Ann: S/HOLDER: FSF: FONTERRA ANNOUNCES PLAN TO SU

• Release Date: 27/02/13 10:30
• Summary: S/HOLDER: FSF: FONTERRA ANNOUNCES PLAN TO SUPPORT AND GROW MILK SUPPLY
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FSF
27/02/2013 08:30
S/HOLDER

REL: 0830 HRS Fonterra Shareholders' Fund (NS)

S/HOLDER: FSF: FONTERRA ANNOUNCES PLAN TO SUPPORT AND GROW MILK SUPPLY

Fonterra announced today a five-point plan to give farmer shareholders more
flexibility in managing their farm businesses in order to support and grow
milk production to support the Co-operative's growth strategy.

The plan includes:
1. A bonus issue of one additional share or unit for every 40 held on 12
April 2013.
2. A further Supply Offer enabling Fonterra shareholders to sell the economic
rights of some of their shares into the Fonterra Shareholders' Fund
3. A Dividend Reinvestment plan enabling shareholders and unit holders to
elect to receive dividends in the form of shares or units
4. Flexible contracts to give new and growing farmers more time and options
to fully back their milk production with Fonterra shares.
5. New opportunities for winter milk supply contracts in the upper North
Island to fuel Fonterra's new UHT plant at Waitoa.

Fonterra Chairman John Wilson said Fonterra was committed to providing
flexibility for its farmers to help them manage their shareholdings: "Milk is
the life blood of the Co-operative.

"For Fonterra to grow, we need our farmers to grow.  With a stable capital
base, we now have certainty and can offer farmers more ways to grow milk
supply and give them more time to share up."

The bonus issue will automatically provide all shareholders and unit holders
with free additional shares and units on April 24.  Each shareholder and unit
holder will receive one bonus share or unit for every 40 shares or units held
on April 12.

"The bonus issue means our farmer shareholders can use these extra shares to
back current or future production increases.  Alternatively, they might
decide to hold them as an investment or sell them," said Mr Wilson.

"Based on current production levels, the bonus issue means around 95 per cent
of farmer shareholders will not need to buy additional shares next season to
match any increase in production," said Mr Wilson.

Mr Wilson said Fonterra's guiding principle was that milk production should
be backed by share ownership.  With Trading Among Farmers providing a more
secure capital base, Fonterra was able to offer more flexible options for
farmers to achieve full share ownership.

Accordingly, the Co-operative had modified its growth contracts to provide
more time and options for growing farmers to buy shares to match their
production, with changes including:

o A new flexi contract linked to Fonterra's Farmgate Milk Price would require
farmers to purchase 50 per cent of shares up front for growth milk but they
would only be required to purchase their remaining shares when the Farmgate
Milk Price was above a certain threshold.

o A modified growth contract that would allow farmers to purchase a minimum
10 per cent of shares up front for growth milk.  Farmers would not have to
purchase further shares until the fourth season.  After that, they would be
given more time to share up provided they made a specified minimum annual
investment.

These contracts would be available to new and current farmer shareholders who
are growing.

Additionally, there would be new opportunities for winter milk contracts for
Fonterra farmers in the upper North Island following Fonterra's decision to
invest more than $100 million in a new UHT plant at Waitoa, in the Waikato.
The new plant would increase UHT capacity by 100%, meeting demand for UHT
products from China.

"To fuel this growth, we will need to increase our winter milk supply in the
upper North Island by over 50 per cent for the 2015 season," Mr Wilson said.
"This represents an opportunity for the many farmers who have signalled an
interest in supplying winter milk."

Chief Executive Theo Spierings said growing milk volumes was fundamental to
Fonterra's growth strategy.

"The steps announced today were planned before the launch of the
Shareholders' Market and Fonterra Shareholders' Fund, and were referred to in
the Offer Documents.  Now is the right time to implement them.

"The initiatives will benefit our existing farmer shareholders, make life
easier for those expanding production, and encourage new entrants to join the
Co-operative.

"Unit holders who have chosen to invest in Fonterra's continuing performance
will also benefit - not only through the bonus issue but also the effort we
are making to keep driving forward on our business strategy," said Mr
Spierings.

Fonterra will have 2.5% more shares on issue after the bonus issue and the
bonus issue will not affect Fonterra's total earnings or dividends paid.
Since everyone receives more shares in the same proportion, no person will be
better or worse off, although the earnings per share, and dividend per share
will reduce proportionately.

Mr Wilson confirmed that Fonterra intended to conduct another Supply Offer
after the interim result, as indicated in the Fund Prospectus. Details would
be provided after the co-operative's interim result announcement next month.

The Board intends to introduce a Dividend Reinvestment Plan later this year,
offering farmer shareholders and unit holders the opportunity to elect to
receive dividends in the form of shares or units.

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Appendix 3 Notice supplied
End CA:00233484 For:FSF    Type:S/HOLDER   Time:2013-02-27 08:30:36