23
Capitalised interest	(1) (2)
Total finance expense excluding CIP securities (notional) interest	154 103
CIP securities (notional) interest	45 39
Total finance expense	199 142

Other interest expense includes $11 million lease interest expense (30 June 2022: $15 million), $11 million of expense recognised for the partial repurchase of the 2023 EMTN and $7 million of amortisation arising from the difference between fair value and proceeds realised from the swaps reset (30 June 2022: $7 million).

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Note 5 – Leases

Chorus is a lessee of certain network assets under lease arrangements. For all leases Chorus recognises assets and liabilities in the Consolidated statement of financial position, except those determined to be short‑term or low value. On inception of a new lease, the lease payable is measured at the present value of the remaining lease payments, discounted at Chorus’ incremental borrowing rate at that date. Lease costs are

recognised through interest expense over the life of the lease. The corresponding right of use asset incurs depreciation over the estimated useful life of the asset.

Chorus’ discounted cash flows by category are summarised below:

	2023	2022
	$M	$M
Fibre cables	11	11
Ducts, manholes and poles	52	51
Property	118	125
Total lease payable	181	187
Current	13	13
Non-current	168	174

Extension options

Most leases contain extension options exercisable by Chorus up to one year before the end of the non‑cancellable contract period. Where practicable, Chorus seeks to include extension options in new leases to provide operational flexibility. The extension options held are exercisable only by Chorus and not by the lessors. Chorus assesses at lease commencement whether it is reasonably certain the extension options will be

exercised, and where it is reasonably certain, the extension period has been included in the lease liability calculation. Chorus reassesses whether it is reasonably certain to exercise the options if there is a significant event or significant change in circumstances within its control.

The amounts recognised in the Consolidated income statement and the Consolidated statement of cash flows relating to leases are summarised below:

2023	2022
$M	$M
Amounts recognised in Consolidated income statement:
Interest on lease payable 11	15

Amounts recognised in Consolidated statement of cash flows:
Principal payments (15)	(14)
Lease interest (11)	(15)

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Note 6 – Crown Infrastructure Partners (CIP) securities

Ultra-Fast Broadband (UFB)

Chorus received Crown funding to finance construction costs associated with the development of the UFB network. Funding was received for every premise passed and certified by CIP.

Funding was received over two phases. Phase one of the build (UFB1) was completed in December 2019 with a total of $924 million of funding received. Phase two (UFB2 and UFB2+) was completed in December 2022 with a total of $411 million of funding received.

In return for funding under both phases, CIP equity securities and CIP debt securities are issued. Under UFB1 CIP warrants were also issued. Under the UFB2 and UFB2+ arrangement, Chorus can elect the mix of securities to be issued, up to a maximum of $306 million of equity securities. This maximum was reached during the year ended 30 June 2022.

The CIP equity and debt securities were recognised initially at fair value plus any directly attributable transaction costs. Subsequently, they are measured at amortised cost using the effective interest method. The fair value is derived by discounting the equity securities and debt securities per premises passed by the effective rate based on market rates. The difference between funding received and the fair value of the securities is recognised as Crown funding. Over time, the CIP debt and equity securities increase to face value and the Crown funding is released against depreciation and reduces to nil.

CIP debt securities

CIP debt securities are unsecured, non‑interest bearing and carry no voting rights at meetings of holders of Chorus ordinary shares. Chorus is required to redeem the CIP debt securities in tranches from 2025 by repaying the face value to the holder.

The principal amount of CIP debt securities consists of a senior portion and a subordinated portion. The senior portion ranks equally with all other unsecured, unsubordinated creditors of Chorus, and has the benefit of any negative pledge covenant that may be contained in any of Chorus’ debt arrangements. The subordinated portion ranks below all other Chorus indebtedness but above ordinary shares of Chorus. The initial value of the senior portion is the present value of the sum repayable on the CIP debt securities, and the initial subordinated portion will be the difference between the issue price of the CIP debt security and the value of the senior portion.

CIP equity securities

CIP equity securities are a class of non‑interest bearing security that carry no right to vote at meetings of holders of Chorus ordinary shares but entitle the holder to a preferential right to repayment on liquidation and additional rights that relate to Chorus’ performance under its construction contract with CIP.

For UFB1 equity securities, dividends will become payable on a portion of the CIP equity securities from 2025 onwards, with the portion of CIP equity securities that attract dividends increasing over time. For UFB2 and UFB2+ equity securities, dividends will become payable from 2030.

CIP equity securities can be redeemed by Chorus at any time by payment of the issue price or issue of new ordinary shares (at a 5% discount to the 20‑day volume weighted average price) to the holder. In limited circumstances CIP equity securities may be converted by the holder into voting preference or ordinary shares.

The CIP equity securities are required to be disclosed as a liability until the liability component of the compound instrument expires.

CIP warrants

Under UFB1 Chorus issued warrants to CIP for nil consideration along with each tranche of CIP equity securities. Each CIP warrant gives CIP the right, on a specified exercise date, to purchase at a set strike price a Chorus share to be issued by Chorus. The strike price for a CIP warrant is based on a total shareholder return of 16% per annum on Chorus shares over the period December 2011 to June 2036.

At 30 June 2023, Chorus had issued a total 15,662,325 warrants which had a fair value and carrying value that approximated zero (30 June 2022: 15,138,187 warrants issued). The number of fibre connections made by 30 June 2023 impacts the number of warrants that could be exercised.

The fair value has been calculated using discount rates from market rates at balance date and is a level 2 valuation of the fair value hierarchy as described in note 20.

At 30 June 2023, the component parts of CIP debt and equity instruments, including notional interest, were:

	2023 2022
	CIP debt securities $M CIP equity securities $M Total CIP securities $M CIP debt securities $M CIP equity securities $M Total CIP securities $M
Fair value on initial recognition
Balance at 1 July	189 250 439 176 234 410
Additional securities recognised at fair value	39 – 39 13 16 29
Balance at 30 June	228 250 478 189 250 439
Accumulated notional interest
Balance at 1 July	78 96 174 63 72 135
Notional interest	18 27 45 15 24 39
Balance at 30 June	96 123 219 78 96 174
Total CIP securities	324 373 697 267 346 613

CIP at fair value	320 375 695 260 333 593

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Note 6 – Crown Infrastructure Partners (CIP) securities (cont.)

Key assumptions in calculations on initial recognition

On initial recognition, a discount rate between 6.16% to 7.36% was used for the CIP debt securities (30 June 2022: 5.71% and 7.31%), and no CIP equity securities were issued in the year ended 30 June 2023 (30 June 2022: 6.26% to 7.80%). The discount rate was used for the CIP equity securities and to discount the expected cash flows, based on the NZ swap curve. The swap rates were adjusted for Chorus specific credit spreads (based on market observed credit spreads for debt issued with similar credit ratings and tenure). The discount rate on the CIP equity securities was capped at Chorus’ estimated cost of (ordinary) equity.

Note 7 – Crown funding

Crown funding is recognised at fair value where there is reasonable assurance that the funding is receivable and all attached conditions will be complied with. Crown funding is then recognised in earnings as a reduction to depreciation expense on a systematic basis over the useful life of the asset the funding was used to construct.

	2023 2022
	UFB $M WCSNB $M RBI $M Other $M Total $M UFB $M WCSNB $M RBI $M Other $M Total $M
Fair value on initial recognition
Balance at 1 July	821 40 242 16 1,119 780 24 242 16 1,062
Additional funding recognised at fair value	39 2 – – 41 41 16 – – 57
Balance at 30 June	860 42 242 16 1,160 821 40 242 16 1,119
Accumulated amortisation of funding
Balance at 1 July	(112) – (61) (10) (183) (92) – (54) (10) (156)
Amortisation	(20) (1) (8) – (29) (20) – (7) – (27)
Balance at 30 June	(132) (1) (69) (10) (212) (112) – (61) (10) (183)
Total Crown funding	728 41 173 6 948 709 40 181 6 936
Current	28 27
Non-current	920 909

Ultra-Fast Broadband (UFB)

Chorus received Crown funding to finance construction costs associated with the development of the UFB network. During the period Chorus has recognised funding for 39,820 premises where the premises was passed and tested by CIP under UFB 2 and UFB 2+ (30 June 2022: 37,000). This brings the total number of premises passed and tested by CIP at 30 June 2023 to approximately 1,053,820 (30 June 2022: 1,014,000).

West Coast Southland Network Build (WCSNB)

Chorus received funding to finance capital expenditure associated with the development of the West Coast Southland Network. One dollar of funding can be claimed for each dollar of allowable costs incurred by Chorus, up to a maximum funding limit agreed with CIP. During the period, the build was completed, with $42 million claimed from CIP.

Other and RBI

Chorus has received funding in the past towards school lead‑ins and extending the network coverage to rural areas.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Note 8 – Segmental reporting

An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses and for which operating results are regularly reviewed by the entity’s chief operating decision maker and for which discrete financial information is available.

Chorus’ Chief Executive Officer (CEO) has been identified as the chief operating decision maker for the purpose of segmental reporting.

All of Chorus’ operations are provided in New Zealand, therefore no geographic information is provided.

Three Chorus customers met the reporting threshold of 10 percent of Chorus’ operating revenue in the year to 30 June 2023. The total revenue for the year ended 30 June 2023 from these customers was $330 million (30 June 2022: $354 million), $198 million (30 June 2022: $171 million) and $146 million (30 June 2022: $116 million).

Chorus has determined that it operates in one segment providing nationwide fixed line communications infrastructure. The determination is based on the reports reviewed by the CEO in assessing performance, allocating resources and making strategic decisions.

Note 9 – Operating revenue

Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. Chorus recognises revenue when it transfers control of a product or service to a customer and cash collection is considered probable. Revenue is presented net of rebates and customer incentives.

==> picture [495 x 18] intentionally omitted <==

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

Chorus services provided to customers Nature, performance obligation and timing of revenue
----- End of picture text -----

Fibre and copper connections	Providing access to the Chorus fixed lines network to enable connections to the internet.
	Chorus recognises revenue as it provides this service to its customers at a point in time.
	Unbilled revenues from the billing cycle date to the end of each month are recognised as
	revenue during the month the service is provided. Revenue is deferred in respect of the
	portion of fixed monthly charges that have been billed in advance.
Value added network services	Providing enhanced access to the Chorus fixed line network to enable internet access,
	through backhaul and handover link services to connect across wider areas and to higher
	quality levels. Recognition is the same as described for fibre and copper connections above.
Infrastructure	Providing physical storage and site‑sharing rental services for co‑location of third party or
	shared assets. This is billed and recognised on a monthly basis, based on a point in time.
Field services products	Providing services in the field to protect, strengthen, and increase the available network
	– for example, installation services, wiring and consultation services. This is billed and
	recognised as the service is provided over time. Revenue from installation of connections
	is recognised upon completion of the connection.

Revenue by service

	2023 $M 2022 $M
Fibre broadband (GPON)	622 548
Copper based broadband	117 153
Fibre premium (P2P)	68 66
Copper based voice	39 52
Field services products	70 71
Value added network services	26 27
Infrastructure	31 30
Data services copper	4 6
Other	3 12
Total operating revenue	980 965

Amounts collected on behalf of third parties

Revenue above is exclusive of amounts collected on behalf of third parties, which totalled $19 million in the year (30 June 2022: $26 million). Any amounts collected but not yet passed to the third party are recognised within trade and other payables.

==> picture [69 x 8] intentionally omitted <==

42 Annual Report 2023

Note 10 – Operating expenses

Note 10 – Operating expenses
	2023 $M 2022 $M
Labour	76 64
Network maintenance	60 59
Information technology costs	42 50
Other network costs	37 29
Electricity	19 17
Rent and rates	12 14
Property maintenance	14 14
Advertising	13 11
Regulatory levies	9 9
Consultants	9 8
Insurance	5 4
Provisioning	1 1
Other	11 10
Total operating expenses	308 290

Labour

Labour of $76 million (30 June 2022: $64 million) represents employee costs which are not capitalised.

Pension contributions

Included in labour costs are payments to the New Zealand Government Superannuation Fund of $297,000 (30 June 2022: $275,000) and contributions to KiwiSaver of $3.3 million (30 June 2022: $2.9 million). At 30 June 2023 there were 11 employees in New Zealand Government Superannuation Fund (30 June 2022: 11 employees) and 758 employees in KiwiSaver (30 June 2022: 724 employees). Chorus has no other obligations to provide pension benefits in respect of employees.

Charitable and political donations

Other costs include charitable donations of $407,000 towards digital inclusion and health initiatives (30 June 2022: $138,000 towards digital inclusion and health initiatives). Chorus has not made any political donations (30 June 2022: nil).

Auditor remuneration

Included in other expenses are fees paid to auditors:

	2023 $000s 2022 $000s
Audit and review of statutory financial statements	640 589

Regulatory audit and assurance work	490 209
Other assurance services1	– 30
Total other services	490 239
Total fees paid to the auditor	1,130 828

1 No other assurance services in the year ended 30 June 2023 (30 June 2022: Other assurance services relate to EMTN refresh comfort letters).

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Note 11 – Trade and other receivables

Trade and other receivables are initially recognised at the fair value of the amounts to be received, plus transaction costs (if any). They are subsequently measured at amortised cost (using the effective interest method) less impairment losses.

	2023 $M 2022 $M
Trade receivables	98 97
Other receivables	37 17
Prepayments	18 12
Trade and other receivables	153 126
Current	153 125
Non-current	– 1

Included within other receivables is $37 million of interest receivable (30 June 2022: $11 million).

Trade receivables are non‑interest bearing and are generally on terms of 20 working days or less.

Chorus applies the simplified approach in providing for expected credit losses prescribed by NZ IFRS 9, which permits the use of the lifetime expected credit loss provision for all trade receivables. The provision for impairment losses are either individually or collectively assessed based on number of days overdue. Chorus takes into account the historical loss

experience and incorporates forward looking information and relevant macroeconomic factors.

Chorus maintains a provision for impairment losses when there is objective evidence of its customers being unable to make required payments and makes provision for doubtful debt where debt is more than 60 days overdue. There have been no significant individual impairment amounts recognised as an expense during the period. Trade receivables are net of allowances for disputed balances with customers.

The ageing profile of trade receivables is as follows:

	2023 $M 2022 $M
Not past due	94 92
Past due 1–30 days	4 5
	98 97

Chorus has a concentrated customer base consisting predominantly of a small number of retail service providers. The concentrated customer base heightens the risk that a dispute with a customer, or a customer’s failure to pay for services, will have a material adverse effect on the collectability of receivables.

Any disputes arising that may affect the relationship between the parties will be raised by relationship managers and follow a dispute resolution process. Chorus has $4 million of accounts receivable that are past due but not impaired (30 June 2022: $5 million). The carrying value of trade and other receivables approximates the fair value. The maximum credit exposure is limited to the carrying value of trade and other receivables.

Note 12 – Trade and other payables

Trade and other payables are initially recognised at fair value less transaction costs (if any). They are subsequently measured at amortised cost using the effective interest method. Trade and other payables are non‑interest bearing and are normally settled within 30 day terms. The carrying value of trade and other payables approximates their fair values.

	2023 $M 2022 $M
Trade payables	66 61
Operating expenditure accruals	79 54
Capital expenditure accruals	38 49
Personnel accruals	18 17
Revenue billed in advance	90 99
Trade and other payables	291 280
Current	280 264
Non-current	11 16

==> picture [69 x 8] intentionally omitted <==

44 Annual Report 2023

Note 13 – Commitments

Capital expenditure

Refer to note 1 and note 2 for details of capital expenditure commitments.

Lease commitments

Refer to note 5 for details of lease commitments.

Note 14 – Taxation

Income tax expense

Income tax expense for the current year comprises current and deferred tax, and is recognised in the Consolidated income statement, except to the extent it relates to items recognised in the Consolidated statement of other comprehensive income or directly in equity. In these cases, income tax expense is recognised in the Consolidated statement of other comprehensive income or directly in equity.

	2023 $M 2022 $M
Recognised in Consolidated income statement
Net earnings before tax	31 106
Tax at 28%	9 30
Tax effect of adjustments
Other non‑taxable items	7 6
Adjustments in respect of prior periods	– 6
Building life reassessment	(10) –
Tax expense recognised in Consolidated income statement Comprising:	6 42

Current tax expense/(benefit)
– Current year	5 5
– Adjustments in respect of prior periods	(1) (8)
Deferred tax expense
– Adjustments in respect of prior periods	1 14
– Depreciation, provisions, accruals, leases & other	1 31
Recognised in other comprehensive income	6 42

Net movement in hedging related reserves	2 43
Net revaluation of buildings	17 –
Tax expense recognised in other comprehensive income	19 43

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Note 14 – Taxation (cont.)

Deferred tax

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for taxation purposes. The amount of the deferred tax is based on the expected manner of realisation of the carrying amount of assets and liabilities, using the tax rates enacted or substantially enacted at reporting year end. A deferred tax asset is recognised only to the extent it is probable it will be utilised.

The movement in the deferred tax assets and liabilities for the period, is presented below.

Deferred tax liability/(asset)

	Changes in fair		Network, software,
	value of hedging		customer retention and		Unused tax	Total deferred
	reserves	Finance leases	other intangible assets	Other	credits	tax liability
	$M	$M	$M	$M	$M	$M
Balance at 1 July 2021	(21)	(72)	356	18	(10)	271
Prior period adjustment	–	–	–	14	–	14
Recognised in Consolidated statement of financial position	–	–	–	–	(17)	(17)
Recognised in Consolidated income statement	–	22	(1)	10	–	31
Recognised in Consolidated statement of	43	–	–	–	–	43
comprehensive income
Balance at 30 June 2022	22	(50)	355	42	(27)	342
Prior period adjustment	–	–	–	1	–	1
Recognised in Consolidated income statement	–	1	5	5	–	11
Recognised in Consolidated statement of comprehensive income	2	–	17	–	–	19
Building life reassessment	–	–	(10)	–	–	(10)
Balance at 30 June 2023	24	(49)	367	48	(27)	363

Imputation credits

Chorus has an imputation credit account balance of $135,000 as at 30 June 2023 (30 June 2022: negative $3,683,000). The account balance was positive as at 31 March 2023 and 31 March 2022.

Note 15 – Cash, call deposits, and cash overdraft

Cash and call deposits are held with bank and financial institution counterparties rated at a minimum of A, based on rating agency Standard & Poor’s ratings.

There are no cash or call deposit balances held that are not available for use. Chorus has a $10 million overdraft facility which is used in the normal course of operations.

The carrying values of cash and call deposits approximate their fair values. The maximum credit exposure is limited to the carrying value of cash and call deposits.

Cash flow

Cash flows from derivatives in cash flow and fair value hedge relationships are recognised in the Consolidated statement of cash flows in the same category as the hedged item.

For the purposes of the Consolidated statement of cash flows, cash is considered to be cash on hand, in banks and cash equivalents, including bank overdrafts and highly liquid investments that are readily convertible to known amounts of cash which are subject to an insignificant risk of changes in values.

Cash and call deposits denominated in foreign currencies are retranslated into New Zealand dollars at the spot rate of exchange at the reporting date. All differences arising on settlement or translation of monetary items are taken to the Consolidated income statement.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Note 16 – Equity

Share capital

Movements in Chorus Limited’s issued ordinary shares were as follows:

	2023 Number of shares (millions) 2022 Number of shares (millions)
Balance 1 July	447 447
Dividend reinvestment plan	1 5
Share buyback	(12) (5)
Balance at 30 June	436 447

Chorus Limited has 435,334,308 fully paid ordinary shares (30 June 2022: 446,512,440). The issued shares have no par value. The holders of ordinary shares are entitled to receive dividends as declared and are entitled to one vote per share at meetings of Chorus Limited. Under Chorus Limited’s constitution, Crown approval is required if a shareholder wishes to have a holding of 10% or more of Chorus Limited’s ordinary shares, or if a shareholder who is not a New Zealand national wishes to have a holding of 49.9% or more of ordinary shares.

Chorus Limited issues securities to CIP based on the number of premises passed. CIP securities are a class of security that carry no right to vote at meetings of holders of Chorus Limited ordinary shares but carry a preference on liquidation. Refer to note 6 for additional information on CIP securities.

Should Chorus Limited return capital to shareholders, any return of capital that arose on demerger may be taxable as Chorus Limited had zero available subscribed capital on demerger.

Dividends

On 11 October 2022 and 11 April 2023, dividends of 21 cents per share and 17 cents per share respectively were paid to shareholders. These two dividend payments totalled $169 million (30 June 2022: 28.5 cents, $128 million).

The dividend reinvestment plan was available for the October 2022 dividend for eligible shareholders (those resident in New Zealand or Australia). A total of 1,160,865 shares with a value of $9 million (30 June 2022: 4,687,851, $31 million) were issued in lieu of dividends.

Long-term performance share scheme

Chorus operates a long‑term performance share scheme for selected key management personnel. Under the legacy option plan, selected key management personnel were issued shares. This was superseded by a new long‑term performance share scheme in July 2019 under which key senior management are issued share‑rights instead of issuing shares.

The new scheme is equity settled and treated as an option plan for accounting purposes. Each tranche of each grant is valued separately. The absolute performance hurdle is valued using Monte Carlo simulations.

In August 2022, Chorus issued a tranche of share rights under the new scheme. The shares have a vesting date of 26 August 2025 and an expiry date of 26 August 2026. The grant has an absolute performance hurdle (Chorus’ actual total shareholder return equalling or being greater than 7% per annum compounding) ending on the vesting date, with provision for monthly retesting in the following twelve‑month period. A total of 132,084 share rights were issued in the tranche.

The combined option cost for the year ended 30 June 2023 of $524,000 has been recognised in the Consolidated income statement (30 June 2022: $546,000).

Reserves

Refer to note 19 for information on the cash flow hedge reserve and cost of hedging reserve.

Share buyback

In February 2022, Chorus commenced an on‑market share buyback programme. The programme will purchase up to $150 million of shares with shares being acquired through the NZX and ASX. As at 30 June 2023, 17,539,292 shares had been repurchased from the market for a total of $139 million.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Note 17 – Earnings per share

The calculation of basic earnings per share at 30 June 2023 is based on the net earnings for the year of $25 million (30 June 2022: $64 million), and a weighted average number of ordinary shares outstanding during the period of 443 million (30 June 2022: 448 million), calculated as follows:

Basic earnings per share	2023 2022
Net earnings attributable to ordinary shareholders ($ millions)	25 64
Denominator – weighted average number of ordinary shares (millions)	443 448
Basic earnings per share (dollars) Diluted earnings per share	0.06 0.14

Net earnings attributable to ordinary shareholders ($ millions)	25 64

Weighted average number of ordinary shares (millions)	443 448
Ordinary shares required to settle CIP equity securities (millions)	95 114
Ordinary shares required to settle CIP warrants (millions)	16 15
Denominator – diluted weighted average number of shares (millions)	554 577
Diluted earnings per share (dollars)	0.05 0.11

The number of ordinary shares that would have been required to settle all CIP equity securities and CIP warrants on issue at 30 June has been used for the purposes of the diluted earnings per share calculation.

Note 18 – Related parties

Subsidiaries

The financial statements include Chorus Limited and it subsidiaries as listed below:

Name of entity	Location	2023 ownership	2022 ownership
Chorus New Zealand Limited	New Zealand	100%	100%
Chorus LTI Trustee Limited	New Zealand	Removed	100%

All day‑to‑day operations of the business occur within Chorus New Zealand Limited including the building and maintenance of the network, sales and marketing, and the supporting corporate function.

Transactions with related parties

Key management personnel are defined as those persons having authority and responsibility for planning, directing, and controlling the activities of the Group, directly or indirectly, and include the Directors, the Chief Executive, and his direct reports. Certain key management personnel have interests in a number of companies that Chorus has transactions within the normal course of business.

Key management personnel compensation

	2023 $000s 2022 $000s
Short term employee benefits	7,672 6,738
Share based payments	1,638 527
	9,310 7,265

This table includes gross remuneration of $1.1 million paid to Directors (30 June 2022: $1.1 million) and $8.2 million paid to key management personnel for the year (30 June 2022: $6.2 million).

Refer to note 16 for details of long‑term incentives.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Note 19 – Derivatives and hedge accounting

Chorus uses derivative financial instruments to reduce its exposure to fluctuations in foreign currency exchange rates, interest rates and the spot price of electricity. The use of hedging instruments is governed by the Treasury Policy approved by the Board. Derivatives are held at fair value with an adjustment made for credit risk in accordance with NZ IFRS 9: Financial Instruments. The derivatives are considered Level 2 investments as defined in note 20.

Hedge accounting is discontinued when the hedge instrument expires or is sold, terminated, exercised, or no longer qualifies for hedge accounting. On discontinuation, any cumulative gain or loss previously recognised in Other comprehensive income is recognised in the Consolidated income statement either at the same time as the forecast transaction, or immediately if the transaction is no longer expected to occur.

Cash flow hedges

Treatment of any fair value gains or losses depends on whether the derivative is designated as a hedging instrument. If the derivative is not designated as a hedging instrument, the remeasurement gain or loss is recognised immediately in the Consolidated income statement.

Hedge accounting

Chorus designates derivatives held for hedging as either:

Cash flow hedges (of highly probable forecast transactions); or
Fair value hedges (of the fair value of recognised assets or liabilities or firm commitments).

At inception each hedge relationship is formalised in hedge documentation.

Derivatives in hedge relationships are designated based on a 1:1 hedge ratio. In these hedge relationships ineffectiveness is generally driven by the effect of the credit risk on the fair value of the derivatives, which is not reflected in the change in the fair value of the hedged item attributable to changes in foreign exchange and interest rates. Ineffectiveness is also recognised in relation to the restructured interest rate swaps – refer below for further information.

Under a cash flow hedge, the effective portion of gains or losses from remeasuring the fair value of the hedging instrument is recognised in Other comprehensive income and accumulated in the cash flow hedge reserve. Accumulated gains or losses are subsequently transferred to the Consolidated income statement when the hedged item affects the Income statement, or when the hedged item is a forecast transaction that is no longer expected to occur. Alternatively, when the hedged item results in a non‑financial asset or liability, the accumulated gains and losses are included in the initial measurement of the cost of the asset or liability.

Differences in the hedged values will flow to finance expense in the Income statement over the life of the derivatives as ineffectiveness. Neither the magnitude or direction of these differences can be predicted as they are influenced by external market factors. In the current year, ineffectiveness was credit $7 million across the hedge relationships (30 June 2022: credit $7 million) Refer to note 4.

As long as the existing cash flow hedge relationships remain effective, any future gains or losses will be processed through the hedge equity reserves.

A reconciliation of movements in the cash flow hedge reserve is outlined below:

	2023 $M 2022 $M
Balance at 1 July	(63) 38
Changes in cash flow hedges	(3) (133)
Amortisation of de‑designated cash flow hedges transferred to Income statement	(7) (7)
De‑designated swaps reclassified to the income statement	(1) –
Tax expense	3 39
Closing balance at 30 June	(71) (63)

Fair value hedges

Under a fair value hedge, the hedged item is revalued at fair value in respect of the hedged risk. This revaluation is recognised in the Consolidated income statement to offset the mark‑to‑ market revaluation of the hedging derivative, except for any adjustment on the hedging derivative relating to credit risk.

Once hedging is discontinued, the fair value adjustment to the carrying amount of the hedged item arising from the hedged risk is amortised through the Consolidated income statement from that date through to maturity of the hedged item. If the hedged item is derecognised any corresponding fair value hedge adjustment is immediately recognised in the Consolidated income statement.

To hedge the interest rate risk and foreign currency risk on the EUR EMTNs, Chorus uses cross currency interest rate swaps. For hedge accounting purposes, these swaps were aggregated and designated as two cash flow hedges and a fair value hedge. Chorus hedges the EUR EMTNs for Euro fixed rate interest to Euro floating rate interest via a fair value hedge. In this case, the change in the fair value of the hedged risk is also attributed to the carrying value of the EMTNs (refer to note 4).

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023 49

Note 19 – Derivatives and hedge accounting (cont.)

Cost of hedging

The cost of hedging reserve captures changes in the fair value of the cost to convert foreign currency to NZD of Chorus’ cross currency interest rate swaps on the EUR EMTNs.

A reconciliation of movements in the cost of hedging reserve is outlined below:

	2023 $M 2022 $M
Balance at 1 July	3 13
Change in currency basis spreads (when excluded from the designation)	7 (14)
De‑designated swaps reclassified to the income statement	(3) –
Tax (benefit)/expense	(1) 4
Closing balance at 30 June	6 3

Derivatives

Interest rate swaps

As at 30 June 2023 Chorus holds all interest rate swaps in designated hedging relationships.

All interest rate swaps which are designated as cash flow hedges are held in effective hedging relationships and their unrealised gains or losses are recognised in the cash flow hedge reserve.

Chorus has also entered into two interest rate swaps which are designated as fair value hedges. They have a combined face value of $200 million and were entered in conjunction with the 10 year NZD bonds issued on 2 December 2020, with the intention of swapping the interest exposure from a fixed to a floating rate.

Restructured interest rate swaps

Three interest rate swaps have been restructured: two in December 2018 and one in February 2020.

The two December 2018 restructured interest rate swaps have a combined face value of $500 million and were reset in conjunction with the resettable NZD fixed rate bond issued in December 2018 to hedge interest rate exposure from December 2023. As part of the restructure the original hedge relationship was discontinued and on termination there was a net present value of $14 million recognised in the cash flow hedge reserve. This amount was held in the cash flow hedge reserve as the hedged item still exists and is amortised over the original hedge period. The unamortised balance of the original fair values at 30 June 2023 is $6 million (30 June 2022: $8 million).

The interest rate swap restructured in February 2020 had a face value of $200 million and was reset to be in conjunction with the EUR 300 million EMTN issued in December 2019 to hedge interest rate exposure from April 2020. The original hedge relationship was discontinued and on termination had a net present value of $27 million. This amount was held in the cash flow hedge reserve as the hedged item still exists and will be amortised over the original hedge period. The unamortised balance of the original fair values at 30 June 2023 was $12 million (30 June 2022: $17 million).

Cross-currency interest rate swaps

Chorus enters into cross‑currency interest rate swaps to hedge the foreign currency and foreign interest rate risks on the EUR EMTNs. Using the cross‑currency interest rate swaps, Chorus will pay New Zealand Dollar floating interest rates and receive EUR nominated fixed interest with coupon payments matching the underlying notes.

In September 2022, Chorus repurchased EUR 291 million ($457 million) of the 2016 EMTN issuance for 99.202% of face value. Concurrently, an equal nominal amount of cross‑currency interest rate swaps (CCIRS) which hedged the debt were exited to ensure the hedging relationship remains fully effective. The residual EUR 209 million payable in October 2023 remains fully hedged with cross‑currency interest rate swaps.

Chorus continues to hold cross currency interest rate swaps in relation to the EMTN EUR 300 million issued in December 2019. This is unchanged in the current year.

Chorus designated the EMTN and cross‑currency interest rate swaps into three‑part hedging relationships for each issue:

a fair value hedge of EUR benchmark interest rates,
a cash flow hedge of margin, and
a cash flow hedge of the principal exchange.

Under the cross‑currency swaps Chorus will pay and receive the following on maturity:

			Principal –	Principal –
			receive leg	pay leg
		Maturity	(EUR M)	($M)
EUR EMTN	209	Oct 2023	209	328
EUR EMTN	300	Dec 2026	300	514
EUR EMTN	500	Sep 2029	500	820

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Note 19 – Derivatives and hedge accounting (cont.)

Hedging instruments used (pre‑tax):

		Year to date values recognised during the year ended 30 June 2023
		Hedge effectiveness in reserves Hedge effectiveness Hedge ineffectiveness
	Currency Maturity years Average rate	Cash flow hedge (OCI) $M Cash flow hedge reclassified to the Income statement $M Fair value hedge recognised in the Income statement $M Recognised in the Income statement $M
Cash flow hedges
Interest rate swaps (including forward starting)	NZD 1‑7 2.53%	12 – – –
Restructured interest rate swaps 2018 (forward starting)	NZD 6 4.41%	11 2 – –
Restructured interest rate swap 2020	NZD 4 3.35%	1 4 – 4
Forward exchange rate contracts	NZD:USD 1‑2 0.6202	1 (6) – –
Electricity futures	NZD 1‑2 NA	(2) (3) – –
Fair value hedges
Interest rate swaps	NZD 8 Floating	– – – –
Fair value and cash flow hedges
Cross currency interest rate swaps NZD:EUR <1 Floating		22 (21) 1 –
Cross currency interest rate swaps NZD:EUR 4 Floating		31 (31) (21) 2
Cross currency interest rate swaps NZD:EUR 7 Floating		60 (71) (38) 1
Total hedged derivatives		136 (126) (58) 7
Current
Non-current

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Note 19 – Derivatives and hedge accounting (cont.)

					Life	to date values as at	to date values as at		Year to date values recognised during the year ended	Year to date values recognised during the year ended	Year to date values recognised during the year ended	Year to date values recognised during the year ended
						30 June 2022				30 June 2022
					Carrying amount
					of the	hedging			Hedge effectiveness in		Hedge	Hedge
					instrument				reserves		effectiveness	ineffectiveness
							Change in			Cash flow	Fair value
				Nominal			value used for			hedge	hedge
				amount of			calculating	Cost of	Cash flow	reclassified to	recognised in	Recognised
				the hedging			hedge	hedging	hedge	the Income	the Income	in the Income
		Maturity	Average	instrument	Assets	Liabilities	ineffectiveness	reserve	(OCI)	statement	statement	statement
	Currency	years	rate	$M	$M	$M	$M	$M	$M	$M	$M	$M
Cash flow hedges
Interest rate swaps
(including forward	NZD	2‑7	1.50%	864	77	–	77	–	65	–	–	–
starting)
Restructured
interest rate swaps 2018 (forward	NZD	7	4.41%	500	–	(9)	7	–	42	2	–	2
starting)
Restructured
interest rate swap	NZD	5	3.35%	200	5	–	33	–	20	5	–	5
2020
Forward exchange	NZD:USD	1‑2	0.7065	6	6	–	6	–	6	–	–	–
rate contracts
Electricity futures	NZD	1‑3	NA	NA	4	–	4	–	2	(4)	–	–
Fair value hedges
Interest rate swaps	NZD	9	Floating	200	–	(45)	(45)	–	–	–	(27)	–
Fair value and cash
flow hedges
Cross currency interest rate swaps	NZD:EUR	2	Floating	785	37	–	42	(5)	(9)	9	(20)	–
Cross currency interest rate swaps	NZD:EUR	5	Floating	514	–	(56)	(56)	–	(4)	6	(42)	–
Total hedged derivatives				3,069	129	(110)	68	(5)	122	18	(89)	7
Current					9	–
Non-current					120	(110)

All hedging instruments can be found in the derivative finance assets and liabilities within the Consolidated statement of financial position. Items taken to the Consolidated income statement have been recognised in finance expenses (refer note 4).

Credit risk associated with derivative financial instruments is managed by ensuring that transactions are executed with counterparties with high quality credit ratings along with credit exposure limits for different credit classes. The counterparty credit risk is monitored and reviewed by the Board on a regular basis.

==> picture [69 x 8] intentionally omitted <==

52 Annual Report 2023

Note 20 – Financial risk management

Chorus’ activities expose it to a variety of financial risks, including market risk (currency risk, electricity price risk and interest rate risk) credit risk and liquidity risk. Financial risk management for currency and interest rate risk is carried out by the treasury function under policies approved by the Board. Chorus’ Treasury Policy, approved by the Board, provides the basis for overall financial risk management.

Chorus uses derivatives to hedge its financial risk exposures and does not hold or issue derivative financial instruments for trading purposes. The risk associated with these transactions is the cost of replacing these agreements at the current market rates in the event of default by a counterparty.

A summary of the financial risks that impact Chorus, how they arise and how they are managed is presented below:

Nature and exposure to Chorus	How the risk is managed
Market risk
Electricity price risk Chorus is exposed to electricity price volatility through the purchase of electricity at spot prices.	Chorus has entered into fixed electricity futures contracts to reduce the exposure to electricity spot price movements. These contracts are designated as cash flow hedge relationships. A 10% increase or decrease in the spot price of electricity, with all other variables held constant, would have minimal impact on profit and equity reserves of Chorus.
Currency risk Chorus’ exposure to foreign currency fluctuations predominantly arises from foreign currency debt and future commitments to purchase foreign currency denominated assets. The primary objective in managing foreign currency risk is to protect against the risk that Chorus’ assets, liabilities and financial performance will fluctuate due to changes in foreign currency exchange rates. Chorus has EUR 1,009 million foreign currency debt in the form of EMTN.	Chorus enters into forward foreign exchange contracts and cross currency interest rate swaps to manage the foreign exchange exposure. The EUR EMTN has in place cross currency interest rate swaps under which Chorus receives principal and fixed coupon payments in EUR for principal and floating NZD interest payments. The exchange gain or loss resulting from the translation of EMTN denominated in foreign currency to NZD is recognised in the Income statement. The movement is offset by the translation of the principal value of the related cross‑currency interest rate swap. As at 30 June 2023, Chorus did not have any significant unhedged exposure to currency risk (30 June 2022: no significant unhedged exposure to currency risk). A 10% increase or decrease in the exchange rate, with all other variables held constant, would have minimal impact on profit and equity reserves of Chorus.
Interest rate risk Chorus is exposed to interest rate risk arising from the cross‑currency interest rate swaps converting the foreign debt into a floating rate NZD obligation as well as loans under the syndicated bank facility which are subject to floating interest rates. Chorus is also exposed to changes in the fair value of the fixed interest 2030 NZD Bond due to fluctuations in the benchmark interest rate.	Where appropriate, Chorus aims to reduce the uncertainty of changes in interest rates by entering into interest rate swaps to fix the effective interest rate to minimise the cost of net debt and manage the impact of interest rate volatility on earnings. The interest rate risk on a portion of the EUR cross currency interest rate swaps has been hedged using interest rate swaps. Refer to note 19 for further information.
Other risks
Credit risk
In the normal course of business, Chorus incurs	Credit risk is managed by entering into contracts with creditworthy financial
counterparty credit risk from financial instruments,	institutions.
including cash, trade and other receivables, and	Refer to individual notes for additional information on credit risk.
derivatives.
	Chorus has certain derivative transactions that are subject to bilateral credit
	support agreements that require Chorus or the counterparty to post collateral
	to support the value of certain derivatives. As at 30 June 2023 no collateral
	was posted.
Liquidity risk
Liquidity risk is the risk that Chorus will encounter	Chorus manages liquidity risk by ensuring sufficient access to committed
difficulty raising liquid funds to meet commitments	facilities, continuous cash flow monitoring and maintaining prudent levels of
as they fall due or foregoing investment	short‑term debt maturities.
opportunities, resulting in defaults or excessive
debt costs. Prudent liquidity risk management
implies maintaining sufficient cash and the ability to
meet its financial obligations.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Note 20 – Financial risk management (cont.)

Interest rate risk

Analysis of Chorus’ interest rate repricing is outlined below:

30 June 2023	Within 1 Year $M 1–2 Years $M 2–3 Years $M 3–4 Years $M 4–5 Years $M Greater than 5 years $M Total $M
Floating rate
Debt (after hedging)	370 – – – – – 370
Fixed rate
Debt (after hedging)	328 – – 514 200 1,150 2,192
CIP securities	– – 150 – – 547 697
30 June 2022	698 – 150 514 200 1,697 3,259

Floating rate
Debt (after hedging)	635 – – – – – 635
Fixed rate
Debt (after hedging)	190 350 – – 514 700 1,754
CIP securities	– – – 140 – 473 613
	825 350 – 140 514 1,173 3,002

Interest rate sensitivity analysis

A reasonably possible change of 100 basis points in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency exchange rates, remain constant.

			2023		2022
		2023	$M	2022	$M
		$M	Equity (increase)	$M	Equity (increase)
		Profit / (loss)	/ decrease	Profit / (loss)	/ decrease
100	basis point increase	1	1	1	(6)
100	basis point decrease	(1)	(2)	(1)	7

Credit risk

The maximum exposure to credit risk at the reporting date was as follows:

Notes	2023 $M 2022 $M
Cash and call deposits 15	76 88
Trade and other receivables 11	153 126
Derivative financial instruments 19	159 129
Maximum exposure to credit risk	388 343

Refer to individual notes for additional information on credit risk.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Note 20 – Financial risk management (cont.)

Liquidity risk

Chorus manages liquidity risk by ensuring sufficient access to committed facilities, continuous cash flow monitoring and maintaining prudent levels of short‑term debt maturities. At balance date, Chorus had available $450 million under the syndicated bank facilities (30 June 2022: $350 million). Nil of the facilities have been drawn down as at 30 June 2023 (30 June 2022: $190 million).

The gross (inflows)/outflows of derivative financial liabilities disclosed in the table below represent the contractual undiscounted cash flows relating to derivative financial liabilities held for risk management purposes and which are usually not closed out prior to contractual maturity. The disclosure shows net cash flow amounts for derivatives that are net cash settled and gross cash inflow and outflow amounts for derivatives that have simultaneous gross cash settlement (for example forward exchange contracts).

30 June 2023	Carrying amount $M Contractual cashflow $M Within 1 Year $M 1–2 Years $M 2–3 Years $M 3–4 Years $M 4–5 Years $M 5+ Years $M
Non-derivative financial liabilities
Trade and other payables	291 291 280 11 – – – –
Leases (net settled)	181 310 24 23 22 21 19 201
Debt	2,528 2,114 751 31 31 328 226 747
CIP securities	697 1,338 – 171 – – – 1,167
Derivative financial liabilities
Interest rate swaps
Outflows	45 55 10 9 7 6 6 17
Cross currency interest rate swaps:
Inflows	– (589) (5) (5) (5) (574) – –
Outflows	47 635 39 36 31 529 – –
Forward exchange contracts:
Inflows	– (13) (13) – – – – –
Outflows	– 12 12 – – – – –
30 June 2022
	Carrying amount $M Contractual cashflow $M Within 1 Year $M 1–2 Years $M 2–3 Years $M 3–4 Years $M 4–5 Years $M 5+ Years $M
Non derivative financial liabilities
Trade and other payables	280 280 264 16 – – – –
Leases (net settled)	187 113 11 10 10 10 9 62
Debt	2,322 2,487 45 1,409 14 14 585 420
CIP securities	613 1,259 – – 171 – – 1,088
Derivative financial liabilities
Interest rate swaps
Outflows	54 65 6 7 8 9 9 26
Cross currency interest rate swaps:
Inflows	– (593) (4) (5) (5) (5) (576) –
Outflows	56 649 28 31 31 30 529 –
Forward exchange contracts:
Inflows	– (3) (3) – – – – –
Outflows	– 21 21 – – – – –

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Note 20 – Financial risk management (cont.)

Master netting arrangements

Chorus enters into derivative transactions under the International Swaps and Derivatives Association (ISDA) master agreements. The ISDA agreements do not meet the criteria for offsetting in the Statement of financial position, as Chorus does not currently have any legally enforceable right to offset recognised amounts. Under the ISDA agreements the right to offset is enforceable

only on the occurrence of future events such as a default on the bank loans or other credit events. The potential net impact of this offsetting is shown below. Chorus does not hold, and is not required to post, collateral against its derivative positions.

Net derivatives after applying rights of offset under ISDA agreements are as below:

30 June 2023	Gross amounts of financial instruments in the statement of financial position $M Related financial instruments that are not offset $M Net amount $M
Financial assets
Other investments including derivatives
Interest rates swaps	89 (45) 44
Cross currency interest rate swaps	57 (47) 10
Restructured interest rate swaps	12 – 12
Forward exchange contracts	1 – 1
Financial liabilities	159 (92) 67

Interest rates swaps	(45) 45 –
Cross currency interest rate swaps	(47) 47 –
Electricity futures	(2) – (2)
30 June 2022	(94) 92 (2)

Financial assets
Other investments including derivatives
Interest rates swaps	77 (45) 32
Cross currency interest rate swaps	37 (37) –
Restructured interest rate swaps	5 (5) –
Forward exchange contracts	6 – 6
Electricity futures	4 – 4
Financial liabilities	129 (87) 42

Interest rates swaps	(45) 45 –
Cross currency interest rate swaps	(56) 37 (19)
Restructured interest rate swaps	(9) 5 (4)
	(110) 87 (23)

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Note 20 – Financial risk management (cont.)

Fair value

Financial instruments are either carried at amortised cost, less any provision for impairment losses, or fair value. The only significant variances between instruments held at amortised cost and their fair value relate to the EMTN and the 2030 NZD Bond.

For those instruments recognised at fair value in the statement of financial position, fair values are determined as follows:

Level	1	Fair value is determined using unadjusted quoted prices from an active market for identical assets and liabilities. A market
		is regarded as active if quoted prices are readily and regularly available from an exchange, a dealer, a broker, an industry
		group, a pricing service or a regulatory agency and those prices represent actual and regularly occurring market
		transactions on an arm’s length basis.
Level	2	Fair value is determined using observable inputs – financial instruments with quoted prices for similar instruments in
		active markets or quoted prices for identical or similar instruments in inactive markets. Where quoted prices are not
		available, the fair value of financial instruments is valued using models where all significant inputs are observable.
Level	3	Fair value is determined using significant non‑observable inputs. Financial instruments are valued using models where
		one or more significant inputs are not observable.

All financial instruments held at fair value are Level 2 instruments. Relevant financial assets and financial liabilities and their fair values are detailed in note 19.

Valuation of level 2 derivatives

The fair values of level two derivatives are determined using discounted cash flow models. The key inputs in the valuation models are:

==> picture [495 x 18] intentionally omitted <==

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

Instrument Valuation input
----- End of picture text -----

Cross‑currency interest rate swaps	Forward curve for the relevant interest rate and foreign exchange rate
Interest rate swaps	Forward interest rate curve
Electricity swaps	ASX forward price curve
Foreign exchange contracts	Forward foreign exchange rate curves

Hedge accounting

Chorus designates and documents the relationship between hedging instruments and hedged items, as well as the risk management objective and strategy for undertaking various hedge transactions. At hedge inception (and on an ongoing basis), hedges are assessed to establish if they are effective in offsetting changes in fair values or cash flows of hedged items.

Hedges are classified into two primary types: cash flow hedges and fair value hedges. Refer to note 19 for additional information on cash flow and fair value hedge reserves.

Capital risk management

Chorus manages its capital considering shareholders’ interests, the value of its assets and credit ratings. The capital Chorus manages consists of cash and debt balances.

The Chorus Board’s broader capital management objectives include maintaining an investment grade credit rating with headroom. In the longer term, the Board continues to consider a ‘BBB’ rating appropriate for a business such as Chorus.

Note 21 – Contingent liabilities

There are no contingent liabilities as at 30 June 2023.

Note 22 – Subsequent events

Dividends

On 21 August 2023 Chorus declared an unimputed dividend of 25.5 cents per share in respect of the year ended 30 June 2023.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

==> picture [69 x 8] intentionally omitted <==

58 Annual Report 2023

Governance 60 Corporate governance framework and disclosures 61 Board composition & performance 71 Board committees 73 Ethical standards 74 Reporting and disclosure 75 Remuneration and performance 83 Risk management 85 Shareholder rights and relations 86 Additional disclosures 92 Glossary

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Corporate governance framework

This statement outlines the key aspects of our corporate governance framework and was approved by our Board on 18 August 2023.

As a New Zealand company listed on the NZX, our corporate governance policies and practices meet or exceed the standards of that market. We have adopted and fully followed the recommendations set out in the NZX Corporate Governance (Code). We are reporting against the 1 April 2023 edition of the Code.

Although we have an ASX “foreign exempt” listing status[1] we also continue to take the ASX Corporate Governance Code into account in our governance practices and policies.

Our Board regularly reviews and assesses our governance policies, processes and practices to identify opportunities for enhancement.

Chorus is, for the third year, publishing its sustainability report (Sustainability Report), reflecting our ambition to support New Zealand in its transition to be more sustainable. The Sustainability Report contains information on our sustainability strategy, including our environmental focus, our commitment to strengthening the digital capability in Aotearoa, and our commitment to helping our people thrive. Aotearoa is also in the process of implementing mandatory climate-related disclosures for many large companies, including Chorus. We continue to refine our climate-related risk and reporting framework to help New Zealand meet its international obligations and to provide stakeholders with meaningful climate-related information.

Our corporate governance practices and reporting against the recommendations set out in the Code, are outlined on the following pages (refer to the index below), in our Sustainability Report and available at www.chorus.co.nz/governance.

Principle	1	Ethical Standards	Pg 73
Principle	2	Board Composition & Performance	Pgs 61-70
Principle	3	Board Committees	Pgs 71-72
Principle	4	Reporting & Disclosure	Pg 74
Principle	5	Remuneration	Pg 75-82
Principle	6	Risk Management	Pg 83
Principle	7	Auditors	Pg 84
Principle	8	Shareholder Rights & Relations	Pg 85

Our Board’s role

Our Board is appointed by shareholders and has overall responsibility for strategy, culture, health and safety, governance and performance.

Board membership

Our Board’s skills, experience and composition support effective governance and decision making, positioning it to add value.

Our Board regularly assesses its composition utilising a skills matrix and annual evaluation processes. Training is provided or recruitment undertaken if new or additional skills or experience is required. This ensures diversity of thought, skills and expertise and that our Board remains aligned with our strategic direction.

Our constitution provides for a minimum of five and a maximum of 12 directors.

As at 30 June 2023 we had seven directors all of whom are independent directors. We have four male directors and three female directors. Our CEO is not a director on our Board.

Directors are not appointed for specified terms. However, the NZX listing rules compulsorily require that no director term exceeds three years, requiring all directors to stand again for re-election before their third anniversary. Due to Chorus' succession planning, Chorus has at least one director standing for re-election each year. Mark Cross and Sue Bailey both stood for re-election in 2022, while Will Irving stood for election as a new director. Patrick Strange retired and Mark Cross was appointed as Chair in his place. Jack Matthews and Kate Jorgensen are due to stand for re-election in 2023.

We recognise that women and ethnic minorities are still under-represented in the leadership of New Zealand businesses and our Board remains actively conscious of this in its succession planning. More information on our approach to diversity is set out on page 79 and in our Sustainability Report, available at www.company.chorus.co.nz/sustainability.

1 An ASX foreign exempt listing is based on the principle of substituted compliance. This means our primary obligation is to comply with the NZX listing rules (as our home exchange). As a result we do not need to follow or report against compliance with the ASX Corporate Governance Code.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Board composition and performance

(Code Recommendations 2.1 - 2.10)

Board Charter

(Code Recommendation 2.1)

The Board has a written charter outlining the roles and responsibilities of the Board and management. A copy of the Board Charter is available at www.chorus.co.nz/governance.

Summary[1] of our Board’s roles and responsibilities:

==> picture [495 x 528] intentionally omitted <==

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

|||
|---|---|
|Strategic objectives|• Approving strategies developed by Management in support of Chorus’ purpose to achieve its strategic|
|and financial|
|objectives|
|performance|
|• Monitoring the execution of strategies by Management|
|• Approving the annual budget and financial plans|
|• Approving major corporate initiatives|
|• Approving expenditure or actions that exceed the limits delegated to the CEO|
|Culture|• Overseeing the effectiveness of Management plans to build and support a corporate culture that|
|champions safe, fair and inclusive workplaces|
|• Receiving reports from Management regarding Chorus’ culture, including employee wellbeing|
|Risk management|• Overseeing the process for identifying significant risks facing Chorus|
|• Overseeing systems of risk management and internal control and compliance (including compliance|
|with Chorus’ legal and regulatory obligations)|
|• Satisfying itself that appropriate controls, monitoring and reporting mechanisms are in place|
|• Overseeing the effective monitoring and management of health and safety|
|Financial reporting|• Approving Chorus’ financial statements|
|• Overseeing the integrity of Chorus’ accounting and corporate reporting systems including liaising with|
|Chorus’ external auditor|
|Monitoring|• Assessing the performance of the CEO|
|Management’s|
|performance and|• (In addition to the CEO) considering the appointment and replacement of the CFO and the Chief|
|succession planning|Corporate Officer & General Counsel|
|• Overseeing succession plans for the CEO and their direct reports|
|Board performance|• Reviewing the needs, size, independence, qualifications, skills, experience and composition of the|
|and succession|
|Board to ensure the right Directors with the right skills sit around the boardroom table|
|planning|
|• Identifying and nominating (or appointing) Director candidates and overseeing Director induction and|
|ongoing Director professional development|
|• Carrying out Board succession planning, including for the Board Chair|
|• Establishing, developing and overseeing evaluation processes to annually assess Board, Board|
|Committee and individual Director performance|
|Continuous Disclosure|• Overseeing the process for making timely and balanced disclosure of all material information|
|concerning Chorus|
|Remuneration|• Approving Chorus’ remuneration policy and framework and satisfying itself that Chorus’ remuneration|
|policy is aligned with Chorus’ purpose, values, strategic objectives, and risk appetite|
|• Approving material changes to employee short and long term incentive plans|
|Governance and|• Monitoring the effectiveness of Chorus’ governance policies and practices including satisfying itself that|
|Sustainability|
|an appropriate framework exists for information to be reported by Management to the Board|
|• Approving Chorus’ sustainability strategy|
|• Overseeing the social, ethical, and environmental impact of Chorus’ activities|
|Stakeholder|• Monitoring the relationships between Chorus and key stakeholders to ensure they are productive|
|Management|and healthy.|

----- End of picture text -----

1 Summary primarily drawn from the Board Charter.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Our Board

(Code Recommendation 2.4)

==> picture [113 x 114] intentionally omitted <==

Mark Cross BBS (Accounting & Finance), CA

Chair

Director since 1 November 2016 Independent

Mark is an experienced director with more than 20 years of international experience in corporate finance and investment banking.

Mark is currently a director of Xero and a board member and investment committee chair of Accident Compensation Corporation (ACC). He is also a former chair of Milford Asset Management and former director of Z Energy, Genesis Energy, and Argosy Property.

Mark is a member of Chartered Accountants Australia and New Zealand, a chartered member of the Institute of Directors NZ and a member of the Australian Institute of Company Directors.

He was chair of our Audit and Risk Management Committee, and was on our Nominations and Corporate Governance Committee.

Mark has been appointed as the new Chair of Chorus following Patrick Strange’s resignation. His appointment took effect from the end of the annual shareholders’ meeting in October 2022.

==> picture [113 x 114] intentionally omitted <==

Kate Jorgensen MTF, BBus, CA

Director since 1 July 2020 Independent

Kate brings a wealth of experience in strategic, financial, and audit matters, with several senior leadership positions held in NZ's telecommunications, infrastructure, and construction industries. Her focus on governance, risk management and sustainability has earned her the respect of stakeholders.

Kate also serves on the boards of Suncorp NZ and Kiwibank. She has held senior positions as CFO of Vodafone NZ, KiwiRail, and Fletcher Building's infrastructure division. Kate is an impact coach with the Springboard Trust and was a member of the Sustainable Business Council Advisory Board.

She holds a Masters in Technological Futures and a Bachelor of Business, is a Chartered Accountant of Australia and New Zealand, and a Chartered Member of the Institute of Directors.

Kate is chair of our Audit and Risk Management Committee.

==> picture [113 x 114] intentionally omitted <==

Murray Jordan MProp

Director since 1 September 2015 Independent

Murray has extensive experience in the management of highly customer focused organisations and in navigating extremely complex environments, including as managing director of Foodstuffs North Island, one of New Zealand’s largest companies.

Murray has also previously held various general manager positions at Foodstuffs and management roles in the property investment and development sectors. He is a director of Deakin TopCo Pty Ltd (trading as Levande), Metlifecare, Metcash Limited, Southern Cross Medical Care Society, Southern Cross Healthcare Limited, Stevenson Group, and a Board trustee of Starship Foundation.

Murray is chair of our People, Performance and Culture Committee.

==> picture [114 x 114] intentionally omitted <==

Sue Bailey Graduate Diploma in Marketing (with Distinction) from RMIT University

Director since 31 October 2019 Independent

Sue has over 30 years experience in telecommunications, across fixed telephony, mobile and broadband. She has worked for Telstra, Virgin Mobile and most recently for Optus (one of Australia's largest telecommunication operators with mobile, cable and fibre networks) where she was a member of the executive leadership team.

From 2010 to 2013, Sue was the CEO for Virgin Mobile Australia, a fully owned subsidiary of Optus. Prior to that, she was a Senior Vice President at Virgin Mobile USA where her responsibilities included product marketing, customer lifecycle management and analytics. Sue’s career began in Telstra, where she held a range of marketing and product roles. Sue is a director of CareFlight and a member of the Australian Institute of Company Directors.

Sue is on our People, Performance and Culture Committee.

==> picture [69 x 8] intentionally omitted <==

62 Annual Report 2023

Our Board and management are committed to ensuring our people act ethically, with integrity and in accordance with our policies and values.

==> picture [113 x 114] intentionally omitted <==

Miriam Dean CNZM, KC

Director since 27 October 2021 Independent

As a King's Counsel and independent director, Miriam has extensive experience in commercial dispute resolution and governance, with a specialty in competition, consumer and regulatory law.

Miriam also has significant experience in the infrastructure and regulatory sectors, most notably as a current director of Rau Paenga Limited (previously Ōtākaro Limited), tasked with supporting and delivering infrastructure around Aotearoa for various government agencies, a former director of Crown Infrastructure Partners, a former deputy chair of Auckland Council Investments, and a former deputy chair of the Commerce Commission.

Miriam is currently chair of the Banking Ombudsman Scheme, deputy chair of the Real Estate Institute of New Zealand, and a member of a number of central and local governmentrelated advisory boards.

Miriam is on our People, Performance and Culture Committee.

==> picture [113 x 114] intentionally omitted <==

Will Irving LL.B. (Hons), BCom

Director since 26 October 2022 Independent

Will has more than 25 years of telecommunications industry experience having held a range of senior roles in the telecommunications industry in Australia ranging across strategy, wholesale, small and medium business customer sales and service and as a lawyer.

Currently, he is the Chief Strategy and Transformation Officer at NBN Co Limited in Australia, the company established to design, build and operate Australia’s wholesale broadband access network.

Prior to this role, Will held wholesale and retail customer sales and service roles as Interim CEO of Telstra InfraCo, Group Executive of Telstra Wholesale and Group Managing Director of Telstra Business. Prior to his commercial management roles, Will was Group General Counsel of Telstra and before that held a range of legal roles, having commenced his legal career at what is now King & Wood Mallesons.

Will is a member of our Audit and Risk Management Committee.

==> picture [113 x 114] intentionally omitted <==

Jack Matthews BA Philosophy, College of William and Mary

Director since 1 July 2017 Independent

Jack is an experienced director who has held a number of senior leadership positions within the media, telecommunications and technology industries in Australia and New Zealand.

Jack has extensive

telecommunications industry experience having been CEO of TelstraSaturn during the period they deployed their HFC network in New Zealand, as well as a former director of Crown Fibre Holdings, the Crown agency overseeing the rollout of New Zealand’s fibre infrastructure network.

Formerly, Jack was CEO of Fairfax Media’s Metro Division, CEO of Fairfax Digital and Chief Operating Officer of Jupiter TV (Japan).

Jack is currently the chair of Lodestone Energy and a director of New Zealand Golf Network Limited, and a former director of Plexure Group, The Network for Learning, APN Outdoor Group and Trilogy International.

Jack is a member of our Audit and Risk Management Committee.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

==> picture [501 x 199] intentionally omitted <==

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

Figure 3: Figure 4:
Director tenure Board gender diversity
14%
29%
43% 57% 43%
43%
0–3 years
Female
4–6 years
6+ years Male
----- End of picture text -----

==> picture [495 x 180] intentionally omitted <==

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

Director Appointed Last elected at ASM
Murray Jordan 2015 2021
Mark Cross 2016 2022
Jack Matthews 2017 2020
Sue Bailey 2019 2022
Kate Jorgensen 2020 2020
Miriam Dean 2021 2021
Will Irving 2022 2022
----- End of picture text -----

Jack Matthews and Kate Jorgensen are retiring by rotation and standing for re-election at our 2023 Annual Shareholders’ Meeting (ASM).

Our Board has determined that collectively its directors have a broad range of managerial, financial, accounting and industry skills and experience in the key areas set out on the following page.

A summary of current directors skills, experience and qualifications is set out on our website at www.chorus.co.nz/governance.

As the Chorus business evolves, so too does the Board. Chorus’ beginnings were focused on infrastructure build and project management. With the success of the build, we are now focused on connecting customers and their experience as well as future connectivity and non-regulated revenue opportunities. The Board is also focused on the increasing risks and impacts of climate change, and how that fits into Chorus' overall strategy. The Board considers it is important to balance both specialist expertise and the ongoing need for strong general commercial expertise.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

The following table reflects the strengths of the current Board based on a mix of key skills and experiences that are currently relevant for Chorus.

==> picture [495 x 432] intentionally omitted <==

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

Skill/experience Description Combined Board
Capital markets Experience in, and understanding of, capital markets, market regulation,
and investment capital investment and the investor experience
Communications Understanding, expertise and/or experience in communications connectivity,
connectivity and adopting new technologies, leveraging and implementing technologies
technology
Governance – Experience with, and a commitment to, high corporate governance standards
financial, audit, including in listed companies
legal, listed company
Understanding financial business drivers, and/or experience implementing or
overseeing financial accounting, external reporting and internal financial controls
Physical infrastructure Experience in leading, and/or understanding of, physical infrastructure
and operations operations, including contracting
including contracting,
Commitment and experience in management of workplace safety
safety and risk
Experience anticipating and identifying key risks and monitoring the effectiveness
of risk management frameworks and controls
Governance – Executive experience in leading large businesses, developing and implementing
executive experience strategy and strategic objectives, assessing business plans and driving execution
in large businesses
Infrastructure Understanding the current and developing regulatory environment, complexities
regulation and actual and potential impacts
Expertise identifying and managing legal, regulatory, public policy and corporate
affairs issues
Customer Experience in customer-led transformation, customer focus (at both a retailer and
experience consumer level) and/or customer centric organisations in competitive industries
Substantial experience Moderate experience Some experience
----- End of picture text -----

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Appointment

(Code Recommendations 2.2 & 2.3)

Our Board may appoint additional directors to our Board or to fill a casual vacancy. Any director appointed by the Board is required to stand for election at the next ASM.

The independence, qualifications, skills and experience needed for the future and those of existing Board members are reviewed by the Board before appointing new directors. External advisors are also engaged to identify potential candidates.

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

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

Shareholders may also nominate candidates for appointment to our Board. In addition, under the agreements entered into with CIP relating to our UFB programme, CIP is entitled to nominate one person as an independent director, however CIP have never exercised this entitlement. Should this occur, our 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 shareholders in the same way as other directors.

Diversity, equity and inclusion policy

(Code Recommendation 2.5)

Information about Chorus' approach to diversity,equity and inclusion is found on page 79 of this report.

Director induction and professional development (Code Recommendation 2.6)

Our director induction programme ensures new directors are appropriately introduced to management and our business, provides directors with relevant industry knowledge and familiarises them with key governance documents and key stakeholders.

Our directors are expected to continue ongoing professional development to ensure they maintain appropriate expertise to effectively perform their duties.

We hold dedicated Board education sessions covering a range of topical matters, both technical and cultural.

Visits to our operations, briefings from key management, industry experts and key advisers, together with educational and stakeholder visits, are also arranged for our Board.

We have written agreements with each non-executive director setting out the terms of their appointment, including obligations and responsibilities, compliance with our policies (including code of ethics and securities trading) and ongoing professional development.

No person who is an 'associated person' (as defined in Chorus' Constitution) of a telecommunications services provider in New Zealand may be appointed or hold office as a director.

Minimum shareholding policy

Chorus' Minimum Shareholding Policy sets the expectation on directors to hold, at a minimum, shares equal in value to one year's director base fee (after tax). If not held at their date of appointment, the policy expects directors to accumulate this holding over the first three years from that date.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Review and evaluation of Board performance

(Code Recommendation 2.7)

Our Board evaluates its performance each year. As part of this process our chair meets with directors individually to discuss performance.

Our Board also formally engages in annual reviews of our Board chair, and chairs of our standing Board committees.

In addition to Board performance reviews, our Board takes a future focused approach to future Board capability, composition and the potential contribution of each existing director.

Independent advice

A director may, with our chair’s prior approval, obtain independent professional advice (including legal advice) and request the attendance of advisers at Board and Board committee meetings. No external advice was sought this year.

Delegation of authority

Our Board has overall responsibility for strategy, culture, health and safety, governance and performance.

Implementation of our Board approved strategy, business plan and governance frameworks, and responsibility for developing our culture and health and safety practices, is delegated by the Board to management through the CEO.

As such our CEO (with the support of his executive team) is responsible for Chorus’ day-to-day management, operations and leadership, reporting to the Board on key performance, management and operational matters.

Our CEO sub-delegates authority to his executive team and they sub-delegate their authority to other Chorus employees within specified financial and non-financial limits.

Formal policies and procedures govern the parameters and operation of these delegations.

Our CEO is not a director on our Board.

Independence

(Code Recommendations 2.4 & 2.8)

All our directors, including our Board chair, are independent directors.

When assessing independence, our Board will consider whether a director is free of material relationships with Chorus (other than as a director) and other relationships that could influence, or could reasonably be perceived to influence, the director's capacity to bring an independent view to decisions about Chorus.

Our Board has not set financial materiality thresholds for determining independence but considers materiality in the context of each relationship and from the perspective of the parties to that relationship.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Director interests and trading

(Code Recommendation 2.4)

As at 30 June 2023, directors had a relevant interest (as defined in the Financial Markets Conduct Act 2013) in approximately 0.059% of shares as follows:

Current Directors

==> picture [495 x 41] intentionally omitted <==

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

Interest as at 30 June 2023 Transactions during the reporting period
Director Shares Interest Number Nature of transaction Consideration Date
of shares
----- End of picture text -----


Mark Cross 30,711 Beneficial owner as beneficiary of Alpha Investment Trust; power to exercise voting rights and acquire/dispose of financial products as director of trustee. 555 Acquisition of shares on reinvestment of dividends under Chorus’ dividend reinvestment plan $4,239.09 11 October 2022
Kate Jorgensen 12,975 Registered holder and beneficial owner – – – –
Murray Jordan 124,010 Registered holder and beneficial owner of ordinary shares as trustee and beneficiary of Endeavour Trust 2,243 Acquisition of shares on reinvestment of dividends under Chorus’ Dividend Reinvestment Plan $17,132.03 11 October 2022
Sue Bailey 35,000 Registered holder and beneficial owner 5,000 On market acquisition $38,520.43 14 March 2023
Miriam Dean 5,000 Registered holder and beneficial owner of ordinary shares as trustee and beneficiary of the Miriam Dean Trust 5,000 On market acquisition $40,070.50 31 August 2022
Will Irving 30,000 Registered holder and beneficial owner	15,000 On market acquisition $119,973 21 February 2023
	15,000 Initial Disclosure Notice – 26 October 2022
Jack Matthews 19,881 Registered holder and beneficial owner	360 Acquisition of shares on reinvestment of dividends under Chorus’ Dividend Reinvestment Plan $2,749.68 11 October 2022

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

As at 30 June 2023, directors had a relevant interest (as defined in the Financial Markets Conduct Act 2013) in approximately 0.024% of Chorus’ NZX bonds maturing December 2028 as follows:

==> picture [496 x 40] intentionally omitted <==

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

Interest as at 30 June 2023 Transactions during the reporting period
Director Bonds Interest Number Nature of transaction Consideration Date
of bonds
----- End of picture text -----

Murray Jordan	100,000 Registered holder and	–	–	–	–
	benefcial owner as
	trustee and benefciary
	of Endeavour Trust
Miriam Dean	20,000 Registered holder and	–	–	–	–
	benefcial owner as
	trustee and benefciary
	of the Miriam Dean Trust
Changes in Director interests
Mark Cross	Retired as a director of Milford Asset Management Limited, Milford Capital Investments Limited, Milford Funds
	Limited, Milford Private Equity Limited, Milford Prived Wealth Limited, Mitre Peak Nominee 1 Limited, MPE II GP
	Limited, MPE III GP Limited.1
Murray Jordan	Became a board member of Deakin TopCo Pty		Ltd (trading as Levande).2
Jack Matthews	Retired as a director of Plexure Group.3
Sue Bailey	None
Miriam Dean	None
Patrick Strange	Retired as a director of Chorus Limited and Chorus New Zealand Limited.4
Kate Jorgensen	Became a board member of Suncorp Group (Vero Liability Insurance Ltd, Asteron Life Ltd, and Vero Insurance NZ Ltd.).5
	Became a board member of Kiwibank Limited.6		Retired as a board member of the Graeme Dingle Foundation.7
Will Irving	None

Notes:

1 From 1 July 2022.

2 From 29 July 2022.

3 From 20 September 2022.

4 From 26 October 2022.

5 From 1 September 2022.

6 From 1 June 2023.

7 From 22 June 2023..

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Board chair

(Code Recommendations 2.9 & 2.10)

Our chair is elected by the Board and must be a non-executive, independent director.

The chair’s responsibilities include:

Leading the Board;
Setting the agenda for Board meetings in consultation with the CEO;
Facilitating the effective contribution of all directors;
Promoting constructive relationships between directors and management; and
Leading stakeholder relationships

The chair’s other commitments must not hinder his or her effective performance in the role.

Board and Board committee meeting attendance in the year ended 30 June 2023

(Code Recommendation 2.4)

==> picture [495 x 46] intentionally omitted <==

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

Regular Board Other Board ARMC PPCC Regulatory
meetings meetings [1] Sub‑Committee
Total number of
8 4 4 4 4
meetings held
----- End of picture text -----

Mark Cross2	7	3	1		4
Kate Jorgensen	8	4	4		4
MurrayJordan	8	4		4	4
Sue Bailey	8	4		4	4
Miriam Dean	8	4		4	4
Will Irving3	7	2	3		3
Jack Matthews	8	4	4		4
Patrick Strange4	2	3			1

JB Rousselot is not a director, but has attended 100% of all Board meetings (except for director-only sessions).

Notes:

1 Includes dedicated Board education, and strategy and business planning, meetings. Directors also have health and safety site visits each year.

2 Mark Cross, as Board chair, attends all Board committee meetings. As he is no longer a formal member of the ARMC or PPCC (following his appointment as Board Chair in October 2022), that attendance is not noted in the table following his appointment date.

3 Will Irving was elected to the Board effective 26 October 2022. He attended 1 regular and one other meeting as an observer.

4 Patrick Strange retired from the Board effective 26 October 2022.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Board committees

(Code Recommendations 3.1 - 3.6)

Two standing Board committees and one ad-hoc subcommittee also assist our Board in carrying out its responsibilities. Some Board responsibilities, powers and authorities are delegated to those committees.

Board committees assist our Board by focusing on specific responsibilities in greater detail than is possible for the Board as a whole. Each standing Board committee and the ad-hoc sub-committee has a Board approved charter and chair. Committee members are appointed by our Board. Chorus employees only attend Committee meetings at the invitation of the Committee.

Other committees may be established and specific responsibilities, powers and authorities delegated to those committees and/or to particular directors.

(Code Recommendations 3.4)

The Nominations and Corporate Governance Committee was disestablished in 2022, with its' responsibilities for director appointment, evaluation, succession planning, education and Board governance now undertaken by the Board. It was disestablished to streamline the governance framework following an internal review of the committees.

It is planned to disestablish the Regulatory Sub-Committee in the first quarter of FY24, with future regulatory responsibilities being undertaken by the Board.

==> picture [406 x 85] intentionally omitted <==

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

Audit and Risk
Management Committee
Chorus People, Performance and CEO Executive Our
Limited Board Culture Committee Team People
Regulatory Sub‑Committee
----- End of picture text -----

Audit and Risk Management Committee (ARMC) (Code Recommendations 3.1)

Role	Our ARMC assists our Board in overseeing our risk and financial management, accounting, audit and financial
	reporting
Members	Kate Jorgensen (chair), Jack Matthews, Will Irving
Independence	All committee members are non-executive independent directors. The Board chair cannot also be the ARMC
	chair.
Responsibilities	• Overseeing the quality and integrity of external financial reporting, financial management, internal controls and
	accounting policy and practice
	• Regularly reviewing principal risk reporting
	• Recommending to our 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 compliance with applicable laws, regulations and standards
	• Overseeing and monitoring progress in the implementation of Chorus' climate strategy.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

People, Performance and Culture Committee (PPCC)

(Code Recommendation 3.3)

Role	Our PPCC assists our Board in overseeing people, culture and related policies and strategies
Members	Murray Jordan (chair), Miriam Dean, Sue Bailey
Independence	All committee members are non-executive independent directors
Responsibilities	• Reviewing people and remuneration strategies, structures and policies
	• Approving annual remuneration increase guides and budgets
	• Reviewing candidates for, and the performance and remuneration of, our CEO
	• Approving, on the recommendation of our CEO, the appointment of our CEO’s executive direct reports (except
	our CFO and Chief Corporate Officer & General Counsel whose appointment is approved by our Board)
	• Reviewing our CEO’s performance evaluation of his executive direct reports
	• Developing and annually reviewing and assessing diversity, equity and inclusion and its reporting
	• Overseeing recruitment, retention and termination policies and procedures for senior management
	• Making recommendations (including proposing amendments) to our Board with respect to senior executive
	(including CEO) incentive remuneration plans / policies
	• Annually reviewing non-executive director remuneration.

Ad-hoc Regulatory Sub-Committee

(Code Recommendation 3.5)

Role	Our Regulatory Sub-Committee assists the Board in overseeing Chorus’ regulatory strategies and meeting Director
	certification obligations required by Chorus' regulator from time to time
Members	Mark Cross (chair), Kate Jorgensen, Miriam Dean, Jack Matthews, Sue Bailey, Murray Jordan, Will Irving
Independence	All committee members are non-executive independent directors
Responsibilities	• Oversee strategy for Chorus as it relates to Chorus’ general regulatory settings and environment both inside and
	outside of the Price Quality and Information Disclosure (PQID) regulatory regime
	• Oversee strategy for Chorus as it transitions to the PQID regulatory regime (which took effect from
	1 January 2022) including the business transformation required to operate effectively under PQID
	• Oversee a regulation evolution strategy to support changing commercial circumstances including regulatory
	settings outside of Chorus’ PQID requirements
	• Provide certifications to accompany mandatory reporting to the regulator, consider regulatory risk
	management, and review any decisions or findings of the regulator regarding the regulatory regime.

Takeovers protocol

(Code Recommendation 3.6)

We have a takeovers protocol setting out the procedure to be followed if there is a takeover offer, including managing communications between insiders

and the bidder and engagement of an independent adviser. The protocol includes the option of establishing an independent takeover committee, and the likely composition and implementation of that committee.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Ethical standards

(Code Recommendations 1.1 & 1.2)

Codes of ethics

(Code Recommendation 1.1)

Directors and employees are expected to act honestly and with high standards of personal integrity. Codes of ethics for our directors and employees set the expected minimum standards for professional conduct. These codes facilitate behaviours and decisions that are consistent with our values, business goals and legal and policy obligations, including in respect of:

Conflicts of interest;
Gifts and personal benefits;
Anti-bribery and corruption;
Use of corporate property, opportunities and information;
Confidentiality;
Compliance with laws and policies; and
Reporting unethical behaviour.

Trading in Chorus securities

(Code Recommendation 1.2)

All trading in Chorus securities by directors and employees must be in accordance with our Securities Trading Policy. That policy prohibits trading in Chorus securities while in possession of inside information and requires, amongst other things:

Directors to notify, and obtain consent from, the chair (or in the chair’s case, the ARMC chair) before trading; and
Employees identified as potentially coming across market sensitive information in the course of their employment (“restricted persons”), to obtain consent from our Chief Corporate Officer & General Counsel (or in our Chief Corporate Officer & General Counsel’s case, our Board chair) before trading.

Trading in Chorus shares or NZX listed bonds by directors is disclosed to our Board, the NZX and ASX. Trading by “senior managers” is disclosed to the NZX.

We have communicated our codes of ethics and provided annual training to our directors and employees. Our people are also encouraged to report any unethical behaviour, including quarterly reporting of any potential conflicts.

This process is subject to internal audit. All reported breaches are investigated.

Chorus also has a dedicated whistle-blower email address and phone number monitored by PwC as part of our risk management framework to allow confidential reporting of serious misconduct or wrongdoing and suspected fraud or corruption. For more information, see the 'Thriving People' section of our Sustainability Report available at http://company.chorus.co.nz/reports

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Reporting and disclosure

(Code Recommendations 4.1 - 4.4)

Chorus reviews its disclosure regularly as a key measure of good governance.

The Board’s aim is to improve our disclosures each year, including our remuneration reporting, based on market research and feedback from investors and other stakeholders.

Market disclosures

(Code Recommendation 4.1)

We are committed to providing timely, factual and accurate information to the market consistent with our legal and regulatory obligations.

We have a Board approved Disclosure Policy and a CEO approved Market Disclosure Policy setting out our disclosure practices and processes in more detail.

Our disclosure policies are designed to ensure:

Roles of directors, executives and employees are clearly set out.
Appropriate reporting and escalation mechanisms are established.
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.

Key Governance Documents

(Code Recommendation 4.2)

Chorus’ website has a dedicated governance section that contains information about our Board, the Board committees (including the Board and committee charters) and key policies that outline our core governance structures and processes. These include policies and codes covering areas such as ethics, health & safety, modern slavery, diversity, equity and inclusion, compliance, remuneration, risk management and whistle blowing. The governance section can be found at https://company.chorus.co.nz/governance

Reporting

(Code Recommendation 4.3)

Chorus’ financial reports are prepared in a manner that is balanced, clear and objective. The financial statements in this Annual Report are prepared in accordance with NZ GAAP and comply with NZ IFRS.

Non-financial disclosures

(Code Recommendation 4.4)

In addition to the Annual Report containing our financial statements, we publish a sustainability report which contains information on our sustainability strategy, including our environmental focus, our commitment to strengthening the digital capability in Aotearoa, and our commitment to helping our people thrive.

Further information about our approach to sustainability and the Sustainability Report can be found at https://company.chorus.co.nz/sustainability

Our approach to tax

We take our tax obligations seriously and work closely with Inland Revenue to ensure we meet our tax obligations.

We obtain external advice and Inland Revenue’s views (through informal correspondence, determinations or rulings) in respect of unusual or material transactions.

As we operate only in New Zealand all our tax is paid in New Zealand at the prevailing corporate tax rate (currently 28%). We have paid all taxes we owe and all tax compliance obligations are up to date.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Remuneration and performance

(Code Recommendations 5.1 - 5.3)

Our remuneration model

(Code Recommendation 5.1)

Our remuneration model is designed to enable the achievement of our strategy, whilst ensuring that remuneration outcomes are aligned with employee and shareholder interests.

The PPCC supports the Board to fulfil their remuneration obligation by overseeing our remunerating strategy and policy.

There were no material changes to Chorus’ remuneration strategy or policy in FY23. The policy is designed around six guiding principles:

What does this mean?

Remuneration principles

1 2 3 4 5 6	Fairto all – employees and shareholders, sharing in the success of Chorus. Commitment to pay equity and alignment with our shareholders’ expectations.
	Supports aPerformancefocused culture. Rewards aligned with performance.
	Valuedby our people. We have a diverse workforce and aim to provide an appropriate suite of rewards that provide value, now and in the future.
	Simpleto understand and administrate. Simplicity promotes understanding, clarity and perceptions of fairness.
	Market— aligned with our competitors. We ensure we are not over or underpaying our people through robust market analysis that guides our decisions on remuneration.
	Point of difference— how we know it is Chorus. Supports Chorus’ strategy, values, purpose and employee

Simplicity promotes understanding, clarity and perceptions of fairness. We ensure we are not over or underpaying our people through robust market analysis that guides our decisions on remuneration. Supports Chorus’ strategy, values, purpose and employee value proposition.

Our remuneration policy sets out our approach to remuneration for both directors and employees (including the CEO and his direct reports).

(Code Recommendation 5.2)

The CEO and members of the executive leadership team have the potential to earn a long term incentive (LTI) and short term incentive (STI). Both STI and LTI are deemed at risk because the outcome is determined by performance against a combination of pre-determined financial and non-financial objectives.

Fixed remuneration

Fixed remuneration (not at risk) consists of base salary and other benefits including KiwiSaver. Fixed remuneration is adjusted each year based on data from independent remuneration specialists. Employees’ fixed remuneration is based on a matrix of their own performance and their current position when compared to the market.

Short term incentive

Senior employees were invited to participate in the FY23 STI scheme. The FY23 STI is an at risk component payment, that is set as a percentage of fixed remuneration, from 15% to 35% based on the complexity of the role (the CEO’s STI is a higher percentage of fixed remuneration). STI payments are determined following a review of company and individual performance and paid out at a multiplier of between 0x and 1.25x for the CEO and executive leadership team, and between 0x and 1.4x for all other employees.

Company performance goals are set and reviewed annually by our Board to align with shareholder value. A continued emphasis on customer experience was supplemented by a new focus on revenue growth for the FY23 STI measures. See figure 5.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Figure 5:

FY23 STI Goals

20% 20% 10% 10% 40%	Measures FY23 target FY23 actual FY23 achieved
	EBITDA:gateway hurdle of $625m1EBITDA. Year end target aligned with objective of modest underlying EBITDA growth. $665m1 $682m1 Exceeded target
	Customer experience– fibre fault restoration as measured by average consumers’ scores (target of 8.2 over three months to 30 June) 8.2 7.8 Did not meet target
	Customer experience– intact fibre connection as measured by average consumers’ scores (target of 7.6 over three months to 30 June) 7.6 7.3 Did not meet target
	Revenue growth:grow FY22 revenue by at least 1% $965m +1% $980m (+1.6%) Exceeded target
	Strategy and execution:qualitative assessment by Board based on long‑term business initiatives including progress of RP2 proposal, non fibre initiatives, growth and Diversity, Equity, and Inclusion. Various As assessed by the Board Met target

1 The FY23 Gateway hurdle, FY23 target and FY23 actual figures represent underlying EBITDA (for more information on underlying FY23 EBITDA, refer to the investor presentation released to the market on or about 21 August 2023).

The Board has agreed the FY24 STI scheme will have similar focus areas and weightings as the FY23 scheme, with the addition of climate-related targets as a new focus area.

A gateway goal is fundamental to the STI structure. This ensures a preliminary threshold of financial success and affordability, before any other measures can be considered for potential STI payments. If the gateway goal is not achieved, no STI is payable.

The STI payment is at the ultimate discretion of the Board and is based on performance against key financial and nonfinancial measures. Some of the non-financial measures include targets associated with health and safety, overall team engagement scores (including both DE&I and Health and Wellbeing scores), and gender balance and mix of teams.

As an example of how the STI is calculated, an employee with fixed remuneration of $100,000 and an STI element of 15% may receive between $0 and $29,400 depending on the level of company performance (0x to 1.4x multiplier) multiplied by their individual performance (0x to 1.4x multiplier). Individual performance is assessed by what employees achieve within their role (70%) and how they perform their role (30%).

Long term incentives

We offer an executive LTI share scheme to align the interests of executives and shareholders and encourage longer term decision making. This at risk payment is described in Note 16 of the financial statements on page 47.

To further align executive and shareholder interests,a minimum shareholding policy was introduced in 2019. This requires executives to hold a minimum of 25% of their after tax base remuneration in Chorus shares. The CEO is required to hold 30% of their after tax base remuneration in Chorus shares.

The LTI scheme remained unchanged for the 2022 grant. It is an absolute rather than a relative return based scheme. A blended total shareholder return rate was adopted to reflect the regulated WACC set for Chorus’ fibre assets. This incorporates a weighted cost of equity calculation, proportional to the regulated versus non-regulated components of the business and based on relative enterprise value. A 0.75% stretch percentage was added to the weighted cost of equity calculation to determine the three-year performance hurdle.

The Board has commissioned an independent review of the 2023 grant and one of the considerations is the removal of the current retesting provision, as well as changing the vesting method from the current cliff method where a grant 100% vests on reaching the performance hurdle, to a progressive vesting scale where the grant vests in stages on meeting agreed hurdles.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Chief Executive Officer employment agreement and remuneration

(Code Recommendation 5.3)

JB Rousselot’s employment agreement reflects standard conditions that are appropriate for a senior executive of a listed New Zealand company. The employment agreement may be terminated by:

either he or Chorus giving six months' notice in writing;
Chorus without notice in the case of serious misconduct, serious breach (including substantial non-performance) or other cause justifying summary dismissal; or
Chorus immediately, if the Board forms the view that substantial incompatibility and/or irreconcilable differences have developed with him, or the Board otherwise wishes to terminate his employment when he is not at fault (including a redundancy situation or medical incapacity).

Our CEO has a significant portion of his remuneration linked to performance and at risk. His total remuneration is determined using a range of external factors, including advice from remuneration specialists, and is annually reviewed by the PPCC and Board.

CEO remuneration performance and pay

The scenario chart below demonstrates the elements of the CEO remuneration design in the year ended 30 June 2023.

==> picture [240 x 154] intentionally omitted <==

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

4,000
3,000
2,000 57%
43%
1,000
100% 57% 43%
0
FIXED ON-PLAN MAXIMUM
Base Annual variable
$ Thousands
----- End of picture text -----

The chart does not include any income from the LTI scheme. The CEO has received four LTI grants ($319,829 in 2019, which vested in August 2022; $412,500 in 2020; $420,750 in 2021; and $441,788 in 2022) with the 2020 grant being tested for vesting in August 2023.

CEO remuneration for FY22 and FY23 was:

		Fixed remuneration	STI	LTI	Total remuneration
J B Rousselot	FY23	1,338,750	1,138,607	532,3691	3,009,726
J B Rousselot	FY22	1,275,000	1,147,500	—	2,442,500

Other benefits paid to JB Rousselot: Chorus KiwiSaver contribution FY23 $76,207.99 and FY22 $61,355. 1 The 2019 LTI grant of $319,829 worth of share rights vested in August 2022 at a value of $532,369.

Five year summary of CEO remuneration:

			% STI awarded	% LTI awarded	Span of LTI
CEO		Total remuneration	against maximum	against maximum	performance period
J B Rousselot	FY23	$3,009,726	65%	100%	2019-2022
	FY22	$2,442,500	67%	—	—
	FY21	$2,018,750	47%	—	—
	FY202	$1,425,253	66%	—	—
Kate McKenzie	FY203	$588,325	—	—	—
	FY19	$2,068,560	53%	—	—

2 Pro-rated from start date of 20 November 2019.

3 Pro-rated to end date of 20 December 2019.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

STI & LTI Schemes

The table below outlines the CEO’s STI and LTI schemes for the performance period ending 30 June 2023[1] :

==> picture [495 x 21] intentionally omitted <==

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

Description Performance measures Percentage achieved
----- End of picture text -----

STI		Set at 75% of base remuneration. Based	• Company performance – see FY23	65%
		on key financial and non-financial	STI Goals on page 76 for weightings.
		performance measures.	• Individual performance – based
			on business fundamentals (both
			financial and non-financial), customer
			experience and strategic initiatives
			including health and safety and DE&I.
LTI –	2019	Three-year grant made November	• Chorus TSR performance over grant	100% vested in
		2019, equivalent to 33% of base	period must exceed 10.35% on an	August 2022.
		remuneration.	annualised basis, compounding.
LTI –	2020	Three-year grant made August	• Chorus TSR performance over grant	Assessed August 2023
		2020, equivalent to 33% of base	period must exceed 9.65% on an	with possible retesting3
		remuneration.	annualised basis, compounding.	up to August 2024.
LTI –	2021	Three-year grant made August	• Chorus TSR performance over grant	Assessed August 2024
		2021, equivalent to 33% of base	period must exceed 6.2%2on an	with possible retesting3
		remuneration.	annualised basis, compounding.	up to August 2025.
LTI –	2022	Three-year grant made August	• Chorus TSR performance over grant	Assessed August 2025
		2022, equivalent to 33% of base	period must exceed 7%2on an	with possible retesting3
		remuneration.	annualised basis, compounding.	up to August 2026.

1 The STI payments for FY23 will be paid in FY24.

2 A blended rate which incorporates a weighted cost of equity calculation proportional to the regulated versus non regulated components of the business, based on relative Enterprise Value has been used. A 0.75% stretch percentage is added to determine the three-year performance hurdle.

3 If the performance hurdles are not met by the initial vesting date, they are assessed monthly for a period of 12 months (noting the hurdle continues to increase).

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Total Shareholder Return (TSR) performance

==> picture [493 x 188] intentionally omitted <==

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

150.00
100.00
50.00
0.00
-50.00
30 June 30 June 30 June 30 June 30 June 30 June
2018 2019 2020 2021 2022 2023
NZX50 Chorus
Percentage return
----- End of picture text -----

The graph above shows Chorus’ TSR performance against the NZX50 between 30 June 2018 and 30 June 2023.

Executive shareholding

For the year ended 30 June 2023, Chorus executives held shares in Chorus as shown in the table below.

Executive	Current Holdings1	Shares Rights Eligible to Convert in 20232

Andrew Carroll3	109,011	19,897
Ed Hyde3	30,858	16,033
Elaine Campbell	28,589	14,572
Ewen Powell JB Rousselot Shaun Philp3	76,914 41,968 38,796	13,776 58,947 12,918
Total	326,136	136,143

1 As at 30 June 2023.

2 If the 2020 LTI hurdles are met, the share rights will be converted to shares in Q2 FY24. In addition, this will also include any share rights in lieu of dividends not yet distributed.

3 Executives are leaving in FY24 and have been granted good leaver status for the 2020 Grant

Diversity, Equity and Inclusion

(Code Recommendation 2.5)

Chorus’ Diversity and Inclusion Policy (available in the Governance section of our website) provides a framework for our current and future diversity and inclusion initiatives. Each year, the Chorus Board sets measurable objectives to promote diversity and inclusion. An overview of the agreed FY23 D,E & I measures and the outcomes achieved can be found in our Sustainability Report.

We had four male and three female directors at 30 June 2023 (30 June 2022: four male and three female directors).

Our executive (officers or senior managers) comprising our CEO and his leadership team had six males and one female at 30 June 2023 (30 June 2022: six males and one female).

Based on the annual review of effectiveness of our Diversity, Equity & Inclusion (D,E&I) Policy and our measurable diversity metrics and objectives, our Board considers that overall we are making good progress towards achieving our D,E&I objectives and that we have performed well against the policy generally. We continue to consciously focus on this as we support a culture of inclusion at Chorus.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Median Pay Gap

The median pay gap was 11 times and represents the number of times greater the CEO’s base salary of $1,338,750 (annualised) was to an employee paid $121,826 (i.e. the median of all Chorus employees). The gap was 19.2 times when including STI payments for FY23 for the CEO.

Gender pay equity

We monitor and report on remuneration outcomes by gender to ensure pay equity at Chorus and have supported pay gap campaigns led by “Mind the Gap” and Global Women.

We conduct gender pay equity analysis for like positions each year and no indications of gender bias across similar positions were identified in FY23.

We report on gender pay gap via two different methods. First, at a total company level, where we compare the median hourly rate for women to the rate for men – irrespective of role. By this measure, as of 30 April 2023, the median, gender pay gap was an aggregate total of -19%, compared to -19.1% in the same period last year.

The second method is by career level, comparing the median hourly rate for women to the rate for men, across our nine career levels (salary bands). Our target is a pay gap no greater than -2% at each career level. We achieved this in seven of the nine career levels. In three of the nine career levels, on average females are paid higher than males.

We’ve committed to report our ethnicity pay gap publicly once a standard, consistent methodology is determined in Aotearoa.

Figure 6:

Gender by role - three year view FY21 - FY23 as of 30 April 2023

==> picture [499 x 141] intentionally omitted <==

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

100%
14 4 14 4 14 4
80%
41 41 42 38 36 39 86 86 86
60% 43 43 43
59 59 58 62 64 61
40% 57 57 57
20%
0
ALL CHORUS 2021 ALL CHORUS 2022 ALL CHORUS 2023 PEOPLE LEADERS 2021 PEOPLE LEADERS 2022 PEOPLE LEADERS 2023 EXECUTIVE 2021 EXECUTIVE 2022 EXECUTIVE 2023 DIRECTORS 2021 DIRECTORS 2022 DIRECTORS 2023
----- End of picture text -----

40:40:20 split of employees by 2023 / 40:40:20 split of Career level 8-11 by 2025 / 40:40:20 split of People Leaders by 2023. 40:40:20 split of Executive by 2023 / 40:40:20 Board split by 2023.

==> picture [69 x 8] intentionally omitted <==

80 Annual Report 2023

Employee remuneration range during the year ended 30 June 2023

The table below shows the number of employees and former employees who received remuneration and other benefits in excess of $100,000 during the year ended 30 June 2023. This includes STI and LTI paid during FY23, as well as other benefits such as insurance and a broadband concession. The table excludes any benefits that do not have an attributable value and contributions employees may receive towards:

the Marram Trust - a community healthcare and holiday accommodation provider
the Government Superannuation Fund - a legacy benefit provided to a small number of employees
KiwiSaver accounts - 3% of gross earnings

The remuneration paid to, and other benefits received by, JB Rousselot in his capacity as CEO are detailed on pages 77 to 78, and are excluded from the table below.

Chorus does not have any permanent employee earning less than the 2022/2023 Living Wage of $23.65 per hour.

	Remuneration range $ (Gross)	Number of employees in the year ended 30 June 2023
	Actual Payment 1,050,000-1,060,000 870,001-880,000	Rem + STI + LTI + insurance + concession 1 1
	820,001-830,000	1
	750,001-760,000	1
	730,001-740,000	1
	480,001-490,000	1
	420,001-430,000	1
	400,001-410,000	1
	390,001-400,000	4
	370,001-380,000	2
	360,001-370,000	2
	350,001-360,000	4
	340,001-350,000	2
	320,001-330,000	1
	310,001-320,000	2
	300,001-310,000	3
	290,001-300,000	4
	280,001-290,000	3
	270,001-280,000	4
	260,001-270,000	4
	250,001-260,000	6
	240,001-250,000	4
	230,001-240,000	16
	220,001-230,000	20
	210,001-220,000	19
	200,001-210,000	19
	190,001-200,000	13
	180,001-190,000	16
	170,001-180,000	28
	160,001-170,000	30
	150,001-160,000	39
	140,001-150,000	50
	130,001‑140,000	48
	120,001‑130,000	55
	110,001‑120,000	63
	100,000‑110,000	53
	Grand Total	522

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Director remuneration

(Code Recommendation 5.1)

Fee structure

Total remuneration available to directors (in their capacity as such) in the year ended 30 June 2023 was fixed at our 2019 annual shareholders’ meeting at $1,169,042.

==> picture [495 x 224] intentionally omitted <==

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

Annual fee structure Year ended 30 June 2023 $ Year ended 30 June 2022 $
Board fees:
Board chair 223,650 223,650
Non-executive director 114,000 114,000
Board committee fees:
Audit and Risk Management Committee
Chair 32,600 32,600
Member 16,300 16,300
People, Performance and Culture Committee
Chair 22,900 22,900
Member 11,750 11,750
Nominations and Corporate Governance Committee
Chair – –
Member 8,880 8,880
Regulatory Sub‑Committee
Chair – –
Member 2,400 2,400
----- End of picture text -----

Notes:

1 The Board chair receives Board chair fees only. Other directors receive committee fees in addition to their Board fees.
2 Directors do not participate in a bonus or profit-sharing plan, do not receive compensation in share options, and do not have superannuation or any other scheme entitlements or retirement benefits.
3 Directors are paid $2,400 per meeting of the Regulatory Sub-Committee. The Regulatory Sub-Committee meets on an ad-hoc basis.
4 Directors may be paid an additional daily rate of $2,400 for additional work as determined and approved by our chair and where the payment is within the total fee pool available. There were no such fees paid in the year to 30 June 2023. There was also no increase in director and committee base fees in the year to 30 June 2023.

Fees paid to Directors (in their capacity as such) in the year ended 30 June 2023

==> picture [495 x 26] intentionally omitted <==

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

Regulatory
Director Total fees $ Board fees ARMC PPCC NCGC Sub‑Committee
----- End of picture text -----

Mark Cross	204,798	189,187	10,382	–	2,828	2,400
Kate Jorgensen	153,904	114,000	27,476	–	2,828	9,600
Murray Jordan	146,500	114,000	–	22,900	–	9,600
Sue Bailey	135,350	114,000	–	11,750	–	9,600
Miriam Dean	135,350	114,000	–	11,750	–	9,600
Will Irving	96,268	77,926	11,142	–	–	7,200
Jack Matthews	139,900	114,000	16,300	–	–	9,600
Patrick Strange	71,844	71,844	–	–	–	–
	1,083,914	908,957	65,300	46,400	5,656	57,600

Notes:

1 Amounts are gross and exclude GST (where applicable).
2 Patrick Strange retired as a director effective 26 October 2022. Mark Cross was appointed as chair, effective 26 October 2022. As a result, he received Board Chair fees only from that date. Prior to that date, he received Committee fees in addition to his Board fee.
3 Directors did not receive any fees or other benefits for additional work during the year ended 30 June 2023.

4 Directors are entitled to be reimbursed for travel and incidental expenses incurred in performance of their duties in addition to the above fees. 5 The total fee pool available to directors is $1,169,042.

6 The NCGC was disestablished during the year ended 30 June 2023.

Fee structure from 1 July 2023

Our PPCC reviews non-executive director remuneration annually based on criteria developed by that committee including internal benchmarking analysis. Director fees have not been increased since 2018 and the Board has accepted the committee’s recommendation that a 5% increase in individual directors’ fees (base and committee fees) is reasonable for the period since 2018. This will be accommodated within the existing director fee pool, with the Regulatory Sub-committee no longer required once Chorus submits its RP2 proposal in 2023. The annualised impact of the 5% increase and removal of the Regulatory Sub-committee fee will be a net reduction in individual directors fees. The Board will undertake an independent review of the director fee pool in 2024.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Risk managment

(Code Recommendations 6.1 & 6.2)

Like all businesses, we are exposed to a range of risks. Our risk management activities aim to ensure we identify, prioritise and manage key risks so we can execute our strategies and achieve our goals.

Risk management

(Code Recommendation 6.1)

No business can thrive without taking on risk. Effective risk management is about informed risk taking and appropriate and active management of risks.

We seek to understand and respond to our current and future business environment, and to actively seek and robustly evaluate opportunities and initiatives which protect and achieve our business strategies. We strive to understand, meet and appropriately balance stakeholders’ expectations to deliver value to shareholders and a sustainable environment for Chorus in the long term.

Our Board

Our Board is ultimately responsible for risk management governance:

Annually setting risk appetite and determining principal risks;
Participating in discussions concerning elements of risk including emerging and unforeseen risks;
Approving and regularly reviewing our Managing Risk Policy and supporting framework;
Promoting a culture of managing risk; and
Through our ARMC, providing risk oversight and monitoring.

Risk appetite

Our risk appetite sets our tolerable levels of risk. It forms a dynamic link between strategy, target setting and risk management and sets boundaries for day-to-day decision making and reporting.

Risk management processes

Our Managing Risk Policy sets out how we manage our risks, including by:

Having a single risk management framework;
Providing the CEO and executive team with discretion to manage risk within the guidance provided in our framework;
Balancing the level of control implemented to mitigate identified risks with our commitment to comply with external regulation and governance requirements and Chorus’ value and growth aspirations; and
Meeting good practice standards for risk management processes and related governance.

Principal risks

Principal risks are owned by relevant executives. This promotes integration into operations and executives planning and a culture of proactive risk management. Notwithstanding individual ownership, our CEO and executive hold collective responsibility for considering how risk and events interrelate and for managing our overall risk profile.

Principal risks are reported to our ARMC quarterly and, if necessary, also by exception. Principal Risk owners support the regular reporting from the Head of Risk, Internal Audit & Compliance by providing updates on the risks they own. Our ARMC reports to our Board.

Principal risks are assessed with each responsible executive and collectively with the executive team before being reported to the ARMC. This allows for constructive challenge and debate. Underlying risk assessment and monitoring practices are undertaken by each principal risk owner with assistance from our Risk, Internal Audit & Compliance team.

Our Board also receives management and other internal and external reporting over risk positions and our risk management operation (including from internal audit plans approved by the ARMC) through our overall governance framework.

==> picture [444 x 176] intentionally omitted <==

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

The risk and
control environment 1. Risk identification and description 5. Annual risk reviews
– Risk identification and description – Completeness,
– Recording principal risks accuracy and validity
of principal risks
2. Risk assessment and ratings – Effectiveness of the
risk management
– Risk assessment (likelihood and impact)
process
– Risk ratings (critical, high, medium, low)
Assurance
3. Risk mitigations
Management assurance
Independent assurance – Risk responses – Action plans
(including internal audit, – Mitigating controls
external audit)
4. Regular risk reporting
– Mitigation status – Current and potential risks
– Risk trends – Action plan status
----- End of picture text -----

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Principal risks are our key risks to the achievement of our strategy. These are assessed on a risk profile identifying likelihood of occurrence and potential severity of impact. Current principal risk categories are identified via a comprehensive enterprise risk management framework encompassing financial and non-financial risks. They include anticipating and responding to:

Health, safety and wellbeing risks: Working to keep safe the people we owe duties to.
Commercial and financial sustainability risks: Maintaining appropriate capital management and credit settings.
Core services risks: Core service availability and network resilience.
People and skills risks: Ensuring Chorus attains and retains employees with the capabilities to achieve its strategic objectives.
Legal, regulatory and contractual risks: Working within the regulatory and legal environment.
Stakeholder and customer confidence / reputation risks: Attaining and retaining a positive reputation with key stakeholders and customers.
Innovation risks: Identify and pursue innovation and opportunities that will enhance Chorus.

Our risk management framework has also been applied to our climate change risks (see our Sustainability Report).

In addition to Principal Risks, the Chorus Board or ARMC regularly receive updates on, and discuss with the Executive:

Unforeseen risks which are 'black swan' events which have not been otherwise identified through normal risk processes;
Emerging risks which are risks that are known to some degree but are not likely to materialise or have an impact in the near term;
Business unit risks which are risks to the achievement of functional area strategies. The risks are managed at the business unit level and reported to the ARMC if a material risk is out of risk tolerance level.

(Code Recommendation 6.2)

Auditors

Reporting on our management of health and safety risks is included in our Sustainability Report.

(Code Recommendations 7.1 - 7.3)

External auditor

(Code Recommendation 7.1)

Our Board and ARMC monitor the ongoing independence and quality of our external auditor (KPMG). Our ARMC also meets with our external auditor without management present at least once per year.

Our ARMC charter and External Auditor Independence Policy

amongst other things:

Prohibit the provision of certain non-audit services by our external auditor;
Require ARMC approval of all audit and permitted non-audit services;
Require our client services partner and 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 our ARMC to review our 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.

Our external auditor KPMG did not provide any nonaudit assurance services in the year to 30 June 2023. Any additional non-audit services would be provided in accordance with our ARMC charter and External Auditor Independence Policy. They should not affect KPMG’s independence, including because:

They are approved only where we are satisfied the services would not compromise KPMG’s independence; and

Internal audit

(Code Recommendation 7.3)

We operate a co-sourced internal audit model with our Head of Risk, Internal Audit & Compliance and her team supported by external advisors PricewaterhouseCoopers to provide additional resource and specialist expertise as required.

The responsibilities of our internal audit function include:

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

Our executive team and ARMC monitor key outstanding internal audit issues and recommendations as part of regular reporting and review, including the timeliness of resolution.

Our ARMC has direct and unrestricted access to our internal audit function, including meeting them without management.

Our Head of Risk, Internal Audit & Compliance has a management reporting line to our Chief Corporate Officer & General Counsel and a direct reporting line to our ARMC, attending every ARMC meeting.

Our ARMC reviews the remuneration and incentive arrangements of our Head of Risk, Internal Audit & Compliance and our Risk & Assurance Manager each year.

They do not involve KPMG acting in a managerial or decision-making capacity.

KPMG confirm their independence via independence declarations every six months.

(Code Recommendation 7.2)

Our external auditors attend our ASM each year.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Shareholder rights and relations

(Code Recommendations 8.1 - 8.3)

We are committed to fostering constructive and open relationships with shareholders:

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

Our investor relations programme is designed to further facilitate two-way communication with shareholders, provide them and other market participants with an understanding of our business, governance and performance and an opportunity to express their views. As part of this programme we enable investors and other interested parties to ask questions and obtain information. We meet with investors and analysts and undertake formal investor presentations.

Our annual and half year results presentations are made available to all investors via webcast.

Our website

(Code Recommendation 8.1)

Our key financial, operational and governance information is available at www.company.chorus.co.nz/investors

Annual shareholder's meeting

(Code Recommendations 8.2 & 8.3)

The 2022 annual shareholders meeting was our first hybrid meeting, where we held a physical meeting in Wellington, a webcast to enable shareholders to view and hear proceedings online, and we facilitated voting and the asking of questions online.

At the time of this Annual Report, the Board has indicated that the 2023 ASM is likely to be a hybrid meeting.

We enable shareholders to vote by proxy ahead of meetings without having to physically attend or participate in those meetings and adopt the one share one vote principle, conducting voting at shareholder meetings by poll.

We consider that shareholders should be entitled to vote on decisions which would change the essential nature of our business.

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

We encourage shareholders to communicate with us and our share registrar electronically, including by providing email communication channels and online contact details and instructions on our website.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Additional disclosures

Group structure

As at 30 June 2023, Chorus Limited has one wholly owned subsidiary: Chorus New Zealand Limited (CNZL).

Chorus Limited Chorus New Zealand Limited

Chorus Limited is the entity listed on the NZX and ASX. It is also the borrowing entity under the group’s main financing arrangements and the entity which has partnered with the Crown for the UFB build.

CNZL undertakes (and is the contracting entity for) Chorus’ operating activities and is the guarantor of Chorus Limited’s borrowing. CNZL also employs all Chorus people. CNZL has its own constitution but its Board is the same as the Chorus Limited Board.

Disclosures in respect of CNZL are set out in the “Subsidiaries” section on page 91.

Indemnities and insurance

Chorus indemnifies directors under our constitution for liabilities and costs they may incur for their acts or omissions as directors (including costs and expenses of defending actions for actual or alleged liability) to the maximum extent permitted by law. We have also entered into deeds of indemnity with each director under which:

Chorus indemnifies the director for liabilities incurred in their capacity as a director and as officers of other Chorus companies.
Directors are permitted to access company records while directors and after they cease to hold office (subject to certain conditions).

Deeds of indemnity have also been entered into on similar terms with certain senior employees for liabilities and costs they may incur for their acts or omissions as employees, directors of subsidiaries or as directors of non-Chorus companies in which Chorus holds interests.

We have a directors’ and officers’ liability insurance policy in place covering directors and senior employees for liability arising from their acts or omissions in their capacity as directors or employees on commercial terms. The policy does not cover dishonest, fraudulent, malicious or wilful acts or omissions.

Director changes

Patrick Strange resigned as director effective 26 October 2022. Will Irving was appointed as a director at the ASM on 26 October 2022.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Director restrictions

No person who is an ‘associated person’ of a telecommunications services provider in New Zealand may be appointed or hold office as a director. NZX has granted a waiver to allow this restriction to be included in our constitution.

Securities and security holders

Ordinary shares

Chorus Limited’s shares are quoted on the NZX and on the ASX and trade under the ‘CNU’ ticker. There were 435,334,308 ordinary shares on issue at 30 June 2023. Each share confers on its holder the right to attend and vote at a shareholder meeting (including the right to cast one vote on a poll on any resolution).

Constitutional ownership restrictions

As part of the establishment of Chorus we inherited an obligation to obtain Crown approval prior to any person:

Having a relevant interest in 10% or more of our shares; or
AMP Capital Holdings Limited can hold a relevant interest in up to 15% of our shares, and
UniSuper Limited can hold a relevant interest in up to 20% of our shares.

If our Board or the Crown determines there are reasonable grounds for believing a person has a relevant interest in our shares in excess of the ownership restrictions, our Board may, after following certain procedures, prohibit the exercise of voting rights (in which case the voting rights vest in our chair) and may force the sale of shares. Our Board may also decline to register a transfer of shares if it reasonably believes the transfer would breach the ownership restrictions.

NZX has granted waivers allowing our constitution to include the power of forfeiture, the restrictions on transferability of shares and our Board’s power to prohibit the exercise of voting rights relating to these ownership restrictions. ASX has also granted a waiver in respect of the refusal to register a transfer of shares which is or may be in breach of the ownership restrictions.

Other than a New Zealand national, having a relevant interest in more than 49.9% of our shares.

On each request the Crown has provided approval, currently:

L1 Capital Pty Ltd can hold a relevant interest in up to 15% of our shares.

Shareholder distribution as at 30 June 2023

==> picture [495 x 24] intentionally omitted <==

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

Holding Number of holders % of holders Total number of % of shares issued
shares held
----- End of picture text -----

1 to 999	10,318	52%	4,221,190	0.97%
1,000 to 4,999	6,284	32%	14,650,855	3.37%
5,000 to 9,999	1,729	9%	11,489,562	2.64%
10,000 to 99,999	1,282	6.5%	26,682,217	6.13%
100,000 and over	89	0.5%	378,290,484	86.90%
Total	19,702	100%	435,334,308	100%

Substantial holders

We have received substantial product holder notices from shareholders as follows:

Notices received as at 30 June 2023	Notices received as at 30 June 2023
Number of ordinaryshares held	% of shares on issue
UniSuper Limited 37,948,874	8.72%
L1 Capital PtyLtd 36,463,390	8.38%
Mitsubishi UFJ Financial Group, Inc 22,196,561	5.10%

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Twenty largest shareholders as at 30 June 2023

==> picture [495 x 18] intentionally omitted <==

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

Rank Holder name Holding %
----- End of picture text -----

1	JP Morgan Nominees Australia Limited	44,850,593	10.28
2	HSBC Custody Nominees (Australia) Limited	41,833,724	9.59
3	BNP Paribas Nominees Pty Ltd	38,791,993	8.89
4	Citicorp Nominees Pty Limited	34,017,082	7.79
5	Citibank Nominees (New Zealand) Limited – NZCSD *	20,862,498	4.78
6	BNP Paribas Nominees (NZ) Limited – NZCSD *	20,405,631	4.68
7	Accident Compensation Corporation – NZCSD *	14,979,612	3.43
8	HSBC Nominees (New Zealand) Limited - NZCSD *	14,438,187	3.31
9	JPMorgan Chase Bank NA NZ Branch-Segregated Clients Acct – NZCSD *	12,220,338	2.80
10	National Nominees Limited	11,654,677	2.67
11	HSBC Nominees (New Zealand) Limited A/C State Street – NZCSD *	9,305,406	2.13
12	New Zealand Depository Nominee Limited	8,453,815	1.94
13	JBWere (NZ) Nominees Limited	7,674,862	1.76
14	Custodial Services Limited	7,467,666	1.71
15	Forsyth Barr Custodians Limited <1-Custody>	6,595,987	1.51
16	HSBC Custody Nominees (Australia) Limited	6,502,999	1.49
17	ANZ Wholesale Australasian Share Fund – NZCSD *	6,290,572	1.44
18	Generate Kiwisaver Public Trust Nominees Limited *	6,264,684	1.44
19	FNZ Custodians Limited	5,862,331	1.34
20	National Nominees Limited – NZCSD *	5,606,790	1.28

Held through New Zealand Central Securities Depository Limited (NZCSD). NZCSD provides a custodial service that allows electronic trading of securities by its members. As at 30 June 2023, 130,743,875 Chorus ordinary shares (or 29.96% of the ordinary shares on issue) were held through NZCSD.

Twenty largest bondholders (December 2027) as at 30 June 2023

==> picture [498 x 18] intentionally omitted <==

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

Rank Holder name Holding %
----- End of picture text -----

1	Custodial Services Limited	60,697,000	30.35
2	FNZ Custodians Limited	25,412,000	12.71
3	BNP Paribas Nominees (NZ) Limited - NZCSD *	22,102,000	11.05
4	Forsyth Barr Custodians Limited <1-CUSTODY>	16,112,000	8.06
5	HSBC Nominees (New Zealand) Limited - NZCSD *	8,600,000	4.30
6	PIN TwentyLimited	7,000,000	3.50
7	National Nominees Limited – NZCSD *	5,000,000	2.50
8	Mint Nominees Limited – NZCSD *	4,953,000	2.48
9	JBWere (NZ) Nominees Limited	3,975,000	1.99
9	FNZ Custodians Limited	3,456,000	1.73
11	JBWere (NZ) Nominees Limited	3,099,000	1.55
12	Citibank Nominees (New Zealand) Limited – NZCSD *	3,050,000	1.53
13	Investment Custodial Services Limited	3,007,000	1.50
14	ANZ Wholesale NZ Fixed Interest Fund – NZCSD*	2,499,000	1.25
15	TEA Custodians Limited Client PropertyTrust Account – NZCSD *	2,250,000	1.13
16	Forsyth Barr Custodians Limited	1,617,000	0.81
17	Bank Of New Zealand - TreasurySupport	1,506,000	0.75
18	Adminis Custodial Nominees Limited	1,500,000	0.75
19	JBWere (NZ) Nominees Limited	1,470,000	0.74
20	Forsyth Barr Custodians Limited	1,468,000	0.73

Held through New Zealand Central Securities Depository Limited (NZCSD).

==> picture [69 x 8] intentionally omitted <==

88 Annual Report 2023

Twenty largest bondholders (December 2028) as at 30 June 2023

==> picture [495 x 18] intentionally omitted <==

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

Rank Holder name Holding %
----- End of picture text -----

1	Custodial Services Limited	101,933,000	20.39
2	Forsyth Barr Custodians Limited <1-CUSTODY>	66,438,000	13.29
3	JBWere (NZ) Nominees Limited	39,516,000	7.90
4	HSBC Nominees (New Zealand) Limited O/A Euroclear Bank – NZCSD *	30,279,000	6.06
5	Hobson Wealth Custodian Limited	26,655,000	5.33
6	FNZ Custodians Limited	24,314,000	4.86
7	ANZ Wholesale NZ Fixed Interest Fund – NZCSD*	22,875,000	4.58
8	Citibank Nominees (New Zealand) Limited - NZCSD *	15,074,000	3.01
9	JBWere (NZ) Nominees Limited	15,000,000	3.00
10	BNP Paribas Nominees (NZ) Limited - NZCSD *	14,527,000	2.91
11	TEA Custodians Limited Client PropertyTrust Account – NZCSD *	13,839,000	2.77
12	Generate Kiwisaver Public Trust Nominees Limited *	9,187,000	1.84
13	BNP Paribas Nominees (NZ) Limited - NZCSD *	7,922,000	1.58
14	Forsyth Barr Custodians Limited	6,318,000	1.26
15	Bank Of New Zealand - TreasurySupport	4,721,000	0.94
16	JBWere (NZ) Nominees Limited <44625 A/C>	4,600,000	0.92
17	HSBC Nominees (New Zealand) Limited A/C State Street -NZCSD *	4,250,000	0.85
18	JBWere (NZ) Nominees Limited <44625 A/C>	4,000,000	0.80
19	RGTKMT Investments Limited	3,000,000	0.60
20	Mint Nominees Limited – NZCSD *	2,977,000	0.60

Held through New Zealand Central Securities Depository Limited (NZCSD).

Twenty largest bondholders (December 2030) as at 30 June 2023

==> picture [495 x 18] intentionally omitted <==

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

Rank Holder name Holding %
----- End of picture text -----

1	Accident Compensation Corporation – NZCSD *	90,500,000	45.25
2	Custodial Services Limited	22,368,000	11.18
3	BNP Paribas Nominees (NZ) Limited – NZCSD *	10,943,000	5.47
4	HSBC Nominees (New Zealand) Limited – NZCSD *	9,561,000	4.78
5	TEA Custodians Limited Client Property Trust Account – NZCSD *	8,434,000	4.22
6	Citibank Nominees (New Zealand) Limited – NZCSD *	8,204,000	4.10
7	FNZ Custodians Limited	6,483,000	3.24
8	HSBC Nominees (New Zealand) Limited O/A Euroclear Bank – NZCSD *	5,000,000	2.50
9	Westpac Banking Corporate NZ Financial Markets Group – NZCSD *	4,918,000	2.46
10	Forsyth Barr Custodians Limited <1-CUSTODY>	4,292,000	2.15
11	BNP Paribas Nominees (NZ) Limited – NZCSD *	3,310,000	1.66
12	NZPT Custodians (Grosvenor) Limited - NZCSD *	2,900,000	1.45
13	CML Shares Limited	2,800,000	1.40
14	ANZ Wholesale NZ Fixed Interest Fund – NZCSD*	2,735,000	1.37
15	Hobson Wealth Custodian Limited	1,556,000	0.78
16	Queen Street Nominees ACF Pie Funds – NZCSD*	1,500,000	0.75
17	Forsyth Barr Custodians Limited <1-CUSTODY>	1,093,000	0.55
18	Investment Custodial Services Limited	1,045,000	0.52
19	Mint Nominees Limited – NZCSD *	800,000	0.40
20	Woolf Fisher Trust Incorporated	500,000	0.25

Held through New Zealand Central Securities Depository Limited (NZCSD).

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Debt listings

Chorus Limited has the following bonds on issue:

$200 million bonds traded on the NZX debt market (the NZDX) maturing December 2027;
$500 million bonds traded on the NZX debt market maturing December 2028;
$200 million bonds traded on the NZX debt market maturing December 2030;
EUR 209 million EMTNs traded on the ASX maturing October 2023;
EUR 300 million EMTNs traded on the ASX, maturing December 2026; and
EUR 500 million EMTNs traded on the ASX, maturing September 2029.

American depositary receipts

American Depositary Shares, each representing five shares and evidenced by American Depositary Receipts, are not listed but are traded on the over-the-counter market in the United States under the ticker ‘CHRYY’ with Bank of New York Mellon as depositary bank. As at 30 June 2023 Chorus had 906,930 ADRs on issue.

NZX bondholder distribution as at 30 June 2023

December 2027 maturity

==> picture [495 x 17] intentionally omitted <==

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

Holding Number of holders % of holders Total number of bonds held % of bonds issued
----- End of picture text -----

1 - 5,000	7	3%	35,000	0.02%
5,000 to 9,999	9	4%	63,000	0.03%
10,000 to 99,999	146	63%	4,103,000	2.05%
100,000 and over	71	30%	195,799,000	97.90%
Total	233	100%	200,000,000	100%

December 2028 maturity

==> picture [495 x 18] intentionally omitted <==

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

Holding Number of holders % of holders Total number of bonds held % of bonds issued
----- End of picture text -----

1 - 5,000	49	4%	245,000	0.05%
5,000 to 9,999	27	2%	219,000	0.04%
10,000 to 99,999	1,014	81%	30,383,000	6.08%
100,000 and over	156	13%	469,153,000	93.83%
Total	1246	100%	500,000,000	100%

December 2030 maturity

==> picture [495 x 18] intentionally omitted <==

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

Holding Number of holders % of holders Total number of bonds held % of bonds issued
----- End of picture text -----

1 - 5,000	11	4%	55,000	0.03%
5,000 to 9,999	10	4%	80,000	0.04%
10,000 to 99,999	220	77%	6,107,000	3.05%
100,000 and over	43	15%	193,758,000	96.88%
Total	284	100%	200,000,000	100%

Unquoted securities

Crown Infrastructure Partners (CIP) Securities

The terms of issue for the CIP1 and CIP2 securities are set out in the subscription agreements between Chorus Limited and CIP.

These terms are summarised in note 6 of our consolidated financial statements and on our website at www.chorus.co.nz/reports.

Security Number issued in the year ended 30 June 2023 Total on issue at 30 June 2023	Security Number issued in the year ended 30 June 2023 Total on issue at 30 June 2023	Holder	Percentage held
CIP1 equity securities	– 462,052,071	CIP	100%
CIP1 debt securities	– 462,052,071	CIP	100%
CIP1 equity warrants	524,138 15,662,325	CIP	100%
CIP2 equity securities	– 306,423,177	CIP	100%
CIP2 debt securities	81,217,080 104,852,093	CIP	100%

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Other disclosures

New NZX listing rules

NZX updated its listing rules from 1 April 2023.

Revenue from ordinary activities and net profit

In the year ended 30 June 2023:

Revenue from ordinary activities increased 1.6% to $980 million (30 June 2022: $965 million); and

NZX waivers

On 28 March 2019 Chorus applied for the continuation of existing and still required waivers and rulings. On 3 April 2020 a waiver from NZX listing rule 2.3.2, 4.1.1, 4.1.2, 4.2.1, 4.14, 6.6.1, 8.1.5 and a ruling from NZX on listing rule 4.9.1 were granted.

A summary of all waivers relied on by Chorus in the 12 months ending 30 June 2023 is available on our website at www.chorus.co.nz/investor‑info

Non-standard designation

NZX has attached a ‘non-standard’ designation to Chorus Limited because of the ownership restrictions in our constitution (described above).

ASX disclosures

Chorus Limited and its subsidiaries are incorporated in New Zealand.

Chorus Limited is not subject to Chapters 6, 6A, 6B and 6C of the Australian Corporations Act 2001 dealing with the acquisition of shares (including substantial shareholdings and takeovers).

Our constitution contains limitations on the acquisition of securities, as described above.

For the purposes of ASX listing rule 1.15.3 Chorus Limited continues to comply with the NZX listing rules.

Profit from ordinary activities after tax, and net profit, attributable to shareholders decreased 60% to $25 million (30 June 2022: $64 million).

Subsidiaries

Chorus New Zealand Limited (CNZL)

Directors as at 30 June 2023: Mark Cross, Miriam Dean, Murray Jordan, Jack Matthews, Sue Bailey, Kate Jorgensen, Will Irving.

Patrick Strange resigned as a director from CNZL during the year to 30 June 2023.

Current CNZL directors are also Chorus Limited directors and do not receive any remuneration in their capacity as CNZL directors.

Chorus LTI Trustee Limited (CLTL)

Directors as at 30 June 2023: None. CLTL was removed (following application by Chorus) from the Companies Office register on 21 July 2022.

Current and former directors of CLTL did not receive any remuneration in their capacity as directors of CLTL.

Other subsidiaries

Chorus Limited has no other subsidiaries.

Registration as a foreign company

Chorus Limited has registered with the Australian Securities and Investments Commission as a foreign company and has been issued an Australian Registered Body Number (ARBN) of 152 485 848.

Net tangible assets per security

As at 30 June 2023, consolidated net tangible assets per share was $1.60 (30 June 2022: $1.54).

Net tangible assets per share is a non-GAAP financial measure and is not prepared in accordance with NZ IFRS.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Glossary

Backbone network Fibre cabling and other shared network Gigabit elements required either in the common areas of multi-dwelling units to connect individual apartments/offices, or to serve GPON premises located along rights of way. IT Backhaul The portion of the network that links Layer 2 local exchanges to other exchanges or retail service provider networks. Baseband A technology neutral voice input service that can be bundled with Mbps a broadband product or provided on a standalone basis. NZ IFRS Board Chorus Limited’s Board of Directors. Building block A methodology used for regulating model monopoly utilities. Under BBM a P2P regulated supplier’s allowed revenue is equal to the sum of the underlying components or ‘building blocks’, Petabyte consisting of the return on capital, depreciation, operating expenditure and RAB various other components such as tax. Chorus Chorus Limited and subsidiaries. CIP Crown Infrastructure Partners, the Government organisation that RBI manages New Zealand’s rollout of Ultra-Fast Broadband infrastructure. Commission Commerce Commission – the independent Crown entity Share whose responsibilities include TSO overseeing the regulation of the telecommunications sector. Constitution Chorus Limited’s Constitution. Direct fibre access Also known as ‘dark’ fibre, a fibre service that provides a point to point fibre TSR connection and can be used to deliver UFB backhaul connections to mobile sites. Director A director of Chorus Limited. EBITDA Earnings before interest, income tax, depreciation and amortisation. EMTN European Medium Term Notes. VDSL FY Financial year – twelve months ended 30 June. e.g. FY23 is from 1 July 2022 to 30 June 2023. Gbps Gigabits per second. A measure of the average rate of data transfer.

The equivalent of 1 billion bits. Gigabit Ethernet provides data transfer rates of about 1 gigabit per second.

Gigabit Passive Optical Network.

Information Technology.

The data link layer, including broadband electronics, within the Open Systems Interconnection model. Layer 1 is the physical cables and co-location space.

Megabits per second – a measure of the average rate of data transfer.

International Financial Reporting Standards – the rules that the financial statements have to be prepared by.

Where two parties or devices are connected point-to-point via fibre.

One million gigabytes (GB), which is a measure of data volume.

Regulatory Asset Base refers to the value of total investment by a regulated utility in the assets which will generate revenues over time.

Rural Broadband Initiative – refers to the Government programme to improve and enhance broadband coverage in rural areas between 2011 and 2016.

Means an ordinary share in Chorus. Telecommunications Services Obligation – a universal service obligation under which Chorus must maintain certain coverage and service on the copper network.

Total shareholder return.

Ultra-Fast Broadband refers to the Government programme to build a fibre to the premises network. UFB1 refers to the original phase of the rollout to 75% of New Zealanders. UFB2 and UFB2+ were subsequent phases announced in 2017.

Very High Speed Digital Subscriber Line – a copper-based technology that provides a better broadband connection than ADSL.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2023

Disclaimer

This annual report:

May contain forward looking statements. These statements are not guarantees or predictions of future performance. They 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 annual report.
Includes statements relating to past performance. These should not be regarded as reliable indicators of future performance.
Is current at its release date. Except as required by law or the NZX and ASX listing rules, Chorus is not under any obligation to update this annual report or the information in it at any time, whether as a result of new information, future events or otherwise.
Contains 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. Although Chorus considers those measures provide useful information they should not be used in substitution for, or isolation of, Chorus’ audited financial statements.
May contain information from third parties Chorus believes reliable. However, no representations or warranties are made as to the accuracy or completeness of such information.
Should be read in the wider context of material previously published by Chorus and released through the NZX and ASX.
Does not constitute investment advice or an offer or invitation to purchase Chorus securities.

==> picture [69 x 8] intentionally omitted <==

Annual Report 2022

Registrars

NEW ZEALAND Computershare Investor Services Limited Private Bag 92119, Victoria Street West Auckland 1142, New Zealand P: +64 9 488 8777 F: +64 9 488 8787 E: [email protected] investorcentre.com/nz

AUSTRALIA

Computershare Investor Services Pty Limited GPO Box 3329, Melbourne 3001, Australia FP: 1 800 501 366 F: +61 3 9473 2500 E: [email protected] investorcentre.com/nz

Registered Offices

NEW ZEALAND Level 10, 1 Willis Street Wellington, New Zealand P: +64 800 600 100

AUSTRALIA

C/– Allens Corporate Services Pty Limited Level 28, Deutsche Bank Place, 126 Phillip Street, Sydney, NSW 2000, Australia P: +61 2 9230 4000

ADR Depository

BNY Mellon Shareowner Services PO Box 505000, Louisville, KY 40233-5000 United States of America P: US domestic calls (toll free) 1 888 269 2377 P: International calls +1 201 680 6825

E: [email protected] https://www-us.computershare.com/investor

ARBN 152 485 848

==> picture [147 x 17] intentionally omitted <==

chorus.co.nz

==> picture [101 x 49] intentionally omitted <==

Results announcement

(for Equity Security issuer/Equity and Debt Security issuer)

Updated as at June 2023

Results for announcement to the market	Results for announcement to the market	Results for announcement to the market	Results for announcement to the market
Name of issuer	Chorus Limited
Reporting Period	12 months to 30 June 2023
Previous Reporting Period	12 months to 30 June 2022
Currency	New Zealand Dollars
Amount (000s)		Percentage change
Revenue from continuing operations	$980,000	+1.6%
Total Revenue	$980,000	+1.6%
Net profit/(loss) from continuing operations	$25,000	-60.9%
Total net profit/(loss)	$25,000	-60.9%
Interim/Final Dividend
Amount per Quoted Equity Security	$0.25500000
Imputed amount per Quoted Equity Security	$0.00000000
Record Date	12 September 2023
Dividend Payment Date	10 October 2023
	Current period		Prior comparable period
Net tangible assets per Quoted Equity Security	$1.60		$1.54
A brief explanation of any of the figures above necessary to enable the figures to be understood	This announcement should be read in conjunction with the attached annual report, audited financial statements for the year ended 30 June 2023 contained in that report, media release and investor presentation.
Authority for this announcement
Name of person authorised to make this announcement	Mark Aue Chief Financial Officer
Contact person for this announcement	Brett Jackson Investor Relations Manager
Contact phone number	+64 4 896 4039
Contact email address	[email protected]
Date of release through MAP	21/08/2023

Audited financial statements accompany this announcement.

Distribution Notice

==> picture [101 x 50] intentionally omitted <==

Updated as at June 2023

Please note: all cash amounts in this form should be provided to 8 decimal places, including zeros (ie 0.01001000)

Section 1: Issuer information
Name of issuer		Chorus Limited
Financial product name/description		Ordinary shares
NZX ticker code		CNU
ISIN (If unknown, check on NZX website)		NZCNUE0001S2
Type of distribution (Please mark with an X in the relevant box/es)		Full Year	X	~~Quarterly~~
		~~Half Year~~		~~Special~~
		~~DRP applies~~
Record date		12/09/2023
Ex-Date (one business day before the Record Date)		11/09/2023
Payment date (and allotment date for DRP)		10/10/2023
Total monies associated with the distribution1		$111,010,249
Source of distribution (for example, retained earnings)		Retained earnings
Currency		NZD
Section 2: Distribution amounts per financial product
Gross distribution2	$0.25500000
Gross taxable amount3	$0.25500000
Total cash distribution4	$0.25500000
Excluded amount (applicable to listed PIEs)	$0.00000000
Supplementary distribution amount	$0.00000000
Section 3: Imputation credits and Resident Withholding Tax5
Is the distribution imputed		~~Fully imputed~~
		~~Partial imputation~~
		No imputation

1 Continuous issuers should indicate that this is based on the number of units on issue at the date of the form

2 “Gross distribution” is the total cash distribution plus the amount of imputation credits, per financial product, before the deduction of Resident Withholding Tax ( RWT ).

3 “Gross taxable amount” is the gross distribution minus any excluded income. 4 “Total cash distribution” is the cash distribution excluding imputation credits, per financial product, before the deduction of RWT. “Total cash distribution” is the cash distribution excluding imputation credits, per financial product, before the deduction of RWT. This should include any excluded amounts, where applicable to listed PIEs.

4 “Total cash distribution” is the cash distribution excluding imputation credits, per financial product, before the deduction of RWT. “Total cash distribution” is the cash distribution excluding imputation credits, per financial product, before the deduction of RWT. This should include any excluded amounts, where applicable to listed PIEs. 5 The imputation credits plus the RWT amount is 33% of the gross taxable amount for the purposes of this form. If the distribution is fully imputed the imputation credits will be 28% of the gross taxable amount with remaining 5% being RWT. This does not constitute advice as to whether or not RWT needs to be withheld.

If fully or partially imputed, please state imputation rate as % applied6	N/A	N/A
Imputation tax credits per financial product	N/A
Resident Withholding Tax per financial product	0.08415000
Section 4: Distribution re-investment plan (if applicable)
DRP % discount (if any)	N/A
Start date and end date for determining market price for DRP	N/A	N/A
Date strike price to be announced (if not available at this time)	N/A
Specify source of financial products to be issued under DRP programme (new issue or to be bought on market)	N/A
DRP strike price per financial product	N/A
Last date to submit a participation notice for this distribution in accordance with DRP participation terms	N/A
Section 5: Authority for this announcement
Name of person authorised to make this announcement	Mark Aue Chief Financial Officer
Contact person for this announcement	Brett Jackson Investor Relations Manager
Contact phone number	+64 27 488 7808 +64 4 896 4039
Contact email address	[email protected]
Date of release through MAP	21/08/2023

6 Calculated as (imputation credits/gross taxable amount) x 100. Fully imputed dividends will be 28% as a % rate applied.

Sustainability Report 2023

This report provides an overview of Chorus’ Sustainability performance for FY23.

It includes the actions we’re taking to identify and manage our climate-related risks and opportunities.

Connecting Aotearoa so that we can all live, learn, work and play

Chorus Sustainability Report 2023

Table of contents

A note from Mark Cross:

Adaptation, Equity and Future-focused

Sustainability overview FY23

Sustainability overview FY23
Who we are Governance	5 7
Strategy	8
Risk management	9

Sustainability impact summary FY23 Thriving environment

Thriving environment
Te taiao puāwai Fibre – a low-emissions technology	16
Resilient and reliant	17
Chorus’ transition roadmap	18
Emissions performance summary 2023	19
Circular economy and waste minimisation	20

Sustainable digital futures

Toa hangarau
Availability	22
Afordability Adoption	22 23
Thriving people
Nga iwi whai hua
Diversity, Equity and Inclusion	25
Chorus employee overview	26
Health and Safety Ethical supply chain Cybersecurity and Privacy	29 30 31
Stakeholder and community	32
Code of Ethics	33

Appendix 1

Appendix 1
Compliance with Task Force on Climate-related
Financial Disclosures/NZ Climate Standards
Governance	35
Strategy	36
Risk management	39
Metrics and targets	40
Greenhouse gas emissions source inclusions	42

Glossary

This report has not been independently verified. Please consider the environment before printing this document.

Connecting Aotearoa so that we can all live, learn, work and play

A note from Mark Cross

Chorus Sustainability Report 2023

Adaptation, Equity and Future-focused

The last year has seen unprecedented extreme weather events challenge the land of Aotearoa and the people who call it home.

The impacts of climate change are real, and we’ve witnessed first-hand the devastation that can result. The extreme rainfall and subsequent flooding took Auckland by surprise in January 2023. Then came Cyclone Gabrielle in February 2023, leaving parts of the North Island cut off from essential utilities, including telecommunications and broadband services.

There is climate realisation across our organisation and the wider telco sector; we recognise the climate-related risks and opportunities ahead and the need for these to be front and centre of our decisions today. We are now firmly focused on our resilience and adaptation to climate change, balanced with doing all we can to mitigate risks and decarbonise our business to prevent further harm. This year we joined the Climate Leaders Coalition to show our ambitious commitment to act and drive change. Copper withdrawal and solar photovoltaics on our exchange buildings are the hero programmes to help us achieve our emissions reduction target. A programme team is considering a handful of pilot sites for our solar PV trials.

We acknowledge that we are in the early stages of our environmental and social impact journey. We have ambitious aspirations to achieve by 2030 and although we are pleased with the progress we have made this year, there is much more for us to do.

==> picture [180 x 181] intentionally omitted <==

At Chorus, we genuinely believe fibre can deliver what’s needed from a technology perspective. It combines the ability to both meet data growth demand while keeping carbon emissions low. The lower emissions profile of fibre is, in part, why we’ve signalled our intention to retire our copper network and focus on the technology that can bring opportunity in our global bid to reduce the impact and rate of climate change.

In addition, every person, every whānau (family) across Aotearoa, should be able to unlock the full potential of being a digital citizen. The reality today is that a significant digital divide still exists. We know that we can’t solve this social issue alone. Listening to the communities we’re here to connect and working in partnership with others is essential. That’s why we continue to support government agency initiatives focused on digital equity. During the financial year, we gave close to half a million dollars to organisations and charities working within their communities to help close the digital divide.

We’ve also introduced a new Diversity, Equity and Inclusion strategy this year to ensure we build a fair, inclusive and equitable culture where differences are our strengths, we connect on shared values, and everyone can thrive.

==> picture [132 x 32] intentionally omitted <==

Mark Cross Chair

In line with recommended practice, we will review our targets annually and consider any material changes to Chorus' business or the assumptions used to model the targets and emissions reduction pathways. The impact of recently disclosed organisational changes will be considered as part of the FY24 review of the targets and emissions reduction pathways.

==> picture [246 x 9] intentionally omitted <==

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

Connecting Aotearoa so that we can all live, learn, work and play
----- End of picture text -----

==> picture [170 x 9] intentionally omitted <==

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

Chorus Sustainability Report 2023 4
----- End of picture text -----

Sustainability Overview FY23

Connecting Aotearoa so that we can all live, learn, work and play

Sustainability Overview FY23

Chorus Sustainability Report 2023

Who we are

Chorus maintains and builds the telephone and broadband networks that connect Aotearoa New Zealand homes and businesses to each other and the world.

We are an open-access internet infrastructure company that provides wholesale telecommunications services to over 90 broadband retailers. Our networks offer people, communities, and businesses greater access to ever-expanding opportunities through high-speed, reliable, and world-class fibre broadband.

==> picture [72 x 72] intentionally omitted <==

==> picture [73 x 72] intentionally omitted <==

==> picture [72 x 72] intentionally omitted <==

846 2,300 2,4,8Gbps 7,400 73% 4 EMPLOYEES WORKING TECHNICIANS WORKING HYPERFIBRE SERVICES PETABYTES OF DATA FIBRE UPTAKE CORPORATE OFFICES FOR CHORUS ON CHORUS’ BEHALF AVAILABLE CARRIED ON OUR 91% CONNECTIONS ON NATIONWIDE NETWORK IN FY23 300MBPS OR ABOVE PLANS 1,271,000 14,700 311,000 67,000kms ~600 FIXED LINE CABINETS POLES DUCT NETWORK EXCHANGES FIBRE IS PROVEN CONNECTIONS ACROSS THE MOTU OVER NEW ZEALAND ACROSS AOTEAROA ACROSS AOTEAROA AS A LOW-EMISSION TECHNOLOGY

Connecting Aotearoa so that we can all live, learn, work and play

Sustainability Overview FY23

Chorus Sustainability Report 2023

Our purpose

‘Connect Aotearoa so that we can all live, learn, work and play’.

This means Chorus invests and innovates to deliver the best possible connectivity services for Aotearoa to help enable the environmental, economic, and social transformation ahead.

Our focus on Sustainability is guided by our purpose, by Kaitiakitanga (environmental guardianship) and Manaakitanga (acts of giving and caring for).

run materiality assessments with stakeholders to ensure we focus on what makes business sense while supporting what’s right for Aotearoa.

Over the last three years, we have worked with external consultants, most recently in 2022, to validate our sustainability approach and

We asked stakeholders to rank a list of material topics in terms of Chorus’ ability to create value.

RANK OPTIONS

Ethical business practices; diverse and inclusive workplace; health, safety and wellbeing were lower on the priority list due to stakeholders generally feeling these are business as usual topics that must be done.

1 DIGITAL INCLUSION
2 DIGITAL LITERACY
3 NETWORK RELIABILITY
SMART COMMUNITIES
4 & ECONOMIES
ENVIRONMENTAL
5 IMPACT
ETHICAL BUSINESS
6 PRACTICES*
DIVERSE & INCLUSIVE
7 WORKPLACE* HEALTH, SAFETY
8 & WELLBEING*

==> picture [396 x 249] intentionally omitted <==

==> picture [48 x 6] intentionally omitted <==

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

FIRST CHOICE
----- End of picture text -----

==> picture [46 x 6] intentionally omitted <==

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

LAST CHOICE
----- End of picture text -----

Connecting Aotearoa so that we can all live, learn, work and play

Sustainability Overview FY23

Chorus Sustainability Report 2023

Governance

==> picture [46 x 46] intentionally omitted <==

CHORUS NEW ZEALAND BOARD OF DIRECTORS

Approval of business strategy and sustainability strategy. Reviews sustainability progress half yearly.

Chorus has a sustainability governance structure that helps ensure sustainability is overseen at the highest levels of the organisation and embedded throughout everyday operations.

==> picture [46 x 46] intentionally omitted <==

AUDIT AND RISK MANAGEMENT COMMITTEE

CHORUS EXECUTIVE TEAM

CHIEF CORPORATE OFFICER AND GENERAL COUNSEL AND HEAD OF SUSTAINABILITY

Proposes the business strategy and sustainability strategy for Board approval. Reviews and leads climate-related risks and opportunities, modern slavery risks and general sustainability progress on a quarterly basis.

Chorus’ governance body for climate-related disclosures. Reviews climate-related risks and opportunities, and modern slavery risks on a half yearly basis.

Designs the sustainability strategy and plan to ensure Chorus makes progress against it.

==> picture [46 x 46] intentionally omitted <==

ALL CHORUS PEOPLE

SUSTAINABILITY NETWORK

SUSTAINABILITY STRATEGY AND PLAN

HEAD OF SUSTAINABILITY AND EMISSIONS AND CLIMATE MANAGER

Support execution of sustainability priorities and consider sustainability impacts in decision making.

Identifies focus areas of most materiality to guide activity and resource allocation. Our strategy and plan align to the United Nations Sustainable Development Goals; 3, 4, 5, 8, 9, 10, 11, 12 & 13.

The Sustainability team works across Chorus with a crossfunctional sustainability network’ to improve sustainability performance and integrate sustainability initiatives into the business via Quarterly Business Review (QBR).

Chorus Sustainability Report 2023

While the three pillars of our Sustainability strategy are enduring, the activities within them will evolve over time to ensure we continue to be responsive to a changing operating environment and the needs of our stakeholders. Our Sustainability strategy sits alongside our Diversity, Equity and Inclusion Strategy which informs how we develop strong connections with Māori and builds our understanding of Te Ao Māori.

Connecting Aotearoa so that we can all live, learn, work and play

Sustainability Overview FY23

Chorus Sustainability Report 2023

Risk management

Chorus Risk Management framework

PURPOSE, MISSION, VALUES BUSINESS STRATEGY AND PLAN RISK APPETITE STATEMENT RISK CATEGORIES

HEALTH, SAFETY AND WELLBEING COMMERCIAL AND FINANCIAL LEGAL, REGULATORY Working to keep our people safe. SUSTAINABILITY AND CONTRACTUAL* Maintaining appropriate capital Working within the regulatory INNOVATION management and credit settings. and legal environment. Identify and pursue innovation and opportunities that will STAKEHOLDER AND CUSTOMER CORE SERVICES enhance Chorus. CONFIDENCE/REPUTATION Core service availability Maintaining a positive reputation with and network resilience. key stakeholders and customers. PEOPLE AND SKILLS Ensuring Chorus has employees with the capabilities to achieve its strategic objectives.

HOW WE MANAGE MATERIAL RISKS

RISK POLICIES RISK IDENTIFICATION, RISK GOVERNANCE AND TOLERANCES. MONITORING AND ASSURANCE. AND REPORTING.

In the context of climate change-related risks, Chorus’ risk management framework is being applied within these categories.

Our corporate governance documents, including our Managing Risk policy, are available at; https://company.chorus.co.nz/governance.

Connecting Aotearoa so that we can all live, learn, work and play

Sustainability Overview FY23

Chorus Sustainability Report 2023

==> picture [227 x 22] intentionally omitted <==

New Zealand has implemented a new mandatory climaterelated disclosure (CRD) regime that will apply to Chorus for FY24. It has been introduced as part of Aotearoa's journey towards a low carbon future and for businesses to have a good understanding of how climate change will impact them, both in terms of risks and opportunities.

Scenario analysis

As part of the incoming CRD standards, we must prepare and disclose three possible climate scenarios: at 1.5 degrees Celsius, at 3 degrees Celsius or greater, and one other scenario (yet to be agreed).

Climate change scenarios are narratives about plausible futures that predict how climate change could affect the sector. They consider various combinations of climate-related risks (e.g. impacts of storms and shifts in temperature) and a range of economic, regulatory and social factors (e.g. emissions pricing or consumer preferences). We are working through our scenario analysis process to meet the CRD standards for FY24.

A sector-wide approach to scenario analysis will benefit risk management and help stakeholders understand the potential implications of climate change. The Telecommunications Forum (TCF) board has formed a Climate Change Working Group (CCWG) to work on a sectorial scenario analysis to gather information on the impacts of climate change and understand the impact climate change could have on the resilience of the telecommunications industry. Chorus proposed the establishment of this working group to the TCF and will play a key active role.

AON 2022 Climate Change risk assessment

Climate-related risk and opportunity register

Chorus' risk management framework is being applied to our climate-related risks and opportunities, with the relevant stakeholders across our Network Operations, Technology, Legal and Sustainability teams identified as owners of the risks and associated mitigants, opportunities and actions.

In 2019, Aon investigated potential climate change impact from sea level rise on Chorus assets. In 2022, Aon built on this work by reassessing the climate change impacts with an updated asset portfolio and an extended scope to consider coastal, pluvial, and fluvial flooding. The report didn’t include transitional or physical risks from high temperatures, severe windstorms, or bushfires. The results of the report can be found on page 44.

We have consolidated all climate-related risks and opportunities into a single risk and opportunities register so we can manage these holistically.

Two of the Intergovernmental Panel on Climate Change (IPCC) global warming Shared Socioeconomic Pathways (SSP) scenarios from moderate (SSP2-4.5) to high (SSP5-8.5) over two timeframes (2040 and 2090) were used in the work. Aon finalised the report in January 2023 – before the Auckland floods and Cyclone Gabrielle significantly impacted New Zealand and parts of Chorus’ network. Cyclone Gabrielle was the largest weather event to affect the Chorus network and while the effects were consistent with the Aon report, with no damage to primary exchanges or access sites, some regional fibre routes were cut and damage to power networks meant about 55,000 consumers were unable to access our services for a period.

==> picture [320 x 293] intentionally omitted <==

There are lessons to be learnt from Cyclone Gabrielle for the future. That’s why we’ve contributed to a telecommunications industry plan, led by the TCF, to identify opportunities for enhanced network resilience and collaboration with government.

Connecting Aotearoa so that we can all live, learn, work and play

Chorus Sustainability Report 2023

Sustainability Impact Summary FY23

Connecting Aotearoa so that we can all live, learn, work and play

FY23 Sustainability Impact Summary

Chorus Sustainability Report 2023

Sustainability Impact summary FY23

Thriving environment Long-term targets

==> picture [36 x 35] intentionally omitted <==

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

1
----- End of picture text -----

Science-based target:

Reduce 62% scope 1 and 2 emissions by 2030 (base year 2020).

==> picture [36 x 35] intentionally omitted <==

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

2
----- End of picture text -----

Science-based target:

Top 70% of suppliers by spend have a science-based target or equivalent by 2030.

==> picture [35 x 35] intentionally omitted <==

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

3
----- End of picture text -----

25% less energy use

across our network by 2030.

==> picture [36 x 35] intentionally omitted <==

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

4
----- End of picture text -----

100% EV or hybrid

Chorus Corporate Fleet by 2028.

==> picture [36 x 34] intentionally omitted <==

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

5
----- End of picture text -----

Accelerate our journey

to be net zero before 2050.

Impact FY23

==> picture [72 x 72] intentionally omitted <==

Membership

First Electric

5% Reduction

Vehicles

of the Climate Leaders in electricity use Coalition and Sustainable FY23 (77.4 GwH) introduced to Business Council. FY22 (81 GwH). the fleet in 2023.

==> picture [72 x 72] intentionally omitted <==

==> picture [73 x 72] intentionally omitted <==

Chorus network

24% Reduction

Future Fit

in Scope 1

is now powered by Toitū climatepositive certified electricity with Ecotricity.

a tool to help employees track and reduce their emissions launched in 2023.

and 2 emissions FY23 (10,661 tCO2e) FY22 (13,957 tCO2e)

Connecting Aotearoa so that we can all live, learn, work and play

FY23 Sustainability Impact Summary

Chorus Sustainability Report 2023

Sustainability Impact summary FY23

Sustainable Digital Futures Long-term targets

==> picture [36 x 35] intentionally omitted <==

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

1
----- End of picture text -----

Host 50 Shine the Light events

In FY23 to enhance digital knowledge. Our aim is to create awareness about the digital skills support available for the local communities.

==> picture [36 x 35] intentionally omitted <==

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

2
----- End of picture text -----

10,000-plus people helped

with digital access, skills support, and devices.

Impact FY23

==> picture [72 x 72] intentionally omitted <==

Delivered

65 Shine the Light events nationwide in FY23.

==> picture [72 x 72] intentionally omitted <==

9,000 students

were supported with free connections and devices through the Ministry of Education initiative.

==> picture [72 x 72] intentionally omitted <==

Active

in the Digital Equity Coalition for Aotearoa, co-chairing the Affordable Connectivity Constellation.

==> picture [72 x 72] intentionally omitted <==

Employee/community

volunteer framework refreshed to align with sustainability strategy and due to launch in FY24.

==> picture [72 x 72] intentionally omitted <==

2,000 Adults

and organisations have benefited from $500,000

in donations and sponsorships to support digital inclusion initiatives nationwide in 2023.

Connecting Aotearoa so that we can all live, learn, work and play

FY23 Sustainability Impact Summary

Chorus Sustainability Report 2023

Sustainability Impact summary FY23

Thriving people Targets by the end of 2023*

Remain in top 10%

==> picture [36 x 34] intentionally omitted <==

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

1
----- End of picture text -----

of the technology industry benchmark for Employee Engagement.

==> picture [36 x 35] intentionally omitted <==

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

2
----- End of picture text -----

40:40:20 gender ratio.

==> picture [36 x 34] intentionally omitted <==

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

3
----- End of picture text -----

Gender pay gap

at no greater than 2% by career level.

==> picture [36 x 34] intentionally omitted <==

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

4
----- End of picture text -----

Rainbow, Gender & Accessibility tick accredited.

==> picture [36 x 35] intentionally omitted <==

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

5
----- End of picture text -----

75% employee participation

in Te Reo and Te Ao Māori education programmes.

Impact FY23

==> picture [72 x 72] intentionally omitted <==

Top 10%

40:40:20

Technology industry benchmark

gender ratio achieved at board and all employee levels.

for employee engagement.

==> picture [72 x 72] intentionally omitted <==

<2%

3 Ticks

gender pay gap in Re-accreditation of the 7 career levels. Rainbow Tick, moved to the advanced category of Gender Tick and achieved Accessibility Tick accreditation.

==> picture [72 x 72] intentionally omitted <==

34% employee

participation in Te Ao Māori programme.

==> picture [72 x 72] intentionally omitted <==

Partnership

with Tupu Toa internship and the Pasifika Niu leadership programme.

==> picture [72 x 72] intentionally omitted <==

Diversity, Equity and Inclusion

Refreshed strategy implemented focused on diversity of thought and wellbeing to support our people to thrive.

*calendar year

Connecting Aotearoa so that we can all live, learn, work and play

Chorus Sustainability Report 2023

Thriving Environment

Te taiao puāwai Thriving environment

Our focus is to reduce carbon emissions and waste to landfills across the Chorus ecosystem. We’re also making sure we’re prepared for what’s to come, that climate change scenarios are understood, and that we adapt for the future.

Connecting Aotearoa so that we can all live, learn, work and play

Chorus Sustainability Report 2023

Thriving Environment

==> picture [212 x 45] intentionally omitted <==

Fibre networks are recognised as the most climate-friendly digital infrastructure because they transmit data via light over large distances.

This means fibre optical equipment doesn’t require cooling or powered equipment in suburban streets and the amount of data able to be transmitted is increasing significantly with each generation of network equipment. Fibre is also more resilient than copper lines, meaning the optical cables will last several decades and require less maintenance.

The 2022 World Broadband Association highlights the environmental benefits of fibre and associated research in its whitepaper ‘The importance of environmental sustainability in telecom service providers’ strategy.

https://worldbroadbandassociation.com/wp content/uploads/ 2022/09/Print_2609_WBBA-Environmental-Sustainability.pdf

As fibre connections and data usage grow, and our copper network is retired, we are seeing a reduction in our electricity usage.

Figure 1: Data usage vs network electricity usage FY21 – FY23

Year	Copper	Fibre	Total	Electricity
	data	data	usage	usage
	usage (PB)	usage (PB)	(PB)	(MWh)
FY21	1,123	4,700	5,823	77,520
FY22	949	6,191	7,140	81,398
FY23	700	6,702	7,402	77,400

Resilient and reliant

In December 2022, we completed an 11-year public-private partnership with the New Zealand Government to build a fibreto-the-premises network for more than 1.3 million homes and businesses. More than 80% of the connections on our network are now on fibre, and we’ve begun withdrawing our legacy copper network in fibre-enabled communities.

Environmental management

As the owner of about 600 exchange sites and an extensive fixed line network throughout urban and rural Aotearoa, we take practical steps to avoid environmental breaches.

Our environmental framework requires that we, and our suppliers, ensure our physical and operational work complies with all relevant local and central government legislation, including the National Environmental Standards for Telecommunications Facilities; the Health and Safety at Work Act NZ; the Resource Management Act; and the Heritage New Zealand Pouhere Taonga Act.

We have about 70 network sites on Department of Conservation (DOC) land, typically transmitter links on hilltops or mountains. Some of these remote sites will be retired as new technologies, that better meet the needs of rural customers, evolve.

We have an in-house Environmental Management System that allows us to manage network build and other physical works projects. We engage with numerous local Māori organisations and Heritage New Zealand to ensure cultural impacts are mitigated, particularly where we are building network in culturally sensitive areas.

For FY23, we had no material environmental breaches.

Connecting Aotearoa so that we can all live, learn, work and play

Chorus Sustainability Report 2023

Thriving Environment

==> picture [185 x 45] intentionally omitted <==

Network resiliency

Our network is designed to limit the consumer impact of service outages through a range of practices including:

physical duplication, or redundancy, within parts of the network to protect against equipment, cable or power system element failure
geographic separation of critical network elements
developing the network in a way that limits the scale of any individual network failures
network practices to reduce the likelihood of accidental damage or network failure.

We’ve made substantial investment in the resiliency of our network through the rollout of fibre to the premise and have begun withdrawing our copper network in areas where fibre is available. Other recent projects have included the governmentsupported deployment of fibre backhaul along the South Island’s West Coast to provide network diversity for that region and the construction of a flood protection wall for the South Dunedin exchange building.

Our FY23 assessment of flooding risk for our network assets is shaping our future asset management plans, along with the knowledge gained from recent extreme weather events. We are, for example, considering ways to make river crossings more resilient and how alternative technology may be used to provide added diversity to key fibre routes. These events also highlighted the interdependence between telco networks and other infrastructure such as electricity and roading in a natural disaster. The Telecommunications Forum’s proposals for disaster preparedness and emergency management include improved understanding of other infrastructure’s resilience and planning.

Earthquakes remain the primary focus for our resiliency planning. Historically, earthquake damage has tended to be limited to local copper cables, and damage to exchange buildings has been minimal. We have an ongoing programme to strengthen critical network sites for earthquakes. Seismologists also use our new West Coast fibre network to analyse the South Island’s Alpine Fault. This first-of-its-kind study will help inform local communities and organisations, and help them to plan for future essential utility resiliency.

Our insurance programme covers all risks (subject to standard

exclusions) of physical damage and business interruption for above-ground assets. The specific cover is provided for earthquake damage to underground cables in Auckland, Hamilton, Wellington and Dunedin.

We undertake probability-based loss estimate modelling to ensure adequate policy limits covering material damage and business interruption.

Network reliability

We recognise our network's essential role in consumers’ daily lives and businesses. We monitor our network 24/7 and have disaster response plans to help maintain or restore service in an emergency. Our employees and service company technicians often go the extra mile to keep communities connected during extreme weather or natural disasters.

We report fibre performance measures to the Commerce Commission. This includes two standards measuring network availability in 23 geographic regions based on downtime in the Layer 1 (physical) and Layer 2 (electronic) parts of the network. Table 2 shows this data for fault restoration and unplanned downtime in FY23 at an aggregated national level. Another quality standard reported to the Commission measures national port utilisation to ensure network capacity is meeting monthly demand.

Figure 2: Fibre faults and restoration in FY23

Fibre network*	Faults per 100	Average yearly
	connections	unplanned downtime
		(minutes)**
Layer 1	2.47	32.52
Layer 2	1.10	12.17
(including premises
electronics)

Excludes Chorus network in other local fibre company areas.
** Excludes force majeure events.

Connecting Aotearoa so that we can all live, learn, work and play

Chorus Sustainability Report 2023

Thriving Environment

Chorus' transition roadmap

Our emissions reduction plan

Our base year to measure our targets against is 2020 and a time to understand our impact.

At the start of FY23 we published our first emissions reduction plan, which details how we will hit our target of reducing 62% of our scope 1 and 2 emissions by 2030.

For scope 3, we’ve committed that 70% of our suppliers will have a Science Based Target or equivalent in place by 2030.

FY20 emissions (tonnes CO2e)

Accelerating the action

Our milestones

1 100% climate-positive Toitū-certified electricity used to power our network from FY23.
2 Future Fit introduced in FY23 to help our people understand and reduce their own carbon footprint.
3 Five Chorus exchanges to have solar trial from FY25.
4 Switch car fleet to EV or hybrid by the end of FY27 with first EVs delivered in FY23.
5 Lower electricity consumption 15% by the end of FY25.
6 Sustainability forum with key suppliers with a focus on minimising waste, reducing emissions, and exploring innovation.

By 2030 we’ll see a 25% reduction in our electricity use and all electricity will be 100% renewable

Scaling up

Future focused

Our milestones

Our goal

7 20-25% of our

Renewable energy will power Chorus' network.

electricity use from power Chorus' network. solar generation on our Broadband technology exchanges by 2030. will help others to be net 8 Energy management zero due to the energy a key part of how efficiency of fibre. we operate.

9 All plastic ducting recycled across our network.

By 2050 we will be

By FY30 our emissions will be reduced 62%

net zero

2020

2023

2030

2050

Connecting Aotearoa so that we can all live, learn, work and play

Chorus Sustainability Report 2023

Thriving Environment

==> picture [227 x 45] intentionally omitted <==

==> picture [55 x 56] intentionally omitted <==

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

62%
Reduction
Scope 1 & 2
BY 2030
----- End of picture text -----

==> picture [56 x 56] intentionally omitted <==

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

10,378
tCO2e
BASE YEAR
2020
----- End of picture text -----

==> picture [55 x 56] intentionally omitted <==

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

10,661
tCO2e
FY 2023
----- End of picture text -----

Following the introduction of our first Emissions Reduction plan last year, we are starting to see good traction in our emissions reduction ambition with the following highlights for FY23: After two years of our scope 1 & 2 emissions increasing, we are now seeing a reduction. Overall our FY23 scope 1 & 2 emissions are up 3% compared to our base year, however FY23 emissions are down 24% when compared to FY22.

==> picture [200 x 20] intentionally omitted <==

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

CHORUS EMISSIONS
----- End of picture text -----

==> picture [388 x 20] intentionally omitted <==

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

UPSTREAM EMISSIONS
----- End of picture text -----

==> picture [134 x 20] intentionally omitted <==

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

DOWNSTREAM EMISSIONS
----- End of picture text -----

SCOPE 1 SCOPE 2 DIRECT EMISSIONS INDIRECT EMISSIONS THAT COME THAT ARE OWNED FROM WHERE THE ENERGY WE OR CONTROLLED BY PURCHASE IS PRODUCED.

CHORUS.

==> picture [199 x 118] intentionally omitted <==

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

740 1,309 9,921
tCO2e tCO2e tCO2e
29% * 6%
FLEET, DIESEL
GENERATOR, GAS MARKET LOCATION
AND REFRIGERANTS BASED BASED
----- End of picture text -----

==> picture [200 x 21] intentionally omitted <==

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

93% of Scope 1 and 2 is from electricity use.
----- End of picture text -----

We are investing in solar and other initiatives to reduce this use by 25% by 2030.

==> picture [38 x 7] intentionally omitted <==

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

SCOPE 3
----- End of picture text -----

==> picture [514 x 152] intentionally omitted <==

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

INDIRECT EMISSIONS NOT COVERED
BY SCOPE 1 OR 2 CREATED
BY CHORUS' VALUE CHAIN.
45,456 3,359 13,324 762 9 265 1,578 7,651
tCO2e tCO2e tCO2e tCO2e tCO2e tCO2e tCO2e tCO2e
PURCHASED GOODS FUEL AND ENERGY TRANSPORT BUSINESS WASTE IN EMPLOYEE COMMUTE TRANSPORT USE OF
AND SERVICES RELATED USE AND DISTRIBUTE TRAVEL OPERATIONS & WORK FROM HOME AND DISTRIBUTE SOLD PRODUCT
----- End of picture text -----

==> picture [521 x 21] intentionally omitted <==

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

Collaborating to reduce Scope 3 emissions.
----- End of picture text -----

We have established a supplier sustainability forum to identify collaboration opportunities and co-design initiatives to help reduce scope 3 emissions.

==> picture [196 x 90] intentionally omitted <==

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

5% 24%
REDUCTION REDUCTION
ELECTRICITY USE SCOPE 1 & 2 EMISSIONS
FY23 : 77.4 GwH FY23 : 10,661 tCO2e
FY22 : 81.0 GwH FY22 : 13,957 tCO2e
----- End of picture text -----

==> picture [90 x 90] intentionally omitted <==

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

Scope 3
Reset
TO INCLUDE
SPEND-BASED
ASSESSMENT
----- End of picture text -----

A market-based method for scope 2 reflects emissions from electricity that companies have purposefully chosen, whereas a location-based method reflects the average emissions intensity of grids on which energy consumption occurs.

Connecting Aotearoa so that we can all live, learn, work and play

Chorus Sustainability Report 2023

Thriving Environment

==> picture [230 x 41] intentionally omitted <==

Figure 3: Waste overview FY21 – FY23

Waste	Disposal	FY21	FY22	FY23
	method	(tonnes)	(tonnes)	(tonnes)
Duct (plastic)	Recycled	85	60	63
Redundant network (metal)	Recycled	187	100	*219
Batteries	Recycled	10	8.5	9
E-waste	Recycled	14	12	26
Corporate offices	Landfill	32	27	15
Fibre cable	Landfill	82	80	36
Total waste (tonnes)		410	287.5	368
% of total waste recycled		72%	63%	90%

With the UFB build now complete, we expect that our waste numbers will reduce. Overall we are recycling more.

We continue to implement programmes to reduce waste and reuse products.

Our plastic duct offcuts are sent to a supplier to be granulated and used in the production of new ducting.

Please refer to Appendix 1 for more detailed information on our emissions.

The increase for FY23 for metal is due to multiple SIMS reporting being included this year.

In October 2023 we took part in the Reclaim Recycling Week, where we encouraged employees to bring in e-waste from home and equally understand the different ways to reduce, reuse and recycle waste. This saw an increase in our e-waste as a result.

FY23 waste and circular economy highlights

==> picture [285 x 137] intentionally omitted <==

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

90% 10m3
of all waste is recycled Water usage
within our network and average per site.
corporate operations, Consistent with
up from 63% in FY22. FY22.
----- End of picture text -----

Connecting Aotearoa so that we can all live, learn, work and play

Sustainable Digital Futures

Chorus Sustainability Report 2023

Toa hangarau Sustainable Digital Futures

Chorus is a member of a network of organisations in Aotearoa dedicated to achieving digital equality for all. The digital divide has several obstacles, such as availability, affordability, and adoption. We understand that significant change can only occur by paying attention to the needs of the communities we connect and collaborating with others to achieve digital equity for everyone.

Is this where we use the Chorus bubble?

Connecting Aotearoa so that we can all live, learn, work and play

Sustainable Digital Futures

Chorus Sustainability Report 2023

Availability

Chorus believes that everyone, regardless of their location in urban or rural areas across Aotearoa, should have the opportunity to connect to the digital world.

In the past year, Chorus has focused on understanding the needs of rural customers by listening to key stakeholders and community feedback. Due to the physical distance from everyday services that urban New Zealanders take for granted, rural New Zealanders require even higher quality technology than their urban counterparts. Therefore, rural customers should have access to the same speed, reliability, ability to use data, and reasonable pricing as their urban peers.

Chorus, in FY23, commissioned the New Zealand Institute of Economic Research (NZIER) to evaluate the advantages of unrestricted connectivity in rural areas of Aotearoa.

According to the report, the benefits would amount to around $16.5 billion in the next decade. Chorus is working towards extending its fibre network and collaborating to expand the reach of fibre where it can to help bring these benefits to communities.

DIGITAL EQUITY P

Affordability

At the same time, Chorus understands that for many people living in urban areas, the expense of being connected is challenging, especially during the current cost of living crisis. For the last decade, Chorus has prioritised the connectivity of key community hubs, like schools and marae.

For the last three years, Chorus has worked closely with the Ministry of Education and the wider telecommunications industry to support free connectivity for students whose

families are struggling with broadband and device affordability. Originally part of the COVID-19 emergency response, this initiative has helped connect over 9,000 student homes through retailers delivering broadband services, using wholesale connections subsidised by Chorus,

other Aotearoa wholesale providers and the Ministry of Education. Despite the pandemic and extended lockdowns now ending, albeit with reduced numbers, the initiative continues, with an expected end date of June 2024.

We continue to work with the government, the Digital Equity Coalition for Aotearoa and the telecommunications industry to understand the ongoing affordability challenges, seeking to co-design solutions to remove affordability challenges within our communities.

Connecting Aotearoa so that we can all live, learn, work and play

Sustainable Digital Futures

Chorus Sustainability Report 2023

Adoption

Hapori (community) connecting to the digital world.

While availability and affordability are the key focus areas for Chorus’ response to establishing Sustainable Digital Futures, support to organisations focused on digital inclusion that give communities the opportunity and skills to be confident online is also at the core of our purpose.

In FY23, Chorus partnered with 20/20 Trust to run a pilot programme called Hapori (community) connect.

Northland, a region with a disproportionate number of digitally excluded people, was chosen for the pilot. Māori and Pasifika adults applied to attend the programme to strengthen their digital skills and develop personal learning plans in parallel, to not only help them build trust, confidence, and skills in the digital space but support the community to thrive in a digital world.

Utilising the existing foundational digital skills curriculum from 20/20 Trust, the programme's focus was Hauora (a Māori philosophy of health and well-being unique to Aotearoa).

Chorus engaged Netsafe in FY23 to identify how to keep seniors safe and confident online. The findings were used to create a range of resources to support them.

==> picture [42 x 17] intentionally omitted <==

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

85%
----- End of picture text -----

OF PARTICIPANTS

saw an uplift in their ability to use a digital device confidently and competently.

FY23 contributions

==> picture [106 x 107] intentionally omitted <==

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

$400,000
Donations
----- End of picture text -----

Digital Future Aotearoa

Digital Seniors

Digits Charitable Trust

Global Centre of Possibility Hokianga Sports Club Inc Matakite Online Trust NZ

Senior Net

The Funding Network NZ

==> picture [107 x 107] intentionally omitted <==

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

$315,000
Sponsorships &
Partnerships
----- End of picture text -----

==> picture [107 x 107] intentionally omitted <==

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

$690,000
Memberships
----- End of picture text -----

Accessibility Tick Ltd.

Business Leaders Health and Safety Forum

Auckland YWCA Inc. Climate Leaders Coalition Diversity Works NZ Human Resources Institute Global Women of NZ Innovative Young Minds Infrastructure New Zealand Internet Service Providers Institute of Managers and Association NZ Conference Leaders Netsafe Property Council of NZ NZ Compare Sustainable Business Council Rainbow Tick Telecommunications Forum Selfie Central Limited (TCF) South Pacific Pride Technology Users Association (TUANZ) TUANZ (After 5 events and Rural The NZ Initiative Ltd Connectivity Symposium)

Connecting Aotearoa so that we can all live, learn, work and play

Chorus Sustainability Report 2023

Thriving People

Nga iwi whai hua Thriving people

Our strategy was developed in consultation with a diverse group of people across the business, using the Aotearoa Inclusivity Matrix (AIM) as the framework and a number of employee data points for input. AIM is an evidence-based framework explicitly developed for NZ workplaces that allows organisations to identify the maturity of their DEI measures across seven components. It provides a basis for workplaces to understand their current capabilities, identify areas for improvement and create a roadmap for transformation.

We continue to use AIM as a measure of progress against our DEI objectives in addition to a number of others, including specific demographic measures and at an overall organisational level. As of 30 June 2023, we achieved our measure of being within the top 10% of the technology industry benchmark for our engagement surveys three drivers of diversity: diversity, inclusiveness and non-discrimination. We report on our measures to the People Performance and Culture Committee, a subset of our board, annually.

Connecting Aotearoa so that we can all live, learn, work and play

Chorus Sustainability Report 2023

Thriving People

Chorus employee overview

==> picture [380 x 114] intentionally omitted <==

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

Employee
Engagement
engagement
result
increased to
846
ACHIEVED
Total number
8.7
permanent and out of 10 TOP 10%
fixed-term employees INTERNATIONAL
has increased PEAKON ‘TECHNOLOGY’ COMPANY
in FY23 METHODOLOGY [2] BENCHMARK
----- End of picture text -----

Figure 5: eNPS[1] - three year view FY21 – FY23

Figure 4: Employee turnover rates - FY21 – FY23

Employee turnover	FY21	FY22	FY23
rate
Voluntary	8.1%	14.4%	9.6%
Total	12.6%	15.3%	10.1%
turnover rate
Positions filled by	43.3%	54.0%	46.0%
internal candidates

Employee	FY21	FY22	FY23
engagement2
Total (out of 10)	8.5	8.5	8.7
Employee net	+62	+64	+70
promoter score
(eNPS)
Participation	86%	85%	86%
rate

Figure 6: Employee learning investment - FY21 – FY23

Training and development	FY21	FY22	FY23
Average hours per FTE	8 hours	5 hours	8 hours
Average spend per FTE	$1,060	$693	$1,012

+77 TOP 8.9 eNPS 5% RATING

+80 TOP 8.9 eNPS 5% RATING

==> picture [144 x 144] intentionally omitted <==

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

BEST IN CLASS
ACHIEVED IN FY23
+78 TOP 8.9
eNPS 5% RATING
Diversity driver target
Top 10% in technology company
benchmark by 2023
----- End of picture text -----

1 eNPS means employee Net Promoter Score. Net promoter scores can range from -100 to +100 and are calculated by subtracting the percentage of detractors (0-6 engagement score) from the percentage of promoters (9-10 engagement score)
2 Chorus engagement survey data is provided by Peakon who provide a technology sector benchmark for comparison.

Connecting Aotearoa so that we can all live, learn, work and play

Chorus Sustainability Report 2023 27

Thriving People

Engagement

As part of Chorus’ employee communications and engagement strategy, each business area reviews their engagement scores and comments every quarter, with people plans in place to respond to trends and needs of teams. Chorus has a comprehensive internal communications strategy which focuses on sharing and discussing the business strategy and news with its people, using a range of channels, from yearly face-to-face events, monthly people leader video calls, to daily intranet articles and an all staff daily call, our heartbeat. There is also regular reporting of engagement results and themes to the People Performance and Culture Committee.

Flexible working

Flex@Chorus is Chorus’ approach to flexible working, providing employees access to multiple flexible working options. This includes flexibility in work schedule, flexible locations, part-time working hours and the ability to stagger a return to work after parental leave.

Gender

Chorus uses the Global Women recommended target of a 40:40:20 gender ratio for its Board and People Leader community. While we’ve had minor fluctuations to date, there is progress with creating more role opportunities and career pathways underway. The highlight in gender is the significant decrease we’ve witnessed in female voluntary turnover. As of June 2023, female voluntary turnover in career levels 8-11 had decreased by 16% and in career levels 3-7, it decreased by 5% compared to June 2022. Chorus uses an industry framework developed by EY to determine the career level of every role at Chorus. There are currently nine career levels (CL3 to CL11) below the executive team.

Figure 7: Female voluntary turnover

Career level	June 2022	June 2023
8-11 (Senior roles)	25.7%	9.6%
3-7	17.1%	12%

Figure 8:

Gender by role - three year view FY21 - FY23 as of 30 April 2023

==> picture [499 x 141] intentionally omitted <==

40:40:20 split of employees by 2023 / 40:40:20 split of Career level 8-11 by 2025 / 40:40:20 split of People Leaders by 2023. 40:40:20 split of Executive by 2023 / 40:40:20 Board split by 2023.

Figure 9:

Ethnicity by role 2023

==> picture [486 x 118] intentionally omitted <==

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

PEOPLE
LEADERS
2023
ALL
CHORUS
2023
0 20% 40% 60% 80% 100%
NZ European Asian European Pacific Peoples Māori Latin / Middle East / Africa Other
----- End of picture text -----

NOTE - these two % columns don't add to 100%. This is because our people can chose up to three ethnicities that they identify as, so where someone has more than one they are represented in each of their ethnicities, but over the total headcount. This is consistent with how we report ethnicity splits elsewhere.

Ethnic representation: Chorus has 99% of our employee population’s ethnicity data, well above the level of many organisations in Aotearoa. Chorus seeks to grow diverse leadership population with internal development and education programmes, sponsorship and mentoring.

Connecting Aotearoa so that we can all live, learn, work and play

Chorus Sustainability Report 2023

Thriving People

Wellbeing

Hauora is the Te Ao Māori view of wellbeing and is the latest part of the evolution of Chorus' wellbeing journey.

Along with supporting Chorus to be a great workplace, the wellbeing programme's objective is to create a healthier and more resilient workforce by influencing and supporting healthy habits. We achieved our measure of being in the top 5% of the technology industry benchmark for the wellbeing drivers in our engagement survey of social, physical and mental wellbeing and organisational support.

The Wellbeing Programme comprises a range of excellent benefits, resources, national events and a range of holistic activities in local offices that Chorus employees can participate in. The programme is run by a passionate and motivated group of champions nationwide. Te Whare Tapa Whā – the four pillars of Mental and Emotional, Physical, Family and Social, and Spiritual Wellbeing ensure a holistic approach.

Accessibility

Chorus was awarded the Accessibility Tick in February 2023, and we have an accessibility action plan in place across nine business categories. We’ve had three digital platforms assessed by subject matter experts, and recommendations for accessible improvements are underway. Educational webinars and workshops, including a focus on neurodiversity, are a regular feature in our DEI communications.

Confidence in Te Reo and Values and Tikanga Māori

At the end of FY23, 34% of our people were enrolled in our online Te Ao Māori programme with additional support provided by an external Te Ao Māori cultural advisor. The increased use of Te Reo across the business has been significant, and Tikanga practices are being adopted across teams. Additional Te Ao Māori learning and development is planned in the first half of FY24.

Figure 10: Confidence in Te Reo & Values in Tikanga Māori

>75% annual participation rate in training in relation to Te Ao Māori	as at April 2022	as at April 2023
	Te Ao Māori education programme 9%	Te Ao Māori education programme 34%
	Te Tiriti workshops 200	Te Tiriti workshops 200

Age

Our people’s knowledge enhances the employee and customer experience, so we can attract, grow and retain the right talent. We are in the process of refreshing our mentoring programme and have implemented a tailor-made talent development programme in our Chief Technology Operations function to create greater internal career pathways.

Rainbow

In FY23, we sponsored and attended the Big Gay Out, The Rainbow Excellence Awards and extended our membership level to Gold with Pride Pledge. We hold the Rainbow Tick Accreditation and, through this partnership, established a calendar of Rainbow 101 workshops accessible through our Chorus learning platform. Our bespoke ally programme, developed with our Rainbow employee network, will launch in July 2023.

==> picture [284 x 367] intentionally omitted <==

Connecting Aotearoa so that we can all live, learn, work and play

Chorus Sustainability Report 2023

Thriving People

==> picture [172 x 22] intentionally omitted <==

The health, safety, and wellbeing of anyone within our ecosystem is paramount for Chorus.

Target: Total Recordable Injury Frequency Rate (TRIFR) benchmark of 2.60 and Lost Time Injury Frequency Rate (LTIFR) benchmark of 1.45.

Health, safety and wellbeing of Chorus people includes our direct employees and the thousands of people working on our behalf to build, connect and maintain our network. Our health and safety focus extends to anyone in, or in the vicinity of,our workplaces.

In FY23, in addition to our focus on risk management, assurance and governance optimisation, we successfully looked after Chorus people during multiple adverse weather events across New Zealand.

The volume of work performed, including our service companies, totalled 6.1 million hours. This was down from 6.7 million hours in FY22, resulting from the connection activity continuing to decrease and the end of the UFB rollout programme.

The TRIFR decreased to 1.30 in FY23, down from 2.53 in FY22. Injuries to our people decreased to eight, down from 17 in FY22. The injuries observed were strains, sprains and lacerations caused by manual handling activities, slips, trips and falls and vehicle accidents. There were no fatalities. The LTIFR decreased to 0.65 from 1.34.

In 2022 Chorus achieved 'performing' level in the SafePlus assessment.

A company at 'performing' level has proactive and visible leadership and governance. It actively reviews and monitors performance to support continual improvement. It also actively seeks information on its health and safety risks and implements and monitors actions to sustainably manage identified health and safety risks. Workers are involved in all activities and empowered to take action. There is a shared understanding from workers at all levels of the commitment to support good health and safety outcomes.

Our Health and Safety Policy is available online. https://company.chorus.co.nz/file-download/download/ public/2260

Figure 11: Injury frequency rates FY21 – FY23

==> picture [239 x 124] intentionally omitted <==

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

3
2
1
0
TRIFR LTIFR
FY21 FY22 FY23
Injury frequency rate
----- End of picture text -----

LTIFR: number of lost time injuries + medical treatment injuries + restricted work injuries per million hours worked.

Figure 12:

Actual recordable injuries* FY22 - FY23

==> picture [239 x 141] intentionally omitted <==

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

15
10
5
0
FY22 FY23
Chorus direct Service companies
Member of the public (community)
Recordable injuries*
----- End of picture text -----**

Recordable injuries are medical treatment, lost time or restricted work injuries
** Member of the public (community) injuries reflect those sustained by slips and trips on Chorus infrastructure e.g. utility covers, which are remediated as quickly as possible.

Connecting Aotearoa so that we can all live, learn, work and play

Chorus Sustainability Report 2023

Thriving People

==> picture [194 x 22] intentionally omitted <==

We want to have sustainable and valuable supplier relationships.

We conduct our business with high social, labour and ethical standards. Given the rapid change within our industry, we focus on building enduring relationships that deliver value to both parties and encourage innovation.

We consider a range of criteria when evaluating potential suppliers, including environment, health and safety, worker welfare and corporate reputation.

We encourage our suppliers to go beyond legal compliance, drawing on internationally recognised standards to advance social, labour and business ethics.

Our commercial team administers our Supplier Code of Practice and has governance oversight from the Board. See www.chorus.co.nz/chorus-suppliers

Modern Slavery Statement

Our latest Modern Slavery Statement is available at: www.chorus.co.nz/governance

Our supply chains span around 1,150 direct suppliers representing approximately $890 million in procurement spend in FY23.

Most of our direct supplier spend is in Aotearoa. We source a range of goods and services internationally, primarily from suppliers in Europe, North America and Asia with a New Zealand presence. Beyond our service company partners, we have surveyed key suppliers to better understand their risks and responses to modern slavery.

In FY23, Chorus focused on resources and efforts to transition to our new Field Service Agreements. To support this, we conducted three ethical voice surveys reaching out to technicians and sub-contractors for feedback on health and safety and employment conditions. These have led to action plans to improve conditions and communications. This is now established as an ongoing tool for continuous improvement in our service company supply chain. We audited the worker welfare programmes within Chorus and at our service companies to ensure that the programme is operating effectively.

With the opening of the borders post the COVID pandemic restrictions, we have seen renewed growth in migrant workers joining the supply chain. We have supported service companies and new migrants into New Zealand and continued monitoring for exploitation. A small number of complaints have been received and dealt with by Chorus, service companies or specialist investigators. Four companies were required to undertake remedial action and one company was removed from further work on the Chorus network.

Worker welfare

We also manage modern slavery risks during the procurement lifecycle: including tendering, supplier selection; prequalification; contracts – through strong terms and conditions; and an ongoing worker welfare programme and audit regime focused on our field workforce to assess supplier performance.

We expect our suppliers to share our commitment that everyone is treated fairly. We work closely with our service company partners, to maintain our network, meet the demand for fibre connections and deliver a good customer experience. This workforce numbers about 2,300 people and is reducing as the fibre network rollout concludes and we retire overlapping areas of our copper network.

Our worker welfare team monitors our contractor and subcontractor field workforce within Aotearoa. The aim is to make worker welfare an everyday part of our business, like health and safety.

From our quarterly Pulse engagement survey to technicians, through our online portal and independent whistle-blower process, our worker welfare team monitors our contractor and subcontractor field workforce within Aotearoa.

Our cross-business governance team oversees any investigation of actual or potential work mistreatment and oversees the service companies’ worker welfare programmes. If we identify worker welfare issues, we'll notify relevant regulatory authorities and, where appropriate, ban companies from working on our network. See: https://worker-welfare.chorus.co.nz

Connecting Aotearoa so that we can all live, learn, work and play

Chorus Sustainability Report 2023

Thriving People

==> picture [253 x 22] intentionally omitted <==

Privacy

We don't sell telecommunications services directly to consumers or bill them directly. This means we hold significantly less personal information than the retailers who use our network to provide services to their customers. For example, we don’t store credit card information (we use a specialist payment gateways provider).

We’re committed to protecting and managing personal information in line with the requirements of the New Zealand Privacy Act 2020 and the Telecommunications Information Privacy Code 2020 (that sets out additional rules for our sector).

Our privacy policy covers how people can raise concerns or make requests, such as access, correction, or deletion of personal information – https://www.chorus.co.nz/terms-andconditions/our-privacy-policy. We either delete or anonymise personal information once it is no longer needed for the purpose for which it was collected.

Our Privacy Officer is responsible for implementing our privacy framework within our wider risk management framework. They promote awareness of our privacy systems and processes, and escalate matters to the Executive team if required.

FY23 privacy initiatives

An independent audit of privacy risks and practices was completed in FY23 and a roadmap for further enhancements to our privacy framework is being developed. Other initiatives included:

refreshing our privacy policy to clarify how we collect, use, and share personal information
launching an employee website with resources such as privacy guidelines, policies on information management, and training videos
new privacy training module for employees and contractors required to be completed annually
a new internal privacy breach reporting tool and process to clarify how we address and mitigate any breaches
a process to identify and assess privacy risks for product and marketing decisions
providing the Board with six-monthly privacy reports

Cybersecurity

The Audit and Risk Management Committee receives comprehensive cybersecurity reports from our Chief Technology Officer every six months, with interim updates as required. These are reported back to the Board.

We have detailed policies, processes, and registers to ensure cybersecurity is addressed through technology selection, network delivery practices, and ongoing operations and protection of our IT systems. Access controls and encryption are applied to systems identified as containing sensitive information.

Our Principal Security Officer tests our security incident responses and liaises with the National Cyber Security Centre on advanced cyber threats. We undertake regular reviews, including annual external audits, and ad-hoc reviews, to provide assurance and feedback on our assessments and controls. Analysis of cyber-attacks against other businesses inform our approach.

We provide annual training to anyone who accesses our information systems, including contractors, on issues such as phishing and malware. Our contracted suppliers are required to meet our information security standards and we have insurance for key cybersecurity risks. We undertake incident exercises and vulnerability audits, including with external parties, in parallel with internal real-time scanning of our systems.

==> picture [137 x 137] intentionally omitted <==

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

We recorded no
material cybersecurity
incidents or privacy
complaints from the
Office of the Privacy
Commissioner
in FY23.
----- End of picture text -----

Connecting Aotearoa so that we can all live, learn, work and play

Chorus Sustainability Report 2023

Thriving People

==> picture [279 x 22] intentionally omitted <==

Stakeholder and investor relations

The rollout and ongoing maintenance of our fibre network has entailed an extensive stakeholder engagement programme at all levels of government, local councils and other stakeholders.

We monitor customer satisfaction through surveys on new fibre installations and connecting homes with an existing fibre box. These measures are linked to organisational objectives for remuneration purposes. We also use independent consumer surveys to assess broadband satisfaction and the public's perception of Chorus.

Our investor relations programme facilitates two-way communication with investors and other market participants about our business, governance and performance. This is a valuable source of feedback. Our annual and half-year results presentations are available to all investors via webcast, as is our annual meeting.

Community relations

Our Community Relations team works closely with local councils, government agencies and community groups, with key highlights being;

Engaged with 39 local councils to get more than 170 murals on our cabinets, enhancing our streets, creating work for local artists and lifting their profile while at the same time playing our part in working to reduce graffiti vandalism.
Partnered with community and business groups such as the Beautification Trust; Creative Bay of Plenty and Creative Northland; Business Associations in Parnell, Wiri and Papakura; graffiti teams in Auckland, Wellington and Christchurch; Art Trust, Greypower and Federated Farmers.
Delivered 65 Shine the Light events in towns and communities around Aotearoa. These face-to-face events run in communities where fibre build is complete, but uptake is slow. These events build community goodwill, identify digital skills needs and help us understand the barriers people have to connect to the digital world.
After the Local Government elections last year, Chorus met with 24 of the 31 new mayors, as well as Deputy Mayors, Chief Executives, CIOs, Councillors, Community Board Chairs and council operations staff. The purpose of the meeting was to emphasise the importance of broadband in their communities.

==> picture [107 x 107] intentionally omitted <==

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

39
Local councils
engaged with to
decorate Chorus
cabinets
----- End of picture text -----

==> picture [106 x 107] intentionally omitted <==

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

170
New murals
applied by
140
local artists
----- End of picture text -----

==> picture [266 x 270] intentionally omitted <==

Connecting Aotearoa so that we can all live, learn, work and play

Chorus Sustainability Report 2023

Thriving People

==> picture [140 x 18] intentionally omitted <==

Our directors and employees are expected to act honestly and with high standards of personal integrity. Our codes of ethics set the expected minimum standards for professional conduct. They also facilitate behaviours and decisions consistent with our values, business goals and legal and policy obligations.

Annual training is provided to our directors and employees, including part-time workers and contractors. Our people are encouraged to report unethical behaviour and are asked annually to register any potential conflicts of interest. This process is subject to internal audit, and all reported breaches are investigated. A third-party review in 2019 benchmarked our compliance function against industry best practices.

Policies that reinforce the behaviours we expect at Chorus, include:

Bribery and gifts

Acceptance of bribes, or gifts and other benefits which could be perceived as influencing decisions, are prohibited under our codes of ethics. Our Gifts and Entertainment policy applies to all directors, employees and contractors. Gifts and entertainment over $150 require approval. Chorus is not involved in any ongoing bribery and corruption cases, and no fines or settlements were incurred for anti-competitive business practices in FY23. Our Supplier Code of Conduct requires our suppliers to comply with laws relating to anti-bribery and corruption. This includes bribery, abuse of power, extortion, fraud, deception, collusion, cartels and embezzlement.

Anti-bullying, harassment and discrimination

We’re committed to a psychologically and physically safe working environment, and we take a zero-tolerance approach to bullying, harassment and discrimination. Anti-bullying training is provided each year. Our policy reflects Aotearoa legislation, such as the New Zealand Bill of Rights Act 1990 and the Human Rights Act 1993, prohibiting discrimination and protecting the right to freedom of expression.

Whistleblowing and fraud

The Protected Disclosures (Protection of Whistle-blowers) Act 2022 provides enhanced legislative protection for employees who notify an appropriate authority about serious wrongdoing in, or by, an organisation. We encourage confidential reporting of serious misconduct or wrongdoing and suspected fraud or corruption. A dedicated whistle-blower email address and phone number are provided. PwC monitors these and are available to all employees and subcontractors. A dedicated email address is also available for reporting suspected fraud.

We did not receive any reports of serious instances of unethical behaviour by our employees in the year to 30 June 2023.

==> picture [266 x 358] intentionally omitted <==

Climate Statement (TCFD Appendix)

Aotearoa has introduced mandatory Climate-Related Disclosures (CRD) for a number of entities, including large, listed issuers such as Chorus. These mandatory disclosures will apply to Chorus’ 2024 annual reporting and closely align with the Task Force on Climate-related Financial Disclosures (TCFD)

framework. With our climate-related disclosures, we seek to provide our stakeholders with a better understanding of both the transition and physical risks that affect our operations, as well as our management approach and strategy to address the resulting financial impact.

Climate Statement (TCFD Appendix)

Connecting Aotearoa so that we can all live, learn, work and play

Chorus Sustainability Report 2023

Governance

Disclose the organisation's governance regarding climate-related risks and opportunities. Describe the governance body's oversight of climate-related risks and opportunities.

Describe the governance	Our Board is ultimately responsible for Chorus' risk management framework and governance. Our Audit and Risk Management	SeeGovernance onpage 7
body's oversight of climate-	Committee (ARMC) has been appointed as the governance body for the purposes of the CRD given its members' financial, industry and	and Risk Management on
related risks and opportunities	sustainability skills. The Board and ARMC expects Chorus to understand the risks, opportunities, and threats to its current and future	pages 9-10.
	business environment, assign principal risks to members of the Executive within the necessary skills to oversee this risks and opportunities
	and respond tactically and strategically.
	This includes:
	• annually setting risk appetite and tolerances and determining principal risks.
	• approving and regularly reviewing our Managing Risk policy and supporting framework.
	• promoting a culture of proactive risk management.
	• providing risk oversight and monitoring through our ARMC/governance body.
	Principal risks are the key risks to the achievement of our strategy. They are assessed based on a risk profile that identifies the likelihood
	of occurrence and potential severity of impact. Our current principal risk categories are identified through a comprehensive enterprise
	risk management framework encompassing financial and non-financial risks. These categories include:
	• Health, safety, and wellbeing risks: Working to keep the people we owe duties to safe.
	• Commercial and financial sustainability risks: Maintaining appropriate capital management and credit settings.
	• Core services risks: Ensuring core service availability and network resilience.
	• People and skills risks: Ensuring Chorus has employees capable of achieving its strategic objectives.
	• Legal, regulatory, and contractual risks: Working within the regulatory and legal environment.
	• Stakeholder and customer confidence/reputation risks: Attaining and retaining a positive reputation with key stakeholders
	and customers.
	• Innovation risks: Identifying and pursuing innovation and opportunities that will enhance Chorus.
	Our climate change risks and opportunities are reviewed within this framework. Principal risks and opportunities are reported to the
	ARMC half yearly and, if necessary, also by exception.Our ARMC reports to the Board.
Describe management’s role	Principal risks are owned by relevant executives, promoting integration into operations and planning and a culture of proactive	SeeGovernance onpage 7
in assessing and managing	risk management.	and Risk Management on
climate-related risks	Our CEO and executive are responsible for considering how risks and events interrelate and for managing our overall risk profile. Executive	pages 9-10.
and opportunities	Management also semi-annually considers unforeseen and emerging risks and reviews Business Unit risks quarterly. Climate change
	risks may be reflected as Principal, Emerging, or Business Unit risks depending on their potential impact and likelihood to impact Chorus'
	strategy. Operational risks related to climate change are identified within our risk management framework, particularly regarding core
	service availability and network resilience. The Chief Technology Officer is responsible for operational risks related to our nationwide
	physical network. Mitigation measures include planning for network deployment and protection, as well as ongoing maintenance and
	fault management. In FY22, we conducted internal workshops to review climate-related risks, creating our first dedicated climate risk
	register. Each risk's likelihood and potential consequences were analysed and recorded, and business owners have been assigned to
	each risk to mitigate and manage that risk, with quarterly reviews. In FY23, we reviewed that register, added some additional risks and
	considered opportunities, and created it into a Climate-Related Risks and Opportunities register to align with the CRD standards. Risks and
	opportunities are reported to the ARMC half-yearly.

Climate Statement (TCFD Appendix)

Connecting Aotearoa so that we can all live, learn, work and play

Chorus Sustainability Report 2023

Strategy

Disclose the climate-related risks and opportunities the organisation has identified over the short (0-3 years), medium (3-10 years), and long-term (10+ years).

Disclose the actual and In anticipation of the mandatory CRDs for FY24, we are preparing climate scenarios and analysis to assess the potential impact of potential impacts of climateclimate change on Chorus' business. We have started with a qualitative approach to identify the climate risks most likely to have an related risks and opportunities impact on Chorus so that these risks can be managed and mitigated under our risk management framework. We plan to quantify on the organisation's select risks next year. businesses, strategy, and In the past year, climate change-related weather events have tested the resilience of the Chorus network. While Cyclone Gabrielle financial planning, where such led to the widespread loss of electricity and the subsequent loss of telecommunications services, damage to our core network was information is material reasonably limited with no exchange buildings affected. Flooding across the North Island also tested the resilience of our copper network, which had higher fault rates as a result. However, we did suffer some fibre backhaul breaks as a consequence of the cyclone. EBITDA impacts from flood and cyclone-related events were $7m and exclude future capital expenditure, where required, for network replacement. The operational risk created by extreme weather remains our main climate-related risk over the short to medium term.

See Network Reliability, starting on page 17, our transition roadmap on page 18, and Risk Management on pages 9-10.

Physical risks	Nature of risk/opportunity	Impact	Response
Risk 1:	• Damage or disruption to our network assets	• Detailed risk analysis in FY23 has identified	• Climate risk is included as part of asset management planning
More frequent/extreme	could affect the delivery of telecommunications	potential exposure across a range of Chorus	with a detailed pluvial and fluvial flooding risk analysis completed
weather events	services to our customers (retail service	network assets (see page 44).	in FY23 (see page 44). This will inform ongoing investment for
Time horizon: Short and medium term	providers) and their end users. • Prolonged service disruption may have a	• Significant damage may require replacement or relocation of assets.	protection or potential exit from key assets (e.g. South Dunedin exchange building flood wall).
	detrimental financial and/or reputational impact, particularly where it impacts a large area or number of consumers (e.g. damage to key fibre routes or widespread loss of electricity).	• Staff and contractors unable to work due to Health & Safety risks posed by extreme events (e.g. physical damage to infrastructure limits movement or temperature extremes	• Continued growth in fibre uptake increases network resilience because fibre is less susceptible to weather-related faults. • The expected shutdown of copper over the next decade will reduce the amount/type of assets exposed to future climate risks.
	• Extreme temperatures or cascading climate related events affect our people’s ability to work.	constrain activity).	• Ongoing investment programmes to enhance network resiliency (e.g. fibre backhaul upgrade and FTTH in high rainfall area of South Island West Coast).
			• Ongoing monitoring of network performance in extreme
			weather to assess trends: $7m EBITDA impact in FY23 following
			significant weather events. Pan-industry working group to
			identify opportunities for enhanced network resilience and
			collaboration with government.
			• Work to minimise the impact of extreme temperature or
			compounding and cascading weather events for both employees
			and technicians.

Continued overleaf

Climate Statement (TCFD Appendix)

Connecting Aotearoa so that we can all live, learn, work and play

Chorus Sustainability Report 2023

Strategy cont.

Physical risks	Nature of risk/opportunity	Impact	Response
Risk 2:	• Projected risk of damage to our network assets	• External impact assessment in 2023 screened	• Network risk assessment findings incorporated into long-term
Sea-level rise	from sea level rise or coastal flooding needs	key network assets.	asset management planning.
Time horizon: Long term.	to be considered as part of our asset management planning.		• Network asset exposure will reduce with the expected shutdown of the copper network over the next decade.
	• Damage to cables or buildings could affect the delivery of telecommunications services to our customers (retail service providers) and		• Periodic updates to network risk assessment in future as new climate change data becomes available.
	their end users.
Risk 3:	• Global supply chain disrupted or materials	• Shortage of ONTs and other core materials.	• Review supply chain forecasting buffers to assess if they allow
Supply chain disrupted due to major weather events Time horizon:	delayed on a more frequent basis due to major weather events (whether at source or while materials are in transit).	• Failure to meet contractual obligations to service companies regarding supply of materials.	for the current and anticipated frequency and severity of climate events and eventual minimal supply of some parts and limited number of supply routes.
Short, medium, and long term		• Unable to meet customer demand.	• Ensure that supply chain processes embed a review of the impact of climate change.
Risk 4:	• Electricity supply (from hydro, wind, solar or	• Increased carbon emissions and rolling	• Install own generation assets and reduce electricity demand.
Insufficient electricity generated through any means could lead to demand	other sources) is insufficient to meet demand to run our business.	black-outs.	• Network asset exposure will reduce over time as copper network is replaced with more energy efficient fibre network.
outstripping supply
Time horizon:
Short, medium, and long term

Continued overleaf

Climate Statement (TCFD Appendix)

Connecting Aotearoa so that we can all live, learn, work and play

Chorus Sustainability Report 2023

Strategy cont.

Transitional risks	Nature of risk/opportunity	Impact	Response
Risk 5:	• Increased unplanned capital spend for	• Financial costs.	• Climate risks factored into asset management planning.
Insufficient priority on climate	frequent and extensive service and network
mitigation and adaptation	restoration activities.
Time horizon:
Short term
Risk 6:	• Regulatory framework provides insufficient	• Financial costs.	• Assess and report costs associated with climate mitigation
Insufficient allowance for	allowance for weather related opex or		and adaptation.
weather related operating cost or asset investment	asset investment.		• Expedited exit of copper network to reduce at risk assets.
Time horizon:
Short and medium term

Opportunities	Nature of risk/opportunity	Impact	Response
Opportunity:	• Electricity is our largest source of scope 1	• Our electricity consumption is expected to	• The national grid averages ~80% renewable and is expected to
Energy sources	and 2 carbon emissions at 9,921 tonnes-CO2e	reduce by 25% as our copper network is retired	become more renewable.
Time horizon:	in FY23.		• We are investing in solar for our exchanges with six pilot sites
Short term	• Energy use reduction and generating our own		decided and build expected to start in FY24.
	electricity from solar PV is one of our biggest opportunities. We have developed an Emissions		• Our new electricity supplier is climate positive certified.
	Reduction Plan that focuses on opportunities to
	reduce carbon emissions and the energy costs
	associated with our network.

Climate Statement (TCFD Appendix)

Connecting Aotearoa so that we can all live, learn, work and play

Chorus Sustainability Report 2023

Risk Management

Describe the impact of	Climate-related risks and opportunities have limited impact on our business, strategy, and financial planning. Our investment in an	See Governance onpage 7
climate-related risks and	FTTH network has helped mitigate significant potential transition and physical risks related to climate change. Our climate change	and Risk Management on
opportunities on the	impact assessment in FY22 and other network information and experience from past extreme weather events inform our ongoing	pages 9-10.
organisation's business,	network planning and management practices. Our Emissions Reduction Plan further focuses on emissions reduction opportunities
strategy, and financial	and potential energy savings. Our transition roadmap is outlined on page 18.
planning.
Disclose the resilience of	As part of the CRD standards, we must prepare and disclose three possible climate scenarios: 1.5 degrees Celsius, 3 degrees	See Risk Management on
the organisation's strategy,	Celsius or greater, and one other scenario in our FY24 reporting. We are working through our scenario analysis process to meet	pages 9-10.
considering different climate-	the CRD standards.
related scenarios.	Climate change scenarios are narratives about plausible futures that predict how climate change could affect the sector. They
	consider various combinations of climate-related risks (e.g. impacts of storms and shifts in temperature) and a range of economic,
	regulatory and social factors (e.g. emissions pricing or consumer preferences). Business and industry groups in New Zealand have
	worked together to do scenario analysis for their respective sectors.
	A sector-wide approach to scenario analysis will benefit risk management and help stakeholders understand the potential
	implications of climate change. The Telecommunications Forum (TCF) board has formed a Climate Change Working Group (CCWG)
	to work on a sectorial scenario analysis and gather and share information on the impacts of climate change on the resilience of the
	telecommunications industry. Chorus has joined this working group.
Describe the organisation’s	Chorus has a Climate Change Risks and Opportunities Registry to align with the requirements of the CRDs. Chorus held a high-level	See Risk Management on
processes for identifying and	workshop with representatives from across the business to review the existing registry and ensure it was still fit for purpose and that	pages 9-10
assessing climate-related risk.	lessons from the recent weather events were considered.
Describe the organisation's	Our management of climate-related risks aligns with the process used for other threats. Principal risks are assigned to individual	See Risk Management on
processes for managing	executives for management, and risk mitigation initiatives are identified. We utilise external data, experience with extreme weather	pages 9-10.
climate-related risks.	events, and ongoing network planning and management practices for network risks related to flooding or sea-level rise. Mitigation
	measures include building maintenance and flood protection for at-risk exchanges, geotechnical surveys for selecting fibre routes,
	placement of cables on the downstream side of bridges, and network expansion projects to enhance route diversity and network
	robustness. Post Cyclone Gabrielle, river crossing build techniques are being revisited, with separate aerial connection being
	considered. As parts of our copper network are shut down, at-risk network assets are being phased out.
Describe how processes for	Climate-related risks are identified, assessed and managed within our existing risk management framework and practices. Identified	See Risk Management on
identifying, assessing, and	risks and related actions are monitored and updated quarterly. If risks exceed our risk tolerance, additional mitigation activities may	pages 9-10.
managing climate-related	be implemented.
risks are integrated into the
organisation's overall risk
management and prioritised.

Climate Statement (TCFD Appendix)

Connecting Aotearoa so that we can all live, learn, work and play

Chorus Sustainability Report 2023

Metrics and Targets

Disclose the metrics the	We measure energy and fuel usage across our network and monitor greenhouse gas emissions. We aim to reduce our scope 1 and	See Thriving Environment,
organisation uses to assess	2 emissions by 62% by FY30, based on FY20 levels. Data usage metrics indicate the reduction in emissions intensity as we transition	starting onpage 15.
climate-related risks and	to a fibre-based network and data volumes continue to grow. Fault performance and associated cost measures are relevant for
opportunities in line with	monitoring network resilience.
its strategy and risk
management process.
Disclose scope 1, scope 2,	We report our scope 1, 2, and limited scope 3 emissions annually. Our emissions performance and intensity for the last three years	See Thriving Environment,
and, if appropriate,	is available on pages 41 & 42. Network electricity consumption accounts for most of our combined scope 1 and 2 emissions. Our	starting onpage 15.
scope 3 greenhouse gas	Emissions Reduction Plan focuses on energy efficiency and reducing energy use across our network. The shutdown of parts of our
(GHG) emissions and the	copper network will reduce electricity needs and emissions by about 25% by 2030. In FY23, we powered down 225 copper cabinets
related risks.	and have seen a 4.5% reduction in electricity consumption. We anticipate reducing scope 3 emissions as fibre uptake increases.
	Fault-related activity is also lower on the fibre network.
Describe the targets	Our Emissions Reduction Plan aims to reduce electricity consumption by 15% over the next three years and we have achieved a	See Thriving Environment,
the organisation uses to	reduction of our corporate fleet by 25% at the end of FY23.	starting onpage 15.
manage climate-related risks and opportunities and performance against targets.	The rollout of our FTTH network has contributed to the transition to a more energy-efficient and resilient network. We have achieved a 70% uptake of the fibre network to date. By increasing fibre uptake, we can further reduce our carbon footprint through reduced electricity usage. Fibre broadband offers high-speed capability with lower emissions. Average data usage per connection
	on our network is growing significantly each year.

Climate Statement (TCFD Appendix)

Connecting Aotearoa so that we can all live, learn, work and play

Chorus Sustainability Report 2023

Our organisational boundary

Our organisational emissions reporting boundary takes an operational control approach defined by the GHG Protocol and includes Chorus New Zealand Limited only, as our operating company and sole subsidiary of our parent company, Chorus Limited. Chorus Limited is publicly listed, and our issued shares are quoted on the New Zealand Stock Exchange (NZX) and Australian Securities Exchange (ASX).

Targets

GHG emissions intensity

Science-based target – reduce 62% scope 1 and 2 emissions from 2020 by 2030
Science-based target –70% of our suppliers, by spend, cover over half of scope 3 emissions and will have science-based targets or emissions reduction plans by FY30.

Chorus monitors emissions intensity against the amount of data transmitted across its network in Petabytes (PB). As the amount of data transmitted on our network steadily increases as more people and devices connect, our emissions intensity decreases.

The largest potential areas to address emissions in Scope 3 are purchased goods and services, fuel and energy-related use (technician van fuel) and use of sold products (downstream). We have established a supplier sustainability forum to identify collaboration opportunities and co-design initiatives to help reduce scope 3 emissions.

We aim to achieve an emissions intensity of under 1 (tCO2e/PB) by FY25.

	Data traffic	Scope 1 and 2	Emissions intensity
	(PB)	(tCO2e)	(tCO2e/PB)
FY20	4,945	10,370	2.09
FY21	5,823	13,239	2.27
FY22	7,140	13,957	1.95
FY23	7,402	10,661	1.44

Climate Statement (TCFD Appendix)

Connecting Aotearoa so that we can all live, learn, work and play

Chorus Sustainability Report 2023 42

Base year

Greenhouse gas emissions source inclusion

Scope - Category	Activity	Methodology and data quality	FY20	FY21	FY22	FY22	FY23
				Tonnes-CO2
1 – Direct	Diesel generator fuel.	Supplier specific: Invoices detailing litres of diesel used for Engine Alternatives.	170	172		273	315
1 – Direct	Refrigerants (gas leakage from air con).	Supplier specific: Invoices detailing litres of refrigerants (gas) top ups.	565	548		601	181
1 – Direct	Natural gas (LPG use in exchanges).	Supplier specific: Invoices detailing LPG bottles purchased.	99	82		95*	85
1 – Direct	Chorus vehicle fleet fuel.	Supplier specific: Fuel card data showing litres of petrol/ diesel.	NA	204		127	159
2 – Purchased electricity	Location based.	Average/Supplier specific: Monthly electricity invoices – detailing usage for	9,334	12,248	12,861		9.921
		each Installation Control Point. Include Spark invoice for Chorus electricity
	Market based.	used in Spark exchanges.	N/A	N/A		N/A	1,309
3/1 – Purchased goods and	Emissions based on spend, per activity.	Spend-based: Toitū worksheet which calculates emissions based on spend	N/A	NA	22,559		**45,456
services	Focused on emissions associated with	and average emissions per activity.
3/2 – Capital goods	manufacturing and shipping.
3/3 – Fuel and energy use	Electricity used by customers and	Average/Hybrid Supplier specific: Based on what we invoice Spark for	3,395	4,339	4,069		3,359
	transmission and distribution line losses.	electricity use in Chorus exchanges.
3/4 – Upstream transportation	Service company corporate fleet and	Supplier specific: Based on information from service providers using some	505	931	5,589		***13,324
and distribution	Chorus technician fleet.	fuel use data and statistical data for light vehicle fleets.
3/5 – Waste generated in	Waste from corporate offices and network.	Average/Hybrid: Based on one month of daily weighing for all corporate sites	63	60		28	9
operations		(multiplied). Network waste data supplied by service providers.
3/6 – Business travel	Business flights, car rentals,	Supplier specific: Actual data provided by travel provider.	765	294		202	762
	accommodation and taxis.	Broken down to employee name and number.
3/7 – Employee commuting	Employee commuting and work from	Average/Hybrid: Based on average data from employee survey.	N/A	N/A		124	265
	home.
3/9 – Downstream	Transportation and distribution of	Supplier specific: Shipment of Nokia equipment and supplier invoices.	N/A	N/A	2,545		1,578
transportation and distribution	equipment and spares.
3/11 – Use of sold product	Electricity used in customer premise to	Supplier specific: Supplier specs on energy consumption for each model.	N/A	51	6,911		7,651
	power the ONT.	Based on a 24/7, seven days a week usage.
		Total Scope 1	1,035	992	1,096		740
Total Scope 2 * Natural gas FY22 emissions number has been restated due to an error found in data capture. We have restated emissions for prior years based on revised emission factors and activity levels. Emissions may vary from previously reported figures.			9,343	12,247	12,861		9,921
Emissions up from last year.		Total Scope 3	9,221	9,807	19,668		72,404

Emissions up from last year. Emissions down from last year.

** Full spend-based analysis and calculation completed for FY23.

*** FY23 is the first year we have had supplier specific data for service companies fleet emissions, including Chorus' technician fleet.

Climate Statement (TCFD Appendix)

Connecting Aotearoa so that we can all live, learn, work and play

Chorus Sustainability Report 2023

Greenhouse gas emissions source exclusions

Scope - Category	Exclusion reason
3/8 – Upstream leased assets	Chorus equipment located in suppliers’ exchange buildings is included in scope 2.
3/10 – Processing of Sold Products	Excluded due to low materiality, lack of available data, and high degree of uncertainty.
3/12 – End of life treatment of sold products	E-waste programme in place and most network waste is recycled.
3/13 – Downstream leased assets	Customer electricity on network/ICT equip in Chorus’ exchanges is included under 3 fuel and energy use.
3/14 – Franchises	Chorus has no franchise model.
3/15 – Investments	Chorus has no other investments at this stage.

Guidance documents, standards and emission factors used for our climate statement

The following guidance documents were used in the preparation of this GHG Inventory:

Aotearoa New Zealand Climate Standard 1 Greenhouse Gas Protocol – Scope 2 Guidance Climate-related Disclosures (NZ CS 1) - https://ghgprotocol.org/sites/default/files/2023 03/Scope%202%20Guidance.pdf https://www.xrb.govt.nz/standards/climate-related-disclosures/aotearoa-newzealand-climate-standards/aotearoa-new-zealand-climate-standard-1/ Greenhouse Gas Protocol Technical Guidance for Calculating Scope 3 Emissions https://ghgprotocol.org/sites/default/files/standards/Scope3_Calculation_ Guidance_0.pdf

Aotearoa New Zealand Climate Standard 2 Adoption of Aotearoa New Zealand Climate Standards (NZ CS 2)

https://www.xrb.govt.nz/standards/climate-related-disclosures/aotearoa-newzealand-climate-standards/aotearoa-new-zealand-climate-standard-2/

SBTi Criteria and Recommendations

https://sciencebasedtargets.org/resources/files/SBTi criteria.pdf

Aotearoa New Zealand Climate Standard 3 General Requirements for Climate-related Disclosures (NZ CS 3)

https://www.xrb.govt.nz/standards/climate-related-disclosures/aotearoa-newzealand-climate-standards/aotearoa-new-zealand-climate-standard-3/

Ministry for the Environment: Measuring Emissions – a guide for organisations https://environment.govt.nz/publications/measuring-emissions-a-guide-fororganisations-2022-detailed-guide/

Climate Statement (TCFD Appendix)

Connecting Aotearoa so that we can all live, learn, work and play

Chorus Sustainability Report 2023

Figure 13: Chorus' network exposure to climate change

==> picture [786 x 288] intentionally omitted <==

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

SEA LEVEL RISE COASTAL FLOODING PLUVIAL FLOODING FLUVIAL FLOODING
2040 2040 2040 2040 2040 2040 2040 2040
SSP2-4.5 SSP5-8.5 2023 SSP2-4.5 SSP5-8.5 2023 SSP2-4.5 SSP5-8.5 2023 SSP2-4.5 SSP5-8.5
KEY EXCHANGE SITES (N=61)
potentially exposed (very low to very high) 0 0 0 0 0 4 (7%) 4 (7%) 4 (7%) 8 (13%) 9 (15%) 9 (15%)
potentially exposed (high to very high) 0 0 0 0 0 2 (3%) 2 (3%) 2 (3%) 3 (5%) 4 (7%) 4 (7%)
OTHER EXCHANGE/ACCESS SITES (N=778)
potentially exposed (very low to very high) 3 (<1%) 3 (<1%) 8 (1%) 16 (2%) 17 (2%) 104 (13%) 104 (13%) 104 (13%) 177 (23%) 181 (23%) 181 (23%)
potentially exposed (high to very high) 4 (1%) 9 (1%) 9 (1%) 20 (3%) 20 (3%) 22 (3%) 79 (10%) 83 (11%) 83 (11%)
UNDERGROUND UTILITY BOXES (N=285,554)
potentially exposed (very low to very high) 383 (<1%) 401 (<1%) 2,610 (1%) 4,723 (2%) 4,789 (2%) 28,292 (10%) 28,292 (10%) 35,017 (12%) 32,988 (12%) 35,017 (12%) 35,017 (12%)
potentially exposed (high to very high) 1,700 (1%) 3,487 (1%) 3,557 (1%) 10,543 (4%) 10,757 (4%) 25,563 (9%) 23,213 (8%) 25,157 (9%) 25,563 (9%)
TERMINAL ENCLOSURES OR CABINETS (N=14,702)
potentially exposed (very low to very high) 40 (<1%) 41 (<1%) 162 (1%) 264 (2%) 269 (2%) 1,295 (9%) 1,295 (9%) 1,295 (9%) 1723 (12%) 1799 (12%) 1799 (12%)
potentially exposed (high to very high) 79 (1%) 140 (1%) 141 (1%) 259 (2%) 267 (2%) 281 (2%) 849 (6%) 919 (6%) 942 (6%)
POLES (N=310,779)
potentially exposed (very low to very high) 529 (<1%) 570 (<1%) 2,875 (1%) 4,258 (1%) 4,295 (1%) 32,239 (10%) 32,239 (10%) 32,239 (10%) 37,456 (12%) 37,456 (12%) 37,456 (12%)
potentially exposed (high to very high) 0 0 0 0 0 0 0 0 0
REGIONAL FIBRE (67,483KM)
potentially exposed (very low to very high) 484 (<1%) 499 (<1%) 962 (1%) 1,356 (2%) 1,371 (2%) 9,144 (14%) 9,144 (14%) 9,144 (14%) 12,181 (18%) 12,435 (18%) 12,435 (18%)
potentially exposed (high to very high) 0 0 0 0 0 0 0 0 0
----- End of picture text -----

This assessment builds on a 2019 analysis of Chorus' network exposure to climate change induced sea level rise. Current network asset information is assessed against additional climate change risk from coastal, pluvial and fluvial flooding. Two global emissions scenarios were used: moderate (SSP2-4.5) and high (SSP5-8.5) to 2040 and 2090. The 2090 results are not shown given most Chorus assets have much shorter accounting lives. Flood damage assessment is based on estimated inundation depth from ground level, with an adjustment for estimated floor height. An impact level is assigned based on damage expectancy with 'very low' representing 1% or less damage and based on damage expectancy with less than one hour of disruption. 'High' and 'very high' impact represents estimated damage above 25% and multi-day disruption.

Chorus is currently migrating customers to its fibre network and expects that its copper network will be shut down within a decade. As the copper network is shut down the number of exposed assets is expected to reduce significantly. The fibre network is much more resilient to water ingress than the copper network because fibre cables do not carry an electrical signal and fibre nodes in suburban streets do not contain electrical equipment.

Chorus is using the findings from this analysis to inform its asset management programme and ongoing investment in network resilience. Cyclone Gabrielle in February 2023 was the largest weather event to affect the Chorus network and the resulting damage was consistent with the findings of this report, with no damage to exchanges or access sites.

DEFINITIONS:

Sea level rise: 0.16m increase in sea level for SSP2-4.5 and 0.18m for SSP5-8.5. Coastal flooding: storm surges causing coastal inundation by sea water. Pluvial flooding: extreme rainfall that overwhelms drainage systems and/or results in flash flooding. Fluvial flooding: excessive rainfall or snow melt causing river or lake overflow onto surrounding land.

Connecting Aotearoa so that we can all live, learn, work and play

Glossary

Chorus Sustainability Report 2023

==> picture [86 x 22] intentionally omitted <==

ADSL Asymmetric Digital Subscriber Line - a copper-based technology that can provide basic fxed line broadband services. Board Chorus Limited’s Board of Directors. CO2e Carbon dioxide equivalent. CRD Climate-Related Disclosures. Emissions Emission sources are categorised by scope to manage risks and impacts of double counting. There are three scopes in greenhouse gas reporting. Fluvial River fooding. FTE Full Time Equivalent. FTTH Fibre-to-the-home. FWA 4G / 5G Fixed Wireless Access 4th/5th generation. FY Financial year – twelve months ended 30 June. FY23 is from 1 July 2022 to 30 June 2023. GHG Greenhouse gas.	GHG Inventory A quantifcation of an organisation’s greenhouse gas sources, sinks, emissions, and removals. GPON Gigabit Passive Optical Network. Layer 1 The physical cables and co-location space. Layer 2 The data link layer, including broadband electronics, within the Open Systems Interconnection model. Mbps Megabits per second – a measure of the average rate of data transfer. ONT Optical Network Terminal, or the termination point of fbre in the home or business. P2P Where two parties or devices are connected point-to-point via fbre. PB A petabyte is equivalent to 1,024 gigabytes pKm Passenger-kilometre (unit of measure for transport). Pluvial Surface water food. RAB Regulatory Asset Base refers to the value of total investment by a regulated utility in the assets which will generate revenues over time.	Refrigerants A substance or mixture used in a heat pump and refrigeration cycle.
		SBTi Science Based Target initiative.
		Scope 1 Direct emissions from sources that are owned or controlled by a company.
		Scope 2 Indirect emissions from the generation of purchased electricity consumed by a company.
		Scope 3 Indirect emissions from the value chain of a company.
		UFB Ultra-Fast Broadband refers to the Government and industry programme to build a FTTH network to 87% of New Zealanders. UFB1 refers to the original phase of the rollout to 75% of New Zealanders. UFB2 and UFB2+ were subsequent phases announced in 2017 extending the network to 87%.
		VDSL Very High Speed Digital Subscriber Line – a copper-based technology that provides a better broadband connection than ADSL.
		WFH Working from home.

Dear investors

On behalf of your Board, I’m pleased to report that Chorus has delivered another strong financial result in a year of operating challenges and change.

We’ve announced a final unimputed dividend for the year of 25.5 cents per share, bringing total dividends for FY23 to 42.5 per share. The dividend reinvestment plan remains paused.

Strategy and Core Beliefs

Empowering our people: One of the best investments we can make is in having the right people, empowered and appropriately incentivised. Our aspiration is for Chorus to be a diverse and inclusive employer of choice.
Fibre is future-proofed: We believe fibre is the most effective technology choice for the vast majority of New Zealanders because it provides a dedicated connection that delivers fast and extremely reliable connectivity. While alternative technologies have a place in the market, fibre has a clear and easily scalable upgrade path to meet the expected growth in consumer needs far into the future.
Connections, connections, connections: Chorus’ longterm value is inextricably linked to fibre connections. Now that we’ve built a world-class network, in partnership with government, the greatest benefit to the country is to harness its potential. We’ve begun retiring the copper network in our urban fibre areas and this will drive fibre uptake even higher. Consumers value fibre above other technologies as a high-quality dependable service and we’re willing to invest in connecting more addresses and devices (e.g. traffic cameras) where the acquisition cost is justified by the long-term value of that connection.
Managed exit from copper: Our copper network is nearing the end of its technological life and alternative technologies will be needed beyond the reach of fibre. Our focus is on managing our copper costs down while deploying fibre to the maximum extent and ensuring regulation supports consumers to get the best possible services.
Be an active wholesaler: As an open access wholesaler we treat all our retailer customers equally. Yet, our largest customers are also our network competitors and have direct consumer relationships where we don’t. This means we need to be an active wholesaler, promoting our network services and ensuring that the regulatory regime supports a level playing field between network providers and keeps consumers fully informed.
Promote digital equity: We’re the provider of an essential utility service that enables New Zealanders to access an increasingly digitised world. This means Chorus can and should play its part in improving digital equity. Because we’re a wholesale only provider, this requires a collaborative effort with government agencies and retail service providers.
Prioritise long-term value: Capital allocation is one of our most important responsibilities. We’re making investment decisions for long-term value, not short-term profit. We’ll prioritise the efficient allocation of capital that grows shareholder value and supports a growing sustainable dividend through time. Our assessment of the necessary level of returns, the impact on consumer pricing, competitive market conditions, and the parameters of our dividend policy and debt limits, will guide our approach to discretionary investment.
A considered approach to new opportunities: We believe generating non-regulated income streams is important, but they must pay their way. We would need to have, or build, the capability to run these businesses well. We’ll tread carefully and generally steer away from businesses that our shareholders can invest in directly, unless there is a compelling adjacency to, and synergies with, our core business.
An appropriate capital structure: We’re committed to maintaining a capital structure reflective of a utility business. At the heart of this is the maintenance of an investment-grade credit rating (BBB or equivalent) and financial policies that support this. We’ve begun turning our minds to the first tranche of Crown funding that will be due in mid-2025.

==> picture [100 x 11] intentionally omitted <==

Reshaping Chorus for its next phase

Governance

If you’d like more detail on our financial results, the annual report and a recorded webcast of our results briefing will be available on our website at

www.chorus.co.nz/reports

Becoming an all‑fibre digital infrastructure company

We’ve provided dividend guidance of 47.5 cents per share, unimputed, for FY24. There is approximately $11 million remaining to be returned to shareholders through the $150 million share buyback programme. To date, more than 17 million shares have been bought back.

Finally, I would like to thank you, our shareholders, for your continued support of Chorus and we look forward to updating you at our annual meeting in November.

==> picture [146 x 33] intentionally omitted <==

Mark Cross Chair

==> picture [115 x 115] intentionally omitted <==

FY23 results overview

==> picture [489 x 378] intentionally omitted <==

About this report

We’d like to keep in touch by email

With postage costs rising and our desire to reduce our environmental impact, we are reconsidering how we keep in touch.

Please send your email address (and include your postal address so we can identify the right recipient) to;

[email protected]

so we can email this letter to you paper-free next time.

Outlook

Market dynamics

As we know from the effect of Netflix and Fortnite on peaktime bandwidth, it only takes one new application to change consumer behaviour almost overnight.

That’s why we’ve been surveying consumers as part of our proposal development and to help evaluate longer-term opportunities for investment.

An opportunity to take fibre further

We believe it’s time for a broader discussion about the right mix of private and public investment that can achieve the government’s goals and close the digital divide for more Kiwis.

Regulatory framework

==> picture [115 x 115] intentionally omitted <==

==> picture [111 x 95] intentionally omitted <==

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

JB Rousselot
Chief Executive
----- End of picture text -----

==> picture [100 x 11] intentionally omitted <==

AI assistant

CHORUS LIMITED — Annual Report 2023

64680_rns_2023-08-20_b74b1c44-873d-4422-ab05-d72f98f5cbc9.pdf

STOCK EXCHANGE ANNOUNCEMENT

Chorus 2023 full year results, annual report & sustainability report

ENDS

21 August 2023

Chorus delivers solid full-year result as Kiwis continue to favour fibre broadband

Highlights

Financial overview

Continuing growth in data usage

Transition to an all-fibre digital infrastructure company

Call for more transparent consumer choices

Copper retirement

Tracking towards sustainability targets

Dividend

FY24 guidance

ENDS

For further information:

Steve Pettigrew

Brett Jackson

Disclaimer

This presentation:

Agenda

FY23 overview

Solid lift in fibre uptake despite workforce constraints

Connection growth +72k

Continued broadband growth in our UFB zone

Quarterly change (’000s) by zone*

Broadband connections

Copper (no broadband) connections

Workforce back to sustainable level

Managed migration: installations vs activations

> 92k fibre installations (FY22: 117k)

> Managed migration programme

More residential consumers opting for 1 Gig plans

Income statement

Revenue

Expenses

Underlying EBITDA & asset revaluation

Asset revaluation: Land & buildings

Gross capex: $454 million (FY22 $492m)

▪ Average cost per UFB premises installation: $1,067 vs $1,000 - $1,115 guidance*

Ca ex: Co er and Common p pp

FY24 guidance

> EBITDA: $680m to $700m

Capital expenditure components

> GROSS CAPEX: $400m to $440m

Note: ranges are not necessarily additive

Net debt/EBITDA

> ND/EBITDA increased from 4.08x (FY22) to 4.39x

> ~65% of CNU interest rate exposure was fixed at 30 June

Crown financing and debt profile

> At 30 June, debt of $2,561m comprised:

Crown equity securities

Crown debt securities

Dividend and share buyback

Dividend guidance

> FY23 final dividend

> FY24 dividend guidance*

> ~$139m of $150m share buyback complete

Regulatory recap

2022 RAB movement ($m)

> Information Disclosure in May 2023:

> Next regulatory period - RP2 (Jan 2025 to Dec 2028)

Data usage back at COVID levels; 4K to come

4K EFFECT ON DATA DEMAND

Evolution of services driving greater data needs

A nimbler Chorus

> Unlocking value through a matrix model

Targeting 80% fibre uptake

> Market dynamics remain positive

> FY24 focus

Bringing more focus to opportunity

Becoming an all-fibre digital infrastructure company

Chorus UFB area

Local fibre co. area

Significant sustainability gains in FY23

Data vs Electricity usage

Appendix A: Pricing and market data

CHORUS LIMITED Annual Report 2023