CHORUS LIMITED — Capital/Financing Update 2014

Jul 16, 2014

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Chorus Limited Level 10, 1 Willis Street P O Box 632 Wellington 6140 New Zealand Email: company.secretary@chorus.co.nz

STOCK EXCHANGE ANNOUNCEMENT

17 July 2014

Notification of issue of CFH securities

Chorus Limited has issued further Crown Fibre Holdings (CFH) securities as per the attached notice.

ENDS

For further information:

Andrew Hopkinson Treasurer Mobile: +64 (27) 249 5678 Email: Andrew.hopkinson@chorus.co.nz

Rule 2.7, 3.10.3, 3.10.4, 3.10.5

Appendix 3B

New issue announcement, application for quotation of additional securities and agreement

Information or documents not available now must be given to ASX as soon as available. Information and documents given to ASX become ASX’s property and may be made public.

Introduced 01/07/96 Origin: Appendix 5 Amended 01/07/98, 01/09/99, 01/07/00, 30/09/01, 11/03/02, 01/01/03, 24/10/05, 01/08/12, 04/03/13

Name of entity

Chorus Limited (“ Chorus ”)

ABN

152 485 848

We (the entity) give ASX the following information.

Part 1 - All issues

You must complete the relevant sections (attach sheets if there is not enough space).

1 +Class of +securities issued or to CFH Equity Securities, CFH Debt Securities & CFH be issued Warrants 2 Number of[+] securities issued or 15,632,462 CFH Equity Securities to be issued (if known) or 15,632,462 Debt Securities maximum number which may be 920,783 CFH Warrants issued

3 Principal terms of the+securities (e.g. if options, exercise price and expiry date; if partly paid +securities, the amount outstanding and due dates for payment; if +convertible securities, the conversion price and dates for conversion)

The CFH Equity Securities are redeemable preference shares carrying no right to vote at meetings of holders of ordinary Chorus shares, but entitle the holder to a right to a repayment preference on liquidation. The CFH Debt Securities are unsecured, non interest bearing and carry no voting rights at meetings of holders of ordinary Chorus shares. The CFH Warrants are an option to acquire ordinary shares in Chorus on a specified exercise date at a set strike price. The terms of the issue for the CFH Equity Securities, CFH Debt Securities and the CFH Warrants are as set out in thethe subscription agreement between Chorus and Crown Fibre Holdings Limited (CFH) dated 9 November 2011 (Subscription Agreement). Further details are set out on pages 139 to 142 of the demerger Scheme Booklet dated 13 September 2011 and available at http://www.chorus.co.nz/file/4926/scheme- booklet.pdf

• See chapter 19 for defined terms.

Appendix 3B Page 2

04/03/2013

• 4 Do the[+] securities rank equally in all respects from the[+] issue date with an existing[+] class of quoted +securities?

CFH Equity Securities

No.

• If the additional[+] securities do not rank equally, please state:

• the date from which they do

• the extent to which they participate for the next dividend, (in the case of a trust, distribution) or interest payment

• the extent to which they do not rank equally, other than in relation to the next dividend, distribution or interest payment

On a liquidation or winding up of Chorus, holders of CFH Equity Securities will have the right to repayment of the issue price ranking behind creditors of Chorus but ahead of the ordinary Chorus shares. The CFH Equity Securities will otherwise carry no right to share in the surplus assets of Chorus on winding up or liquidation.

CFH Debt Securities No.

The principal amount of each CFH Debt Security will consist of a senior portion, equal to the present value of the sum repayable on the CFH Debt Security, and a subordinated portion equal to the remainder of the face value. The senior portion will rank equally with all other unsecured, unsubordinated creditors of Chorus. The subordinated portion will rank below all other indebtedness of Chorus. On winding up, dissolution or liquidation of Chorus, no payment shall be made to holders of CFH Debt Securities in respect of the subordinated portion until all other indebtedness of Chorus is repaid in full.

CFH Warrants

N/a

5 Issue price or consideration 6 Purpose of the issue (If issued as consideration for the acquisition of assets, clearly identify those assets) 6a Is the entity an+eligible entity that has obtained security holder approval under rule 7.1A? If Yes, complete sections 6b – 6h in relation to the+securities the subject of this Appendix 3B, and comply with section 6i	$NZ1.00 per CFH Equity Security $NZ1.00 per CFH Debt Security Nilper CFH Warrant
	Call notice issued by Chorus to Crown Fibre Holdings Limited ("CFH") on 14 July 2014 pursuant to the terms of the Subscription Agreement. The funds are to be used by Chorus in the construction of the Ultra-Fast Broadband network in New Zealand.
	N/a

6b The date the security holder resolution under rule 7.1A was passed 6c Number of+securities issued without security holder approval under rule 7.1 6d Number of+securities issued with security holder approval under rule 7.1A 6e Number of+securities issued with security holder approval under rule 7.3, or another specific security holder approval (specify date of meeting) 6f Number of+securities issued under an exception in rule 7.2 6g If+securities issued under rule 7.1A, was issue price at least 75% of 15 day VWAP as calculated under rule 7.1A.3? Include the +issue date and both values. Include the source of the VWAP calculation. 6h If+securities were issued under rule 7.1A for non-cash consideration, state date on which valuation of consideration was released to ASX Market Announcements 6i Calculate the entity’s remaining issue capacity under rule 7.1 and rule 7.1A – complete Annexure 1 and release to ASX Market Announcements 7 +Issue dates Note: The issue date may be prescribed by ASX (refer to the definition of issue date in rule 19.12). For example, the issue date for a pro rata entitlement issue must comply with the applicable timetable in Appendix 7A. Cross reference: item 33 of Appendix 3B.	N/a
	N/a
	N/a
	N/a
	N/a
	N/a
	N/a
	N/a
	16 July 2014 for each of the CFH Equity Securities, CFH Debt Securities and the CFH Warrants

• See chapter 19 for defined terms.

Appendix 3B Page 4

04/03/2013

8 Number and +class of all +securities quoted on ASX (_including_the +securities in section 2 if applicable) 9 Number and +class of all +securities not quoted on ASX (_including_the +securities in section 2 if applicable)	Number	+Class
	396,369,767	fully paid ordinary shares
		+Class CFH Equity Securities (unquoted) CFH Debt Securities (unquoted) CFH Warrants (unquoted)
	Number	+Class
	146,210,731 146,210,731 8,182,505	CFH Equity Securities (unquoted) CFH Debt Securities (unquoted) CFH Warrants (unquoted)

10 Dividend policy (in the case of a trust, distribution policy) on the increased capital (interests)

CFH Equity Securities To the extent they have not been redeemed, dividends will become payable on an increasing proportion of the CFH Equity Securities from 2025 onwards. The dividend rate on the CFH Equity Securities will be equal to a reference rate plus a margin of 6% per annum. Chorus is not obliged to declare any dividend on CFH Equity Securities in respect of any period, but if it does not make a scheduled dividend on the CFH Equity Securities it may not make any distribution on ordinary shares until a subsequent dividend on the CFH Equity Securities is paid in full. The dividends payable on the CFH Equity Securities are non-cumulative. If at any time Chorus' credit rating is three notches or more below its initial rating, no dividends will be scheduled or payable on the CFH Equity Securities. Details of the dividends for the CFH Equity Securities are set out on pages 140 to 141 of the demerger Scheme Booklet dated 13 September 2011 and available at http://www.chorus.co.nz/file/4926/scheme- booklet.pdf CFH Debt Securities N/a CFH Warrants N/a

Part 2 - Pro rata issue

art 2 - Pro rata issue
11 Is security holder approval required? 12 Is the issue renounceable or non- renounceable? 13 Ratio in which the+securities will be offered	N/a
	N/a
	N/a

• See chapter 19 for defined terms.

Appendix 3B Page 6

04/03/2013

14 +Class of+securities to which the offer relates 15 +Record date to determine entitlements 16 Will holdings on different registers (or subregisters) be aggregated for calculating entitlements? 17 Policy for deciding entitlements in relation to fractions 18 Names of countries in which the entity has security holders who will not be sent new offer documents Note: Security holders must be told how their entitlements are to be dealt with. Cross reference: rule 7.7. 19 Closing date for receipt of acceptances or renunciations 20 Names of any underwriters 21 Amount of any underwriting fee or commission 22 Names of any brokers to the issue 23 Fee or commission payable to the broker to the issue 24 Amount of any handling fee payable to brokers who lodge acceptances or renunciations on behalf of security holders 25 If the issue is contingent on security holders’ approval, the date of the meeting 26 Date entitlement and acceptance form and offer documents will be sent to persons entitled	N/a
	N/a
	N/a
	N/a
	N/a
	N/a
	N/a
	N/a
	N/a
	N/a
	N/a
	N/a
	N/a

27 If the entity has issued options, N/a and the terms entitle option holders to participate on exercise, the date on which notices will be sent to option holders 28 Date rights trading will begin (if N/a applicable) 29 Date rights trading will end (if N/a applicable) 30 How do security holders sell their N/a entitlements in full through a broker? 31 How do security holders sell part N/a of their entitlements through a broker and accept for the balance?

• See chapter 19 for defined terms.

Appendix 3B Page 8

04/03/2013

32 How do security holders dispose N/a of their entitlements (except by sale through a broker)? 33 +Issue date N/a

Part 3 - Quotation of securities

You need only complete this section if you are applying for quotation of securities

• 34 Type of[+] securities ( tick one )

• (a) +Securities described in Part 1

• (b)[All other ][+][securities ]

Example: restricted securities at the end of the escrowed period, partly paid securities that become fully paid, employee incentive share securities when restriction ends, securities issued on expiry or conversion of convertible securities

Entities that have ticked box 34(a)

Additional securities forming a new class of securities

Tick to indicate you are providing the information or documents

35 If the[+] securities are[+] equity securities, the names of the 20 largest holders of the additional[+] securities, and the number and percentage of additional[+] securities held by those holders

36 If the[+] securities are[+] equity securities, a distribution schedule of the additional +securities setting out the number of holders in the categories

• 1 - 1,000

• 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over

• 37 A copy of any trust deed for the additional[+] securities

Entities that have ticked box 34(b)

• 38 Number of[+] securities for which +quotation is sought

39 +Class of +securities for which quotation is sought 40 Do the[+] securities rank equally in all respects from the[+] issue date with an existing[+] class of quoted +securities? If the additional[+] securities do not rank equally, please state:  the date from which they do  the extent to which they participate for the next dividend, (in the case of a trust, distribution) or interest payment  the extent to which they do not rank equally, other than in relation to the next dividend, distribution or interest payment 41 Reason for request for quotation now Example: In the case of restricted securities, end of restriction period (if issued upon conversion of another[+] security, clearly identify that other[+] security) Number +Class 42 Number and +class of all +securities quoted on ASX ( including the[+] securities in clause 38)

• See chapter 19 for defined terms.

Appendix 3B Page 10

04/03/2013

Quotation agreement

• 1 +Quotation of our additional +securities is in ASX’s absolute discretion. ASX may quote the[+] securities on any conditions it decides.

• 2 We warrant the following to ASX.

• The issue of the[+] securities to be quoted complies with the law and is not for an illegal purpose.

• There is no reason why those[+] securities should not be granted +quotation.

• An offer of the[+] securities for sale within 12 months after their issue will not require disclosure under section 707(3) or section 1012C(6) of the Corporations Act.

Note: An entity may need to obtain appropriate warranties from subscribers for the securities in order to be able to give this warranty

• Section 724 or section 1016E of the Corporations Act does not apply to any applications received by us in relation to any[+] securities to be quoted and that no-one has any right to return any[+] securities to be quoted under sections 737, 738 or 1016F of the Corporations Act at the time that we request that the[+] securities be quoted.

• If we are a trust, we warrant that no person has the right to return the +securities to be quoted under section 1019B of the Corporations Act at the time that we request that the[+] securities be quoted.

• 3 We will indemnify ASX to the fullest extent permitted by law in respect of any claim, action or expense arising from or connected with any breach of the warranties in this agreement.

• 4 We give ASX the information and documents required by this form. If any information or document is not available now, we will give it to ASX before +quotation of the +securities begins. We acknowledge that ASX is relying on the information and documents. We warrant that they are (will be) true and complete.

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Sign here: ......................................................... Date: 16 July 2014 ~~(Director/C~~ ompany secretary)

Print name: Vanessa Oakley

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• See chapter 19 for defined terms.

Appendix 3B Page 11

04/03/2013

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NZX Client Market Services NZX Limited Wellington

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

Email: company.secretary@chorus.co.nz

17 July 2014

NOTIFICATION OF ISSUE OF SECURITIES

For the purposes of Listing Rule 7.12.1 Chorus Limited (NZX: CNU) ( Chorus ) advises that the following Securities have been issued pursuant to the terms of the subscription agreement between Chorus and Crown Fibre Holdings Limited ( CFH ) dated 9 November 2011 ( Subscription Agreement ):

• a) Class of Securities

CFH Equity Securities (unquoted)

CFH Warrants (unquoted)

• ISIN Not applicable Not applicable

• b) Number issued 15,632,462 920,783 c) Issue price $1.00 per CFH Equity Security Nil d) Payment Cash Nil e) Amount paid up Paid in full Not applicable

• f) Principal terms of CFH Equity Securities are Securities (other redeemable preference shares than for Quoted carrying no right to vote at Securities) meetings of holders of ordinary Chorus shares, but entitle the holder to a right to a repayment preference on liquidation. Dividends will become payable on a portion of the CFH Equity Securities from 2025 onwards, with the portion of CFH Equity Securities that attract dividends increasing over time.

CFH Warrants are an option to acquire ordinary shares in Chorus on a specified exercise date at a set strike price.

Further information regarding the terms of the CFH Warrants is set out in Section 6.4.4 of the demerger scheme booklet dated 13 September 2011 which is available at http://www.chorus.co.nz/file/4926/s ch%20erne-booklet,%20odf

Further information regarding the terms of the CFH Equity Securities is set out in Section 6.4.4 of the demerger scheme booklet dated 13 September 2011 which is available at http://www.chorus.co.nz/file/4926/ sch%20erne-booklet,%20odf

Chorus Limited

• g) Percentage of 3.37% of those CFH Equity 3.37% of those CFH Warrants eligible the total Class Securities eligible to be issued to be issued under this programme of Securities under this programme issued

• h) Reason for issue Call notice issued by Chorus to CFH Call notice issued by Chorus to CFH on 14 July 2014 pursuant to the on 14 July 2014 pursuant to the terms of the Subscription terms of the Subscription Agreement Agreement

• i) Specific authority Board resolution passed on 3 April Board resolution passed on 3 April for issue 2012 2012

• j) Terms or details The terms of issue are as set out in The terms of issue are as set out in of issue the Subscription Agreement. the Subscription Agreement. Further Further information regarding the information regarding the terms of terms of the CFH Equity Securities the CFH Warrants is set out in Section is set out in Section 6.4.4 of the 6.4.4 of the demerger scheme demerger scheme booklet dated 13 booklet dated 13 September 2011 September 2011 which is available which is available at at http://www.chorus.co.nz/file/4926/s http://www.chorus.co.nz/file/4926/ ch%20erne-booklet,%20odf sch%20erne-booklet,%20odf

• k) Total number of 146,210,731 (unquoted) 8,182,505 (unquoted) Securities of Class after issue

• l) Treasury Stock Not applicable Not applicable (acquisition only)

• m) Date of issue 16 July 2014 16 July 2014

Yours faithfully

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Vanessa Oakley General Counsel & Company Secretary

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Chorus Limited