CHORUS LIMITED — Governance Information 2011

Nov 20, 2011

Monday, 21 November 2011

Pre-quotation Disclosure

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The following information is provided to ASX Limited for release to the market in connection with the official quotation and deferred settlement trading of the fully paid ordinary shares in Chorus Limited (ARBN 152 485 848) ( Chorus and Chorus Shares ) which will commence at 12.00pm (AEDST) today.

The demerger of Chorus from Telecom Corporation of New Zealand Limited ( Telecom ) will be effected by a scheme of arrangement between Telecom and its shareholders, and Chorus, Telecom New Zealand Limited and Chorus New Zealand Limited, pursuant to Part XV of the Companies Act 1993 of New Zealand (the Scheme ).

The terms 'Eligible Shareholder', 'Ineligible Shareholder', 'Sale Agent', 'Sale Facility' and 'Telecom Shares' which are used below, are defined in the Telecom Scheme Booklet dated 13 September 2011 ( Scheme Booklet ).

Scheme Timetable

The current timetable for the carrying out of the Scheme is set out below. These dates may change at Telecom's discretion (with the agreement of ASX).

Event	Date
Receipt of Final Court Orders	11 November 2011
Chorus Shares commence trading on ASX on a deferred settlement basis (Chorus Shares traded on ASX on 21 November to 30 November (inclusive) will not settle according to ASX's standard settlement timing, but will instead settle on 6 December 2011)	21 November 2011
Record Date (and relevant time) (all Eligible Shareholders who hold Telecom Shares at this time and date will be entitled to receive Chorus Shares)	7pm (NZ time) on 25 November 2011
Demerger Date (distribution of Chorus Shares to Eligible Shareholders and the Sale Agent)	30 November 2011
Chorus Shares commence trading on ASX on a normal settlement basis	1 December 2011
Dispatch of payment to Ineligible Shareholders for Chorus Shares sold under the Sale Facility	On or about 23 December 2011

Indicative statement of 20 largest shareholders

Attachment 1 is an indicative statement setting out the names of the twenty largest holders of Chorus Shares and the number and percentage of Chorus Shares held by those holders.

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Indicative distribution of Chorus shares

Attachment 2 is an indicative distribution of Chorus Shares in the form contained in Appendix 1A, paragraph 48.

Shareholder entitlements

Pursuant to the Scheme:

• (a) each Eligible Shareholder will receive one Chorus Share for every five Telecom Shares that they hold at 7pm (NZ time) on the Record Date (rounded to the nearest whole number, which may be zero); and

• (b) in respect of each Ineligible Shareholder, the Sale Agent will receive one Chorus Share for every five Telecom Shares held by the Ineligible Shareholder at 7pm (NZ time) on the Record Date (rounded to the nearest whole number, which may be zero). The Sale Agent will, as soon as reasonably practicable (and, in any event, within 15 business days (as defined in the NZSX Listing Rules) following the Demerger Date or such longer period of time which the Sale Agent and Telecom determine), sell those Chorus Shares on the NZSX and remit the proceeds of sale to the Ineligible Shareholders, free of any brokerage costs.

Telecom shareholders can call 1800 501 366 (within Australia), 0800 737 100 (within New Zealand) or +64 9 488 8777 (from outside Australia or New Zealand) if they have questions in relation to their entitlements under the Scheme. The information line is open from 8.30 to 5pm (AEDST for the Australian number, and NZ time for the other numbers) Monday to Friday.

Conditions Precedent to the Scheme

All of the conditions precedent to the Scheme have been satisfied or waived.

Chorus Corporate Governance Statement

Attachment 3 is a copy of Chorus' Corporate Governance Statement.

Chorus Securities Trading Policy

Attachment 4 is a copy of Chorus' Securities Trading Policy.

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Attachment 1 – Indicative statement of 20 largest shareholders as at 17 November 2011

Name	Number of Chorus shares held	% Chorus shares held
NATIONAL NOMINEES NEW ZEALAND LIMITED - NZCSD	79,687,637	20.70%
HSBC NOMINEES (NEW ZEALAND) LIMITED A/C STATE STREET -NZCSD	52,650,303	13.67%
HSBC NOMINEES (NEW ZEALAND) LIMITED - NZCSD	48,416,613	12.57%
JPMORGAN CHASE BANK NA - NZCSD	38,477,894	9.99%
NATIONAL NOMINEES LIMITED	19208853	4.99%
ACCIDENT COMPENSATION CORPORATION - NZCSD	16,036,606	4.17%
JP MORGAN NOMINEES AUSTRALIA LIMITED	13776496	3.58%
CITIBANK NOMINEES (NEW ZEALAND) LIMITED - NZCSD	11,333,562	2.94%
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED	10810148	2.81%
NEW ZEALAND SUPERANNUATION FUND NOMINEES LIMITED -NZCSD	10,097,958	2.62%
PREMIER NOMINEES LTD -ONEPATH WHOLESALE AUSTRALASIAN SHR FUND -NZCSD	4,778,557	1.24%
CITICORP NOMINEES PTY LIMITED	4555372	1.18%
TEA CUSTODIANS LIMITED - NZCSD	4,071,797	1.06%
NZGT NOMINEES LIMITED - AIF EQUITY FUND - A/C NZCSD	3,177,905	0.83%
AMP LIFE LIMITED	2745482	0.71%
COGENT NOMINEES PTY LIMITED	2058483	0.53%
WESTPAC NZ SHARES 2002 WHOLESALE TRUST - A/C NZCSD	1,992,637	0.52%
AMP INVESTMENTS STRATEGIC EQUITY GROWTH FUND - A/C NZCSD	1,849,113	0.48%
CUSTODY AND INVESTMENT NOMINEES LIMITED - A/C NZCSD	1,811,409	0.47%
ASTERON LIFE LIMITED - NZCSD	1,743,485	0.45%

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Attachment 2 – Indicative distribution of Chorus shares as at 17 November 2011

Category	Number of holders
1 – 1,000	30112
1,001 – 5,000	6194
5,001 – 10,000	592
10,001 – 100,000	312
100,001 and over	59

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Attachment 3 – Chorus Corporate Governance Statement

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Chorus Limited Corporate Governance Statement

The board and management are committed to ensuring that Chorus maintains international best practice governance structures and adheres to the highest ethical standards. The board will regularly review and assess Chorus' governance structures and processes to ensure that they are consistent with international best practice, in both form and substance.

Chorus' approach to corporate governance

Framework

Chorus will have a dual listing of its shares on the New Zealand Stock Market ( NZSX ) and on the Australian Securities Exchange ( ASX ). Chorus will be required to comply with the full listing rules of the NZSX and ASX.

As a result of Chorus' stock exchange listings in New Zealand and Australia, it will be subject to the governance requirements of each of these jurisdictions. These include: the NZSX Listing Rules and Corporate Governance Best Practice Code; the New Zealand Financial Markets Authority's report titled ‘Corporate Governance in New Zealand Principles and Guidelines’ ( Corporate Governance in New Zealand Principles and Guidelines ); and the ASX Listing Rules and ASX Corporate Governance Council’s Principles and Recommendations

Where there are conflicts between the requirements or best practice recommendations of New Zealand and Australia, the board proposes to adopt practices and policies consistent with the requirements across both jurisdictions.

The board will continue to monitor developments in the governance area and review and update its governance practices to ensure that appropriate standards of governance for Chorus are maintained.

Compliance with NZSX Best Practice Code, Corporate Governance in New Zealand Principles and Guidelines and ASX Corporate Governance Council’s Principles and Recommendations

Chorus intends to comply with the NZSX Corporate Governance Best Practice Code and the Corporate Governance in New Zealand Principles and Guidelines in their entirety. The ASX Listing Rules require Chorus to release to the market a statement disclosing the extent to which Chorus intends to comply with the ASX Corporate Governance Council’s Principles and Recommendations set out in the second edition of the Corporate Governance Principles and Recommendations (as amended in 2010). Chorus intends to comply with each of the recommendations.

Further information

More detail about Chorus' governance practices and copies of its principal governance documents (including the board charter, the Nominations and Corporate Governance Committee charter, the Human Resources and Compensation Committee charter and the Audit and Risk Management Committee charter) will be available on its website following completion of the demerger of Chorus from Telecom Corporation of New Zealand Limited ( Telecom ) ( Demerger ).

The board of directors

Role of the board and responsibility

The board of directors has been appointed to govern Chorus in the interests of Chorus and its shareholders and to protect and enhance the value of the assets of Chorus. The board is the overall and final body responsible for all decision-making within the Company. In carrying out its role, the board will work to enhance the value of Chorus in the interests of Chorus and its shareholders. The board charter describes the board’s role and responsibilities and regulates internal board procedure. The board will also delegate a number of its responsibilities to board committees. The role of each committee is described below. To enhance efficiency, from Demerger, the board will delegate to the CEO and subsidiary company boards the

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day-to-day leadership and management of the Company. From Demerger, the CEO will also, in some cases, formally delegate certain authorities to his direct reports.

Board membership, size and composition

As at the date of this statement, the Chorus board comprises the existing Telecom directors. However, upon completion of the Demerger, there will be six directors: being a non-executive chairman and five nonexecutive directors. The post-Demerger board has a broad range of experience and skills appropriate to meet its objectives. Areas of expertise and experience include telecommunications, finance, legal, brand, marketing and international business. For details of individual directors see section 5.9 of the Scheme Booklet dated 13 September 2011 relating to the Demerger ( Scheme Booklet ).

The Nominations and Corporate Governance Committee will be responsible for making recommendations to the board regarding its size and composition. It will also review the criteria for the selection of directors to ensure the board comprises the right mix of skills and experience to meet the needs of Chorus.

Selection and role of chairman

Going forward, the chairman will be elected by the board from the non-executive directors. The postDemerger board supports the separation of the role of chairman and CEO. The chairman’s role will be to manage and provide leadership to the board and to facilitate the board’s interface with the CEO. The postDemerger chairman, Sue Sheldon, is a non-executive director and, as required by the board charter, is expected to be independent on the basis outlined below. For her biography, see section 5.9 of the Scheme Booklet.

Director independence

The post-Demerger board is committed to having a majority of directors who are judged by the board to be independent of judgement and character and free of disqualifying relationships with Chorus and/or other entities and people who might influence, or could be perceived by others to influence, such judgement.

In setting the criteria for determining independence, the board will consider the requirements under the NZSX Listing Rules and the guidance provided in the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations. Independence standards consistent with the requirements of both jurisdictions have been adopted by Chorus and are contained in the board charter. Chorus' board charter requires a majority of directors to be independent.

As set out in the Scheme Booklet, the directors' independence will be reviewed following completion of the Demerger. For further information about the directors’ interests see section 11.17 of the Scheme Booklet.

The board will review any determination it makes on a director’s independence on becoming aware of any information that indicates the director may have a relevant disqualifying relationship. For this purpose, directors will be required to ensure that they immediately advise of any new or changed relationships so the board can consider and determine the materiality of the relationship.

Conflicts of interest

The board is conscious of its obligations to ensure that directors avoid conflicts of interest (both real and perceived) between their duty to Chorus and their own interests. The board charter outlines the board’s policy on conflicts of interest. Where conflicts of interest do exist at law, then the relevant director will be required to disclose their interest and excuse themselves from any relevant board discussions. Such a director will not be permitted to receive any board papers in respect of those interests and, in accordance with the relevant stock exchange listing rules, may not exercise his or her right to vote in respect of such matters.

Nominations and appointment of new directors

The procedures for the appointment and removal of directors will ultimately be governed by the Company’s constitution. The board may appoint directors to fill casual vacancies that occur or to add additional persons to the board up to the maximum number (currently 12) prescribed by the constitution. Recommendations for

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nominations of new directors will be made by the Nominations and Corporate Governance Committee and considered by the board as a whole. External consultants will be used to access a wide base of potential candidates and to review the suitability of candidates for appointment. When recommending a candidate to act as director, the Nominations and Corporate Governance Committee will take into account such factors as it deems appropriate, including the background, experience, professional skills and personal qualities of the candidate, whether their skills and experience will augment the existing board and their availability to commit themselves to the role.

If the board appoints a new director during the year, that person will stand for election by shareholders at the next annual meeting. Shareholders will be provided with relevant information on the candidates standing for election in the notice of meeting.

Diversity within the board

The board recognises that building diversity across Chorus will deliver enhanced business performance – this includes building diversity of thought within the board of directors. Diverse backgrounds, experience and perspectives are critical to building a leading edge business, better able to solve problems and implement new ideas. The composition of the board will be tailored to address the future needs of the Company.

Letters of appointment

All directors have signed formal letters of appointment (conditional, in some cases, on completion of the Demerger) setting out the arrangements of their appointment, including their duties, terms and conditions and term of appointment, expectations of the role and remuneration. The terms of appointment may be amended with the agreement of the board.

Board performance review

The chairman of the board will regularly address various issues with directors, including individual performance. The board will also undertake regular discussions on governance and performance issues and annually review its own performance as a whole against the board charter and each committee against its charter.

CEO performance review

The Human Resources and Compensation Committee will formally review the performance of the CEO annually in respect of the immediately preceding financial year. This evaluation will be undertaken using criteria set by the committee that may include the performance of the business, the accomplishment of strategic and operational objectives and other non-quantitative objectives agreed at the beginning of each year. The committee will be responsible for the evaluation of the CEO against his key performance objectives and will recommend a performance outcome to the board for approval. The committee will periodically review the CEO’s key performance objectives to ensure they are an appropriate measure of the CEO’s performance. For further details of the employment arrangements relating to the CEO see section 5.11.5 of the Scheme Booklet.

The CEO will report to the Human Resources and Compensation Committee at least annually on management succession planning and management development.

Executive performance review

The CEO will be responsible for formally reviewing the performance of his direct reports against their key performance objectives annually in respect of the immediately preceding financial year. This evaluation will be undertaken using criteria set annually by the CEO that may include the performance of the business, the accomplishment of strategic and operational objectives and other non-quantitative objectives agreed with the Human Resources and Compensation Committee at the beginning of each financial year. The Human Resources and Compensation Committee will review and approve the CEO’s remuneration recommendations for his direct reports, including the payment level of their annual short-term incentives and any other variation

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of the terms and conditions of employment. For further details relating to executive remuneration see section 5.11.6 of the Scheme Booklet.

Retirement and re-election of directors

Chorus directors have no fixed term of office but are subject to the retirement provisions contained in the constitution, company policies and relevant stock exchange listing rules. In addition, under the NZSX Listing Rules, at least one third (or the number nearest to one third) of the directors are required to retire from office at the annual meeting each year (although, as a condition to waivers from NZX in connection with Demerger, one half of the directors are required to retire at the 2012 annual meeting) but shall be eligible for re-election at that meeting. One managing director is exempt from the requirement to stand for re-election, but that managing director is counted in determining the number of directors that must retire (at this stage, no managing director has been appointed). Under the ASX Listing Rules, a director must not hold office without re-election past the third annual meeting following the director’s appointment or three years, whichever is the longer. The retiring directors at any annual meeting will be those who have been longest in office since they were last elected. Chorus' notice of meeting will detail those director(s) standing for re-election at Chorus' annual meeting.

Board access to information and advice

Chorus' general counsel and company secretary will be responsible for supporting the effectiveness of the board by ensuring that policies and procedures are followed and for coordinating the completion and dispatch of the board agendas and papers.

All directors will have access to senior management, including the general counsel and company secretary, to discuss issues or obtain information on specific areas or items to be considered at the board meeting or other areas they consider appropriate. The board, board committees and each director will have the right, subject to the approval of the chairman, to seek independent professional advice at Chorus' expense to assist them in carrying out their responsibilities. Further, the board and board committees will have the authority to secure the attendance of outsiders with relevant experience and expertise at board meetings.

Directors’ shareholding

As a matter of Company policy, non-executive directors will be encouraged to hold Chorus shares. For disclosure of each director’s current shareholding in Telecom, see section 11.22 of the Scheme Booklet. Details of each director's shareholding in Chorus will be released to the market following completion of the Demerger. Directors will be required to comply with Chorus' Insider Trading Policy and Rules when trading in Chorus shares. For further information about Chorus' Insider Trading Policy see Insider Trading Policy and trading in Chorus shares below.

Indemnities and insurance

As permitted by the constitution, deeds of indemnity will be given to directors for potential liabilities and costs they may incur for acts or omissions in their capacity as directors. In addition, deeds of indemnity will be given to certain senior staff for potential liabilities and costs they may incur for acts or omissions in their capacity as employees of Chorus, directors of Chorus subsidiaries or directors of non-Chorus companies in which Chorus holds interests.

Chorus will hold directors' and officers' liability insurance to cover risks normally covered by such policies arising out of acts or omissions of directors and employees in their capacity as such. Insurance will not be provided for dishonest, fraudulent, malicious or wilful acts or omissions.

Meetings of the board and conduct of meetings

It is intended that the board will have eight scheduled meetings each year. In addition, it will meet whenever necessary between the scheduled meetings to discuss key strategic issues or urgent business. The chairman and the CEO will establish meeting agendas to ensure adequate coverage of key issues during the year. The directors will generally receive materials for board meetings approximately seven days in advance of the

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meeting, except in the case of special meetings for which the time period may be shorter due to the urgency of the matter to be considered.

Executives and other senior employees will regularly attend board meetings and will also be available to be contacted by directors between meetings. The board and its committees will also meet regularly in executive session, presided over by the chairman, without the CEO or other management present. Such sessions, in particular, will deal with management performance and remuneration issues, board performance evaluation issues, and discussions with the general manager group risk and audit and external auditor to promote a robust independent audit process.

Board committees

Board committees and membership

Three board committees will assist in the execution of the board’s responsibilities: the Human Resources and Compensation Committee; the Nominations and Corporate Governance Committee; and the Audit and Risk Management Committee. The committees will have a number of scheduled meetings each year to coincide with the timing of the various responsibilities of that committee. Other committees may be established from time to time to consider matters of special importance or to exercise the delegated authority of the board.

Each board committee will have a charter summarising the role, rights, responsibilities and membership requirements for that committee. The board will annually review the charters of the board committees and their performance against those charters.

Committee composition

The board will be responsible for appointing committee members according to the skills, experience and other qualities they bring to the committee. All committees will be required to comprise a minimum of three members. The proposed composition of the Human Resources and Compensation Committee and the Nominations and Corporate Governance Committee are each expected to satisfy the requirement of the respective committee charter that a majority of directors be independent. The proposed composition of the Human Resources and Compensation Committee satisfies the requirement of its charter that all proposed members are non-executive directors. In accordance with its charter, all proposed members of the Audit and Risk Management Committee are expected to be independent.

Committee roles and operations

After each committee meeting, the board will be provided with minutes of the committee meeting at the next meeting of the board. Where appropriate, the board will be given a verbal report by the chairman of the committee on the outcomes of the meeting. The structure, proposed membership and responsibilities of the board’s committees are summarised below. Each committee’s role and responsibilities are also outlined in the relevant committee charter.

Committee roles, responsibilities and membership

COMMITTEE	HUMAN RESOURCES AND COMPENSATION COMMITTEE	AUDIT AND RISK MANAGEMENT COMMITTEE	NOMINATIONS AND CORPORATE GOVERNANCE COMMITTEE
Role	- To assist the board in overseeing the management of the human resources activities of Chorus	- To assist the board in its oversight of both the integrity of the financial reporting and risk management framework - To ensure the independence of the external auditor	- To identify and recommend to the board, nominations for members of the board - To review and develop Chorus' corporate governance principles and make recommendations to

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COMMITTEE	HUMAN RESOURCES AND COMPENSATION COMMITTEE	AUDIT AND RISK MANAGEMENT COMMITTEE	NOMINATIONS AND CORPORATE GOVERNANCE COMMITTEE
			the board
Responsibilities	- Review the current remuneration and human resources strategy, structure and policy of Chorus - Review and make recommendations to the board on non-executive director remuneration, having regard to any relevant factors (including the shareholder approved fee pool) - Review and evaluate the CEO’s performance against key objectives and make recommendations to the board on the CEO’s remuneration - Review and approve the conditions and terms of employment of the CEO’s direct reports - Review and recommend to the board the appointment or termination of the CFO and general counsel - Review and make recommendations to the board with respect to incentive remuneration plans and equity-based compensation plans - Make recommendations to the board with respect to the measurable objectives to be set by the board for achieving gender diversity - Annually assess the effectiveness of the diversity policy, the measurable objectives set for achieving diversity, the progress toward achieving them and make recommendations to the board in respect of such assessments - Ensure that the appropriate disclosures with respect to	- Oversee all matters concerning the integrity of the financial statements and financial reporting systems and processes - Ensure compliance with financial reporting and related regulatory requirements - Consider the adequacy of internal controls after consultation with management and the external and internal auditors - Review the six-monthly fraud report and make any necessary disclosures to the external auditor - Ensure that an appropriate risk management framework exists and review principal risks - Appoint the external auditors (subject to annual shareholder approval) - Review the external auditors’ qualifications, performance and independence - Approve the appointment of the internal auditor and review the activities and performance of the internal audit function - Review Chorus' compliance with applicable laws, regulations and standards through Chorus' compliance frameworks - Provide oversight of the structure and outcome of remuneration incentive arrangements as they relate to key internal audit personnel	- Recommend candidates for appointment to the board based on the criteria set out in the board charter - Oversee the performance evaluation of the board and review board succession planning - Be actively involved in succession planning for the chairman - Review, on an ongoing basis, the governance structures and processes of the board and make recommendations to the board - Recommend to the board the removal of any director, subject to the provisions of the constitution - Make recommendations to the board as to its size

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COMMITTEE	HUMAN RESOURCES AND COMPENSATION COMMITTEE	AUDIT AND RISK MANAGEMENT COMMITTEE	NOMINATIONS AND CORPORATE GOVERNANCE COMMITTEE
	diversity are made in Chorus' annual report - Annually review and report to the board on the relative proportion of women and men who make up Chorus' workforce, at all levels of the business

Audit governance and independence

Audit and Risk Management Committee

The proposed members of the Audit and Risk Management Committee include members who have appropriate financial experience and an understanding of the industry in which Chorus operates. All committee members are expected to be independent (in accordance with the independence criteria contained in the board charter) and are financially literate. The Committee charter provides that Committee members (and their family members and entities to which they are related) must not receive (directly or indirectly) any compensation or consultancy, advisory or other fees from Chorus (other than those relating to their services as committee and board members or retirement payments made under the constitution) and must not be an affiliated person of Chorus.

For the industry knowledge and financial experience of other members of the Audit and Risk Management Committee see section 5.9 of the Scheme Booklet.

External audit independence

The Audit and Risk Management Committee will be responsible for making recommendations to the board concerning the appointment of Chorus' external auditors and their terms of engagement. The board has appointed KPMG as Chorus' auditor for the upcoming year. The chair of the Audit and Risk Management Committee may invite such persons to attend the committee meetings as deemed necessary. It is proposed that the committee will regularly meet with the external auditor without management being present and meet management without the external auditor being present. Committee members will be able to contact the external auditor directly at any time.

Chorus is committed to auditor independence. The Audit and Risk Management Committee will review the independence and objectivity of the external auditor. For this reason, the work of the external auditor will be limited to audit and related assurance work only.

Under Chorus' External Audit Independence Policy, the Audit and Risk Management Committee must preapprove all audit (including all statutory and regulatory audit services) and related assurance services provided by the auditor.

The External Audit Independence Policy requires rotation of audit partners every five years and places restrictions on an audit partner or audit manager being employed by Chorus in another role, and on the external auditor employing Chorus' CEO, CFO, financial controller or any other member of Chorus management who has acted in a financial oversight role.

The policy prohibits the auditor from providing certain specified services and is designed to ensure that related assurance services provided by Chorus' auditor are not perceived as conflicting with the independent role of the auditor.

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The general principles to be applied in assessing related assurance services are as follows:

• The external auditor should not have any involvement in the production of financial information or preparation of financial statements such that they might be perceived as auditing their own work; this includes the provision of valuation services where such valuation forms an input into audited financial information;

• The external auditor should not perform any function of management or be responsible for making management decisions;

• The external auditor should not be responsible for the design or implementation of financial information systems; and

• The separation between internal and external audit should be maintained.

Aside from core audit services, Chorus' auditor may provide the following services with prior approval from the Audit and Risk Management Committee:

• Other assurance services (eg, TSO certification, trust deed reporting);

• Accounting policy advice (including opinions on compliance with International Financial Reporting Standards);

• Listing advice; and

• Accounting/technical training.

However, it is not considered appropriate for Chorus' auditor to provide:

• Bookkeeping/other services related to accounting records or financial statements;

• The design of financial information systems;

• Appraisal/valuation services/opinions as to fairness;

• Internal audit services;

• Structured finance advice;

• Due diligence services;

• Legal services (these are services that could be provided only by a person who is qualified in law);

• Tax planning, strategy and compliance services;

• Management functions;

• Broker/dealer/investment adviser/investment banking services;

• Services of an expert as an advocate;

• Actuarial services;

• Provision of temporary staff for appropriate assignments;

• Assistance in the recruitment of senior management; and

• Tax services to employees of Chorus who act in a financial reporting oversight role.

It is a requirement of the Audit and Risk Management Committee charter that the committee annually assesses and confirms to the board, the independence of the external auditor after consideration of the External Audit Independence Policy criteria. This will include assessing whether the independence of the external audit process has been maintained in light of the performance of any other assurance services.

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Attendance at annual meeting

Representatives of Chorus' external auditor will be available at Chorus' annual meeting to answer shareholder questions about the conduct of the audit and the content of the external auditors’ reports.

Controlling and managing risks

Approach to risk management

Through its risk management framework, Chorus will identify, assess and manage risks that affect its business, including specific pan-Chorus risks arising from the business direction and strategic environment. Chorus' risk management framework will be implemented through business processes, such as business planning, investment analysis, project management and operations management. Chorus' Managing Risk Policy requires Chorus' business and support groups to:

• Identify risks that relate to the achievement of their business objectives;

• Assess those risks and determine whether they are acceptable under existing controls or whether additional treatment is required;

• Respond appropriately to the risks, based on that assessment; and

• Monitor and report on the current status of risks and the effectiveness of their controls.

This systematic approach to managing risk will be performed on a planned or embedded basis and will be implemented throughout Chorus.

Management will regularly report to the board on the effectiveness of Chorus' management of its material business risks.

For further information on the specific risks facing Chorus' business, see section 9.2 of the Scheme Booklet.

Risk management roles and responsibilities

Risk management will take place in the context of normal business processes, such as business planning, investment analysis, project management and operations management. In addition, risk will be managed through Chorus policies that provide a framework for managing specific pan-Chorus risks arising from the Company’s business direction and strategic environment. To manage financial risks around treasury transactions, it is intended that the board will approve principles and policies specifying who may authorise transactions and segregate the duties of those carrying them out.

The Audit and Risk Management Committee will be responsible for ensuring that management has established a risk management framework that includes policies and procedures to effectively identify, treat and monitor principal business risks. The committee will also regularly review Chorus' risk profile.

Chorus' Audit and Risk Management Committee will receive reports on the effectiveness of the implementation of policies and processes designed to manage risk. The Audit and Risk Management Committee will receive reports from internal audit on the adequacy and effectiveness of Chorus' internal controls. The committee will regularly report this information to the board.

CEO/CFO assurance

Although Chorus is not required to comply with all of the provisions of the Australian Corporations Act 2001 , Chorus will require that its CEO and CFO make an annual declaration in relation to Chorus' financial statements in the form set out in s295A of the Australian Corporations Act. Section 295A requires the CEO and CFO to declare that: (a) Chorus' financial records have been properly maintained; (b) the financial statements comply with the accounting standards; and (c) the financial statements give a true and fair view. The board will receive a written assurance from the CEO and the CFO that, to the best of their knowledge and belief, the declaration provided by them in the form set out in s295A of the Australian Corporations Act is

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founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks.

Internal audit

Following completion of the Demerger, Chorus will establish an internal audit group based in New Zealand, and adopt an internal audit charter defining the internal audit group’s objectives, scope, independence, responsibilities and authority. The internal audit group’s primary objective will be to assist the board and CEO in exercising good governance by providing independent assurance on Chorus' control and risk management processes. The internal audit group will be independent from the activities and operations it audits, including risk management systems and has unrestricted access to Chorus' records and employees. The internal audit group will regularly perform audits across Chorus business units. The Audit and Risk Management Committee will ensure that the internal audit group is appropriately staffed and that its scope of work is adequate in light of the key risks facing Chorus.

The effectiveness of risk management within Chorus will be audited and augmented by regular independent external reviews.

Promoting ethical and responsible behaviour

Internal policies and procedures

Chorus employees will be responsible for ensuring that Chorus carries out its business activities in a way that maximises business opportunities, has due regard to all applicable legal and regulatory requirements and minimises Chorus' exposure to unacceptable legal and regulatory risk. Managers will be responsible for making sure that Chorus people are given appropriate information and training to assist them in complying with legal, regulatory and policy compliance obligations. Chorus will have dedicated compliance staff who will support employees and managers in these roles.

Chorus has a number of core internal policies and procedures, including:

• Directors' Code of Ethics;

• Governance Policy;

• Managing Risk Policy;

• Insider Trading Policy;

• Disclosure Policy;

• Diversity Policy; and

• Legal and Compliance Policy.

Following completion of the Demerger, the Chorus board and management will develop further operational policies, including policies relating to delegation of authority, health & safety, human resources matters, information management and technology.

Chorus intends to adopt an integrated compliance framework consistent with AS/NZ-3806 Compliance Programmes over a three-year cycle and implementation will be monitored by the Audit and Risk Management Committee.

Further detail on selected policies and procedures is set out below.

Directors' Code of Ethics

Chorus will expect its employees and directors to maintain the highest ethical standards. Chorus' Directors' Code of Ethics establishes the framework by which Chorus directors are expected to conduct their

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professional lives by facilitating behaviour and decision-making that meets Chorus' business goals and is consistent with Chorus' values, policies and legal obligations.

The Directors' Code of Ethics addresses:

• Conflicts of interest;

• Receipt of gifts;

• Corporate opportunities;

• Confidentiality;

• Expected behaviours (including to deal fairly and honestly with Chorus' people, professional advisers, customers, and suppliers);

• The proper use of Chorus' assets and information;

• Compliance with laws and Chorus policies;

• Delegated authority; and

• Reporting issues regarding breaches of the Directors' Code of Ethics, legal obligations or other Chorus policies.

Following completion of the Demerger, the Chorus board will develop a Code of Ethics applying to other Chorus people (including the CEO and CFO), which will addresses similar topics and establishes the behaviour expected of Chorus people.

Insider Trading Policy and trading in Chorus shares

Directors and employees are subject to restrictions under the law relating to dealing in Chorus securities and other related Chorus derivatives if they are in possession of inside information. Inside information is information that is not generally available and, if it were generally available, a reasonable person would expect it to have a material effect on the price or value of Chorus securities.

To help ensure compliance with these legal requirements, the Insider Trading Policy specifies that no director or Chorus employee may buy or sell Chorus shares while in possession of inside information. The policy also states that directors and Chorus employees in possession of inside information cannot directly or indirectly advise or encourage any person to deal in Chorus shares. The policy sets out additional rules for directors, executives, direct reports to the executive and certain other Chorus employees.

Compliance with the Insider Trading Policy will be monitored through education and notification by Chorus' share registrar when any director or officer engages in trading activities. Any breach of the Insider Trading Policy would be regarded very seriously. In addition, as required by the Securities Markets Act 1988 and the Securities Markets (Disclosure of Relevant Interests by Directors and Officers) Regulations 2003 , all trading by directors and officers will be reported to NZX. Trading by directors will also be reported to ASX.

Disclosure Policy

Chorus' Disclosure Policy governs communications with shareholders and other stakeholders. Chorus is committed to providing comprehensive continuous disclosure to shareholders and other stakeholders and complying with the listing rules of the stock exchanges on which Chorus is listed.

Chorus will require certain senior people (the CEO, CFO, general counsel and company secretary and the general manager, capital markets) and, in some cases, the chairman, to discuss whether information is material prior to its release.

Chorus will appoint a disclosure officer soon after completion of the Demerger who, together with the general counsel and company secretary, will be responsible for ensuring that all material information is lodged, as soon as practicable, simultaneously with the NZX and ASX.

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The disclosure officer will ensure that such information is published on Chorus' website where appropriate, with further dissemination through broadcast emails to news agencies and other market commentators. Disclosure practices will be monitored by the disclosure officer.

Management will be responsible for ensuring compliance with the policy.

Chorus' website will contain media releases, periodic financial information, current and past annual reports, dividend histories, notices of meeting, a list of shareholders’ frequently asked questions and other information about the Company. Chorus intends to webcast its investor and analyst briefings over its website where appropriate.

Full participation of shareholders at the annual meeting will be encouraged. Chorus intends to webcast its 2012 annual meeting live. Shareholders will have the opportunity to submit questions prior to the meeting and will be given the opportunity to ask questions of the chairman, directors and auditor during the meeting.

Diversity at Chorus

Chorus believes that building diversity of thought across the organisation will deliver enhanced business performance. Diverse backgrounds, experience and perspectives are critical to build a leading edge business and to deliver for our customers. Chorus is committed to attracting, recruiting, developing, promoting and retaining a diverse group of talented individuals who will help drive Chorus' business performance.

The board will be responsible for approving measurable objectives for achieving greater diversity at Chorus developed by Chorus' senior managers and the Human Resources and Compensation Committee and conducting annual assessments of the measurable objectives and progress made towards achieving them. The committee will be responsible for recommending measurable objectives to the board and reporting on progress against those objectives.

These responsibilities are set out in the respective board and committee charters.

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Attachment 4 – Chorus Securities Trading Policy

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Insider Trading Policy December 2011

THIS POLICY APPLIES TO ALL DIRECTORS, OFFICERS AND EMPLOYEES OF CHORUS WHO INTEND TO DEAL IN CHORUS RESTRICTED SECURITIES.

More specific and stringent rules (Additional Rules for Restricted Persons) ("Additional Rules"), also apply to dealing in Chorus Restricted Securities, by directors and certain employees of Chorus. The Additional Rules form part of this Policy and are set out in the Appendix.

Statement

Chorus Limited (“ Chorus ”) is committed to complying with all legal and statutory requirements. New Zealand and Australian legal requirements make it unlawful to deal in Chorus Restricted Securities while in possession of Inside Information.

No Restricted Person (as defined in the Additional Rules) or employee may deal in Chorus Restricted Securities, or the securities of any other issuers, or encourage others to do so, while in possession of Inside Information.

Confidential information should not be disclosed to third parties unless those persons are covered by express or implied duties of confidentiality.

In this Policy:

• "

• deal " includes applying for, acquiring or disposing of Chorus Restricted Securities or agreeing to do so, whether as principal or

agent.

• "

• Chorus Restricted Securities " means any Chorus shares, options, derivatives and debt securities. Chorus Restricted Securities include:

• Ordinary shares of Chorus listed on the NZSX or ASX;

• o Chorus debt securities (including EMTN bonds) listed on the Luxembourg Stock Exchange; and

• o any other securities of Chorus and any options, derivatives or other financial products issued or created over or in respect of any securities of Chorus.

The Insider Trading Policy applies to any dealing in which you are involved or instrumental, whether or not the Chorus Restricted Securities are held or received in your own name or that of your spouse, children, other relatives, associates, trusts of which you are a trustee or companies which you

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control.

Exception

This Policy may be reviewed to allow exceptions for Restricted Persons or employees in possession of Inside Information to acquire or be issued Chorus shares under any employee incentive arrangements approved by the Board.

family, friends, nominees, partners, and trusts or companies you control – knowing, or where you ought reasonably to have known, that the other person will or is likely to use that information to deal in, continue to hold, or procure, advise or encourage someone else to deal in, or hold, Chorus Restricted Securities.

You should follow the guidance in this Policy to reduce any risk of liability for insider trading.

Guidance

Fundamental Rule - No dealing may be done while in possession of Inside Information

This is the primary rule under the insider trading laws. If you have any Inside Information, it is illegal for you to:

• deal in Chorus Restricted Securities;

• procure, advise or encourage another person to deal in or hold Chorus Restricted Securities;

• procure, advise or encourage a person to procure, advise or encourage another person to deal in or hold Chorus Restricted Securities; or

• directly or indirectly communicate, or pass on the Inside Information anyone else – including colleagues,

This offence, called “insider trading”, can subject you to criminal liability including large fines and/or imprisonment, and civil liability, which may include being sued by another party or Chorus, for any loss suffered as a result of illegal dealing.

The Insider Trading Policy restricts dealing in Chorus Restricted Securities. It does not replace your legal obligations. You should be aware that insider trading laws relate to a broad range of securities including interests in managed investment schemes, superannuation products, and other financial products which are able to be traded on a financial market. If you have inside information concerning securities (including the financial products described) insider trading laws will apply to your conduct in relation to those securities. You should satisfy yourself of compliance with insider trading laws before making any

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decisions in relation to those securities.

Information?

What is “Inside Information”?

“ Inside Information ” is information

that:

• is not generally available; and

• if it were generally available, a reasonable person would expect it to have a material effect on the price or value of securities.

Information is " generally available " if:

• it is readily obtainable; or

• it is made known to people who commonly invest in the securities (such as by NZX or ASX announcements) and since it was made known, a reasonable period for it to be disseminated among such persons has elapsed.

It does not matter how you come to know the Inside Information (including whether you learn it in the course of carrying out your responsibilities, or in passing in the corridor, or in a lift, or at a social function).

Information includes rumours, matters of supposition, intentions or likely intentions of a person (including Chorus or its subsidiaries), and information, which is insufficiently definite to warrant disclosure to the public.

What are some examples of Inside

The following list is illustrative only. Inside Information could include information, which has not been released to the market, concerning:

• an unannounced upcoming performance announcement, especially if it contains unexpected results;

• the unannounced imminent introduction of an important new product or service;

• a possible change in the strategic direction of Chorus;

• a possible acquisition or sale of any material assets or company by Chorus;

• entry into or the likely entry into or termination or likely termination of material contracts or other business arrangements which are not publicly known;

• a possible change in Chorus's capital structure;

• a change in the historical pattern of dividends;

• executive management changes;

• a material legal claim by or against Chorus;

• major new regulation of Chorus; or

• any other material and unexpected liability.

If you have knowledge of any of these matters or any other information likely to affect the price or value of Chorus

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Restricted Securities in the market, or you can procure a decision whether or not to deal in the Chorus Restricted Securities, you should not deal in those Chorus Restricted Securities until such matters become public knowledge and a reasonable period for the information to be disseminated has elapsed.

Short term dealing should be avoided Short term dealing is buying and selling Chorus Restricted Securities over a very short time period (within a 3 month period). You should not engage in short term trading unless there are exceptional circumstances discussed and approved by the General Counsel and Company Secretary. If you did this in relation to Chorus Restricted Securities it might give rise to allegations of insider trading, particularly if short term dealing is undertaken on a regular basis, in large amounts, or around important events which affect the price of the Chorus Restricted Securities. These events may not be expected or known by you, but if they do occur your short term dealing may be viewed adversely with the benefit of hindsight. Therefore, to reduce the risk of an allegation of insider trading, do not deal in Chorus Restricted Securities on a short-term basis.

Chorus Employees’ Participation in the Employee Share Schemes or Dividend Reinvestment Plan (DRP)

The acquisition of shares under any Chorus Employee Share Scheme or DRP (if any or all of those are implemented by Chorus in future) while in possession of Inside Information will be caught by the definition of dealing in Chorus Restricted Securities for the purposes of the Insider Trading regime.

As a result, if Chorus implements any Employee Share Schemes or a DRP in future, any Chorus employees who participate in the Scheme or DRP who have Inside Information should cease their contributions to the Scheme or DRP as soon as becoming aware of that Inside Information (and processes for doing so will be provided as part of any such future Scheme or DRP). Chorus employees can recommence contributions to the Scheme or DRP once the information is no longer Inside Information (for example, once the Inside Information has been released publicly).

Please note that while we consider it important to be aware of potential Inside Information, it is likely that most Chorus employees will not have Inside Information and will be able to participate in the any future Chorus Employee Share Scheme or DRP

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without needing to cease contributions to the Schemes.

hold Chorus Restricted Securities. You could be liable in respect of dealing by these people.

If in doubt, don’t

The rules contained in this Policy do not replace your legal obligations. The boundary between what is (and is not) in breach of the law is not always clear. Sometimes behaviour that you consider to be ethical actually may be insider trading or it may give rise to the public drawing adverse inferences as to Chorus's conduct. If in doubt, don’t.

Dealing/Issue/Exercise Periods

You cannot avoid the insider trading laws by dealing in Chorus Restricted Securities through companies or trusts you control. If the companies or trusts that you control deal in Chorus Restricted Securities while you have Inside Information, you will be deemed to have procured the company or trust to deal in Chorus Restricted Securities, exposing yourself and the company or trust to liability.

There are no 'safe' periods for dealing in Chorus Restricted Securities. You may never deal in Chorus Restricted Securities if you have Inside Information.

Don't "tip" or encourage dealing by others

You should not either directly or indirectly advise or encourage any person to deal in Chorus Restricted Securities when you are in possession of Inside Information. You should take particular care not to "tip", which means to directly or indirectly communicate or cause to be communicated Inside Information to those who you know or suspect are likely to deal in or otherwise hold Chorus Restricted Securities or to procure others to deal in or otherwise

In addition, you should not deal in or procure, advise or encourage others to deal in, or tip, with respect to, securities of another company if you have Inside Information about that other company.

Chorus Inside Information should only be disclosed to other Chorus

personnel on a "need to know" basis

Inside Information should not be freely discussed by employees other than for work purposes. The "need to know" rule is part of Chorus’s general security policy. This will reduce the flow of Inside Information within Chorus and help lessen the risk of insider trading.

No Chorus Inside Information should be disclosed to third parties unless

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those third parties are covered by

express or implied duties of confidentiality

Implied duties of confidentiality arise for example with respect to disclosure to legal advisers for the purposes of obtaining legal advice, on (say) a proposed acquisition of another company. Express obligations will arise where specific confidentiality agreements are entered into to cover disclosure in specific instances. You are also referred to Chorus's Market Disclosure Policy.

This policy applies whether the dealing is to be done in New Zealand or overseas and whether or not the dealing relates to Chorus's New Zealand or foreign securities

Remember - if in doubt consult the General Counsel and Company Secretary or your own legal adviser.

Ownership

This is a CEO Policy that is owned by the General Counsel and Company Secretary. It will be updated twice yearly or as otherwise required or necessary.

Review Date

December 2011

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Additional Rules for Restricted Persons

Application

Secretary.

These Rules are in addition to New Zealand and Australian legislative requirements and apply to:

Persons covered by these additional restrictions are called “ Restricted Persons ”.

1. All Directors of Chorus;

2. The Chief Executive;

3. All members of the senior management team;

4. All direct reports to members of the senior management team;

5. To the extent not included above, all persons who manage a principal function of Chorus*;

Employees and directors will be considered responsible for the actions of trusts and companies controlled by them. In this respect, “control” is not to be construed in a technical way but by looking at how decisions are made in practice.

Dealing window

2. All members of the Financial Controllers Team;

3. All other people designated by the General Counsel and Company Secretary. Such designation may be by name, position or business function and shall be for such period of time as determined by the General Counsel and Company Secretary;

4. From time to time other persons may be temporarily designated as restricted persons, in which case the General Counsel and Company Secretary will keep a list and inform those persons when their temporary designation lapses.

5. If you are unsure as to whether these

6. Rules apply to you, you should contact the General Counsel and Company

Restricted Persons are prohibited from dealing in any Chorus Restricted Securities except in the 30 days commencing on the first trading day after:

• Release of half-year results to the Stock Exchanges;

• Release of full-year results to the Stock Exchanges; and

• Release of a prospectus for a general public offer of the same class of Chorus Restricted Securities.

Restricted Persons are not permitted to deal in any Chorus Restricted Securities during any other period unless the General Counsel and Company

Secretary provides a specific exemption

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in exceptional circumstances.

Exceptional Circumstances may

include: (i) where the Restricted Person is in severe financial hardship; or (ii) where the Restricted Person is required by a court order or other court enforceable undertaking to transfer or sell Chorus Restricted Securities.

Please note that, subject to any exception in this Policy for

acquiring options, rights or shares under any future Chorus employee incentive schemes, if you possess Inside Information you must not deal in Chorus Restricted Securities at any time – regardless of these periods.

Consent

1. Before dealing in Chorus Restricted Securities (or having Chorus Restricted Securities traded in your name or on your behalf), at any time, Restricted Persons must:

2. Notify the General Counsel and Company Secretary of your intention to deal in Chorus Restricted Securities and seek consent to do so (forms will be provided for this);

3. Confirm that you do not possess Inside Information;

4. Confirm that there is no known reason to prohibit dealing in any

Chorus Restricted Securities; and

• Where Exceptional Circumstances exist and the Restricted Person wishes to trade outside of a trading window, specify the nature of the Exceptional Circumstances.

By way of example, consent is required should you wish to:

• acquire or dispose of Chorus shares (including a disposal of shares that have been acquired through the exercise of any options or rights (zepos) or the vesting of shares under any future Chorus employee incentive scheme);

• deal in Chorus debt securities (including EMTN Bonds) listed on the Luxembourg Stock Exchange;

• otherwise deal in Chorus shares (e.g. gifting of shares to a family member, transferring shares to a trust);

• enter any future Chorus Employee Share Scheme;

• re-enter any future Chorus Employee Share Scheme following cessation of contributions to any such future Employee Share Scheme due to you being in possession of Inside Information; or

• participate in any future Dividend Reinvestment Plan each quarter.

• *N.B. All dealing involving:

1. Chorus Directors; or

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2. Greater than 100,000 shares/ options,

must be approved by the Chairman of the Chorus Board. The completed internal dealing form should be submitted to the General Counsel and Company Secretary.

Consent is not required should you:

• acquire Chorus shares through the vesting of your restricted shares under any future Chorus Restricted Share Scheme;

• cease contributions to any future Employee Share Scheme because you are in possession of Inside Information; or

• cease to participate in any future DRP because you are in possession of Inside Information.

Consent is also not required should your restricted shares, options or rights (zepos) granted under any future Chorus employee incentive scheme lapse or be forfeited.

A consent is only valid for a period of 10 trading days after notification. Further consent is required for trades which will be completed more than 10 trading days after a previous consent was given. A consent is automatically deemed to be withdrawn if the person becomes aware of Inside Information prior to dealing.

1. Permission will only be given if the General Counsel and Company Secretary or the Chorus Chairman, as appropriate, is reasonably satisfied as to the following:

2. The decision to deal in the Chorus Restricted Securities has not been made on the basis of Inside Information;

3. The applicant does not intend to sell the Chorus Restricted Securities within 3 months of when they are purchased;

4. The applicant believes that the dealing in the Chorus Restricted Securities will be at the fair value of the securities;

5. The information provided in the internal dealing form is true; and

6. Exceptional Circumstances exist in the case of a Restricted Person seeking Permission to deal outside of a trading window.

7. Permission to deal, if it is granted, will be provided by way of letter, fax or email.

Notification of Dealing

Once dealing is complete this must be disclosed to the General Counsel and Company Secretary.

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Hedging and other Dealings

Restricted Persons are prohibited from entering into hedging arrangements to limit their exposure in relation to “atrisk” remuneration (meaning any unvested shares, options or rights issued or acquired under any future Chorus employee incentive schemes where performance hurdles have not yet been achieved or other conditions have not yet been met). A Restricted Person shall not enter into any transaction (including any hedging or derivative transaction) which will limit that person’s economic risk in relation to such unvested shares, options or rights.

If you are:

1. a director of Chorus New Zealand Limited ;

2. the Chief Executive; or

3. a direct report to the Chief Executive,

you may have additional disclosure requirements if you deal in Chorus securities. Please see the Additional Disclosure Requirements for Directors and Officers for a detailed description of your legal obligations.

Status of Rules

Failure to comply with these requirements will be treated seriously. Full and accurate disclosure of all relevant facts must be made when completing the internal dealing form.

These Additional Rules form part of the "Insider Trading Policy" which applies to all Directors, “officers” and employees.

Additional Disclosure

Requirements for Directors and Officers

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