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Fonterra Shareholders Council seeks to calm farmers over

Thursday 8th April 2010

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The Fonterra Shareholders' Council has moved to help quell potential backlash from farmers misunderstanding a proposed new fund that will allow private investors exposure to the commercial performance of Fonterra's value added businesses.

Media reports, including in BusinessWire, focusing on the capacity for the public to invest in the proposed Fonterra Shareholders' Fund provoked a deeply sensitive response from Fonterra after it announced the third phase of its capital restructuring titled "Trading Among Farmers", on Wednesday.

Fonterra senior managers engaged in damage control with media on Wednesday evening amid fears that even accurate reporting of the fund's intent could be misconstrued by farmers, many of whom are suspicious of any suggestion of back-door direct investment in Fonterra.

The suggested Fund could be invested in "by people such as sharemilkers and retired farmers and the public", said Blue Read, chairman of the shareholders’ council, an advisory body to the Fonterra board of farmer shareholders.

He refuted any suggestion "that possible changes to the co-operative’s capital structure involve direct public investment in Fonterra".

"Trading Among Farmers has been developed from the starting point that Fonterra must be 100% controlled and owned by farmer shareholders," said Read. The council had worked to make sure farmer control and ownership was "locked in”.

"There has been no compromise and there should be no compromise. It is essential Fonterra is 100% owned and controlled by its supplying shareholders. Farmers have told us this is what they want,” Read said.

The Fonterra Shareholders Fund was developed to create additional liquidity and options to help supplying farmers stay in the co-operative.

"The Fund could help supplying shareholders retain shares in Fonterra they might otherwise want to sell, or help farmers purchase shares if they need them. The Fund would pay supplying shareholders for the right to receive dividends from their shares and the potential gain or loss from any change in the value of their shares."

“Unit holders in the Fund would not own shares in Fonterra and therefore would not have any voting rights. Neither would the Fund,” Mr Read said. “All voting rights would remain with supplying shareholders and supplying shareholders would still be the owners of their shares,” he said.

Supplying shareholders would continue to be paid their full share-backed Milk Price and would retain all voting rights in their shares based on their share-backed milksolids.

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