Due Diligence Report - Fonterra

Appendices to Report to the BoardShareholder information versionAppendix 1 – 100% Farmer Control and Ownership100% farmer control and ownership of the Co-operativeFonterra will be 100% farmer controlled and owned under Trading Among Farmers. 1100% farmer ownershipThis means that the only shareholders of the Co-operative can be: farmers who supply milk to Fonterra; those people who supplied milk to Fonterra but are selling down their shares over three seasons (exiting farmers); and the Fonterra Farmer Custodian, which will be ultimately owned and controlled by farmers who supply milk to Fonterra and holdCo-operative shares.If you look at Fonterra’s share register at the end of a trading day, you will only see as legal owners of Co-operative shares the peopledescribed above.Fonterra will be using a system approved by the Reserve Bank to transfer Co-operative shares between parties who are entitled to holdthem. As part of this approved system, shares may be temporarily held during the course of a day by approved market participants whoare subject to the rules of the Fonterra Shareholders’ Market.There have always been and will continue to be people who have beneficial rights in Co-operative shares – such as the beneficiaries of afamily trust or passive investors in a farm syndicate. This will not change under Trading Among Farmers.Under Trading Among Farmers both the FSF and the RVP will have beneficial rights in Co-operative shares. However, they will not be legalowners of Co-operative shares.100% farmer controlThis means that farmers who supply milk to Fonterra and who hold Co-operative shares are the only people who can: vote on Co-operative matters on the basis of their share-backed production; and appoint and remove Fonterra directors.However if Directors or farmer shareholders try to take an action which will adversely affect the rights of the Fonterra Shareholders’ Fundor the Registered Volume Provider, then those parties may have legal rights to take steps to protect their interests. Under the terms of thedocumentation constituting Trading Among Farmers, those steps would be taken in the name of the Fonterra Farmer Custodian.1 As set out in TAF Blueprint (version 3.9)18