Due Diligence Report - Fonterra

3.2 Work PlanThe Committee adopted a comprehensive work plan describingthe various due diligence work streams to be addressed by theCommittee and its advisors. The Committee’s advisors providedinput on the scope of the work plan. The work plan identifies thefollowing critical work streams:(a) Co-operative Model(b) Milk Price(c) Process(d) Legal Issues(e) Financial/Markets (including Scenario Analysis)(f) Taxation(g) Constitutional(h) Control/Ownership(i) Fall-Back Plans(j) Legislation/Regulation(k) Satisfaction of Pre-conditions(l) BlueprintThe work plan also identifies the time frame for addressing thevarious work streams, actions and documents relating to the workstreams, and the advisor or advisors with primary responsibility foraddressing each work stream.3.3 Appointment of AdvisorsThe Committee appointed independent legal, tax, financial andindustry advisors to review and report on certain due diligencematters. These advisors are some of New Zealand’s leadingexperts in their respective fields. The Committee entered into anengagement letter with each of the advisors which described thepreliminary scope of the due diligence work to be undertaken bythe advisor. The Committee confirmed with each advisor that theyhad no conflict in connection with the performance of their workfor the Committee. A list of the advisors and their role in the duediligence process is described in more detail in Section 4 below.3.4 Information Shared with AdvisorsManagement and the Committee have provided detailed projectinformation (including copies of the Blueprint which outlinesthe key requirements for TAF) to the Committee’s advisors. TheBlueprint was the primary document reviewed by the advisors inthe due diligence process. Other information (including copies ofmanagement papers and reports and other relevant documents)was provided to the advisors who were also provided with allrelevant documentation that they requested. Advisors were alsogiven full access to, and an opportunity to discuss issues with,members of management and Fonterra’s advisors involved in theTAF implementation process.3.5 Meetings of the CommitteeThe Committee met formally on the following dates: 18 October2011, 27 October 2011, 14 November 2011, 9 December 2011,17 February 2012, 24 February 2012, 20 March 2012, 20 April 2012and 14 May 2012.The Committee’s advisors attended all meetings of the Committeeother than the initial meeting of the Committee after they hadbeen engaged by the Committee. 3 Representatives from Fonterramanagement also attended the meetings of the Committee.In addition to the meetings listed, the Committee and advisorsattended a meeting of the Capital Structure Committee on8 February 2012 at which Fonterra’s capital markets advisors,Oliver Wyman, presented and discussed a paper on the role ofthe Registered Volume Provider (“RVP”). At this meeting, theCommittee and advisors had the opportunity to discuss thispaper with representatives of Oliver Wyman. The Committeeand its advisors also attended the meeting of the CapitalStructure Committee on 12 March 2012 at which Fonterra’s TAFcapital markets advisors, Rothschild and Cameron Partners(“Rothschild/Cameron”), presented papers on launch of theFonterra Shareholders’ Fund (the “Fund”) including an indicativeprocess for launching the Fund, management of Fund size, andunwind provisions. The Committee and its advisors were giventhe opportunity to discuss these papers with Rothschild/Cameronat the meeting. At the 12 March meeting of the Capital StructureCommittee, Professor Michael Cook, the Robert D. PartridgeProfessor of Co-operative Leadership, Division of Applied SocialSciences, University of Missouri, Columbia, Missouri, also gavea presentation on co-operatives that have changed their capitalstructure and the Committee and advisors were able to discussaspects of the presentation with Professor Cook at the meeting.3.6 Issues ListThe project manager for the Committee maintained a comprehensiveissues list with respect to the various due diligence work streamsthat enabled the Committee to monitor issues raised by the advisorsand the status of those issues. As issues were addressed bymanagement and its advisors, the “closed issues” were removedfrom the list, and the status of resolution of the issues andmanagement responses and actions were also incorporated in theissues list.3 Robin Oliver and Mike Shaw only attended the meetings of the Committee on 20 April 2012and 14 May 2012. Alan Galbraith only attended the meetings of the Committee on 27 October2011, 14 November 2011 and 20 April 2012.5