Ann: WAV/RULE: FSF: FSF -Various Waivers and Ruli

• Release Date: 30/11/12 12:47
• Summary: WAV/RULE: FSF: FSF -Various Waivers and Rulings from the NZSX/NZDX Listing
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FSF
30/11/2012 10:47
WAV/RULE

REL: 1047 HRS Fonterra Shareholders' Fund (NS)

WAV/RULE: FSF: FSF -Various Waivers and Rulings from the NZSX/NZDX Listing

23 October 2012

NZX Regulation Decision
Fonterra Shareholders' Fund ("FSF")
Application for Various Waivers and Rulings from the
NZSX/NZDX Listing Rules

Background

1. In June 2010 Fonterra Co-operative Group Limited ("Fonterra") Shareholders
voted in changes to Fonterra's Constitution to allow Fonterra to put in place
a regime for Trading Among Farmers ("TAF").
2. Integral to TAF is the establishment of the Fonterra Shareholders' Market
("FSM") as a reliable and effective platform for the trading of shares in
Fonterra ("Shares") and the establishment of a Fonterra Shareholders' Fund
("FSF"), a unit trust that is to be listed on NZX's Main Board.
3. The trustee of the FSF will be The New Zealand Guardian Trust Company
Limited ("Trustee"). The FSF manager will be FSF Management Company Limited
("Manager"), which will be wholly-owned by Trustees Executors Limited ("TEL")
in accordance with the terms of a shareholding deed executed by the Manager,
TEL and Fonterra on or about 23 October 2012 ("Shareholding Deed").
4. The FSF will operate pursuant to a Trust Deed to be dated on or about 23
October 2012 executed by the Manager, the Trustee and Fonterra ("Trust
Deed").
5. The trustees of the Fonterra Farmer Custodian Trust ("FCT Trustees"), will
hold shares in a company that will act as custodian of the FSF ("Custodian").

6. Through the FSF, Fonterra's farmer Shareholders, the Custodian (on behalf
of a registered volume provider ("RVP")) and Fonterra (together the
"Permitted Persons") have the ability to sell Shares.  Permitted Persons may
transfer legal title to Shares to the Custodian, who will hold interests in
those Shares known as "Economic Rights" on trust for the FSF.
7. The FSF will, in consideration, issue a FSF Unit ("Unit") to the
transferor of that Share (except where the transferor is Fonterra), and the
transferor must, if they are a Farmer, then sell that Unit on the NZSX to a
person who need not be a Permitted Person.  Only the registered volume
provider may elect to hold a Unit issued directly by the FSF upon the
transfer of a Share to the Custodian.  Permitted Persons (and the RVP) may
acquire Units on the FSF market and may then require the FSF to redeem Units
and upon redemption, the Custodian will transfer one Share for each Unit
redeemed to the relevant Permitted Person.
8. It is critical that the Units and Shares be exchangeable as outlined above
to promote price convergence between Units and Shares.
9. When the FSF is launched, Farmers will transfer Shares (and Fonterra could
potentially issue Shares) to the Custodian who will hold the Economic Rights
in those Shares for the FSF and the FSF will issue Units to the public at a
price set by means of a bookbuild.  Otherwise, the FSF will, generally, only
issue Units to transferors of Shares when such Shares are transferred to the
Custodian to hold Economic Rights in those Shares for the FSF.
10. It is intended that Economic Rights be flowed through to Unitholders.
Should Fonterra undertake any corporate action in respect of which
Shareholders can participate, it is intended that the FSF will enable
Unitholders to participate on an equivalent basis. For example, if Fonterra
was to establish a dividend reinvestment plan ("DRP") then it is expected
that the FSF would also establish a DRP so that Unitholders could direct the
Custodian to participate in Fonterra's DRP.
11. The FSF cannot undertake activities other than those described above.
12. The FCT Trustees will hold one special Unit (the "Fonterra Unit") that
will give the FCT Trustees certain rights to ensure that the Trust Deed is
not amended where such an amendment would have certain prescribed effects.
The rights attached to the Fonterra Unit are recognised in the Dairy Industry
Restructuring Act 2001("DIRA").
13. DIRA also contains provisions relating to the Commerce Commission's
oversight of the setting of the Farmgate Milk Price and provisions that
facilitate "open entry and exit" by farmers.
14. The Farmgate Milk Price is the base price that Fonterra pays for milk
supplied to it in New Zealand and is intended to reflect the price that
Fonterra would be required to pay for milk in a competitive environment. The
Fonterra Board is responsible for setting the Farmgate Milk Price based on
transparent calculations and rules set out in the Farmgate Milk Price Manual.
Fonterra's Constitution requires Fonterra to maintain the Farmgate Milk Price
Manual that must reflect the Milk Price Principles set out in Fonterra's
Constitution.
15. In 2012 DIRA was amended so that once TAF is implemented, Fonterra will
no longer be required to issue and redeem Shares ""at a value determined in
accordance with DIRA and under Fonterra's Constitution. Instead, Shareholders
will be able to trade their Shares on the FSM.
16. Fonterra and the Manager will enter into an agreement in respect of the
establishment and operation of the FSF which will include details of the
services to be provided by Fonterra to the FSF ("Authorised Fund Contract").
17. The Manager of the FSF is to have 5 Directors. Fonterra will have the
right to appoint 2 Directors and Unitholders will have the right to appoint
the 3 remaining Directors at the annual Unitholders' meeting.
18. The FSF will provide NZX Regulation ("NZXR") with an Offer Document
("Offer Document") containing full and accurate disclosure of the material
terms of the FSF for approval prior to the Listing of the FSF and Quotation
of its Units.
19. The FSF has made application for certain waivers and rulings from the
NZSX Listing Rules ("Rules") in order for it to operate as intended,
consistent with the objectives of TAF. Unless the context otherwise
requires, capitalised terms used in this document, but not defined in this
document, have the meaning given to them in either the Rules or the Trust
Deed, as applicable.
Application 1 - Waiver from Rule 3.1.1(a)

20. The FSF has applied for a waiver from Rule 3.1.1(a) to the extent that
Rule 3.1.1(a) would require the Trust Deed (which falls within the definition
of Constitution contained in the Rules) to incorporate by reference
provisions consistent with or having the same effect as Rules 3.3.10 and
3.4.3. This application has been made to reflect the waivers provided in
paragraphs 35(c) and 42 below.
Application 1 - Rule 3.1.1(a)

21. Rule 3.3.1(a) provides as follows:
"The Constitution of each Issuer shall:

(a)    either incorporate by reference or contain provisions consistent with,
and having the same effect as, the provisions listed in Appendix 6, as such
provisions apply from time to time and as modified by any Ruling relevant to
the Issuer; and.."

22. Appendix 6 includes reference to Rules 3.3.10 and 3.4.3.
Application 1 - Decision

23. On the basis that the information provided to NZXR is full and accurate
in all material respects NZXR waives Rule 3.1.1(a) to the extent that Rule
3.1.1(a) would require the Trust Deed to incorporate by reference provisions
consistent with or having the same effect as Rules 3.3.10 and 3.4.3.
Application 1 - Reasons

24. The waiver provided in paragraph 23 is necessary to ensure the waivers
provided by NZXR described in paragraphs 35(b) and 42 below are effective.
Application 2 - Ruling under Rule 3.1.1(d)

25. The FSF has applied for a ruling under Rule 3.1.1(d) to allow clause
4.5(c) of the Trust Deed that sets out the rights attached to the Fonterra
Unit to be regarded as a contrary intention for the purposes of that Rule, so
as to ensure that the rights attaching to the Fonterra Unit cannot be
circumvented by a Ruling granted by NZXR.
26. In support of its application the FSF submits that the rights attaching
to the Fonterra Unit in clause 4.5(c) of the Trust Deed are those attributed
to it by DIRA and are necessary to ensure that the FSF complies with the
principles of TAF.
Application 2 -Rule 3.1.1(d)

27. Rule 3.1.1(d) provides as follows:
"The Constitution of each Issuer shall:

(d)    contain a provision to the effect that if NZX has granted a Ruling in
relation to that Issuer authorising any act or omission which in the absence
of that Ruling would be in contravention of the Rules or the Constitution
that act or omission shall, unless a contrary intention appears in the
Constitution, be deemed to be authorised by the Rules and by the
Constitution; and"
Application 2 - Decision

28. On the basis that the information provided to NZXR is full and accurate
in all material respects NZXR provides a Ruling that the provisions contained
in clause 4.5(c) constitute a "contrary intention" for the purposes of Rule
3.1.1(d).
Application 2 - Reasons

29. DIRA establishes a legislative framework within which Fonterra must
operate in relation to TAF.  The ruling provided in paragraph 28 ensures that
a Ruling cannot be granted permitting an act under the Rules that would be
contrary to DIRA.
Application 3 - Waivers from Rule 3.3.5, 3.3.10 and 3.3.11

30. The FSF has applied for waivers from the governance requirements
contained in Rules 3.3.5, 3.3.10 and 3.3.11 as the process for the
appointment of Directors outlined in paragraph 17 above, that are contained
in the Trust Deed and the constitution of the Manager, are inconsistent with
the provisions of those Rules, as follows:
(a) a waiver from Rule 3.3.5 to:
i. allow Fonterra to appoint 2 Directors to the Board of the Manager even
though Fonterra is not a Unitholder in the FSF, as permitted by clause 6.2 of
the Manager's constitution; and
ii. allow a precondition to be imposed in respect of persons who may be
nominated by Unitholders to fill 3 Director positions, that those candidates
be Independent for the purposes of the Rules, as required by clause 31.8(e)
of the Trust Deed;
(b) a waiver from Rule 3.3.10 that requires all Directors to be subject to
removal from office by an Ordinary Resolution of an Issuer, so that only
Fonterra may remove its appointed Directors; and
(c) a waiver from Rule 3.3.11 that requires one third of the Directors of the
Issuer to retire by rotation, to remove the obligation for the Fonterra
appointed Directors to retire by rotation, so that the Fonterra appointed
Directors may only be removed by a direction from Fonterra, with the identity
of the FSF Directors who are to retire by rotation being calculated by
reference to the 3 Directors appointed by the FSF Unitholders.
31. In support of its application the FSF submits as follows:
(a) The Manager will play a relatively constrained role given the nature of
the assets of the FSF, which is essentially a passive investment vehicle;
(b) On the launch of the FSF, one of the Fonterra Directors will be
Independent for the purposes of Fonterra's Constitution; and
(c) FSF Unitholders will be able to appoint a majority of Directors of the
Manager subject to those Directors being Independent for the purposes of the
Rules.
Application 3 - Rules 3.3.5, 3.3.10 and 3.3.11

32. Rule 3.3.5 provides as follows:
"No person (other than a Director retiring at the meeting) shall be elected
as a Director at an annual meeting of Security holders of an Issuer unless
that person has been nominated by a Security holder entitled to attend and
vote at the meeting. There shall be no restriction on the persons who may be
nominated as Directors (other than the holding of qualification shares, if
the Constitution so requires) nor shall there be any precondition to the
nomination of a Director other than compliance with time limits in accordance
with this Rule 3.3.5. The closing date for nominations shall not be more than
two months before the date of the annual meeting at which the election is to
take place.  An Issuer shall make an announcement to the market of the
closing date for Director nominations and contact details for making
nominations no less than 10 Business Days prior to the closing date for
Director nominations.  Notice of every nomination received by the Issuer
before the closing date for nominations shall be given by the Issuer to all
persons entitled to attend the meeting together with, or as part of, the
notice of the meeting and the Issuer shall specify in such notice the Board's
view on whether or not the nominee would qualify as an Independent Director."

33. Rule 3.3.10 provides as follows:
"All Directors (other than a Director appointed pursuant to Rule 3.3.8) shall
be subject to removal from office as Director by Ordinary Resolution of the
Issuer."

34. Rule 3.3.11 provides as follows:
"Subject to Rule 3.3.12, at least one third of the Directors, or if their
number is not a multiple of three then the number nearest to one third, shall
retire from office at the annual meeting each year, but shall be eligible for
re-election at that meeting."
Application 3 - Decision

35. Subject to paragraph 36 and on the basis that the information provided to
NZXR is full and accurate in all material respects NZXR grants the FSF:
(a) a waiver from Rule 3.3.5 to the extent necessary to allow Fonterra to
appoint 2 Directors to the Board of the Manager even though Fonterra is not a
FSF Unitholder, as permitted by clause 6.2(b) of the Manager's constitution;
(b) a waiver from Rule 3.3.5, to allow a precondition to be imposed on
persons who may be nominated by Unitholders to fill 3 Director positions,
that those candidates be Independent for the purposes of the Rules, as
required by clause 31.8(e) of the Trust Deed;
(c) a waiver from Rule 3.3.10 to the extent that Fonterra may remove its
appointed Directors from the Board of the Manager in accordance with the
constitution of the Manager; and
(d) a waiver from Rule 3.3.11 to the extent that the Fonterra nominated
Directors are not subject to the requirement to retire by rotation but are
subject to removal by Fonterra in accordance with the constitution of the
Manager, with the effect that the reference to 'Directors' in Rule 3.3.11
refers solely to the Directors appointed by the Unitholders.
36. The waivers provided in paragraph 35 are subject to the following
conditions:
(a) that full and accurate disclosure of the governance arrangements of the
Manager and Fonterra's reliance on this waiver is contained in the Offer
Document and in every Annual Report for the FSF relating to a period when
this waiver is relied upon;
(b) that the FSF bear a Non-Standard designation to act as a notification to
the market of the FSF's unique governance arrangements; and
(c) that Fonterra appoints and removes the Fonterra appointed Directors only
in accordance with the provisions of the constitution of the Manager and the
Trust Deed.
Application 3 - Reasons

37. In coming to the decision to grant the waivers in paragraph 35 above,
NZXR considered that:
(a) in the context of the FSF, the Manager has a relatively constrained role
given the scope of its powers under the Trust Deed, consistent with the FSF
being a passive investment vehicle;
(b) Fonterra has a stakeholder interest in the FSF, given that the FSF has
been established to facilitate TAF and that TAF has been developed as a means
for the reduction of Fonterra's redemption risk that existed under DIRA's
requirement for open entry and exit. Fonterra's ability to appoint and remove
2 Directors to the Manager of the FSF is consistent with the policy behind
Rule 3.3.5 and 3.3.8 that allows a stakeholder to appoint and remove
Directors to represent its interests;
(c) the requirement that all persons nominated by Unitholders be Independent
will ensure that the FSF has a minimum of 3 Independent Directors rather than
a minimum of 2 as required by Rule 3.3.1(a), and this provides an added
protection for Unitholders;
(d) the FSF will need to comply with Rules 3.3.3 and 10.8.1(d) which will
ensure the market has visibility of those persons appointed and removed as
Directors of the Manager;
(e) the conditions contained in paragraph 36 provide comfort to NZXR that
information concerning the unique governance arrangements that apply to the
FSF will be publicly available.
Application 4 - Ruling under Rule 3.4.3

38. The FSF has sought a waiver from the prohibition contained in Rule 3.4.3
on interested Directors voting on Board resolutions, to the extent that such
interests arise because the Directors of the Manager are treated, for the
purposes of the Rules, as Directors of the Issuer and the Manager may obtain
a financial benefit from a transaction that is within the intended scope of
the FSF.
39. In support of its application the FSF submits that:
(a) section 139(c) of the Companies Act states that a Director is interested
in a transaction where the Director is also a Director of another party to,
or person who will or may derive a material financial benefit from, a
transaction. As the Directors of the Manager are also deemed to be Directors
of the FSF, any transaction between the FSF and the Manager which causes the
Manager to derive a material financial benefit will cause the Directors to be
interested in the transaction and precluded from voting under Rule 3.4.3; and

(b) the Directors of the Manager will need to pass resolutions in connection
with the operation of the FSF to enable the FSF to carry out its functions
and it would be unreasonable, and not in the interests of Unitholders, if the
Directors of the Manager were not permitted vote on such resolutions.
Application 4 - Rule 3.4.3

40. Rule 3.4.3 provides:
 "Subject to Rule 3.4.4, a Director shall not vote on a Board resolution in
respect of any matter in which that Director is interested, nor shall the
Director be counted in the quorum for the purposes of consideration of that
matter.  For this purpose, the term "interested" bears the meaning assigned
to that term in section 139 of the Companies Act 1993, on the basis that if
an Issuer is not a company registered under that Act, the reference to the
"company" in that section shall be read as a reference to the Issuer."

41. The Companies Act 1993 defines "interested" to include the following:
"139(1) For the purposes of this Act, a director of a company is interested
in a transaction to which the company is a party if, and only if, the
director--
...(c)? is a director, officer, or trustee of another party to, or person who
will or may derive a material financial benefit from, the transaction, not
being a party or person that is--
(i)? the company's holding company being a holding company of which the
company is a wholly-owned subsidiary; or
(ii)? a wholly-owned subsidiary of the company; or
(iii)? a wholly-owned subsidiary of a holding company of which the company is
also a wholly-owned subsidiary;"

Application 4 - Decision

42. On the basis that the information provided to NZXR is full and accurate
in all material respects, NZXR hereby grants the FSF a ruling that any
Director of the Manager is not "interested" in any matter, within the meaning
assigned to that term in section 139 of the Companies Act 1993, solely
because that person is a Director of the Manager.
Application 4 - Reasons

43. In coming to the decision to grant the FSF the waiver in respect of Rule
3.4.3, NZXR has considered that:
(a) the policy behind Rule 3.4.3 is to prevent situations arising whereby
Directors who have a vested interest in a transaction may authorise the entry
into, or implementation of, matters that are detrimental to the interests of
Unitholders as a result of that "interest";
(b) the "interest" of the Directors of the Manager in this instance arises by
virtue of the unique operating and management arrangement of a unit trust;
(c) the Manager will play a relatively constrained role given the nature of
the assets of the FSF and the status of the FSF as a passive investment
vehicle; and
(d) the Directors of the Manager will continue to be precluded by Rule 3.4.3
from voting on Board resolutions in which they are "interested" where the
Director is "interested" in the counterparty to a transaction with the
Manager or FSF.
Application 5 - Waiver from Rule 3.5.1 and 3.5.2

44. The FSF has sought a waiver from the requirements contained in Rules
3.5.1 and 3.5.2 that Directors of the Manager may only be paid remuneration
or lump sum retirement payments in accordance with an Ordinary Resolution of
Unitholders, to allow the Manager to make such payments to its Directors with
those payments being reimbursed to the Manager by Fonterra rather than the
FSF.
45. In support of its application the FSF submits as follows:
(a) the fees payable by Fonterra are de minimus in light of the business of
Fonterra and it would be inconsistent to require Unitholder oversight of
these fees where the other fees payable by Fonterra in respect of TAF do not
require such oversight;
(b) as Fonterra is the ultimate payor of the Manager's Directors' fees it is
appropriate for Fonterra to determine fees which are fair and in accordance
with a proper commercial basis;
(c) in the context of the FSF the Manager and its Directors have a relatively
constrained role given the scope of its powers under the Trust Deed;
(d) the Directors of the Manager have a limited role in establishing the
value of the FSF and are less subject to influence by Fonterra given the
arrangements that apply to the setting of the Farmgate Milk Price which
affects the level of dividends that attach to the Shares; and
(e) in the circumstances set out above, Fonterra has a limited ability to
influence the operation of the FSF.
Application 5 - Rules 3.5.1 and 3.5.2

46. Rule 3.5.1 provides as follows:
"No remuneration shall be paid to a Director in his or her capacity as a
Director of the Issuer or any Subsidiary, other than a Subsidiary which is
Listed (including any remuneration paid to that Director by a Subsidiary,
other than a Subsidiary which is also Listed) unless that remuneration has
been authorised by an Ordinary Resolution of the Issuer.  Each such
resolution shall express Directors' remuneration as either:
(a)  a monetary sum per annum payable to all Directors of the Issuer taken
together; or
(b)  a monetary sum per annum payable to any person who from time to time
holds office as a Director of the Issuer..."

47. Rule 3.5.2 provides as follows:
"An Issuer may make a payment to a Director or former Director of that
Issuer, or his or her dependents, by way of a lump sum or pension, upon or in
connection with the retirement or cessation of office of that Director, only
if the amount of the payment, or the method of calculation of the amount of
that payment is authorised by an Ordinary Resolution of the Issuer provided
that an Issuer may make a payment to a Director or former Director that was
in office on or before 1 May 2004 and has continued to hold office since that
date, or to his or her dependents, by way of a lump sum or pension, upon or
in connection with the retirement or cessation of office of that Director,
without an Ordinary Resolution of the Issuer provided that the total amount
of that payment (or the base for the pension) does not exceed the total
remuneration of that Director in his or her capacity as a Director in any
three years chosen by the Issuer."

Application 5 - Decision

48. Subject to paragraph 49 below and on the basis that the information
provided to NZXR is full and accurate in all material respects, NZXR hereby
grants the FSF a waiver from Rules 3.5.1 and 3.5.2 to allow the Manager to
pay remuneration to the Directors of the Manager without approval by an
ordinary resolution of Unitholders.
49. The waiver granted in paragraph 48 above is granted on the conditions
that:
(a) full and accurate disclosure of the remuneration to be paid to the
Directors of the Manager and the process for amending such payments will be
contained in the FSF Offer Document and NZXR will have the opportunity to
review and approve that Offer Document; and
(b) the FSF will bear a Non-Standard designation to alert the market of the
FSF's unique governance arrangements.
Application 5 - Reasons

50. In coming to the decision to grant the FSF the waiver in respect of Rules
3.5.1 and 3.5.2, NZXR has considered:
(a) that the policy behind Rules 3.5.1 and 3.5.2 is to ensure that Directors
cannot seek to reward themselves without sufficient scrutiny by an Issuer's
security holders;
(b) in the context of the FSF this concern is alleviated by the involvement
of Fonterra in the negotiation of remuneration payments;
(c) there is also a limited ability for Fonterra to influence the Directors
of the Manager given the investment mandate of the FSF as a passive
investment vehicle.
Application 6 - Ruling under Rule 4.1.1

51. The FSF has sought a ruling that a Transfer of Units to Fonterra will
never be a Restricted Transfer for the purposes of the definition of
"Restricted Transfer" in Rule 4.1.1, because section 161A of DIRA prohibits
Fonterra from exercising voting rights in respect of any Units that it holds.

52. In support of its application the FSF has submitted that:
(a) Fonterra does not control the Votes attributed to the Units it holds
because it is precluded by legislation from voting in respect of those Units;

(b) although a Transfer of Units to Fonterra could result in a change in the
Voting control of the remaining Unitholders, this would not result in a
Restricted Transfer in respect of those Unitholders because the effective
increase in the voting rights of the Unitholders would be "involuntary and
occasioned by the action of another party" (i.e. Fonterra);
(c) the notice and pause provisions contained in Section 4 of the Rules have
been incorporated into the Trust Deed and will otherwise apply to Unitholders
who are insiders other than Fonterra, when a Unitholder effects a Restricted
Transfer;
(d) clause 6.1 of the Trust Deed imposes the Ownership Restriction described
in paragraph 73 below and Rule 7.5 will apply to the FSF.
Application 6 - Rule 4.1.1

53. The definition of "Restricted Transfer" in Rule 4.1.1 is as follows:
"Restricted Transfer means:
(a) the Transfer which would result in the Votes controlled by any person or
group of persons who are Associated Persons of each other, of any Class of
Quoted Equity Securities of an Issuer:
(i) exceeding 20% of the Votes attached to that Class; or
(ii) if the person or group of persons controls 20% or more of the Votes
attached to that Class, increasing by more than 5% in any period of 12 months
excluding increases as a result of Transfers pursuant to a Restricted
Transfer notice previously given by the person or group of persons;...
Provided that for the purposes of this definition acquisition of interests in
Equity Securities of an Issuer may be disregarded:
(a) where it is determined by NZX that the acquisition was involuntary and
occasioned by the action of another party over which the acquiring party had
no effective control or influence in the matter; or..."
Application 6 - Decision

54. On the basis that the information provided to NZXR is full and accurate
in all material respects, NZXR hereby grants the FSF a ruling that a Transfer
of Units to Fonterra will not be a Restricted Transfer where section 161A of
DIRA operates to prohibit Fonterra from exercising voting rights in respect
of any Units that it holds.
Application 6 - Reasons

55. In coming to the decision to grant the FSF the ruling in paragraph 54
above, NZXR has considered that it is inappropriate for the Notice and Pause
provisions contained in Rule 4.5 to apply to a Transfer of Units to Fonterra
in the circumstance where DIRA prohibits Fonterra from voting those Units, as
Fonterra will not be able to increase its control by virtue of such a
Transfer.
Application 7 - Waiver from Rules 5.1.10 and Appendix 10

56. The FSF has sought a waiver from Rule 5.1.10 to the extent that the Rule
requires the Trust Deed to contain provisions consistent with:
(a) clause (a) of Appendix 10 that the Trustee is entitled to appoint an
independent valuer to value the assets of the FSF; and
(b) clause (c) of Appendix 10 that if the office of Trustee is vacated and a
new Trustee not appointed within two months that the FSF be wound up.
57. In support of this application the FSF submits that:
(a) given that the FSF's investment mandate to invest in Economic Rights
there are no circumstances in which the Trustee would wish to appoint an
independent valuer to value the FSF;
(b) the Trustee has confirmed that it does not require the Trust Deed to
expressly provide for the Trustee to be able to obtain and independent
valuation of the assets of the Fund;
(c) in practice the Trustee could only resign if the Fund was wound up and in
addition Fonterra has been given a power to appoint a replacement Trustee
should the Manager fail to do so on the Trustee's resignation;
(d) further, section 10(1) of the Unit Trusts Act 1960 provides limited
grounds for the Trustee to resign or retire, which should result in the
Trustee not ceasing to act without a replacement being appointed; and
(e) in addition, the nature of the investments of the Trust is not such that
a decision to terminate will result in prompt termination, given the very
limited persons who may acquire those investments.  Rights of termination and
the consequences of the exercise of those rights are set out in clause 38 of
the Trust Deed.  That clause provides for the consequences should Unitholders
elect to resolve to wind up the Trust, which would be an action available to
them if there is no Trustee.
Application 7 - Rules 5.1.10 and Appendix 10

58. Rule 5.1.10 provides as follows:
"Without limiting any other provision of these Rules, the Trust Deed
governing a unit trust for which Listing is sought shall contain the
provisions specified in Appendix 10."

59. Appendix 10 provides as follows:
"A Trust Deed governing a unit trust shall contain provisions to the
following effect:

(a) The trustee shall be entitled at any time to appoint an independent
valuer to value, at the expense of the trust, the assets of the trust; and
...
(c) If the office of the trustee becomes vacant, and a new trustee is not
appointed within two months of the vacancy occurring, the trust shall be
wound up; and ..."
Application 7 - Decision

60. On the basis that the information provided to NZXR is full and accurate
in all material respects, NZXR hereby grants the FSF a waiver from Rule
5.1.10 in respect of the provisions contained in paragraphs 10(a) and 10(c)
of Appendix 10 on the condition that the Offer Document will contain
disclosure of the termination circumstances set out in the Trust Deed and the
consequences which arise should this occur.
Application 7 - Reasons

61. In coming to the decision to grant the FSF the waiver in paragraph 60
above, NZXR has considered that:
(a) the FSF has submitted, and NZXR has no reason not to accept, that there
are no circumstances in which the Trustee would wish to appoint an
independent valuer to value the assets of the FSF;
(b) the Trustee has confirmed that it does not require the Trust Deed to
expressly provide for the Trustee to be able to obtain and independent
valuation of the assets of the Fund; and
(c) detailed termination provisions are specified in the Trust Deed,
including consequences which arise upon termination that are appropriate
given the investment mandate of the FSF.
Application 8 - Waiver from Rule 7.3

62. The FSF has sought a waiver from Rule 7.3 so as to allow the FSF to issue
units as set out in the Trust Deed to both permit an issue of Units to be
made to a transferor of a Share as well as to mirror issuances made by
Fonterra, without the need for Unitholder approval.
63. In support of its application the FSF submits that:
(a) The ability for the FSF to issue Units in exchange for FSM Shares is
essential to the operation of TAF;
(b) The FSF may issue Units after the initial launch in order to mirror
issues by Fonterra. For example, if Fonterra was to undertake a bonus issue
the FSF would contemporaneously undertake a bonus issue on the same terms so
as to preserve the one for one nature between the FSF Units and the FSM
Shares;
(c) The prohibition in Rule 7.3 cuts across the ability of the FSF to make
offers which mirror those made by Fonterra.
Application 8 - Rule 7.3

64. Rule 7.3 provides as follows:
"No Issuer shall issue any Equity Securities (including issue on Conversion
of any other Security) unless:
(a) the precise terms and conditions of the specific proposal to issue those
Equity Securities have been approved (subject to Rule 7.3.3) by separate
resolutions (passed by a simple majority of Votes) of holders of each Class
of Quoted Equity Securities of the Issuer whose rights or entitlements could
be affected by that issue, and that issue is completed within the time
specified in Rule 7.3.2; or
(b) the issue is made in accordance with any of Rules 7.3.4 to 7.3.11."
Application 8 - Decision

65. On the basis that the information provided to NZXR is full and accurate
in all material respects, NZXR hereby grants the FSF a waiver from Rule 7.3
to allow the FSF to issue units as set out in the Trust Deed, on the
condition that there is full and accurate disclosure of the reliance of the
FSF on this waiver in the Offer Document.
Application 8 - Reasons

66. In coming to the decision to grant the FSF the waiver in paragraph 65
above, NZXR has considered that:
(a) the ability for the FSF to make issuances of Units on the basis set out
in the decision in paragraph 65 is integral to the operation of TAF and will
be clearly disclosed in the Offer Document;
(b) the principles underlying TAF include that the Fund must match on a
one-for-one basis economic rights purchased from Farmers with Units that the
FSF issues and cannot undertake any other activity; and
(c) the Trust Deed prescribes the basis on which the FSF can issue Units.
Application 9 - Waiver from Rule 7.4

67. The FSF has sought a waiver from the requirement contained in Rule 7.4
that the Securities of a third party not be created or conferred other than
in compliance with Rule 7.3, to the extent necessary to allow the FSF to pass
on any Benefit or Distribution (as defined in the Trust Deed) to Unitholders
that Fonterra passes on to Shareholders. A Benefit could include a right to
acquire a Fonterra security (excluding Shares and rights to Shares or
securities Convertible into Shares) as described in clause 15 of the Trust
Deed.
68. In support of its application the FSF submits as follows:
(a) it is integral to TAF that the benefits provided to Shareholders, which
could include entitlements to Fonterra securities, are similarly provided to
Unitholders and therefore it will be necessary for the FSF to be empowered to
distribute Benefits that are distributed by Fonterra to Shareholders
(excluding Shares and rights to Shares or securities Convertible into Shares)
without the need for further Unitholder approval; and
(b) the manner in which the FSF may distribute such Benefits will be fully
and accurately disclosed in the Offer Document.
Application 9 - Rule 7.4

69. Rule 7.4 provides as follows:

"Entitlements conferred by the holding of Equity Securities of an Issuer, to
Securities of a third party (whether or not that third party is an Issuer),
shall not be created or conferred other than in compliance with Rule 7.3, as
if such Securities comprised an issue of Equity Securities of the Issuer."

Application 9 - Decision

70. On the basis that the information provided to NZXR is full and accurate
in all material respects and the condition stated in paragraph 71, NZXR
hereby grants the FSF a waiver from Rule 7.4 to permit the Manager to pass on
any Benefit or Distribution (as those terms are defined in the Trust Deed) to
Unitholders that Fonterra passes on to Shareholders, as required by the Trust
Deed.
71. The waiver provided in paragraph 70 is granted on the condition that
reliance on that waiver and the manner in which such Benefits and
Distributions may be distributed is fully and accurately disclosed in the
Offer Document.
Application 9 - Reasons

72. In coming to the decision to grant the FSF the waiver in paragraph 70
above, NZXR has considered the following:
(a) the distribution by the FSF of Benefits and Distributions to Unitholders
as permitted by the Trust Deed to reflect those provided by Fonterra to
Shareholders is integral to the operation of the FSF and the FSM;
(b) the condition contained in paragraph 71 above provides NZXR comfort that
Unitholders will be fully informed as to the non-application of Rule 7.4.
Application 10 - Ruling under Rule 7.5

73. Clause 6.1 of the Trust Deed imposes an ownership limitation (the
"Ownership Restriction") such that no person together with that person's
Associates (as that term is defined in the Trust Deed)), other than Fonterra,
may hold an interest that is greater than 15% of the lesser of:
(a) the total number of Units on issue for the time being; or
(b) the total Voting Rights for the time being.
74. The FSF has applied for a ruling that a holding that is less than that
prescribed as the maximum holding permitted by the Ownership Restriction
shall not amount to "effective control" for the purposes of Rule 7.5.
75. In support of its application the FSF has submitted as follows:
(a) The Trust Deed allows the Manager to refuse to register a transfer that
would cause a person to breach the Ownership Restriction;
(b) The Trust Deed incorporates the Notice and Pause Provisions contained in
section 4 of the Rules (in respect of "Insiders");
(c) A holding that complies with the Ownership Restriction will not cause the
holder to have effective control because that person will not be able to
exercise negative control as such a holding would not be sufficient to block
any Unitholder resolution; and
(d) 20% is the threshold adopted by the Takeover's Code and section 4 of the
Rules at which a holder and its Associates is understood to have control and
the Ownership Restriction is set below this level.
Application 10 - Rule 7.5

76. Rule 7.5 provides as follows:
"Notwithstanding the provisions of Rules 7.3 and 7.6, no issue, acquisition,
or redemption of Securities shall be made by an Issuer if:
(a) there is a significant likelihood that the issue, acquisition, or
redemption will result in any person or group of Associated Persons
materially increasing their ability to exercise, or direct the exercise of
(either then or at any future time) effective control of that Issuer; and
(b) that person or group of Associated Persons is entitled before the issue,
acquisition, or redemption to exercise, or direct the exercise of, not less
than 1% of the total Votes attaching to Securities of the Issuer;
unless the precise terms and conditions of the issue, acquisition or
redemption have been approved by an Ordinary Resolution of the Issuer."

Application 10 - Decision

77. On the basis that the information provided to NZXR is full and accurate
in all material respects NZXR grants the FSF a ruling that any person or
group of Associated Persons' holdings that do not breach the Ownership
Restriction shall not amount to "effective control" of the FSF for the
purposes of Rule 7.5.
Application 10 - Reasons

78. In coming to the decision to grant the FSF the ruling described in
paragraph 77 above, NZXR has considered the following:
(a) a person or group of Associated Persons who comply with the Ownership
Restriction will not have a sufficient holding to enable such persons to
block the passage of a resolution tabled at a FSF Unitholder meeting;
(b) the Ownership Restriction will not allow a person and that person's
Associates to maintain a holding in excess of 15% of the Units in the FSF,
which is less than 20% which is a commonly understood threshold at which a
person may be regarded as having control.
Application 11 - Waiver from Rules 7.6.1, 7.6.2

79. The FSF has applied for a waiver to allow it to redeem Units in exchange
for Shares, and in accordance with clause 15.1(h) of the Trust Deed if
Unitholders direct the Custodian to accept an offer for Shares, as specified
in the Trust Deed without the need to seek shareholder approval as required
by Rules 7.6.1 and 7.6.2.
80. In support of its application the FSF submits that the principles
underlying TAF include that:
(a) the Fund must match on a one-for-one basis the redemption of Units by
Permitted Persons, by the Custodian transferring one Share in respect of each
Unit redeemed to the Permitted Person who has redeemed the Unit; and
(b) the intention is that the benefits of holding a Unit include the right to
instruct the Fund how to deal with any offer received for Shares held by the
Custodian.  If Shares are disposed of in accordance with the direction of a
Unitholder, the relevant Units of that Unitholder would be required to be
redeemed in consideration for the sale proceeds of the Shares, as set out in
the Trust Deed.
Application 11 - Rules 7.6.1 and 7.6.2

81. Rule 7.6.1 provides as follows:
 "An Issuer shall not acquire or redeem Equity Securities of that Issuer
other than by way of:
(a) an acquisition effected by offers made by the Issuer through NZX's order
matching market, or through the order matching market of a Recognised Stock
Exchange; or
(b) an acquisition effected in compliance with section 60(1)(a) (read
together with section 60(2)) of the Companies Act 1993; or
(c) an acquisition of the nature referred to in section 61(7) of the
Companies Act 1993; or
(d) an acquisition or redemption approved in accordance with Rule 7.6.5; or
(e) an acquisition required by a shareholder of the Issuer pursuant to
sections 110 or 118 of the Companies Act 1993; or
(f) an acquisition effected in compliance with section 60(1)(b)(ii) (read
together with section 61) of the Companies Act 1993 and:
i) is made from any person who is not a Director or an Associated Person of a
Director of the Issuer; and
ii) the total number of Equity Securities of the same Class acquired together
with all other Equity Securities of the same Class as those Equity Securities
that are to be acquired, pursuant to this Rule 7.6.1(f) during the shorter of
the period of 12 months preceding the date of the acquisition and the period
from the date on which the Issuer was listed to the date of the acquisition,
will not exceed 15% of the total number of Equity Securities of that Class on
issue at the commencement of that period; or
(g) a redemption from a holder who holds less than a Minimum Holding; or
(h) a redemption of Equity Securities issued:
i) before 1 September 1994; or
ii) in compliance with Rule 7.3.1(a) or Rule 7.3.4, where the Issuer is bound
or entitled to redeem those Equity Securities pursuant to their terms of
issue; or
(i) a redemption in compliance with section 69(1)(a) of the Companies Act
1993; or
(j) a redemption of Equity Securities that are Debt Securities which may be
Converted into shares in an Issuer which is a company, and, before that
Conversion, they are redeemed in cash;
Provided that for the purposes of Rule 7.6.1(f):
(k) Securities which will, or may, convert to other Equity Securities shall
be deemed to be of the same Class as, and to correspond in number to,
Securities into which they will, or may, convert; and
(l) where the Conversion ratio is fixed by reference to the market price of
the underlying Securities, the market price for the purposes of Rule 7.6.1(f)
shall be the volume weighted average market price over the 20 Business Days
before the earlier of the day the acquisition is entered into or announced to
the market."
82. Rule 7.6.2 provides as follows:
 "Before an Issuer acquires Equity Securities of that Issuer, other than an
acquisition from a holder who holds less than a Minimum Holding, the Issuer
shall give at least 3 Business Days, notice to NZX.  That notice shall:
(a) specify a period of time not exceeding 12 months from the date of the
notice within which the Issuer will acquire Equity Securities; and
(b) specify the Class and maximum number of Equity Securities to be acquired
in that period:
(c) Provided that an Issuer may at any time by 3 Business Days notice to NZX
vary any notice so given and may cancel such notice at any time."
Application 11 - Decision

83. On the basis that the information provided to NZXR is full and accurate
in all material respects NZXR grants the FSF a waiver from Rules 7.6.1 and
7.6.2 to the extent necessary to allow the FSF to redeem Units as required by
the Trust Deed on the condition that the FSF's reliance on this waiver and
the consequences of that reliance are included in the Offer Document.
Application 11 - Reasons

84. In coming to the decision to grant the FSF the waiver in paragraph 83
above, NZXR has considered the following:
(a) the ability for the FSF to redeem Units on the basis set out in the
decision in paragraph 83 is integral to the operation of TAF and will be
clearly disclosed in the Offer Document;
(b) the principles underlying TAF include that the Fund must match on a
one-for-one basis Units redeemed, by ensuring that the Custodian transfers an
equal number of Shares to the relevant Permitted Person.
Application 12 - Waiver from Rules 8.1.3 and 8.1.4

85. The FSF has applied for a waiver from the requirements in Rule 8.1.3 and
8.1.4 that Directors certify that the issue of Affected Securities at less
than 85% of the Average Market Price is fair and reasonable and to seek NZX
approval of such an issuance.
86. In support of its application, the FSF submits as follows:
(a) the FSF must issue one Unit each time a Share is transferred to the
Custodian for the Economic Rights to be held for the Fund;
(b) if Fonterra issued Shares to the Custodian (e.g. by a Rights issue or
DRP) the FSF must issue a Unit in respect of each such Share;
(c) Issues conducted by Fonterra would need to comply with the FSM Rules and
Fonterra's duties under the Companies Act 1993; and
(d) in the issues made by the FSF, it can have no regard to the then market
price of Units.
Application 12 - Rules 8.1.3 and 8.1.4

87. Rule 8.1.3 provides as follows:
"If:
(a) an Issuer proposes to issue Equity Securities carrying Votes, or
Securities which are Convertible into Equity Securities carrying Votes, under
Rules 7.3.4(c), 7.3.5 or 7.3.6 (the "Affected Securities"); and
(b) the issue price of an Affected Security is less than 85% of the Average
Market Price, then before issuing Affected Securities all Directors who voted
in favour of the resolution to issue the Affected Securities, must sign a
certificate that the consideration for the Affected Securities is fair and
reasonable to the Issuer and to shareholders who are not receiving, or
associated with those receiving, Affected Securities under the Issue.

Provided that:
(c) for the purposes of this Rule 8.1.3 "Average Market Price" means the
volume weighted average market price of the Issuer's  existing Quoted Equity
Securities over the 5 Business Days before the earlier of the day the issue
is made, or the proposal is announced to the market; and
(d) if the Issuer has more than one Class of Equity Securities Quoted, the
existing Quoted Equity Securities in Rule 8.1.3(b) and (c) shall refer to the
Class having the most similar characteristics (other than Votes) to the
Affected Securities or, in the case of Convertible Securities, the Securities
into which the Affected Securities Convert; and
(e) in the case of Convertible Securities where the consideration payable on
Conversion is fixed by reference to the market price of existing Securities,
the consideration payable on Conversion must be at least 85% of the Average
Market Price of the Securities into which the Affected Securities Convert."
88. Rule 8.1.4 provides as follows:
"Any provision of the nature referred to in Rule 8.1.1 or 8.1.2, or issue of
the nature referred to in Rule 8.1.3, shall be subject to the approval of
NZX. NZX may grant approval on such conditions as it thinks fit (including a
condition for approval of resolutions of holders of any Class or group of
Securities of the Issuer)."

Application 12 - Decision

89. On the basis that the information provided to NZXR is full and accurate
in all material respects NZXR grants the FSF a waiver from Rules 8.1.3 and
8.1.4 in respect of the pricing of Units issued in accordance with the Trust
Deed to reflect Shares transferred or issued to the Custodian on the
condition that the effect of this waiver and the consideration for the issue
of Units is fully and accurately disclosed in the Offer Document (and any FSF
Offer Document relating to any subsequent Rights issue).
Application 12 - Reasons

90. In coming to the decision to grant the waiver stated in paragraph 89
above, NZXR considered that as the trust deed sets out the provisions for the
issue of Units and the Manager has no discretion as to the pricing of the
Units, the protections afforded to Unitholders by Rules 8.1.3 and 8.1.4 are
unnecessary.
Application 13 - Ruling from Rules 9.1.1 and 9.2.2

91. The FSF has applied for a ruling that each and any:
(a) acquisition or disposition of Economic Rights of Shares in accordance
with the Trust Deed;  and
(b) issue or redemption of Units in accordance with the Trust Deed;
are not a "series of linked or related transactions" for the purposes of Rule
9.1.1 and are not a "related series of transactions" for the purposes of Rule
9.2.2.

92. In support of its application the FSF has submitted that:
(a) the issuance and redemption of Units and the acquisition and disposition
of Economic Rights reflect the investment mandate of the FSF which is
essentially a passive investment vehicle;
(b) the ability for the FSF to make issuances of Units in accordance with the
Trust  Deed and to continuously redeem Units is integral to the operation of
TAF; and
(c) the policy behind Rule 9.2.1 is to ensure that Related Parties do not
exercise undue influence on an Issuer's decision to enter into a transaction.
No ability for such influence exists in these circumstances as the FSF is
obliged to issue and redeem Units and to acquire Economic Rights of Shares in
accordance with the terms of the Trust Deed of the FSF.
Application 13 - Rules 9.1.1, 9.2.1 and 9.2.2

93. Rule 9.1.1 provides as follows:
"An Issuer shall not (subject to Rule 9.1.3) enter into any transaction or
series of linked or related transactions to acquire, sell, lease, exchange,
or otherwise dispose of (otherwise than by way of charge) assets of the
Issuer or assets to be held by the Issuer:
(a) which would change the essential nature of the business of the Issuer; or

(b) in respect of which the gross value is in excess of 50% of the Average
Market Capitalisation of the Issuer;
except with the prior approval of an Ordinary Resolution of the Issuer or a
special resolution if that Issuer must obtain approval of the transaction or
transactions by a special resolution under section 129 of the Companies Act
1993."
94. Rule 9.2.1 provides as follows:
"An Issuer shall not enter into a Material Transaction if a Related Party is,
or is likely to become:
(a) a direct or indirect party to the Material Transaction, or to at least
one of a related series of transactions of which the Material Transaction
forms part; or
(b) in the case of a guarantee or other transaction of the nature referred to
in paragraph (d) of the definition of Material Transaction, a direct or
indirect beneficiary of such guarantee or other transaction,
unless that Material Transaction is approved by an Ordinary Resolution of the
Issuer.
1. NZX may waive the requirement to obtain the approval of a resolution for
the purposes of Rule 9.2.1 if it is satisfied that the personal connections
with, or involvement or personal interest of a Related Party are immaterial
or plainly unlikely to have influenced the promotion of the proposal to enter
into the transaction or its terms and conditions."

95. Rule 9.2.2 provides as follows:
"For the purposes of Rule 9.2.1, "Material Transaction" means a transaction
or a related series of transactions whereby an Issuer:...
(b) issues its own Securities or acquires its own Equity Securities having a
market value in excess of 10% of the Average Market Capitalisation of that
Issuer, save in the case of an issue pursuant to Rule 7.3.5 where only the
market value of those Securities being issued to the Related Party or to any
Employees (as defined in Rule 7.3.6) of the Issuer are to be taken into
account; or
(c) borrows, lends, pays, or receives, money, or incurs an obligation, of an
amount in excess of 10% of the Average Market Capitalisation of the Issuer;
or
(d) provides or obtains any services (including without limitation obtaining
underwriting of Securities or services as an employee) in respect of which
the actual gross cost to the Issuer in any financial year (ignoring any
returns or benefits in connection with such services) is likely to exceed an
amount equal to 1% of the Average Market Capitalisation of the Issuer; or..."

Application 13 - Decision

96. On the basis that the information provided to NZXR is full and accurate
in all material respects, NZXR grants the FSF a ruling that each and any:
(a) acquisition or disposition of Economic Rights of Shares in accordance
with the Trust Deed; and
(b) issue or redemption of Units in accordance with the Trust Deed;
are not a "series of linked or related transactions" for the purposes of Rule
9.1.1 and are not a "related series of transactions" for the purposes of Rule
9.2.2.

Application 13 - Reasons

97. In coming to the decision to grant the ruling stated in paragraph 96
above, NZXR considered that:
(a) the transactions described in the ruling reflect the ordinary course of
business of the FSF and the investment mandate of the FSF as prescribed in
the Trust Deed;
(b) there is no necessary relationship between each issuance of Units,
redemption of Units or acquisition of Economic Rights, rather these are the
ongoing activities of the FSF; and
(c) a Related Party would be unable to influence the FSF's decision to issue
or redeem Units or to acquire the Economic Rights of Shares as these
activities are required to be conducted in the manner prescribed in the Trust
Deed.
Application 14 - Ruling under Rules 9.1.1 and 9.2

98. The Authorised Fund Contract whereby Fonterra agrees to provide the FSF
with certain administrative services as well as to meet the costs of the
general business of the FSF will be entered into by Fonterra, the Trustee,
the Manager and the Custodian prior to the Listing of the FSF.
99. The FSF has applied for a ruling that neither Rule 9.1.1 nor Rule 9.2
that respectively require shareholder approval for Major Transactions and
Related Party Transactions, apply to the FSF's entry into the Authorised Fund
Contract with Fonterra or the performance of matters pursuant to that
Authorised Fund Contract.
100. In support of its application the FSF has submitted that:
(a) the entry by the FSF into the Authorised Fund Contract will occur prior
to Quotation of the Units and the execution by the Manager of the Listing
Agreement;
(b) the material terms of the Authorised Fund Contract will be disclosed in
the FSF Offer Document along with all arrangements with Fonterra in respect
of the services to be provided by Fonterra to the FSF; and
(c) the Authorised Fund Contract will be a Material Contract that will be
delivered to the Registrar of Financial Service Providers.

Application 14 - Rules 9.1.1, 9.2.1 and 9.2.2

101. Rule 9.1.1 is set out in paragraph 93.

102. Rule 9.2.1 is set out in paragraph 94.

103. Rule 9.2.2 is set out in paragraph 95.

Application 14 - Decision

104. On the basis that the information provided to NZXR is full and accurate
in all material respects NZXR grants the FSF a ruling that the entry into,
and the performance of obligations under, the Authorised Fund Contract is not
a transaction or series of linked or related transaction for the purposes of
Rule 9.1.1 nor a Material Transaction with a Related Party for the purposes
of Rule 9.2.'
Application 14 - Reasons

105. In coming to the decision to grant the ruling stated in paragraph 104
above, NZXR considered that:
(a) the Authorised Fund Contract will be entered into prior to Quotation of
the Units and the execution by the Manager of the Listing Agreement,
therefore the FSF will not be an Issuer for the purposes of Rules 9.1.1 and
9.2 at the time that the Authorised Fund Contract and therefore those Rules
will be inapplicable;
(b) in any event Rules 9.1.1 and 9.2 act to provide transparency for
securityholders and, in the case of Rule 9.2 to ensure that Related Parties
do not exercise undue influence on an Issuer's decision to enter into a
transaction, these concerns do not arise in respect of the Authorised Fund
Contract where Fonterra will both supply administrative services to the FSF
and pay for those services; and
(c) the material terms of the Authorised Fund Contract will be disclosed in
the Offer Document for the FSF.
Application 15 - Waiver from Rules 9.1.1 and 9.2

106. The FSF has applied for a waiver from the requirements in Rule 9.1.1 and
Rule 9.2 that respectively require shareholder approval for a major
transaction or a Material Transaction with a Related Party, to allow the
termination provisions of the Trust Deed to operate as intended such that if
the Fund is terminated, Fonterra or a nominee may acquire the Economic Rights
held for the FSF or the Shares held for the Custodian.
107. In support of its application the FSF has submitted that:
(a) the ability for Fonterra to unilaterally terminate the FSF or for
Unitholders to terminate the FSF by extraordinary resolution is set out in
the Trust Deed, along with the procedure by which the termination would be
conducted;
(b) the termination provisions will be contained in the Trust Deed and fully
and accurately disclosed in the Offer Document for the FSF; and
(c) the termination procedure is one of the terms of the Units which has been
agreed prior to Listing.

Application 15 - Rules 9.1.1 and 9.2

108. Rule 9.1.1 is set out in paragraph 93.
109. Rule 9.2.1 is set in paragraph 94.
Application 15 - Decision

110. On the condition that the FSF termination provisions are fully and
accurately disclosed in the FSF Offer Document and on the basis that the
information provided to NZXR is full and accurate in all material respects,
NZXR grants the FSF a waiver from the requirements of Rule 9.1.1 and in Rule
9.2 to seek Unitholder approval to allow the FSF to dispose of its assets as
permitted by the termination provisions of the Trust Deed.
Application 15 - Reasons

111. In coming to the decision to grant the ruling stated in paragraph 110
above, NZXR considered that:
(a) the termination provisions contained in the Trust Deed relating to the
FSF will be fully disclosed in the Offer Document;
(b) the nature of the investments of the Fund are such that they cannot be
freely held by other parties.  To facilitate the termination of the FSF, it
is therefore likely that Fonterra or the nominee will be the purchaser; and
(c) the mischief with which Rule 9.1.1 and Rule 9.2 is concerned is not
present should the FSF termination provisions be exercised.  Full details of
the termination provisions will be fully disclosed in the FSF Offer Document
and these provisions are a term of the Units.
Application 16 - Approval under Rule 11.1.5

112. The FSF has applied for approval under Rule 11.1.5 for the inclusion in
the Trust Deed of a provision allowing Fonterra to refuse to register a
holding that would cause:
(a) a Unitholder and its associates (other than Fonterra) to have a relevant
interest (as that term is defined in the Securities Markets Act 1988) in more
than 15% of Units on issue or voting rights, and may require a sell down if
this level is exceeded; or
(b) the FSF to become ineligible as a Portfolio Investment Entity or Foreign
PIE, or would operate to threaten any such eligibility.
113. In support of its application the FSF has submitted that:
(a) following consultation with the Joint Lead Managers, the Managers
consider 15% to be an appropriate ownership restriction;
(b) the 15% ownership restriction will be clearly disclosed in the Offer
Document;
(c) DIRA requires the Fonterra Unitholder's consent to any change in the
limit of Units that can be held by a person or entity;
(d) if Fonterra was unable to apply the ownership restriction this would
amount to a change to the scope of the Fund which is a right attributed to
the Fonterra Unit; and
(e) it is appropriate to allow the Manager to refuse transfers that could
cause the FSF's tax status to be negatively effected; and
(f) the FSF would be comfortable with the imposition of a Non-Standard
designation to notify the market of the restriction.
Application 16 - Rule 11.1.5

114. Rule 11.1.5 provides as follows:
"An Issuer may, with the prior approval of NZX, incorporate in its
Constitution or Trust Deed a provision restricting the issue, acquisition or
transfer of Relevant Interests in Equity Securities."

Application 16 - Decision

115. Subject to paragraph 116 below, and on the basis that the information
provided to NZXR is full and accurate in all material respects, NZXR approves
the restriction contained in the Trust Deed allowing the Manager to refuse
to:
(a) register a holding that would cause a Unitholder and its associates
(other than Fonterra) to have a relevant interest  (as that term is defined
in the Securities Markets Act 1988) in more than 15% of Units on issue or
voting rights, and may require a sell down if this level is exceeded;
(b) register a holding that would cause the FSF to become ineligible as a
Portfolio Investment Entity or Foreign PIE, or would operate to threaten any
such eligibility.
116. The approval is conditional upon the restriction being accurately
described in the FSF Offer Document and is given on the basis that the FSF
bear a Non-Standard designation to act as notification to the market of this
matter.

ENDS.
End CA:00230489 For:FSF    Type:WAV/RULE   Time:2012-11-30 10:47:27