Shareholders’ Council Approves Proposal Vote

MEDIA RELEASE

1 June 2010

Shareholders’ Council Approves Proposal Being Put to the Vote

The Fonterra Shareholders’ Council believes Fonterra Co-operative Group Limited’s Trading Among Farmers proposal provides a unique opportunity to move the co-operative and New Zealand dairying forward.

The Council has resolved that proposed constitutional changes can be put by the Board of Fonterra to Shareholders for their consideration and vote at a Special Meeting to be held on 30 June 2010.

Fonterra Shareholders’ Council chairman Blue Read said Trading Among Farmers is being developed to eliminate the redemption risk currently faced by Fonterra and to provide a permanent capital base for the co-operative. Trading Among Farmers will also provide Fonterra’s supplying shareholders with greater flexibility in managing their investment in Fonterra shares.

Mr Read said the Council supports the proposed changes being put to a vote so Fonterra can be provided with a sound basis for future planning.

“We want to see Fonterra well positioned to capture the great opportunities available to drive performance and grow sustainable returns to farmers, ” he said.

“Farmers should expect Fonterra to be better positioned to deliver improved results if redemption risk is eliminated. Equally, supplying shareholders will have the opportunity to capture the benefits of greater financial flexibility on farm if Trading Among Farmers is adopted,” Mr Read said.

Farmer confidence in the Milk Price has been paramount in the Council’s deliberations on Trading Among Farmers.

“We consider the establishment of a Milk Price Panel, coupled with continuity of Council’s performance monitoring and representation roles, should provide shareholders with the necessary level of comfort,” Mr Read said.

He noted continued farmer ownership and control of Fonterra is vital.

“The Council is satisfied the shareholding caps and limits outlined in the proposal adequately safeguard the interests of supplying shareholders and the interests of the co-operative as a whole.”

Mr Read said there remains a lot of work to be done before Trading Among Farmers could be implemented and much detail to be worked through. Pending a successful outcome to the vote, Council will consult with the Board on the finer details of the proposal. These include the governance of the proposed Fonterra unit fund and the rules and mechanisms around the proposed Trading Among Farmers market.

“Our objective here is to ensure our co-operative continues to develop in a way that safeguards and promotes the interests of Fonterra farmers. We are uniquely positioned to contribute to the future success of dairying and the wider New Zealand economy,” Mr Read said.

Details of the proposal will be sent to shareholders in a Notice of Meeting pack to be mailed on June 11.

ENDS

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