Ann: MEETING: FCG: TAF VOTER PACKS SENT TO FARMER

• Release Date: 01/06/12 12:33
• Summary: MEETING: FCG: TAF VOTER PACKS SENT TO FARMERS
• Price Sensitive: No
• Download Document  4.48KB

					

FCG
01/06/2012 10:33
MEETING

REL: 1033 HRS Fonterra Co-operative Group Limited

MEETING: FCG: TAF VOTER PACKS SENT TO FARMERS

Fonterra's Board will be looking for a clear mandate from the Co-operative's
10,500 dairy farmers when they vote on Trading Among Farmers (TAF) on June
25, says Chairman Sir Henry van der Heyden.

While the TAF resolution at the special shareholder meeting is an ordinary
resolution that requires a 50% plus majority to be passed, Sir Henry says the
Board won't be proceeding unless it has a much stronger mandate than that.

"I want a mandate that will unify the Co-operative around this proposed
evolution in our capital structure," he said. "This is the final vote in a
long process. Shareholders have given us strong support in the earlier stages
and that is what the Board is looking for this time.

"TAF offers a means of sustainably protecting 100% farmer control and
ownership into the future and reducing risk to our Co-operative, so we're
looking for a mandate that enables the Board to continue to work towards
protecting and strengthening Fonterra," said Sir Henry.

"We have listened to our farmer shareholders and their key concerns rest on
two fundamental points: Preserving 100% control and ownership and the
integrity of the Farmgate Milk Price.

"Accordingly, we have proposed a range of resolutions for farmer shareholders
to vote on that will tighten limits on the size of the Fonterra Shareholders'
Fund, which is fundamental to 100% farmer control and ownership, and preserve
the integrity of the
Farmgate Milk Price.

"These resolutions would require Constitutional change and would therefore
involve a 75% vote.

"We propose to decrease the threshold on the size of the Fund from 25% to 20%
of total shares, and decrease the number of Dry shares on issue from 25% to
15%," said Sir Henry.

He said that robust modelling and much deliberation by the Board had informed
the recommendation for a lower 20% threshold which struck the right balance
between flexibility to manage seasonal milk fluctuations and controls to
manage risk.

"While we intend to operate the Fund at a size of 7%-12% of total Fonterra
shares on issue, we do need breathing room to take account of seasonal
changes in milk volume," he said.

"Milk production is driven by weather - for example this year we anticipated
3% milk growth but got 10%. Add 10% growth to our 7%-12% ideal Fund size and
a 15% cap is too restrictive."

He said that over time the Fund would be managed within the target size
range, but the Constitutional limit needed to be higher to allow for seasonal
shifts in milk production.

"It's a combination of hard maths and good judgement that leads us to
recommend 20%," he said.

Sir Henry said another key resolution was to enshrine protections for setting
the Farmgate Milk Price in the Co-operative's Constitution so that future
changes would require a 75%-plus majority.

"The proposal is that the Shareholders' Council's appointment to the Milk
Price Panel be added to the constitution," he said.

"This underpins the integrity of the Farmgate Milk Price going forward," said
Sir Henry. "Unlikely as it might be, were a future Board were to bow to
pressure from investors in the Fund, this would become obvious and the
Council's constitutional ability to protect the process provides a further
assurance for farmers."

He said that Commerce Commission oversight of the Farmgate Milk Price formula
- a process being worked through independently of TAF - provided a further
safeguard in terms of transparency.

Dairy farmers supplying Fonterra throughout the country will receive
shareholder Special Meeting voter packs in the next few days providing
further detail on how it's proposed TAF will operate.

Sir Henry said the material distributed to farmers included:

o The Notice of Special Meeting of Shareholders, including proposed
resolutions,
o A copy of the Blueprint, the masterplan document for Trading Among Farmers,

o A Due Diligence Report provided to the Board for its May, 2012 meeting; and

o A Trading Among Farmers Summary Sheet

Sir Henry said the Co-operative would hold a series of shed meetings early in
June, once farmers had received their TAF voter packs, to ensure farmers
could ask questions of Fonterra's Board and management, as well as the
Board's Due Diligence Committee.

"There's a lot of information to consider, and we're taking every opportunity
to ensure that farmers are as informed as they can be when they vote on June
25," he said.
End CA:00223521 For:FCG    Type:MEETING    Time:2012-06-01 10:33:26