CHORUS LIMITED — Interim / Quarterly Report 2013

Feb 24, 2013

==> picture [139 x 47] intentionally omitted <==

Companies Announcement Office Australian Securities Exchange 4[th] Floor, 20 Bridge Street Sydney, NSW 2000 Australia

Chorus Limited Level 9 Datacom House 68-86 Jervois Quay P O Box 632 Wellington New Zealand

Email: company.secretary@chorus.co.nz

25 February 2013

Dear Sir/Madam,

CHORUS HALF YEAR RESULT: SUPPLEMENTARY DOCUMENTS

Further to the filing of the Appendix 4D, please find attached the following documentation for release to the market:

1. Media Release

2. Investor Presentation

3. NZX Appendix 1

4. NZX Appendix 7

5. Dividend Reinvestment Plan Offer Document

These documents will also be released to the New Zealand Stock Exchange (NZSX).

Yours sincerely

==> picture [100 x 59] intentionally omitted <==

Vanessa Oakley General Counsel & Company Secretary Chorus Limited

==> picture [139 x 47] intentionally omitted <==

STOCK EXCHANGE ANNOUNCEMENT 25 February 2013

Chorus Limited Level 9 Datacom House 68-86 Jervois Quay P O Box 632 Wellington New Zealand Email: company.secretary@chorus.co.nz

Chorus announces interim FY13 result

$84m NPAT and 10cps dividend for six months Updated CAPEX guidance for FY13 and UFB communal CAPEX

Chorus Limited today reported its financial result for the six months to 31 December 2012.

The fixed line communications infrastructure company reported net earnings before interest, tax, depreciation and amortisation (EBITDA) of $331 million for the period, and a net profit of $84 million after tax (NPAT).

The company’s sound underlying earnings result is attributed to good growth in fixed line and broadband connections. Chorus reports growth of 10,000 fixed line connections to 1,793,000, and 36,000 new broadband connections to total 1,076,000. There was also 50% growth in fibre connections to 15,000.

Chorus Chief Executive, Mark Ratcliffe said that this demonstrated New Zealanders’ demand for higher performing broadband services to meet their developing online needs.

While Chorus’ earnings result is pleasing, Ratcliffe also said that the company faces challenging headwinds in its efforts to build New Zealand’s fibre future.

“While we have made progress and reduced deployment costs for about 90% of our ultra fast broadband build areas, we did not anticipate the extreme costs in the remaining 10% of areas. This is specifically because of the significant variability in regional compliance requirements and civil work that is driving up the cost per premises passed,” he said.

As a consequence of higher than expected costs in its Ultra-Fast Broadband (UFB) programme, Chorus updated its capital expenditure guidance:

• FY13 Gross CAPEX increased from $560-$610 million to $640-$690 million

• Total UFB communal CAPEX increased from $1.4-$1.6 billion to $1.7-1.9 billion

• FY13 average cost per premises passed increased from $2,500-$2,700 to $2,900$3,200

“We’re on track to deliver fibre past 149,000 premises by 30 June 2013 and continue to introduce a steady stream of initiatives to gain operational and cost efficiencies across the UFB and RBI programmes. We are also rigorously pursuing alternative deployment approaches in particular areas to address the high cost of civil work,” Ratcliffe said. Fibre related investment, principally for UFB and the Rural Broadband Initiative (RBI), accounted for $290 million of capital expenditure for the six months, which is 85% of Chorus’ gross capital expenditure for the six months to 31 December.

The company also faced on-going challenges with the current regulatory environment. Commenting on the recent Government announcement to bring forward the regulatory framework review, Ratcliffe said; “This is a positive step for the industry and for New Zealand, though there is a rigorous process to go through before we know the final outcomes.”

“We’re seeking a clearer, more aligned regulatory environment that delivers the right incentives to encourage the transition to our fibre network, and help New Zealand realise the productivity and economic benefits UFB and RBI can deliver,” Ratcliffe said.

The Chorus Board approved a fully imputed interim dividend of 10.0 cents per share to be paid on 12 April 2013.

Following the 8 February announcement from the Minister of Communications and Information Technology, Chorus considers that it has sufficient near term certainty to announce its FY14 dividend guidance of a fully imputed dividend of 25.5 cents per share (subject to there being no material adverse change in circumstances, operating outlook or Chorus’ guidance for expected total UFB communal build costs of $1.7 to $1.9 billion).

The Board currently expects to announce longer term dividend guidance when the outcomes from the Government’s reviews have been announced. At that stage, Chorus will also have an updated view of how its capital expenditure programmes are tracking.

Results summary for the six months ending 31 December 2012:

• Chorus achieved EBITDA of $331 million.

• Revenue has increased 2% to $525 million.

• Chorus will pay a fully imputed dividend of 10.0 cents per share.

• Gross capital expenditure was $341 million with 85%, or $290 million, spent on fibre related projects.

• Fixed line connections increased by 10,000 to total 1,793,000.

• Continued growth in broadband with 36,000 new connections to total 1,076,000.

• Fibre connections increase of 50% to total 15,000.

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

ENDS

For further information:

Brett Jackson, Investor Relations Manager Mobile: +64 (27) 488 7808 / Email: brett.jackson@chorus.co.nz

Melanie Marshall, Head of Communications & Brand

Mobile: +64 (27) 452 6231 / Email: melanie.marshall@chorus.co.nz

==> picture [73 x 25] intentionally omitted <==

==> picture [721 x 68] intentionally omitted <==

==> picture [721 x 69] intentionally omitted <==

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

Chorus Half Year Result, FY13
25 February 2013, Wellington
----- End of picture text -----

==> picture [721 x 68] intentionally omitted <==

==> picture [721 x 69] intentionally omitted <==

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

For six months ending
31 December 2012
----- End of picture text -----

==> picture [721 x 68] intentionally omitted <==

==> picture [721 x 69] intentionally omitted <==

==> picture [721 x 68] intentionally omitted <==

/ PAGE 1

Disclaimer

Forward-Looking Statements

• This presentation may contain forward-looking statements regarding future events and the future financial per f ormance o f Ch orus, nc u i l di ng orwar f d l oo ki ng s t a t emen t s regar di ng n i d us t ry ren t d s, s t ra t eg es, cap i it a l expenditure, the construction of the UFB network, credit ratings and future financial and operational performance. These forward-looking statements are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond Chorus’ control, and which may cause actual results to differ materially from those expressed in the statements contained in this p resentation. No re p resentation , warrant y or undertakin g, ex p ress or im p lied , is made as to the fairness , accuracy or completeness of the information contained, referred to or reflected in this presentation, or any information provided orally or in writing in connection with it. Please read this presentation in the wider context of material previously published by Chorus and released through the NZSX and ASX.

• Except as required by law or the listing rules of the NZSX and the ASX, Chorus is not under any obligation to u p date this p resentation at an y time after its release to y ou , whether as a result of new information , future events or otherwise.

Not an offer of securities

• None of the information contained in this presentation constitutes an offer of , or a proposal or an invitation to make an offer of, any security (and, in particular, does not constitute an offer of securities in the United States of America or to, or for the account or benefit of, U.S. persons (as defined in Regulation S under the Securities Act of 1933, as amended ). Distribution of this presentation (including an electronic copy) may be restricted by law and, if you come into possession of it, you should observe any such restrictions. These materials are provided for information purposes only.

Investment Advice

• This presentation does not constitute investment advice or a securities recommendation and has not taken into account any particular investor ’ s investment objectives or other circumstances. Investors are encouraged to make an independent assessment of Chorus.

/ PAGE 2

==> picture [721 x 68] intentionally omitted <==

==> picture [721 x 69] intentionally omitted <==

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

Mark Ratcliffe
Chorus CEO
----- End of picture text -----

==> picture [721 x 68] intentionally omitted <==

==> picture [721 x 69] intentionally omitted <==

==> picture [721 x 68] intentionally omitted <==

==> picture [721 x 69] intentionally omitted <==

==> picture [721 x 68] intentionally omitted <==

/ PAGE 3

==> picture [721 x 68] intentionally omitted <==

Agenda

M ar k R a t c liff e, CEO

• Half year performance overview

• Connection rowth g

• RBI and UFB programmes

• IT systems transition

Andrew Carroll, CFO

• Financial results

• Capex and UFB cost per premises passed, including guidance

• Dividend guidance and Dividend Reinvestment Plan

Mark Ratcliffe, CEO

• UFB initiatives and regulatory framework

• Q&A

/ PAGE 4

OVERVIEW

A sound underlying earnings result

Net Profit After Tax of $84 million

> EBITDA of $331 million

• Revenue of $525 million

(an increase of 2% on prior six month period)

Growth in total fixed line connections to 1,793,000

Fibre connections rew 50% to 15 000 g ,

Broadband growth continues; 36,000 new connections

==> picture [721 x 68] intentionally omitted <==

/ PAGE 5

OVERVIEW

Facing challenging headwinds

> Regulatory uncertainty

• Draft UBA decision undermines the fibre vision

• Welcome the Government’s decision to bring forward the wider reviews to align policy to support fibre transition

> UFB production line still work in progress

• Continued roll out p ro g ress, but not y et standardised

• Positive gains in most areas being offset by extreme civil costs in a small group of areas

• Significant variability in regional compliance requirements

• Initiatives will take more time for cost benefits to materialise

/ PAGE 6

==> picture [721 x 68] intentionally omitted <==

Fixed line connection growth

	Fixed line connections	30 June 2012	31 Dec 2012
	Baseband copper	1,585,000	1,559,000
	UCLL	97,000	109,000
	SLU/SLES	19,000	16,000
	Fibre	10,000	15,000
	Naked Basic/Enhanced UBA and Naked VDSL	50,000	72,000
	Data services over copper	15,000	22,000*
	Total fixed line connections	1,776,000	1,793,000

• Real growth of 10,000 connections

• • Allow for 7,000 lines previously omitted from data services over copper

• Fibre connections increased by 50%

• > 44% growt h i n Na ‘ k e d’ connect ons i

/ PAGE 7

Continuin broadband rowth g g

	Broadband connections	30 June 2012	31 Dec 2012
	BasicUBA	619000	474000
		,	,
	Naked Basic UBA	11,000	9,500
	Enhanced UBA	371,000	530,000
	Naked Enhanced UBA	39 000 ,	60 500 ,
	VDSL/Naked VDSL	NM	2,000
	Total broadband connections	1,040,000	1,076,000

==> picture [721 x 221] intentionally omitted <==

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

1000
800 >
VDSL/Naked VDSL Copper lines with
Naked Basic Enhanced UBA
600 Chorus provided
Enhanced UBA broadband increased
400 Naked Basic UBA from 59% to 61%
Basic UBA
200
0
30 June FY12 31 Dec FY13
----- End of picture text -----

/ PAGE 8

==> picture [721 x 68] intentionally omitted <==

Growth and market activity

Fixed line and broadband growth drives small proportion of activity relative to ongoing activity ‘behind the scenes’ > 587 , 000 or d ers processe d b y Ch orus or vo ce, roa f i b db an d , UCLL and data related activity over the six months > 254 000 truck rolls in the same eriod , p

Orders processed

==> picture [721 x 212] intentionally omitted <==

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

120,000
100 , 000
80,000
Voice
60,000
Broadband & Data
Orders actual TOTALs
40,000
20,000
‐
Jul‐12 Aug‐12 Sep‐12 Oct‐12 Nov‐12 Dec‐12
----- End of picture text -----

/ PAGE 9

==> picture [721 x 68] intentionally omitted <==

Deliver UFB and RBI agreements

==> picture [604 x 9] intentionally omitted <==

RBI > 1,300km fibre laid > 36,100 lines within reach of better broadband

634 schools

UFB > 2,000km of fibre laid

88,590 premises passed > 335 schools > FY13 cumulative 149 000 Target: , premises passed

/ PAGE 10

==> picture [721 x 68] intentionally omitted <==

==> picture [721 x 437] intentionally omitted <==

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

UFB rollout continuing at pace
> B u ild on track f or ear Y 2 cumu at ve target o l i f
149,000 premises
160000
WIP
140000
Chorus complete
120000
100000
CFH tested
80000
CFH tested and paid
60000
88,590 premises at 31
40000 December; comprising
19,824 priority
premises and 68,766
20000 non-priority premises
0
As at 31 Dec 2012
----- End of picture text -----

/ PAGE 11

==> picture [721 x 68] intentionally omitted <==

T rans t on to a i i fib re wor ld

~95,000 customers within reach of Chorus’ UFB network at 31 Dec > UFB uptake gains momentum with 1,400 connected

Customers connected

==> picture [721 x 241] intentionally omitted <==

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

1600
RSPs trialling 24
1400
RSPs in business market ~8
1200
RSPs in residential market ~5
1000
800
600 Types of connections 1,400
400 30Mbps down, 10Mbps up 850
200
100Mbps down, 50Mbps up 550
0
‐ ‐ ‐
March 30 Jun 31 Oct 31 Dec
----- End of picture text -----

/ PAGE 12

==> picture [721 x 68] intentionally omitted <==

Building Chorus IT capability

PHASE 1: BASE FIBRE CAPABILITY BUILD Bui ld C h orus enterprise capability Build standalone fibre capability

PHASE 2: MIGRATION OFF LEGACY COPPER SYSTEMS

PHASE 3: FINAL MIGRATION OF COPPER RELATED PROCESSES

Migration of copper products / processes into Chorus systems Rationalise remaining Reducing reliance copper related processes on Telecom systems and support

NOTE: pace of transition subject to customer choices and regulatory settings

/ PAGE 13

==> picture [721 x 68] intentionally omitted <==

==> picture [721 x 69] intentionally omitted <==

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

Chorus CFO
----- End of picture text -----

==> picture [721 x 68] intentionally omitted <==

==> picture [721 x 69] intentionally omitted <==

==> picture [721 x 68] intentionally omitted <==

==> picture [721 x 69] intentionally omitted <==

==> picture [721 x 68] intentionally omitted <==

/ PAGE 14

==> picture [721 x 68] intentionally omitted <==

Income statement

		H1 FY13 (6 months) $m	Prior 6 months (normalised) $m
	O peratingrevenue	2 5 5	514
	Operatingexpenses	(194)	(185)
	Earnings before interest, tax,	331	329
	depreciation and amortisation (EBITDA)
	Depreciation and amortisation	(160)	(161)
	Earnings before interest and income tax	171	168
	Net interest expense	(54)	(59)
	Net earnings before income tax	117	109
	Income tax expense	(33)	(31)
	Net earnings for theperiod	$84m	$78m

/ PAGE 15

H1 FY13 Revenue

==> picture [721 x 368] intentionally omitted <==

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

Revenue H1 FY13 Prior 6 months
category (6 months) (normalised) H1 FY13 $m
$m $m
Basic copper 329 340
Enhanced 94 76
copper
Fibre 28 24
Value Added 17 15
Network
Services
Field Services 41 40
Infrastructure 9 13
Other 7 6
Total 525 514
revenue
----- End of picture text -----

/ PAGE 16

==> picture [721 x 68] intentionally omitted <==

H1 FY13 Operating expenses

		H1 FY13 (6 months)$m	Prior 6 months (normalised)
	Labour costs	33	27
	Provisioning	26	20
	Network maintenance	50	44
	Oth di t t er rec cos s	17	19
	Electricity	6	10
	Rents, rates and property	11	12
	maintenance
	Consultants	3	4
	Other	24	23
	Total operating expenses	194	185

/ PAGE 17

H1 FY13 g r o ss ca pe x b y ca tego ry

T o a capex o t l f $341 m or s x mon f i th per o i d

==> picture [721 x 271] intentionally omitted <==

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

Fibre capex $290m Copper capex 37
4%
UFB communal 187 Network sustain 17
Copper connections 11
11%
UFB connections & 11
Copper layer 2 4
fibre layer 2
Product 5
Fibre products & 10
systems Common capex 14
Other fibre 23 Information 7
connections & 85% technology
growth
Building & engineering 6
serv ces i
RBI 59
Other 1
----- End of picture text -----

Note : capex amounts should not necessarily be doubled to develop an annual FY13 capex estimate because of seasonal, market and scheduling factors, particularly for UFB

/ PAGE 18

CPPP: Good offset a few progress by

• Large variance in build costs area by area from $1,000 to $8,000

• Small number of areas (~10%) driving excessive costs (e.g. Ponsonby, Queenstown, Wellington CBD)

• This is outweighing CPPP reduction from $3,000 (Year 1) to $2,700 (Year 2) in other areas

==> picture [721 x 317] intentionally omitted <==

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

8000
7000
6000
5000
CPPP
($) 4000
3000
2000
1000
Premises
0 (cumulative)
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Y1 Deployment Y2 deployment / PAGE 19
----- End of picture text -----

==> picture [721 x 68] intentionally omitted <==

Cost per premises connected (CPPC)

• Prior guidance of $900 to $1,100 (real)

• 1,400 connections to date too few to evaluate trends or change guidance

• UFB connections for FY13 includes: capex

• marketing initiatives (e.g. trial offers)

• training and programme establishment costs

• non-standard installs

==> picture [721 x 68] intentionally omitted <==

/ PAGE 20

==> picture [721 x 68] intentionally omitted <==

Changes to FY13 fibre capex

• Service company billing for UFB work started in FY12 but completed in FY13 added $12m . This increases Year 1 CPPP to $3,500 from $3,300.

• Higher than expected cost per premises passed (CPPP) of $2,900 at half year, expect $2,900 to $3,200 for all Year 2 build, adding ~$40-$50m

• Expected school UFB capex of around $12m-$15m represents a bring forward of ‘out of zone’ schools previously planned for UFB in later years

• Expected new school connection capex of around $10m that is fully funded

• RBI capex o f around $12m-$15m expected to be brought orward and grant f funded

		Total capex at 31 Dec ($m)	CPPP
	Cost to complete work commenced in Year 1	34	$3,500 (all Y1)
	Year 2 out of zone schools (incl WIP)	5	N/A
	Year 2 work completed	72	$2,900
	Year2workinprogress	76	N/A
	UFB communal spend for H1 FY13	187	N/A

/ PAGE 21

==> picture [721 x 68] intentionally omitted <==

FY13 revised capex guidance

	Previous FY13 guidance $m Updated FY13 guidance (at 25 February 2013) $m	Previous FY13 guidance $m Updated FY13 guidance (at 25 February 2013) $m	Previous FY13 guidance $m Updated FY13 guidance (at 25 February 2013) $m	Previous FY13 guidance $m Updated FY13 guidance (at 25 February 2013) $m
		Previous FY13 guidance $m	Updated FY13 guidance (at 25 February 2013) $m
	Fibre capex	450 – 480	540 – 590
	Copper capex	75 – 85	70 – 75
	Common capex	35 - 45	30 - 35
	Gross capex	560 - 610	640 - 690

Revised capex guidance reflects:

• fibre capex trends as per previous slide

• mo d es t e ffi c enc es n o i i i th er copper an d common programmes

Note: The individual ranges presented above are not necessarily additive

/ PAGE 22

==> picture [721 x 68] intentionally omitted <==

Cost per premises passed

• Update largely reflects cost impact of outlier areas (greater in first half of rollout)

• Average CPPP by end of programme now forecast to be $1,300 to $1,500

==> picture [721 x 266] intentionally omitted <==

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

3500
Average
CPPP
($)
0
2012 2020
Previous Current
----- End of picture text -----

/ PAGE 23

UFB build metrics: updated view

			Current	Current	Previous	Previous
			assessment		assessment
		Estimated cost of communal network (guidance)	$1.7 to $1.9 billion		$1.4	to $1.6 billion
		Less contribution from CFH		$929m		$929m
		E ti t d t Ch t ib ti s ma e ne orus con r u on	$771 t m o	$971 m	$471 t m o	$671 m
		Estimated average cost per premise	$2,046 to	$2,287	$1,685 to	$1,926
		passed (total programme)
		FY13 average cost per premises passed (guidance)	$2,900 to	$3,200	$2,500 to	$2,700

/ PAGE 24

==> picture [721 x 68] intentionally omitted <==

IT capex and opex outlook

• FY13 IT capex spend currently $55m-$60m across fibre, copper and common capex categories

• IT i i d ill systems trans t on programme means capex an opex w

• grow in short term

• Indicative p lannin g su gg ests additional combined capex and opex of $50m to $100m over the next 4 years

• This is incremental to the FY13 'base' capex and opex

• Total w ill be on r iod o v e r w hich t w o IT spend dependent pe

• stacks are run in parallel and ability to extract savings from existing service providers

• Pace of transition will also be influenced by customer choices and regulatory settings

/ PAGE 25

==> picture [721 x 68] intentionally omitted <==

Dividends

• FY13 interim dividend of 10 . 0 cents per share , fully imputed

• Supplementary dividend of 1.7647 cents per share payable to nonresident shareholders

• Record date: 28 March 2013

• Payment date: 12 April 2013

• Followin g the 8 Februar y announcement from the Minister , Chorus considers that it has sufficient near term certainty to announce its FY14 dividend guidance of a fully imputed dividend of 25.5 cents per share (subject to there being no material adverse change in ci r c u mstances , ope r ating o u tlook o r Cho ru s’ g u idance fo r x e pected total UFB communal build costs of $1.7 to $1.9 billion)

• The Board currently expects to announce longer term dividend guidance when the outcomes from the Government ’ s reviews have been announced. At that stage, Chorus will also have an updated view of how its capital expenditure programmes are performing

/ PAGE 26

==> picture [721 x 68] intentionally omitted <==

Dividend Reinvestment Plan

• Plan is intended to increase flexibility for shareholders and provide Chorus with enhanced capital management.

• Th e oar B d h as current y set a l 3% di scount to t h e preva ili ng market price

• Shareholders are eli g ible to p artici p ate in the Plan if the y are resident in New Zealand or Australia

• Offer document to be sent to eligible shareholders in time to enrol in the Plan before the FY13 interim dividend record date

==> picture [721 x 136] intentionally omitted <==

/ PAGE 27

Net Debt / EBITDA

• Net debt to EBITDA expected to increase through build period

• Calculation below reflects Standard & Poor ’ s treatment

• PV of CFH debt securities uses 8.5% discount. This differs from accounting treatment that uses market rate on call notice date

• Smaller December month end cash balance will influence ratio for H1 FY13

		As at 31 Dec 2012	As at 31 Dec 2012
		$m
	Borrowings	1,792
	+ PV of CFH debt securities(senior)	5
	+ Net Finance leases	119
	+ Operatingleases		17
	Sub total	1,933
	- Cash	(46)
	Total net debt	1,887
	Net debt/EBITDA	2.8 times

/ PAGE 28

==> picture [721 x 68] intentionally omitted <==

==> picture [721 x 69] intentionally omitted <==

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

Chorus CEO
----- End of picture text -----

==> picture [721 x 68] intentionally omitted <==

==> picture [721 x 69] intentionally omitted <==

==> picture [721 x 68] intentionally omitted <==

==> picture [721 x 69] intentionally omitted <==

==> picture [721 x 68] intentionally omitted <==

/ PAGE 29

==> picture [721 x 68] intentionally omitted <==

Moving to ‘steady state’ roll out

==> picture [721 x 203] intentionally omitted <==

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

CFH and Brief to Service Service Compliance Build work CFH
Chorus Service Co. Co quote and consent tests
agree year Co. per design for requirements sign off
build plan FFP Chorus area
Chorus approval unit
sign off (i.e.
multiple
FFPs)
----- End of picture text -----

Roll out not yet optimal due to:

Condensed planning time

Service company contract models from previous framework

Variations in compliance requirements in outlier areas

/ PAGE 30

==> picture [721 x 68] intentionally omitted <==

Our p an or operationa cost l f l reduction

==> picture [603 x 15] intentionally omitted <==

• Moving to new service company contracts with targeted cost incenti v es and sha r ed r isk

• Seek regional consistency in Council requirements and utilities code interpretations

• New deployment techniques, including micro trenching and aerial deployment where economic

• Reassess upcoming deployment plans based on known challenges

• Introduce new network technology innovations

• Organisational changes to integrate fibre deployment and connection functions

/ PAGE 31

==> picture [721 x 68] intentionally omitted <==

Moving to ‘steady state’ roll out

==> picture [721 x 346] intentionally omitted <==

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

Year 3 build
Year 1&2 build Year 4 build
Focus on
More lead time
implementing
Short or no lead between design,
new service
time between quote and start
company
design quote and enables ‘steady
agreements ,
build start state’ focus on
design and
programme
operational
efficiency
refinements
----- End of picture text -----

/ PAGE 32

==> picture [721 x 68] intentionally omitted <==

==> picture [721 x 69] intentionally omitted <==

==> picture [721 x 68] intentionally omitted <==

==> picture [721 x 69] intentionally omitted <==

==> picture [721 x 68] intentionally omitted <==

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

Looking ahead:
----- End of picture text -----

==> picture [721 x 69] intentionally omitted <==

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

underline the need for a
----- End of picture text -----

==> picture [721 x 68] intentionally omitted <==

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

clear and stable regulatory
environment
----- End of picture text -----

/ PAGE 33

==> picture [721 x 68] intentionally omitted <==

==> picture [721 x 69] intentionally omitted <==

==> picture [721 x 68] intentionally omitted <==

==> picture [721 x 69] intentionally omitted <==

==> picture [721 x 68] intentionally omitted <==

==> picture [721 x 69] intentionally omitted <==

==> picture [721 x 68] intentionally omitted <==

/ PAGE 34

==> picture [721 x 68] intentionally omitted <==

Appendices

• Appendix A: Indicative comparison of six months to 31 December 2012 results with six months to 30 June 2012 results

• Appendix B: Revenue categories

• A endix C: Ca ex cate ories pp p g

• Appendix D: Contributions to capex categories

==> picture [721 x 136] intentionally omitted <==

/ PAGE 35

Appendix A : Indicative comparison of six months to 31 December 2012 results with six months to 30 June 2012 results

• This analysis is indicative only and provides a comparison between the results for the two eriods. This A endix has p pp

• not been audited.

• Given Chorus’ limited history as a stand-alone business, there isn ’ t a previous comparable period for ready comparison. The Indicative Income statement creates a somewhat comparable six month result for information purposes by using the unaudited results for the immediatel recedin six month y p g

• period.

• The two periods provide some indicative relativities, but also have some limitations , including , the seasonality implicit in network maintenance costs (the worst of the weather was experienced in July 2012 with another weather event in December). The six months to 31 December 2012 also include one month of reduced revenues following the Commission’s 3 December 2012 final UCLL decision.

• > The 30 June 2012 results have been normalised for the one off insurance proceeds received in that period.

/ PAGE 36

Indicative income statement

	Indicative income statement	Indicative income statement	Indicative income statement	Indicative income statement	Indicative income statement
	31 December 2012 (sixmonths) 30 June 2012 (sixmonths) Change
		31 December 2012 (sixmonths)	30 June 2012 (sixmonths)	Change
		$m	$m	%
	Operating revenue	525	514	2.1
	Operatingexpenses	(194)	(185)	4.9
	EBITDA	331	329	0.6
	Depreciation	(128)	(127)
	Amortisation	(32)	(34)
	EBIT 171 168 1.8 Finance costs (net) (54) (59) Income tax (33) (31)
	Finance costs (net)	(54)	(59)
	Income tax	(33)	(31)
	NPAT	84	78	7.7

/ PAGE 37

O p eratin g revenue

		31 December 2012 (six months)	30 June 2012 (six months)	Change
		$m	$m	%
	B i as c copper	329	340	(3 2) .
	Enhanced copper	94	76	23.7
	Fibre	28	24	16.7
	Value added services	17	15	13.3
	Infrastructure	9	13	(30.8)
	Other	7	6	16.7
	T l i ota operat ng revenues	525	514	2 1 .

> Total revenues have increased on the operating slightly previous six month period, with the trend of migration from basic copper to enhanced copper continuing. Fibre revenues have continued to row alon with carrier network services. g g Infrastructure revenues have reduced as one-off (up front fees) are charged when an exchange is unbundled, and the ace of exchan e unbundlin has reduced durin the eriod. p g g g p

/ PAGE 38

Operating expenses

		31 December 2012 (six months)	30 June 2012 (six months)	Change
		$m	$m	%
	Labour costs	(33)	(27)	22 2 .
	Provisioning	(26)	(20)	30.0
	Network maintenance	(50)	(44)	13.6
	Other networkcosts	(17)	(19)	(10.5)
	Information technologycosts	(24)	(26)	(7.7)
	Property maintenance	(6)	(7)	(14.3)
	Electricity	(6)	(10)	(40 0) .
	Insurance	(2)	(3)	(33.3)
	Consultants	(3)	(4)	(25.0)
	Other	(22)	(20)	10 0 .
	Total operating expenses	(194)	(185)	4.9

Total operating expenses have increased during the period as the business con ti nue d t o grow, a l b our cos t s ave ncrease h i d as a dditi ona peop e ave l l h joined during the period, while provisioning and network maintenance costs have increased, partly as a result of the weather during the period and service company overheads. The majority of other costs have decreased period on period.

/ PAGE 39

De reciation and amortisation p

		31 December 2012	30 June 2012	Change
		(six months)	(six months)
		$m	$m	%
	Depreciation	(128)	(127)	0.8
	Amortisation	(32)	(34)	(59)
				.
	Total depreciation and amortisation	(160)	(161)	(0.6)

> T o t a l d eprec a i ti on an d amor ti sa ti on ave ecrease h d d s li g htl y during the period. Depreciation expense has increased reflecting the significant capital expenditure programme, partially offset by a slightly larger credit of the government grant. Amortisation of software and other intangible assets is lower reflecting the short lives of this type of asset.

==> picture [721 x 68] intentionally omitted <==

/ PAGE 40

Finance costs

	31 December 2012 30 June 2012	31 December 2012 30 June 2012	31 December 2012 30 June 2012	31 December 2012 30 June 2012	31 December 2012 30 June 2012
		31 December 2012	30 June 2012
		( i th ) s x mon s	( i th ) s x mon s	Ch ange
		$m	$m	%
	Finance income	3	4	(25.0)
	Finance expense	(57)	(63)	(9.5)
	Finance costs(net)	(54)	(59)	(8.5)

> Finance income in the one month to 31 December 2011 included a gain on cross currency interest rate swaps which reversed prior to entering into a hedging relationship on 14 February 2012 . Therefore , simply removing the one month December 2011 from the seven months to June 2012 does not create a comparable period to that ended 31 December 2012. When the $11 million gain is excluded from the June 2012 comparison a reduction in finance expense is recorded, which reflects the largely fixed interest expense on debt.

/ PAGE 41

Appendix B: Revenue categories

• core regulated products that are earlier technology or products with limited scope for further development e.g Baseband copper (UCLFS), Basic UBA, Naked UBA, UCLL, SLU, SLES

• products enhanced to deliver higher speed capability and better customer experience e.g. Enhanced UBA, VDSL2, Baseband IP, HSNS Lite Copper

• existing business fibre and new UFB services. Also includes UFB backhaul and direct, or ‘dark’, fibre

• Value Added • products and expertise for higher value or specialist services. Includes carrier network services which provide connectivity

• Network Services across backhaul links • field force in provisioning, maintaining and installing copper or

• Field Services fibre products

• • services that provide access to Chorus’ network assets,

• Infrastructure principally exchange co-location space.

/ PAGE 42

Appendix C: Capex categories

Fibre capex categories

==> picture [175 x 399] intentionally omitted <==

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

UFB
communal
UFB
connections
& fibre layer 2
Fibre
products &
systems
Other fibre
connections &
growth
RBI
----- End of picture text -----

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

• •UFB connections are subject to demand via RSPs •Layer 2 electronics •Fibre- related product and system development •Demand driven by greenfield & business fibre growth. •Regional backhaul to enable RSP traffic •Fibre lifecycle investment •Layers 0, 1 - network duct and fibre; Layer 2 cabinet electronics

• •Expect total 5 year programme to cost around $270 - 280 million . Spend weighted to front end of programme

/ PAGE 43

==> picture [721 x 68] intentionally omitted <==

Copper capex categories

==> picture [169 x 372] intentionally omitted <==

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

Network sustain
Copper
connections
Copper layer 2
Product fixed
----- End of picture text -----

==> picture [439 x 12] intentionally omitted <==

• •Upgrading or replacing plant (e.g. poles, cabinets, cables) where risk of failure or degraded service

• •Proactive network replacement more cost effective than reactive maintenance

==> picture [439 x 9] intentionally omitted <==

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

• •Demand driven layer 2 investment in broadband capacity and growth. Expected to reduce slowly as customers migrate to fibre

• •Largely RSP driven investment in copper-related products

==> picture [439 x 19] intentionally omitted <==

/ PAGE 44

==> picture [721 x 68] intentionally omitted <==

Common capex categories

•Investment in future Chorus IT platforms, in part to meet June 2014 deadline to move from Telecom enterprise systems Information technology
•Spend for growth and plant replacement (e.g. power, Building and
i diti i ) t Ch h b ildi d i i a r con on ng a orus exc ange, u ng an eng neer ng
remote sites services
•Items such as office accommodation and equipment Other

/ PAGE 45

Appendix D: Contributions to capex

• •CFH funds up to $929 million over course of programme, at a rate of $1,118 per premise

• •Government grant funding of ~$225 million over 5 years to cover most layer 0 and 1 capex spend

• • La y e r 2 is not co v e r ed b y the g r ant •Grant is payable on completion of build work •Annual grant around 80 - 85% of annual RBI capex spend •Central & local government contribute to cost (often 100%) when re q uestin g Chorus to relocate or rebuild existin g network.

/ PAGE 46

Appendix 1 (Rule 10.4) Preliminary Announcement – Half Year Results

Chorus Limited	Chorus Limited	Chorus Limited	Chorus Limited
Results for announcement to the market
Reporting Period		Six months to 31 December 2012
Previous Reporting Period		Seven months to 30 June 2012
	Amount (000s)		Percentage change
Revenue from ordinary activities	$525,000		Down 14%
Profit (loss) from ordinary activities after tax attributable to security holder.	$84,000		Down 18%
Net profit (loss) attributable to security holders.	$84,000		Down 18%
InterimDividend	Amount per security		Imputed amount per security
	10.0cps		3.889cps
Record Date	28 March 2013
Dividend Payment Date	12 April 2013
Audit	This report is based on unaudited condensed consolidated interim financial statements
Comments:	Refer press release. This report should be read in conjunction with the unaudited condensed consolidated interim financial statements for the six months ended 31 December 2012 as contained in the half year report attached.
Net tangible asset per security	$1.03

APPENDIX 7 – NZSX Listing Rules NZSX Listing Rule 7.12.2. For rights, NZSX Listing Rules 7.10.9 and 7.10.10 For change to allotment, NZSX Listing Rule 7.12.1, a separate advice is required Notice of event affecting securities	APPENDIX 7 – NZSX Listing Rules NZSX Listing Rule 7.12.2. For rights, NZSX Listing Rules 7.10.9 and 7.10.10 For change to allotment, NZSX Listing Rule 7.12.1, a separate advice is required Notice of event affecting securities	APPENDIX 7 – NZSX Listing Rules NZSX Listing Rule 7.12.2. For rights, NZSX Listing Rules 7.10.9 and 7.10.10 For change to allotment, NZSX Listing Rule 7.12.1, a separate advice is required Notice of event affecting securities	APPENDIX 7 – NZSX Listing Rules NZSX Listing Rule 7.12.2. For rights, NZSX Listing Rules 7.10.9 and 7.10.10 For change to allotment, NZSX Listing Rule 7.12.1, a separate advice is required Notice of event affecting securities	APPENDIX 7 – NZSX Listing Rules NZSX Listing Rule 7.12.2. For rights, NZSX Listing Rules 7.10.9 and 7.10.10 For change to allotment, NZSX Listing Rule 7.12.1, a separate advice is required Notice of event affecting securities	APPENDIX 7 – NZSX Listing Rules NZSX Listing Rule 7.12.2. For rights, NZSX Listing Rules 7.10.9 and 7.10.10 For change to allotment, NZSX Listing Rule 7.12.1, a separate advice is required Notice of event affecting securities	APPENDIX 7 – NZSX Listing Rules NZSX Listing Rule 7.12.2. For rights, NZSX Listing Rules 7.10.9 and 7.10.10 For change to allotment, NZSX Listing Rule 7.12.1, a separate advice is required Notice of event affecting securities	APPENDIX 7 – NZSX Listing Rules NZSX Listing Rule 7.12.2. For rights, NZSX Listing Rules 7.10.9 and 7.10.10 For change to allotment, NZSX Listing Rule 7.12.1, a separate advice is required Notice of event affecting securities	APPENDIX 7 – NZSX Listing Rules NZSX Listing Rule 7.12.2. For rights, NZSX Listing Rules 7.10.9 and 7.10.10 For change to allotment, NZSX Listing Rule 7.12.1, a separate advice is required Notice of event affecting securities	APPENDIX 7 – NZSX Listing Rules NZSX Listing Rule 7.12.2. For rights, NZSX Listing Rules 7.10.9 and 7.10.10 For change to allotment, NZSX Listing Rule 7.12.1, a separate advice is required Notice of event affecting securities	APPENDIX 7 – NZSX Listing Rules NZSX Listing Rule 7.12.2. For rights, NZSX Listing Rules 7.10.9 and 7.10.10 For change to allotment, NZSX Listing Rule 7.12.1, a separate advice is required Notice of event affecting securities	APPENDIX 7 – NZSX Listing Rules NZSX Listing Rule 7.12.2. For rights, NZSX Listing Rules 7.10.9 and 7.10.10 For change to allotment, NZSX Listing Rule 7.12.1, a separate advice is required Notice of event affecting securities	APPENDIX 7 – NZSX Listing Rules NZSX Listing Rule 7.12.2. For rights, NZSX Listing Rules 7.10.9 and 7.10.10 For change to allotment, NZSX Listing Rule 7.12.1, a separate advice is required Notice of event affecting securities	APPENDIX 7 – NZSX Listing Rules NZSX Listing Rule 7.12.2. For rights, NZSX Listing Rules 7.10.9 and 7.10.10 For change to allotment, NZSX Listing Rule 7.12.1, a separate advice is required Notice of event affecting securities	APPENDIX 7 – NZSX Listing Rules NZSX Listing Rule 7.12.2. For rights, NZSX Listing Rules 7.10.9 and 7.10.10 For change to allotment, NZSX Listing Rule 7.12.1, a separate advice is required Notice of event affecting securities											EMAIL: announce@nzx.com	EMAIL: announce@nzx.com	EMAIL: announce@nzx.com	EMAIL: announce@nzx.com	EMAIL: announce@nzx.com	EMAIL: announce@nzx.com	EMAIL: announce@nzx.com	EMAIL: announce@nzx.com	EMAIL: announce@nzx.com
																								N (P d	umber of pages including this one lease provide any other relevan etails on additional pages) 1
Full name of Issuer Name of officer make this notice Contact phone number
		CHORUS LIMITED
		authori	sed to												Authority for e.g. Directors					event, ' resolution			Dat	e
							ANDREW CARROLL																		DIRECTORS' RESOLUTION
										Contact fax number
			(04)	498 9331											(04) 499 7070											25 2						2013
Nature of eve Tick as appropr		nt iate		Bonus Issue Rights Issue			If ticked, state whether: Capital Ca			Taxable ll Dividend					/ Non Taxable Conv If ticked, state F					ersion ull						Rights Issue Interest Renouncable
				non-renouncable			change						√		whether: Interim			√	Y	ear				Special				DRP Applies
EXISTING se Description of th class of securiti		curitie e es	s affe	cted by this						If more than one security is affected by the event, use a se										parate form			ISIN
				ORDINARY		SHARE																					NZCNUE0001S2
																											If		unknown, contact NZX
Details of se		curitie	s issu	ed pursuant t	o t	his event				If more than one class of security is to be iss										ued, use a			sepa ISIN	rate form			for e		ach class
Description of the class of securities Number of Securities to be issued following eve			nt
																	Minimum Entitlement										If R		unknown, contact NZX atio, e.g 1 for 2 for
Conversion, Maturity, Call Payable or Exercise Date Strike price per security for an Strike Price available.				y issue in lieu or	da												Treatment of Fractions provide an OR explanation of the ranking
						te Enter N/A if not applicable
M	onies Associated with			Event In dollars	an	Dividen d cents				d payable, Call payable, Exercise price, Convers Source of Payment							ion price, Redemption price						, Ap	plication			mone		y.
																	RETAINED												EARNINGS
	Amount per security (does not include any ex			cluded income)	$0.100
	Excluded income per security (only applicable to listed PIEs)
	Currency Total monies				NZD											Supplementary Amount per security dividend in dollars and cents details - NZSX Listing Rule 7.12.7 Date Payable													$0.017647
					$38,508,212																								12 April, 2013
T In is	axation the case of a taxable bonus sue state strike price															Amountper Security in Dollars and cents to six deci													malplaces
												Resident Withholding Tax				Imputation Credits (Give details) $0.006944
							$									$0.006944													$0.038889
												Foreign Withholding Tax				FWP Credits (Give details) $
																$

Timing (Refer Appendix 8 in the NZSX Listing Rules)

Record Date 5pm

For calculation of entitlements -

Notice Date

Entitlement letters, call notices, conversion notices mailed

OFFICE USE ONLY

Ex Date: Commence Quoting Rights: Cease Quoting Rights 5pm: Commence Quoting New Securities: Cease Quoting Old Security 5pm:

Application Date Also, Call Payable, Dividend / 28 March, 2013 Interest Payable, Exercise Date,Conversion Date. In the case 12 April, 2013 of applications this must be the last business day of the week

Allotment Date

For the issue of new securities Must be within 5 business days of application closing date.

==> picture [99 x 26] intentionally omitted <==

Security Code: Security Code:

Chorus Dividend Reinvestment Plan

Choose to have Chorus reinvest all or part of your future dividends in additional Chorus shares. It’s a cost effective and convenient way for you to increase your investment in Chorus.

Offer Document

FEBRUARY 2013

P. 1

Dear shareholder

As announced at Chorus Limited’s (Chorus) half year result on 25 February 2013, the Board has approved the implementation of a Dividend Reinvestment Plan (the Plan).

This booklet provides details of the Plan, so that you can decide if you’d like to participate. If you do not wish to participate in the Plan you do not need to do anything, and you will continue to receive all future dividends as cash.

How the Dividend Reinvestment Plan works

The Plan enables eligible shareholders to choose to have Chorus reinvest all or part of their future dividend entitlements in additional Chorus shares (rather than receiving cash payments). This provides a cost effective and convenient way for shareholders to increase their investment in Chorus:

• There are no charges for participation in the Plan

• Shares purchased via the Plan do not incur brokerage fees.

• Additional shares are purchased at a discount to the prevailing market price. The Board has currently set this discount at 3%.

Further details are provided in the terms and conditions attached.

Why is Chorus implementing a Dividend Reinvestment Plan?

The Plan is intended to increase flexibility for shareholders and provide Chorus with enhanced capital management. A number of shareholders have previously expressed an interest in being able to participate in such a plan and the Board is also conscious that the demerger process in late 2011 means Chorus has a significant number of small shareholders who wish to grow their holdings.

Who can participate in the Plan?

Shareholders are eligible to participate in the Plan if they are resident in New Zealand or Australia. Chorus has elected not to offer participation under the Plan to shareholders who are resident outside of New Zealand or Australia. This is because of the costs and requirements involved in ensuring the Plan’s compliance with laws of additional jurisdictions.

P. 2

This document is important. If you do not understand it, or are in any doubt as to how to act, you should consult your financial adviser.

This is an Offer Document complying with the New Zealand Securities Act (Dividend Reinvestment) Exemption Notice 1998.

Any person residing outside New Zealand or Australia who participates in the Plan through a New Zealand or Australian resident nominee will be deemed to represent and warrant to Chorus that they can lawfully participate through their nominee.

How do you enrol in the Plan?

Please read the enclosed information carefully. You should consult your own financial adviser if you have any questions.

If you do wish to enrol in the Plan you can either:

• a. Go to www.investorcentre.com/nz, select ‘Payments enquiry’ and log in. Then select ‘Update my details’ and click on ‘Reinvestment plans’ in the dropdown box. Select Chorus Limited in the holding line and follow the instructions. You will need your CSN/ Investor Number and FIN to log in. If you don’t have this information available you can email enquiry@computershare.co.nz or phone +64 9 488 8777; or

• b. Complete the enclosed Participation Notice and return it in the enclosed pre-paid envelope.

When do you need to enrol in the Plan by?

If you wish to have your next dividend entitlement reinvested via the Plan, you will need to enrol in the Plan before the next scheduled record date for a Chorus dividend payment.

==> picture [167 x 24] intentionally omitted <==

Sue Sheldon Chairman

P. 3

Questions and answers

1. How do shareholders participate in the Plan?

Read this offer document and then confirm participation by either enrolling online or returning the enclosed form in the envelope provided. If you wish to have your next dividend entitlement reinvested via the Plan, you will need to enrol in the Plan before the next scheduled record date for a Chorus dividend payment.

2.

What does it cost to participate?

There are no costs charged for eligible shareholders to participate in the Plan. Shares acquired under the Plan do not incur brokerage or commission costs and are issued at a discount to the prevailing market price.

3.

How many shares do shareholders need to have to participate?

There is no minimum shareholding requirement.

4.

Can I reinvest just some of my dividends?

Yes, shareholders can choose between full or partial participation in the Plan.

5. What price will shareholders pay for the shares?

The price of shares is based upon a discount to the volume weighted average sale price of Chorus shares sold on the New Zealand Stock Exchange on each of the first five days following the date fixed by the Board for determining entitlement to the relevant dividend payment. The Board has initially set this discount at 3%, although the Board can change, suspend or cancel the Plan at its sole discretion.

6.

Can shareholders still sell shares when they want?

Yes, shares can be sold at any time when shareholders participate in the Plan.

P. 4

7. Can shareholders opt out of the Plan in the future?

Yes. If shareholders choose to join the Plan, they can opt out of it in the future by informing Chorus’ share registrar, Computershare.

8. Can the Plan be changed or cancelled?

Yes, Chorus’ Board can change, suspend or cancel the Plan at its sole discretion. If that occurs, notice will be given to all participants.

9. Are there any tax implications?

For New Zealand and Australian income tax purposes, dividends reinvested in shares under a dividend reinvestment plan are generally treated in the same manner as a cash dividend. Chorus will provide details of the dividend, taxes withheld and credits available so shareholders can complete their tax return. It is recommended that each shareholder contact their professional tax adviser for more information about their specific circumstances. Refer to clause 15 of the Terms and Conditions.

P. 5

Terms and Conditions

1. Introduction

The Plan enables Shareholders to reinvest the net proceeds of cash dividends payable or credited on all or some of their Shares by acquiring further fully paid Shares. The terms and conditions of the Plan (the “Terms and Conditions”) as determined by the Board are set out below.

Words defined on page 14 of this Offer Document have the same meaning in these Terms and Conditions.

2. Participation in the Plan

• (a) Subject to these Terms and Conditions, Chorus offers to all Shareholders the right to elect to participate in the Plan.

• (b) Chorus may, in its absolute discretion, elect not to offer participation under the Plan to Shareholders who are resident outside New Zealand or Australia if Chorus considers that to do so would risk breaching the laws of places outside New Zealand or Australia. The Board may, in its sole discretion, elect to amend this policy at any time.

• (c) If Chorus does amend this policy, then shareholders who apply to participate in the Plan and who reside outside New Zealand or Australia will represent and warrant to Chorus that the offer of the Plan and their participation in it would not breach any laws in their country of residence.

• (d) Any person residing outside New Zealand or Australia who holds Shares through a New Zealand or Australian resident nominee should not allow their nominee to participate in the Plan if participation in respect of their Shares would be contrary to the laws of their country of residence.

• (e) Any person residing outside New Zealand or Australia who participates in the Plan through a New Zealand or Australian resident nominee will be deemed to represent and warrant to Chorus that they can lawfully participate through their nominee.

• (f) Chorus accepts, and shall have, no responsibility for determining whether a person is able to participate in the Plan under laws applicable outside of New Zealand or Australia.

• (g) Additional Shares to be issued to a Shareholder under the Plan will be issued on the terms set out in this Offer Document and subject to the same rights as Shares acquired by all other Shareholders who participate in the Plan.

P. 6

• (h) Normal cash dividend payments will be paid out to those Shareholders not participating in the Plan and on a Participant’s Non-Participating Shares, and will not be reinvested in further Shares.

• i) Each time a Share is issued (or transferred) to a Participant under the Plan, the Participant will be deemed to have warranted to Chorus that the Participant is legally entitled to be issued (or transferred) that Share and that such issue (or transfer) does not result in the Participant or any other person breaching any law or provision in Chorus’ constitution.

3. Participation Notice

• (a) Election to participate in the Plan must be made on the prescribed Participation Notice, which accompanies this Offer Document.

• (b) Participation will commence in relation to the net proceeds of cash dividends payable or credited on the first Record Date after receipt by the Registrar of a correctly completed Participation Notice, subject to any termination of the Plan becoming effective before then.

4. Degree of Participation

• (a) Participation may be either full or partial.

• (b) In the case of full participation in the Plan, these Terms and Conditions will apply to the cash dividends payable or credited in respect of all the Participant’s Shares from time to time registered in the Participant’s name, until such number of Shares participating in the Plan is varied or participation in the Plan is terminated in accordance with clause 10 of these Terms and Conditions.

• (c) Partial participation applies only to the number or percentage of Shares nominated by the Participant in a Participation Notice, as varied from time to time in accordance with clause 10 of these Terms and Conditions. However, if at the relevant Record Date the number of Shares held by the Participant is less than the number of Participating Shares, then the provisions of the Plan will only apply to such lesser number of Shares.

• (d) If the Participation Notice does not indicate the degree of participation, it will be deemed to be an application for full participation provided it is otherwise correctly completed and signed.

• (e) A Participation Notice will not attach to the Shares in respect of which it has been given but will be personal to the Shareholder giving it.

• (f) Any Shares over which Chorus has a lien or charge under the Constitution or other requirements of law, for a sum which is presently payable, will not be eligible to participate in the Plan.

P. 7

5. Operation of the Plan

• (a) By accepting this offer, each Participant directs Chorus to apply the net proceeds of every cash dividend payable or credited on the Participating Shares held by the Participant on the relevant dividend’s Record Date as payment for the Shares to be issued to the Participant, in accordance with the Plan.

Such direction shall continue until the Participant or Chorus terminates the Participant’s participation in the Plan in accordance with these Terms and Conditions and shall not apply during any period in which Chorus suspends the Plan or after Chorus has terminated the Plan.

Notice of termination of, or variation in, participation in the Plan must be received prior to 5pm on the relevant Record Date (New Zealand time) to be effective for a particular dividend.

The number of Shares to be issued to the Participant in each case will be determined in accordance with clause 6 of these Terms and Conditions.

• (b) The Board will, on the day that a Participant would have otherwise received the net proceeds of cash dividends on Participating Shares, either issue new Shares or arrange the transfer of existing Shares to the Participant in accordance with clause 6 of these Terms and Conditions.

• (c) Additional Shares issued to the Participant under the Plan will, from the date of allotment, rank equally in all respects with all other fully paid Shares.

• (d) Additional Shares acquired by the Participant under the Plan will be registered on the register where the Participant already holds Shares.

6. Additional Share Entitlement

• (a) The number of Shares to be issued under the Plan as fully paid (or transferred) to a Participant in return for a cash dividend will be calculated in accordance with the following formula:

• N = PS x D + B

P

Where:

N is the number of additional Shares which the Participant will receive;

PS is the number of Participating Shares;

D is the net proceeds per Share from Chorus (expressed in cents and decimals of cents, including any tax refunds and after deduction of any New Zealand withholding or other taxes, if any) of cash dividends paid or credited on each Share and which would otherwise have been paid to a Shareholder in cash if the Shareholder had not elected to participate in the Plan;

P. 8

B is the amount, if any, held to the order of the Participant under the Plan in accordance with paragraph 6(e) below as a result of rounding Share entitlements when the Plan last operated; and

P is the volume weighted average sale price (expressed in cents and decimals of cents), for a Share, calculated on all price setting trades of Shares which took place through the NZSX over a period of five Business Days commencing on the Ex Date (less a discount (if any) at the discretion of the Board, as contemplated by paragraph 12(a)(i) of these Terms and Conditions).

• (b) If no sales of Shares occur during such period then the volume weighted average sale price will be deemed to be the sale price for a Share on the first price setting trade of Shares on the NZSX which takes place after such period.

• (c) Any volume weighted average sale price so determined may be reasonably adjusted by the Board to allow for any bonus or dividend or other distribution expectation. If, in the opinion of the Board, any exceptional or unusual circumstances have artificially affected the volume weighted average sale price so determined, the Board may make such adjustments to that sale price as it considers reasonable.

• (d) Where the number calculated in accordance with the preceding formula is not a whole number, then the number of Shares a Participant receives will be rounded down to the nearest whole number of Shares.

• (e) Any net proceeds per Share as described in the definition of “D” in clause 6(a) above which are not applied to acquire a part of a Share because of clause 6(d) above shall be held to the order of the Participant and applied under the Plan on the Participant’s behalf the next time the Plan operates.

Should the Participant:

• (i) terminate his or her participation in the Plan, under clause 10(a)(ii) of these Terms and Conditions; or

• (ii) cease to be a shareholder of Chorus,

any amount above NZ$2.00, which at the time is held to the order of the Participant under this clause 6(e), will be paid in cash to the Participant on the next dividend payment date. Amounts of NZ$2.00 or less which are held to the order of the Participant at that time shall be forfeited.

7. Statements to Participants

Chorus will send to each Participant, promptly after each dividend payment date, a statement detailing in respect of that Participant:

• (a) the number of Participating Shares as at the relevant Record Date;

• (b) the amount of cash dividend reinvested in respect of Participating Shares and the amount of dividend paid in cash on the Non-Participating Shares (if applicable);

P. 9

• (c) the amount of any taxation deduction made;

• (d) the number of Shares the Participant has received under the Plan;

• (e) advice as to the amount of any taxation credits;

• (f) advice as to the amount held to the order of the Participant under the Plan; and

• (g) such other matters as are required by law with respect to dividends and/or their reinvestment.

Participants should contact the Registrar if they need to change their contact details.

8. No Brokerage or Commission Costs to Participants

No brokerage or commission costs will be payable by Participants in respect of the Shares they receive under the Plan.

9. Source of Additional Shares

Additional Shares to be acquired by Participants under the Plan may, at the Board’s discretion, be:

• (a) new Shares issued by Chorus; or

• (b) existing Shares acquired by Chorus or its nominee or agent and transferred to Participants; or

• (c) any combination of (a) and (b) above.

10. Variation or Termination of Participation

• (a) A Participant may, at any time, by giving written notice to the Registrar and subject to any additional requirements determined by Chorus in its discretion:

• (i) increase or decrease the number or percentage of Participating Shares participating in the Plan; or

• (ii) terminate participation in the Plan.

• (b) Such alteration or termination will take effect immediately upon receipt by the Registrar of the written notice; provided that any notice received between a Record Date and the corresponding dividend payment date will take effect on the day following such dividend payment date.

• (c) If a Participant dies, receipt by the Registrar of a notice of death in a form acceptable to Chorus will be treated as notice under clause 10(a)(ii) of these Terms and Conditions. Death of one of two or more joint holders will not automatically terminate participation.

P. 10

11. Non-Participating Shares Transferred First

Where a Participant with partial participation disposes of part of his or her holding of Shares and that Participant has elected to participate in the Plan in respect of a specified number of Shares, then, unless the Participant advises the Registrar otherwise:

• (a) the Shares disposed of will be deemed to be the Participant’s Non-Participating Shares; except

• (b) if the number of Shares disposed of is more than the number of the Participant’s Non-Participating Shares, the balance will be attributed to Participating Shares.

12. The Board’s Discretion on Termination, Suspension and Modification

• (a) In addition to any other clauses in these Terms and Conditions granting the Board discretion, the Board may also in its sole discretion resolve:

• (i) that the price at which additional Shares are to be issued under the Plan shall contain a discount to market price;

• (ii) that participation in the Plan will not apply to the whole or a part of the net proceeds of any cash dividend and that the applicable part will be paid out in cash and not be reinvested;

• (iii) that a Participation Notice will cease to be of any effect;

• (iv) that the terms and conditions of the Plan be modified, suspended or terminated. If the Plan is modified, then a Participation Notice will be deemed to be a Participation Notice under the Plan as modified unless such Participation Notice is subsequently changed or withdrawn by the Participant; and

• (v) in the event of the subdivision, consolidation or reclassification of Shares into one or more new classes of Shares, that a Participation Notice will be deemed to be a Participation Notice in respect of the Shares as subdivided, consolidated or reclassified unless such Participation Notice is subsequently changed or withdrawn by the Participants.

• (b) Notice of any modification, suspension or termination by Chorus under clause 12(a)(iv) will be given to all Participants.

• (c) However, no such modification or termination by Chorus under clause 12(a)(iv) will be made during the period commencing on a date 21 days before a Record Date for the purposes of determining entitlement to a dividend and ending on the date of payment of that dividend.

• (d) Notwithstanding clauses 12(b) and (c), Chorus may at any time, without the need of any notice:

• (i) modify or terminate the Plan to comply with any applicable law, the listing rules of any stock exchange on which Shares are listed, or any provision of the Constitution; and

• (ii) make minor amendments to the Plan where such amendments are of an administrative or procedural nature.

P. 11

13. Stock Exchange Listing

Chorus will apply for Shares which may be issued under the Plan to be quoted on the NZSX and the Australian Securities Exchange promptly after they have been issued. NZX and the Australian Securities Exchange accept no responsibility for any statement in this Offer Document.

14. No Inside Information

At each time the price for Shares is set under clause 6 of these Terms and Conditions, Chorus is required to, and will, ensure that it has no information that is not publicly available that would, or would be likely to, have a material adverse affect on the realisable price of the Shares if the information were publicly available.

15. Taxation

The taxation consequences for each Shareholder should they elect to participate in the Plan will differ depending upon their particular circumstances. Accordingly, each Shareholder should consult their own tax adviser as to the taxation implications of the Plan. Chorus does not accept any responsibility for the financial or taxation effects of a Shareholder’s participation or nonparticipation in the Plan.

16. Information for Australian Shareholders

• (a) The offer of Shares under the Plan does not require disclosure for the purposes of section 708 of the Corporations Act 2001 (Cth).

• (b) Australian resident Shareholders should note that Chorus is not licensed to provide financial product advice in relation to the Shares offered under the Plan. There is no cooling-off regime that applies in respect of the issue of Shares under the Plan.

17. Governing Law

The Plan and its operation and these Terms and Conditions will be governed by the laws of New Zealand.

18. Available Information

Copies of Chorus’ most recent Annual Report and financial statements complying with the Financial Reporting Act 1993 are available online at: http://chorus.co.nz/financial-reports.

A hard copy is also available free of charge on request from:

Chorus Limited Level 9 Datacom House 68-86 Jervois Quay P O Box 632 Wellington 6140 New Zealand

Email: company.secretary@chorus.co.nz Website: www.chorus.co.nz

P. 12

19. Registrar’s Address

The contact details of the Registrar are as follows:

Computershare Investor Services Limited Private Bag 92119 Level 2, 159 Hurstmere Road, Takapuna, Auckland 0622 New Zealand Phone: 0-9-488 8777 Fax: 0-9-488 8787 Email: enquiry@computershare.co.nz

P. 13

Definitions

The following words have these meanings in this Offer Document:

Board: Chorus’ Board of Directors.

Business Day: A day on which NZX is open for trading.

Chorus: Chorus Limited

Constitution: Chorus’ constitution.

Ex Date: The second Business Day before the relevant Record Date, unless NZX determines otherwise.

Issue: In the case of existing Shares, includes transfer where the context requires.

Non-Participating Share: A Share registered in the name of a Participant, the dividends on which are not subject to the Plan, and in respect of a particular Record Date, the Non-Participating Shares that are not participating in the Plan on that date.

NZSX: The main board equity security market operated by NZX.

NZX: NZX Limited.

Participant: Any eligible holder of Shares who has completed (and has not withdrawn) a Participation Notice which has been accepted by Chorus.

Participating Share: A Share registered in the name of a Participant, the net proceeds of cash dividends on which are subject to the Plan, and in respect of a particular Record Date, the Participating Shares participating in the Plan on that date.

Participation Notice: The Participation Notice accompanying this Offer Document as approved by Chorus (or such amended or replacement version thereof as Chorus may approve).

Plan: The Chorus Dividend Reinvestment Plan established by the Board pursuant to the Constitution on the terms and conditions set out in this Offer Document, as amended from time to time.

Record Date: The date and time fixed by the Board for determining entitlement to the relevant dividend.

Registrar: Computershare Investor Services Limited.

Shares: Ordinary Shares in Chorus.

Shareholders: Holders of Shares.

P. 14

ARBN 152 485 848

P. 2