Fonterra Shareholders' Fund Prospectus and Investment Statement

The Final Price is expected to be announced
to NZX on 27 November 2012. All successful
Applicants will pay the Final Price. Fonterra
reserves the right to set the Final Price within
or higher than the Indicative Price Range.
Expected initial
distribution
As described in further detail under the
heading “What returns will I get” in the
section entitled Answers to Important
Questions above, the Manager of the Fund
will pass on to Unit Holders any cash
dividend or other cash benefit (other than
supplementary dividends) paid in respect of
Fonterra Shares, less any adjustments for tax.
The Fonterra Board intends to declare an
interim dividend for the 2013 Season in
March 2013, to be paid in April 2013.
The Manager can give no assurance as to the
amount or frequency of any cash dividend or
other cash benefit that may be paid in respect
of Fonterra Shares. Therefore, the Manager
cannot give any assurance as to the amount
or frequency of cash distributions to be paid
in respect of Units.
Discretion regarding
the Offer
Fonterra (as corporate promoter of the Offer)
will be responsible for making all decisions in
relation to the Offer.
Fonterra reserves the right to withdraw the
Offer at any time prior to the allotment of
Units to Applicants. If the Offer or any part of
it is withdrawn, then all Application Monies,
or the relevant Application Monies, will be
refunded (without interest).
Fonterra also reserves the right to close the
Offer or any part of it early, extend the Offer
or any part of it, accept late Applications
either generally or in particular cases, reject
any Application, or allocate to any Applicant
Units with a lesser aggregate value than that
applied for.
If Fonterra amends the Offer in any way,
any such amendment will be announced
through NZX.
Where to find out more
about the Offer
Further information about the terms of the
Offer and how those terms may be altered
is set out in the section entitled Answers to
Important Questions above and in Section 8
– Details of the Offer.
Key inveSTment metrics 1
INDICATIVE PRICE RANGE $4.60 to $5.50
FUND METRICS
Units on issue following the Offer 2 109m 91m
Implied Fund market capitalisation 2 $500m $500m
FY2013 gross distribution yield 3 7.0% 5.8%
FY2013 net cash distribution yield 4 5.0% 4.2%
FONTERRA METRICS
Shares on issue following the Offer 5 1,598m 1,586m
Implied Fonterra market capitalisation 6 $7,352m $8,722m
Pro forma net debt (as at 31 July 2012) 7 $3,788m $3,788m
Implied Fonterra enterprise value 8
$11,140m $12,510m
Offer price / FY2013 EPS 10.6x 12.7x
Implied Fonterra enterprise value / FY2013 6.8x 7.7x
normalised EBITDA 9
Implied Fonterra enterprise value / FY2013 10.3x 11.6x
normalised EBIT 9
FY2013 Fonterra dividend yield
7.0% 5.8%
(unimputed) 10
1 The information in this table has been prepared on the basis of the estimates
and assumptions referred to below and in the metrics stated. The yields and
ratios provided have been calculated with reference to the Fonterra Prospective
Financial Information included in Section 4 – Fonterra Financial Information,
which should be read in conjunction with the assumptions and sensitivity
analysis included in that section and the risks described in Section 7 –
Investment Risks. The Fonterra Prospective Financial Information is also subject
to the Investigating Accountant’s Report on Prospective Financial Information.
2 Assumes minimum subscriptions are $500 million and excludes
oversubscriptions.
3 Represents the total dividend (unimputed) expected to be paid by Fonterra to
the Fund in FY2013 excluding any investor-level tax, divided by the Implied
Fund market capitalisation.
4 Assumes distributions paid by the Fund to Unit Holders are net of a prescribed
investor tax rate of 28%. Refer to Section 9 – Taxation for further information.
5 The number of Shares on issue following the Offer has been estimated based
on the aggregate of the total number of Shares on issue as at the date of this
Offer Document (1,522 million Shares), the number of Shares required to be
issued by Fonterra to meet the minimum Fund size (76.09 to 63.64 million
Shares) assuming Fonterra issues Shares to the value of $350 million, and the
issue of 110,000 Shares by Fonterra to the Fonterra Farmer Custodian to hold
for the Registered Volume Provider. Refer to Section 8 – Details of the Offer
under the heading “Formation of the Fund” for further information.
6 Represents the number of Shares on issue following the Offer multiplied by
the lowest and highest prices respectively in the Indicative Price Range.
7 Represents net debt including the effect of debt hedging in place at balance
date, less new equity raised between balance date and the date of this Offer
Document being 20 million Shares at $4.52 per Share, less new equity raised
from issuing 110,000 Shares to the Registered Volume Provider, less
$350 million of assumed new equity issued by Fonterra in order to meet
the minimum Fund size.
8 Represents implied Fonterra market capitalisation plus pro forma net debt.
9 Note that normalised EBITDA and normalised EBIT includes share of profit
from equity accounted investees and excludes non-recurring items as
described on page 96 in Section 4 – Fonterra Financial Information.
10 Based on the lowest and highest prices respectively in the Indicative Price
Range and prospective dividends per Share for FY2013. Refer to Section 4
– Fonterra Financial Information for further information.
FONTERRA SHAREHOLDERS’ FUND PROSPECTUS AND INVESTMENT STATEMENT 23