Prospectus - Fonterra

40Fonterra Co-operative Group LimitedNotes to the Financial StatementsFor the 14 months ended 31 July 20081 Cost of goods sold14 months to31 July 2008$ million12 months to31 May 2007Cost of milk 8,978 4,812Supplier premiums 33 52Payout to shareholder suppliers included in cost of goodssold9,011 4,864Other purchases 187 6Total cost of goods sold 9,198 4,870Fonterra processes approximately 95% of all New Zealand milk and accordingly there is not a market based pricefor raw milk acquired in New Zealand. The cost of milk is based on the Milk Price which is an estimate as it relieson a model using a combination of actual and forecast sales.2 Operating (loss) before finance costs and tax14 months to31 July 2008$ million12 months to31 May 2007The following items have been included in arriving atoperating (loss) before finance costs and taxAuditor’s remuneration:- Audit fees 2 2- Other audit related services (1) 1 1Operating lease expense 5 4Restructuring costs 1 19Research costs 1 1Gain on disposal of property, plant and equipment - 1Total employee benefits expense 181 111Included in employee benefits expense arecontributions to defined contribution plans 1 1Note:(1) Other audit related services include services for financial and IT controls assurance.3 Net finance income14 months to31 July 2008$ million12 months to31 May 2007Interest income 497 372Interest expense on financial liabilities measured atamortised cost (408) (294)Change in fair value of hedged risks on debt instrumentsdesignated in a fair value hedge relationship (184) 336Change in fair value of derivative instruments designatedas a fair value hedge 14 (451)Change in fair value of financial instruments classified asheld for trading 177 69Finance costs (401) (340)Net finance income 96 32