Statement On Shareholders' Council Annual Review

Media Release

10 November 2008

Statement On Shareholders' Council Annual Review

Fonterra farmers would value the independent and critical assessment of the Co-operative's performance for the 2007/08 year outlined in the Shareholders' Council Annual Review, says Chairman Henry van der Heyden.

"In a record year when we achieved a $9.1 billion payout to our farmers it's important to be able to stand back and look at the business, the operating environment and how we performed against the targets."

He noted the Council's disappointment that Fonterra had failed to meet the targets for Total Shareholder Return (TSR) and Return on Net Assets (RONA).

"Overall Fonterra had an exceptionally good year in terms of payout but I agree with Council that there is room for continuous improvement and looking at where we can do better. We will be sitting down with Council to take a good hard look at their comments and identifying areas where we can lift our game and sustain our performance over the longer-term."

Mr van der Heyden says part of the Council's role is monitoring Fonterra's performance against agreed criteria and providing a perspective on strategic issues such as the company's capital structure, competition and business plans.

"One of the key issues in this regard that remains on the table is our discussions and consultation with farmers over Fonterra's capital structure. The Council's report talks about the importance of tackling the 'real and undiminished' issues of redemption risk, capital for growth and investment choice.

"This will be a key focus for Board, Council, management and our farmers in the year ahead. At the same time we recognise that we have a challenging business environment and we will not be taking our eye off the ball in terms of performance," he says.

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