Fonterra Shareholders’ Fund Annual Results 2018

Page 1


Reporting Period 12 months to 31 July 2018
Previous Reporting Period 12 months to 31 July 2017


Amount
(m’s)
Percentage
Change
(Expense) revenue from ordinary activities NZ$(85) (208)%
Profit (loss) from ordinary activities after tax attributable
to security holder
1

NZ$- -%
Net profit (loss) attributable to security holders NZ$- -%
1
Fonterra Shareholders’ Fund financial statements are prepared in accordance with New Zealand Equivalents to
International Financial Reporting Standards. Revenue from ordinary activities comprises net fair value movements of
Economic Rights of Fonterra Shares, and dividend income. This is a loss for the current reporting period.

Interim/Final Dividend
Amount per Security
Imputed Amount
per Security
No final dividend to be paid $0.00 $0.00

Record Date -
Dividend Payment Date -

Comments -

To be followed by the balance of the information required in the report pursuant to Appendix 1 –
Including the Net Tangible Asset amount per security for the current and previous reporting period.

---

Fonterra
Shareholders’
Fund Annual
Report
2018

FONTERRA SHAREHOLDERS’ FUND ANNUAL REPORT 2018
Contents
Chairman’s Report 01
Our Board 02
Financial Statements 04
Statutory Information 15
Directory 20

FONTERRA SHAREHOLDERS’ FUND ANNUAL REPORT 201801
Dear Investors
It has been a disappointing year for the Fonterra Shareholders’
Fund (the Fund). The unit price is down, the earnings guidance
given at Fonterra’s interim results has not been met and the
distribution limited to just the 10 cents already paid in April.
This is unacceptable for both the Fund’s unit holders and
Fonterra’s farmer shareholders.
The Fund, and the Board of FSF Management Company
Limited, which oversees it, have no direct involvement in
Fonterra’s operations. However, as holder of Economic Rights
in the Fonterra Co-operative Group Limited (Fonterra) the
performance of the Fund is tied to Fonterra’s performance.
The Board of FSF Management liaises regularly with Fonterra
in raising issues relevant to the interest of unit holders.
With this as the backdrop I would like to pass on Fonterra’s
answers to three questions which I’m sure will be top of
mind for any of our investors: Why did Fonterra not meet the
earnings guidance it gave at half year? Why has Fonterra’s
earnings performance been below expectations? And, most
importantly, what is being done to improve performance?
Why did Fonterra not meet the earnings guidance it
gave at half year?
Fonterra entered the second half of FY18 expecting its
earnings to be weighted to the second half of year. There are a
number of reasons this did not eventuate. First, forecasting is
never easy but Fonterra’s proved to be too optimistic. Second,
butter prices did not come down as anticipated, which
impacted Fonterra’s sales volumes and margins. Third, the
increase in the forecast Farmgate Milk Price late in the season,
while good for farmers, put pressure on margins. And fourth,
operating expenses were up in some parts of the business
and, while this was planned, it was also based on delivering
higher earnings than achieved.
Why has Fonterra’s earnings performance been
below expectations?
The performance across all business units in Fonterra was
below expectations in FY18. While Fonterra continued to
shift more volumes into higher value products it did not hit
its target of an additional 400 million litres of volume into
Consumer and Foodservice due to high prices. The timing and
significance of the late season increase in forecast Farmgate
Milk Price reduced margins and made it difficult to pass
through all the costs in the 2018 financial year. Operating costs
were up because of higher costs in the Ingredients business,
including some one-offs. It also had additional costs for new
category growth and higher costs in Australia as it expanded
the business. In addition, Fonterra also had higher IT and R&D
expenditure to support future development.
Chairman’s
Report
In a year that was already challenging due to the payment to
Danone and the Beingmate impairment, the lower earnings
performance and higher costs have put pressure on Fonterra’s
balance sheet. This resulted in the decision, announced by
Fonterra’s Board in August, to reduce the milk price paid to farmers
by five cents per kg of milk solid and to not pay a final distribution.
What is being done to improve performance?
Fonterra is acutely aware its performance has financial
consequences for its unit holders, farmers and other stakeholders
and it is taking a number of clear steps to improve performance:
1. Taking stock of the business – Fonterra will re-evaluate
all investments, major assets and partnerships to ensure
they still meet its needs today. This will involve a thorough
analysis of whether they directly support the strategy, are
hitting their target return on capital and whether it can scale
them up and grow more value over the next two-three years.
2. Getting the basics right – Fonterra has already begun taking
action and fixing the businesses that are not performing.
The level of financial discipline will be lifted so debt can be
reduced and return on capital improved.
3. Ensuring more accurate forecasting – the business will
be run on realistic forecasts with a clear line of sight on
potential opportunities as well as the risks. Fonterra will also
be more transparent in its assumptions so farmers and unit
holders know exactly where they stand and can make the
decisions that are right for them and their businesses.
Fonterra’s management team are focused on delivering a high-
performing co-operative that can prudently fund its future.
Fonterra’s priority is to strengthen its core business and provide
an acceptable return on capital. At the same time, Fonterra
will have an eye on building the capability it will need to grow
sustainably – environmentally, socially and financially.
The Board of FSF Management Company Limited hopes to see
better financial performance from Fonterra during the coming
financial year.
John Shewan
Chairman
FSF Management Company Limited
(Australian Registered Body Number 160 539 935, Incorporated In New Zealand)

FONTERRA SHAREHOLDERS’ FUND ANNUAL REPORT 201802
Our Board
1
2
4
1. 2. 3. 4. 5.
Scott St JohnNicola Shadbolt Kim Ellis Pip DunphyJohn Shewan
5
3

FONTERRA SHAREHOLDERS’ FUND ANNUAL REPORT 201803
1. John Shewan
CNZM BCA (Hons), FCA
Independent Director appointed by unit holders
John Shewan was appointed chairman of the FSF board in November 2012. He is an independent director, and in addition to
FSF currently serves on the boards of Munich Reinsurance Australasia, China Construction Bank and the Wellington Regional
Stadium Trust, which he chairs. He is also an Adjunct Professor in the Business School at Victoria University.
2. Pip Dunphy
B.Horti.Sci, CFA
Independent Director appointed by unit holders
Pip Dunphy has worked as a non-executive director for the last
10 years in a variety of different industries and companies.
Pip currently chairs the Boards of First Gas Limited and
associated companies and is deputy chair of Abano Healthcare
Group Limited and Transpower New Zealand Limited.
4. Nicola Shadbolt ONZM
B.Sc(Hons), M.AgrSc(Hons), DipBusStud (Accountancy),
FNZIPIM (Reg), FAICD, INSEAD IDP-C
Appointed to the Board of the Manager by Fonterra
Nicola Shadbolt was elected to the Fonterra Board in 2009
and serves on the Board of the Manager of the Fonterra
Shareholders’ Fund. Nicola has worked in government,
agribusiness, consultancy and academia and is now a
Professor of Farm and Agribusiness Management. She
serves on the board of the International Food & Agribusiness
Association and, as chair, on a large dairy farming business.
Nicola was made an officer of the New Zealand Order of
Merit for services to agribusiness in 2018. Nicola lives in the
Manawatu, the base for her four farming and forestry equity
partnerships, which include two dairy farms.
3. Kim Ellis
BCA (Hons), BE (Hons)
Independent Director appointed by unit holders
Kim Ellis was the Chief Executive Officer of listed company
Waste Management NZ for 13 years, until its sale in 2006.
Kim currently chairs the Boards of New Zealand Social
Infrastructure Fund, Turner Family’s Sleepyhead Group Limited
and Metlife Care Limited. Kim also holds directorships in
Freightways, Ballance Agri-Nutrients and the Port of Tauranga.
5. Scott St John
B.Com, Diploma of Business
Appointed to the Board of the Manager by Fonterra
Scott St John was appointed to the Fonterra Board in 2016
and serves on the Board of the Manager of the Fonterra
Shareholders’ Fund. He was the CEO of First NZ Capital
(FNZC) for 15 years, stepping down from that role in early
2017. Scott has served on the Council of the University of
Auckland since 2009 and was appointed Chancellor in 2017.
He is a Director of Fisher and Paykel Healthcare and chairs
their Audit and Risk Committee. Scott also serves on the
Board of Mercury NZ Limited and NEXT Foundation. Previous
roles have included Chairman of the Securities Industries
Association, and membership of both the Capital Markets
Development Taskforce, and the Financial Markets Authority
Establishment Board.

FONTERRA SHAREHOLDERS’ FUND ANNUAL REPORT 201804
FSF Management Company Limited (the Manager)
presents to the unit holders the financial statements for
the Fonterra Shareholders’ Fund (the Fund) for the year
ended 31 July 2018.
The Manager is responsible for presenting financial
statements for each financial year which fairly present
the financial position of the Fund and its financial
performance and cash flows for that period.
The Manager considers the financial statements of the
Fund have been prepared using accounting policies
which have been consistently applied and supported
by reasonable judgements and estimates, and that all
relevant financial reporting and accounting standards
have been followed.
The Manager believes that proper accounting records
have been kept which enable, with reasonable accuracy,
the determination of the financial position of the Fund
and facilitate compliance of the financial statements
with the Financial Markets Conduct Act 2013 and the
Fonterra Shareholders’ Fund Trust Deed.
The Manager considers that it has taken adequate steps
to safeguard the assets of the Fund, and to prevent and
detect fraud and other irregularities.
The Manager approves and authorises for issue the
financial statements for the year ended 31 July 2018
presented on pages 5 to 12.
For and on behalf of the Board of the Manager:
Manager’s Statement
FOR THE YEAR ENDED 31 JULY 2018
Financial
Statements
FOR THE YEAR ENDED 31 JULY 2018
Manager’s Statement 04
Statement Of Comprehensive Income 05
Statement Of Changes In Net Assets
Attributable To Unit Holders 05
Statement Of Financial Position 06
Cash Flow Statement 06
Statement Of Significant Accounting Policies 07
Notes To The Financial Statements 09
Independent Auditor’s Report 13
Statutory Information 15
Directory 20
John Shewan
Chairman
FSF Management Company Limited
12 September 2018
Pip Dunphy
Director
FSF Management Company Limited
12 September 2018

FONTERRA SHAREHOLDERS’ FUND ANNUAL REPORT 201805
The accompanying notes form part of these financial statements.
$ MILLION
31 JULY 201831 JULY 2017
Net fair value (loss)/gain on revaluation of Economic Rights of Fonterra shares(124)42
Dividend income3937
Investment (expense)/income(85)79
Net change in fair value of liability to unit holders124(42)
Distributions to unit holders(39)(37)
Finance income/(cost)85(79)
Profit before tax––
Tax expense––
Profit for the year––
There are no items of other comprehensive income.
Statement of Changes in Net Assets
Attributable to Unit Holders
FOR THE YEAR ENDED 31 JULY 2018

$ MILLION
Net assets attributable to unit holders at 1 August 2017763
Movements:
Revaluation of liability to unit holders(124)
Issue of units129
Redemption of units(198)
Net assets attributable to unit holders at 31 July 2018570
Net assets attributable to unit holders at 1 August 2016637
Movements:
Revaluation of liability to unit holders42
Issue of units179
Redemption of units(95)
Net assets attributable to unit holders at 31 July 2017763
Statement of Comprehensive Income
FOR THE YEAR ENDED 31 JULY 2018

FONTERRA SHAREHOLDERS’ FUND ANNUAL REPORT 201806
Statement of Financial Position
AS AT 31 JULY 2018

$ MILLION
NOTES31 JULY 201831 JULY 2017
Assets
Economic Rights of Fonterra shares2570763
Total assets570763
Total liabilities (excluding net assets attributable to unit holders)––
Net assets attributable to unit holders – liability3570763
Cash Flow Statement
FOR THE YEAR ENDED 31 JULY 2018

$ MILLION
NOTES31 JULY 201831 JULY 2017
Cash flows from operating activities
Cash was provided from:
–Sale of Economic Rights of Fonterra shares19895
–Dividends received (net of dividends reinvested)3130
Cash was applied to:
–Purchase of Economic Rights of Fonterra shares(121)(172)
Net cash flows from operating activities4108(47)
Cash flows from financing activities
Cash was provided from:
–Proceeds from issue of units121172
Cash was applied to:
–Outflows on redemption of units(198)(95)
–Distributions paid to unit holders (net of distributions reinvested)(31)(30)
Net cash flows from financing activities(108)47
Net (decrease)/increase in cash and cash equivalents––
Cash and cash equivalents at the beginning of the year––
Cash and cash equivalents at the end of the year––
The accompanying notes form part of these financial statements.

FONTERRA SHAREHOLDERS’ FUND ANNUAL REPORT 201807
Statement of Significant Accounting Policies
FOR THE YEAR ENDED 31 JULY 2018
A) GENERAL INFORMATION
The Fonterra Shareholders’ Fund (FSF or the Fund) is a New Zealand
managed investment scheme established to be the ‘Authorised Fund’
under Fonterra’s Trading Among Farmers scheme. It is registered
under the Financial Markets Conduct Act 2013 and its governing
document is the Fonterra Shareholders’ Fund Trust Deed (the Trust
Deed) dated 23 October 2012 (as amended) and has a life of 80 years.
Under the Trust Deed, the Fund may invest only in authorised
investments, which are Economic Rights of Fonterra shares (Economic
Rights), and issue units to investors. It may not invest directly in
Fonterra shares (shares).
The Fund is listed on the NZX Main Board operated by NZX Limited
and as a Foreign Exempt Listing on the Australian Securities Exchange
operated by ASX Limited. The activities of the Fund and the issue of
units to the public are managed by FSF Management Company
Limited (the Manager). The immediate and ultimate parent of the
Fund is Fonterra Co-operative Group Limited (Fonterra).
The New Zealand Guardian Trust Company Limited (the Trustee) acts
as the trustee for the Fund. The Economic Rights assets are held on
trust for the Trustee under the Fonterra Economic Rights Trust by
Fonterra Farmer Custodian Limited (the Custodian). The trustees of
the Fonterra Farmer Custodian Trust also hold one unit known as the
Fonterra unit.
The Manager is an FMC reporting entity under the Financial Markets
Conduct Act 2013. The registered office of the Fund is 109 Fanshawe
Street, Auckland Central, Auckland 1010, New Zealand.
The financial statements were authorised for issue by the Manager
on 12 September 2018.
Fonterra financial statements
Investors are encouraged to read the financial statements of Fonterra,
together with the financial statements of the Fund, given that the
performance of the Fund is driven by the performance of Fonterra.
The Fonterra financial statements can be found at www.fonterra.com
in the ‘Investors/Financial Results’ section.
Activities
The principal activity of the Fund is to acquire Economic Rights and
issue units to investors. It allows investors in the Fund an opportunity
to earn returns based on the financial performance of Fonterra.
Economic Rights and units
One Economic Right represents the right to receive dividends and
other economic benefits derived from a fully paid share in Fonterra.
This does not include the right to hold legal title to the share or to
exercise voting rights in Fonterra.
A unit constitutes an undivided interest in the Fund. The Fund is
designed to have the effect that each unit on issue in the Fund will
represent the Economic Right derived from a single share in Fonterra.
Key attributes of Economic Rights
• The right to receive a distribution equivalent to any dividend
declared by the Fonterra Board (before PIE tax, withholding tax or
other tax on distribution).
• The right to participate in other transactions in respect of Fonterra
shares such as bonus issues, rights issues or buy-backs.
• The right to share in any surplus on liquidation of Fonterra.
Key rights and restrictions of unit holders
• Unit holders will be entitled to have passed through to them an
amount equal to any dividend payable in relation to a share in
Fonterra (less any PIE tax, withholding tax or any other adjustments
for tax in relation to that unit holder).
• If Fonterra reconstructs or adjusts its shares, an equivalent
reconstruction or adjustment will be made in respect of units.
• If Fonterra makes bonus issues or rights issues of shares to its
shareholders, corresponding issues of units will be made to
unit holders.
• If there is an offer to acquire shares held by the Custodian, the Fund
will seek instructions from unit holders as to whether the offer should
be accepted. If a unit holder directs the Fund to accept the offer, the
Fund will redeem units from such unit holder and accept the offer for
shares in proportion to that direction. The amount received from the
sale of the shares will be paid by the Fund to the unit holder.
• Unit holders are entitled to attend and vote at unit holder meetings
and to elect three Directors of the Manager of the Fund.
The additional two Directors of the Manager of the Fund are
appointed by Fonterra.
• Unit holders do not have any right to attend or vote, or request
the Custodian to attend or vote, at any meeting of Fonterra
farmer shareholders.
Key rights of the Fonterra unit holder
The Trust Deed cannot be amended without the prior approval of the
holder of the Fonterra unit if that amendment would change the
governance structure of the Board of the Manager, the scope and role
of the Fund, the exchange mechanism for units and Economic Rights
and the individual fund size restrictions.
In other respects the holder of the Fonterra unit has the same rights
as any other unit holder.
B) BASIS OF PREPARATION
These financial statements comply with New Zealand Equivalents to
International Financial Reporting Standards (NZ IFRS) and have been
prepared in accordance with Generally Accepted Accounting Practice
(GAAP) applicable to for-profit entities. These financial statements
also comply with International Financial Reporting Standards (IFRS).
These financial statements are prepared on a historical cost basis,
except for Economic Rights and liabilities to unit holders which have
been measured at fair value.
These financial statements are presented in New Zealand dollars ($),
which is the Fund’s functional and presentation currency, and
rounded to the nearest million, except where otherwise stated.
The same accounting policies are followed in these financial
statements as were applied in the financial statements for the year
ended 31 July 2017.
The preparation of financial statements requires the Manager to
make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of
assets, liabilities, income and expenses. Actual results may differ from
these estimates. Estimates and judgements are continually evaluated
and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable
under the circumstances. Revisions of accounting estimates are
recognised in the period in which the estimates are revised and in any
future periods affected.
C) OPERATING SEGMENTS
The Fund’s investments only include Economic Rights assets and the
Fund’s performance is evaluated on an overall basis. Therefore, the
Fund is a single segment entity.
All of the Fund’s income is from investments in the Economic Rights.
The internal reporting provided to the Board of the Manager, which is
the Fund’s chief operating decision maker, for the Fund’s assets,
liabilities and performance is prepared on a consistent basis with the
measurement and recognition principles of NZ IFRS. The Board of the
Manager reviews the Fund’s internal reporting in order to assess the
performance and position of the Fund.

FONTERRA SHAREHOLDERS’ FUND ANNUAL REPORT 201808
D) DIVIDEND INCOME
Dividend income from investments in Economic Rights is recognised
in profit or loss on the date that the right to receive payment of the
dividend is established.
E) DISTRIBUTIONS TO UNIT HOLDERS
Distributions payable to unit holders are recognised in profit or loss
as finance costs in the period in which they are declared by the Board
of the Manager.
F) FINANCIAL ASSETS AND FINANCIAL LIABILITIES
A financial asset or liability is recognised when the Fund becomes
a party to the contractual provisions of the asset or liability
(i.e. trade date).
Financial assets are derecognised if the Fund’s contractual rights to
the cash flows from the financial assets expire or if the Fund transfers
the financial asset to another party without retaining control or
substantially all risks and rewards of the asset. Financial liabilities are
derecognised if the Fund’s obligations specified in the contract expire
or are discharged or cancelled.
i) Economic Rights of Fonterra shares
The Economic Rights of Fonterra shares are measured at fair value.
Changes in fair value are recognised as investment income in
profit or loss.
ii) Liability to unit holders
The Fund has an obligation to repurchase units from Farmers, the
Registered Volume Provider and Fonterra, therefore the liability to
unit holders is a financial liability. It is presented as a financial liability
because it does not meet the limited set of criteria that would allow it
to be presented as equity.
The Fund manages its liability to unit holders on a fair value basis.
Therefore the Fund has elected to measure the liability to unit holders
at fair value. Changes in fair value are recognised as finance costs in
profit or loss.
G) TAX
The Fund has elected to be a ‘foreign investment variable-rate
Portfolio Investment Entity’ for New Zealand income tax purposes.
Due to this election, income is effectively taxed in the hands of the
unit holders and therefore the Fund has no tax expense, current tax
payable or deferred tax assets or liabilities.
The Fund will attribute PIE income (being Fonterra dividends) to unit
holders and pay tax on that income at each relevant unit holder’s
nominated prescribed investor rate (PIR), being their applicable tax
rate, subject to the option to apply the non-resident withholding tax
rules in respect of Notified Foreign Investors. When the Fund receives
Fonterra dividends the Fund will retain an amount from dividends
distributed to a unit holder to satisfy the PIE (or withholding) tax
liability in relation to that unit holder and pay amounts owing direct
to the IRD. It is not anticipated that the Fund will have a PIE tax loss
or excess tax credits which will be attributed to unit holders.
H) NEW STANDARDS AND INTERPRETATIONS
Standards issued but not yet effective
A number of new standards, amendments to standards and
interpretations have been issued which were available for early
adoption but have not been adopted. None of these will have a
material impact on the financial statements of the Fund.
Statement of Significant Accounting Policies CONTINUED
FOR THE YEAR ENDED 31 JULY 2018

FONTERRA SHAREHOLDERS’ FUND ANNUAL REPORT 201809
Notes to the Financial Statements
FOR THE YEAR ENDED 31 JULY 2018
1. FINANCIAL RISK MANAGEMENT
The Fund is primarily established to invest in Economic Rights and
issue units to investors. As such its only investment comprises of
Economic Rights. Through the holding of this investment and issuing
units to unit holders, the Fund has limited net exposure to market
price risk and liquidity risk. The Fund has no direct exposure to
interest rate, foreign exchange or credit risk. The risk management
policies employed by the Fund are discussed in the notes below.
Market price risk
Market price risk is the risk that the value of an instrument will
fluctuate as a result of changes in market prices, whether caused by
factors specific to an individual instrument, its issuer or factors
affecting all instruments traded in the market.
The Fund’s financial instruments primarily comprise of investments
in the Economic Rights and liabilities to unit holders which are both
carried at fair value with fair value changes recognised in profit or
loss. Both of these instruments are exposed to market price risk.
Any change in the market price of the units will result in an equal
and opposite change in the market price of the Economic Rights.
Hence, no impact on profit or loss in the Statement of
Comprehensive Income is expected due to changes in market prices.
Liquidity risk
Liquidity risk is the risk that the Fund will not be able to meet its
financial obligations as they fall due. The Fund is not exposed to cash
redemptions and only certain parties are permitted to redeem their
units. Where permitted parties redeem units, the Fund will transfer
one Economic Right for each unit redeemed to meet the redemption.
Unit holders will not otherwise have the ability to redeem their units
or exchange them for shares. Hence, the Fund does not have
significant liquidity risk.
Financial instruments fair value
The Fund measures fair values for recognition of both Economic
Rights assets and unit holder liabilities.
Fair value is the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market
participants at the measurement date.
The Fund uses the following fair value hierarchy that reflects the
significance of the inputs used in making the measurements:
–Level 1: Quoted price (unadjusted) in an active market for an
identical instrument.
–Level 2: Valuation techniques based on observable inputs, either
directly (i.e. as prices) or indirectly (i.e. derived from prices). This
category includes instruments valued using: quoted prices in active
markets for similar instruments; quoted prices for identical or
similar instruments in markets that are considered less than active;
or other valuation techniques for which all significant inputs are
directly or indirectly observable from market data.
–Level 3: Valuation techniques using significant unobservable inputs.
The Fund has no Level 3 instruments.
The Fund’s liability to unit holders is a Level 1 instrument as the unit
price is quoted on the NZX Main Board, which is considered to be an
active market. The Manager considers market prices to be the most
representative measure of fair value as they are used by market
participants as a practical expedient for fair value measurement.
Where there is a bid and ask price, the Fund uses the price within that
range that is most representative of fair value. Where the last traded
price is within that range, the Fund uses the last traded price as fair
value. Where the last traded price falls outside that range the Fund
uses the mid-point between the bid and ask prices.
The market will be monitored on an on-going basis to confirm that it
remains active for the purposes of establishing fair value.
Economic Rights are Level 2 instruments as Economic Rights are not
listed and there is no active market for Economic Rights assets.
Economic Rights are valued using the quoted price of units (which are
considered to be a materially comparable instrument) in the Fund
listed on the NZX Main Board. The on-going validity of assumptions
relating to the comparability between a unit and an Economic Right is
regularly reviewed.
There have been no transfers between the categories in the fair value
hierarchy during any of the periods presented.
Capital risk management
The Fund manages its net assets attributable to unit holders as
capital, notwithstanding that net assets attributable to unit holders is
classified as a financial liability. The amount of unit holders’ funds can
change on a daily basis as the Fund is subject to the issue and
redemption of units at the discretion of Fonterra and Fonterra farmer
shareholders. Fonterra has an interest in ensuring the stability of the
Fund and has established a Fund Size Risk Management Policy which
requires that the number of units on issue remain within specified
limits and that, within these limits, the number of units is managed
appropriately. Fonterra can use a range of measures to ensure the
Fund size remains within the specified limits, including: introducing
or cancelling a distribution reinvestment plan, operating a unit
repurchase programme and introducing new units.

FONTERRA SHAREHOLDERS’ FUND ANNUAL REPORT 201810
2. ECONOMIC RIGHTS OF FONTERRA SHARES
The Economic Rights are held on trust for the Fund by the Custodian under the Fonterra Economic Rights Trust.
31 JULY 201831 JULY 2017
Value of Economic Rights ($ million)570763
Number of Economic Rights111,423,603126,047,304
The Economic Rights are measured at fair value, calculated as the number of Economic Rights held multiplied by the established fair value for
each Economic Right.
$ MILLION
31 JULY 2018 31 JULY 2017
Opening value of Economic Rights 763637
Movements:
Purchase of Economic Rights
1
129179
Sale of Economic Rights(198)(95)
Revaluation of Economic Rights(124)42
Closing value of Economic Rights570763
1 Purchase of Economic Rights includes $8.4 million for Economic Rights acquired in conjunction with Fonterra’s Dividend Reinvestment Plan (31 July 2017: $6.7 million).
3. LIABILITY TO UNIT HOLDERS
31 JULY 201831 JULY 2017
Value of unit holder liability ($ million)
1
570763
Opening number of units on issue
2
126,047,304111,991,937
Number of units issued
3
20,946,17029,932,644
Number of units redeemed (35,569,871)(15,877,277)
Closing number of units on issue111,423,603126,047,304
1 The liability to unit holders is measured at fair value, calculated as the number of units on issue multiplied by the unit market price of $5.12 (31 July 2017: $6.05).
2 Included in the total number of units is one Fonterra unit which was issued at launch.
3 Included in the number of units issued are 1,447,736 units with a total value of $8.4 million that were issued under the Distribution Reinvestment Plan
(31 July 2017: 1,148,243 units with a total value of $6.7 million).
4. RECONCILIATION OF NET CASH FLOW FROM OPERATING ACTIVITIES TO PROFIT
$ MILLION
31 JULY 2018 31 JULY 2017
Reconciliation of profit for the year to net cash flows from operating activities
Profit for the year––
Adjustments for:
–Fair value loss/(gain) on revaluation of Economic Rights of Fonterra shares124(42)
–Net change in fair value of liability to unit holders(124)42
–Distributions to unit holders3937
–Non-cash dividend income(8)(7)
Changes in assets:
Net sale/(purchase) of Economic Rights of Fonterra shares77(77)
Net cash flows from operating activities108(47)
Notes to the Financial Statements CONTINUED
FOR THE YEAR ENDED 31 JULY 2018

FONTERRA SHAREHOLDERS’ FUND ANNUAL REPORT 201811
5. NET TANGIBLE ASSETS PER SECURITY
As at 31 July 2018, the net tangible assets per unit on issue was $5.12 (31 July 2017: $6.05).
6. COMMITMENTS AND CONTINGENT LIABILITIES
The Fund has no material commitments or contingent liabilities as at 31 July 2018 (31 July 2017: nil).
7. RELATED PARTIES
Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in
making financial and operational decisions, or if they are members of the same group.
FSF Management Company Limited (the Manager)
FSF Management Company Limited is the Fund’s Manager whose sole objective is to manage the Fund and its property as a passive investment
vehicle under the Trust Deed. Under the Trust Deed, the Manager is not entitled to any fees in respect of its services.
Key Management Personnel are those people with the responsibility and authority for planning, directing and controlling the activities of an
entity. As the Fund does not have any employees or directors, Key Management Personnel are considered to be the Directors of the Manager.
Unit transactions and balances with Key Management Personnel
$ MILLION
YEAR ENDED
31 JULY 2018
YEAR ENDED
31 JULY 2017
Purchased0.06–
Sold––
Value at the end of the year0.240.21
At 31 July 2018 46,192 (31 July 2017: 35,192) units were held by Key Management Personnel.
Fonterra Co-operative Group Limited (Fonterra)
Under the Authorised Fund Contract, Fonterra provides administrative services in relation to the Fund for the Manager and meets the operating
expenses of the Fund, including the fees of the Directors of the Manager.
The Manager and the Trustee have agreed that Fonterra will meet the day-to-day operating costs of the Fund. In addition, the Fund will use
corporate facilities, support functions and services provided by Fonterra. All of these services will be provided at no cost to the Fund.
There are some costs that will not be covered by Fonterra. These principally relate to circumstances where the Manager has breached certain
obligations or seeks to bring claims outside the ambit of those which Fonterra has undertaken to pay. In these circumstances, the Manager
would have to seek funding from other sources. This could include seeking a resolution of unit holders that they agree to bear the relevant costs
through a deduction from distributions that would otherwise be made by the Fund.
Fonterra Farmer Custodian Limited (the Custodian)
The Fund has appointed Fonterra Farmer Custodian Limited, a subsidiary of Fonterra, to provide custodian services. The Economic Rights are
held on trust for the Trustee by the Custodian under the Fonterra Economic Rights Trust. Custodian services are provided at no cost to the Fund.
Fonterra (Delegated Compliance Trading Services) Limited (DCT)
DCT is a wholly owned subsidiary of Fonterra which undertakes delegated compliance trading in the Fund on behalf of Fonterra’s farmer shareholders.
Fund expenses
Fonterra, the Manager, the Trustee and the Custodian have entered into the Authorised Fund Contract, which authorises the Fund to operate as
an Authorised Fund and regulates the relationship between Fonterra and the Fund.
Under the Authorised Fund Contract all expenses relating to the Fund are incurred and paid by either Fonterra or the Manager. The costs of running
the Fund include services by Fonterra for which there is no payment made, as well as services for which the Fund contracts to third parties.
Included within the total expenses incurred and paid by Fonterra during the year ended 31 July 2018 with respect to the Fund are the following
amounts paid to PricewaterhouseCoopers:
–Fees for the annual audit of the financial statements of $32,780 (31 July 2017: $31,800), and
–Fees for other audit related services comprising agreed upon procedures on Prescribed Investor Rates of $7,000 (31 July 2017:nil),
and Annual Meeting voting of $3,500 (31 July 2017: $3,000).
Fund unit and Fonterra share transactions
As at 31 July 2018, the Custodian holds 111,423,603 (31 July 2017: 126,047,304) Fonterra shares on trust for the Fund.
During the current year 173,568 units were sold for $1.1 million by DCT on behalf of Fonterra farmer shareholders participating in the 2018
season Delegated Compliance Trading Scheme. In the prior year, 282,872 units were purchased for $1.7 million by DCT on behalf of Fonterra
farmer shareholders participating in the 2017 season Delegated Compliance Trading Scheme. These units were converted to shares and sold to
the participating farmers for $1.7 million.
The closing date for the 2019 season applications under the Delegated Compliance Trading Scheme is 30 September 2018, and as such there
were no units held by DCT on behalf of Fonterra’s farmer shareholders at 31 July 2018 (31 July 2017: nil).
Notes to the Financial Statements CONTINUED
FOR THE YEAR ENDED 31 JULY 2018

FONTERRA SHAREHOLDERS’ FUND ANNUAL REPORT 201812
Notes to the Financial Statements CONTINUED
FOR THE YEAR ENDED 31 JULY 2018
Dividends received
The following dividends were received from Fonterra:
$ MILLION
DIVIDENDS
YEAR ENDED
31 JULY 2018
YEAR ENDED
31 JULY 2017
2018 Interim dividend received – 10.0 cents per Economic Right¹13–
2017 Final dividend received – 20.0 cents per Economic Right²26–
2017 Interim dividend received – 20.0 cents per Economic Right³–25
2016 Final dividend received – 10.0 cents per Economic Right
4
–12
1 This was distributed on to unit holders on 20 April 2018 and represented a cash distribution of 10.0 cents per unit.
2 This was distributed on to unit holders on 20 October 2017 and represented a cash distribution of 20.0 cents per unit.
3 This was distributed on to unit holders on 20 April 2017 and represented a cash distribution of 20.0 cents per unit.
4 This was distributed on to unit holders on 9 September 2016 and represented a cash distribution of 10.0 cents per unit.
8. SUBSEQUENT EVENTS
Changes in unit price
Units are traded on the NZX and ASX and accordingly the unit price changes regularly, including during the period between balance date and
the date these financial statements were authorised for issue. Changes in the market price of the units result in a corresponding change in the
value of the Economic Rights asset held by the Fund. Daily unit prices are available on the NZX website.

FONTERRA SHAREHOLDERS’ FUND ANNUAL REPORT 201813
Independent Auditor’s Report
TO THE UNIT HOLDERS OF FONTERRA SHAREHOLDERS’ FUND
The financial statements comprise:
• the statement of financial position as at 31 July 2018;
• the statement of comprehensive income for the year then ended;
• the statement of changes in net assets attributable to unit holders for the year then ended;
• the cash flow statement for the year then ended;
• the statement of significant accounting policies; and
• the notes to the financial statements.
OUR OPINION
In our opinion, the financial statements of Fonterra Shareholders’ Fund (the Fund), present fairly, in all material respects, the financial position
of the Fund as at 31 July 2018, its financial performance and its cash flows for the year then ended in accordance with New Zealand Equivalents
to International Financial Reporting Standards (NZ IFRS) and International Financial Reporting Standards (IFRS).
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs NZ) and International Standards on
Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial
statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We are independent of the Fund in accordance with Professional and Ethical Standard 1 (Revised) Code of Ethics for Assurance Practitioners (PES 1)
issued by the New Zealand Auditing and Assurance Standards Board and the International Ethics Standards Board for Accountants’ Code of Ethics
for Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements.
Our firm carries out other services for the Fund, including agreed upon procedures in regards to prescribed investor rates and annual meeting
voting. The provision of these other services has not impaired our independence as auditor of the Fund.
OUR AUDIT APPROACH
Overview
An audit is designed to obtain reasonable assurance whether the financial statements are free from material misstatement.
Overall materiality: $5.7 million, which represents approximately 1% of net assets attributable to unit holders.
We used this benchmark because, in our view, this is an appropriate benchmark for a Fund.
We agreed with the Board of the Manager that we would report to them misstatements identified during our audit above
$285,000 as well as misstatements below that amount that in our view, warranted reporting for qualitative reasons.
We have not identified any key audit matters from our audit given the nature of the entity. Refer to the Key audit
matters section of our report.
Materiality
The scope of our audit was influenced by our application of materiality.
Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the
overall materiality for the financial statements as a whole as set out above. These, together with qualitative
considerations, helped us to determine the scope of our audit, the nature, timing and extent of our audit procedures
and to evaluate the effect of misstatements, both individually and in aggregate on the financial statements as a whole.
Audit scope
We designed our audit by assessing the risks of material misstatement in the financial statements and our application of materiality. As in all of
our audits, we also addressed the risk of management override of internal controls including among other matters, consideration of whether
there was evidence of bias that represented a risk of material misstatement due to fraud.
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the financial statements as a whole,
taking into account the structure of the Fund, the accounting processes and controls, and the industry in which the Fund operates.
KEY AUDIT MATTERS
Key audit matters are those that, in our professional judgement, were of most significance in our audit of the financial statements of the current
year. The Fund only invests in Economic Rights of Fonterra Shares (Economic Rights). The value of the Economic Rights are based on the price of the
Units in the Fund which are quoted on the NZX Main Board. Our audit focussed on the valuation of the Units and the application of this to the
Economic Rights. Given the nature of the Fund’s operations, we determined that there were no key audit matters to communicate in our report.

FONTERRA SHAREHOLDERS’ FUND ANNUAL REPORT 201814
Independent Auditor’s Report CONTINUED
INFORMATION OTHER THAN THE FINANCIAL STATEMENTS AND AUDITOR’S REPORT
The Manager of the Fund is responsible for the annual report. Our opinion on the financial statements does not cover the other information
included in the annual report and we do not, express any form of assurance conclusion on the other information.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to
be materially misstated. If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s
report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to
report in this regard.
RESPONSIBILITIES OF THE MANAGER FOR THE FINANCIAL STATEMENTS
The Manager of the Fund is responsible, on behalf of the Fund, for the preparation and fair presentation of the financial statements in
accordance with NZ IFRS and IFRS, and for such internal control as the Manager determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Manager is responsible for assessing the Fund’s ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis of accounting unless the Manager either intend to liquidate the
Fund or to cease operations, or have no realistic alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the financial statements, as a whole, are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance with ISAs NZ and ISAs will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located at the External Reporting Board’s website at:
https://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-report-2/
This description forms part of our auditor’s report.
WHO WE REPORT TO
This report is made solely to the Fund’s unit holders, as a body. Our audit work has been undertaken so that we might state those matters which
we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Fund and the Fund’s unit holders, as a body, for our audit work, for this report or for the opinions
we have formed.
The engagement partner on the audit resulting in this independent auditor’s report is Richard Day.
For and on behalf of:
Chartered Accountants
Auckland
12 September 2018

FONTERRA SHAREHOLDERS’ FUND ANNUAL REPORT 201815
Statutory Information
FOR THE YEAR ENDED 31 JULY 2018
TWENTY LARGEST UNIT HOLDERS
As at 31 July 2018
UNIT HOLDER
NUMBER OF
UNITS
% OF TOTAL
ISSUED UNITS
HSBC Nominees (New Zealand) Limited 9,643,5538.65
Accident Compensation Corporation 4,100,6463.68
FNZ Custodians Limited3,966,9673.56
JBWere (NZ) Nominees Limited3,349,5103.01
Citibank Nominees (New Zealand) Limited3,305,9572.97
HSBC Nominees (New Zealand) Limited A/C State Street 3,052,2982.74
HSBC Custody Nominees (Australia) Limited 2,714,2182.44
JP Morgan Nominees Australia Limited2,395,4292.15
National Nominees Limited 2,043,9321.83
BNP Paribas Nominees Pty Ltd 1,581,0081.42
Custodial Services Limited <A/C 3>1,555,5831.40
Custodial Services Limited <A/C 4>1,414,1281.27
JPMorgan Chase Bank NA NZ Branch-Segregated Clients Acct 1,328,6201.19
New Zealand Depository Nominee Limited949,3780.85
Powerwrap Limited 922,3310.83
BNP Paribas Nominees (NZ) Limited – NZCSD <BPSS40> 900,3230.81
Custodial Services Limited <A/C 2> 816,0570.73
Michael Douglas Hammond & Helen Mavis Hammond & Leigh Joseph Horton770,2700.69
BNP Paribas Nominees (NZ) Limited – NZCSD <COGN40>754,0900.68
FNZ Custodians Limited <DTA Non-Resident A/C>573,7120.51
Total46,138,01041.41
Total quoted units on issue111,423,602100.00
SPREAD OF UNIT HOLDERS
As at 31 July 2018
SIZE OF HOLDING
NUMBER OF
HOLDERS
NUMBER OF
UNITS
% OF TOTAL
ISSUED UNITS
1 – 1,0002,7741,556,7501.40
1,001 – 5,0003,527
8,916,9678.00
5,001 – 10,0009297,054,6276.33
10,001 – 100,00081526,919,97524.16
100,001 and over12566,975,28460.11
Total
1
8,170111,423,603100.00
1 Total includes the Fonterra unit (which is not quoted).
SUBSTANTIAL PRODUCT HOLDERS
As at 31 July 2018
The following unit holder filed substantial product holder notices in accordance with the Financial Markets Conduct Act 2013.
PRODUCT HOLDERNUMBER OF UNITS
% OF TOTAL
ISSUED UNITS
Legg Mason Asset Management Australia Limited6,678,6015.99
As at 31 July 2018 the Fund had 111,423,602 quoted units, and one Fonterra unit, on issue.

FONTERRA SHAREHOLDERS’ FUND ANNUAL REPORT 201816
HOLDINGS OF DIRECTORS OF THE MANAGER
As at 31 July 2018
The following Directors of the Manager have disclosed relevant interests in units of the Fund:
DIRECTOR
NUMBER OF
UNITSNATURE OF INTEREST
John Bruce Shewan (Chairman)15,680Trustee and discretionary beneficial interest through Investment Custodial Services Limited
John Bruce Shewan (Chairman)4,512Power to control and exercise a right to vote and to control the acquisition and disposal of
these units held on behalf of his wife by private Nominees Limited
Kimmitt Rowland Ellis15,000Trustee and discretionary beneficial interest held by Custodial Services Limited
Nicola Shadbolt11,000Indirect interest through power to control the exercise of a right to vote attached to, and to
control the acquisition or disposition, of these units held by North Grove Dairy Limited
NZX TRADING HALTS
No trading halts were placed by NZX Regulation in the financial year ended 31 July 2018.
Statutory Information CONTINUED
FOR THE YEAR ENDED 31 JULY 2018

FONTERRA SHAREHOLDERS’ FUND ANNUAL REPORT 201817
NZX DIVERSITY REPORTING REQUIREMENTS
As at 31 July 2018, the gender composition of the Board of the Manager
comprised two female and three male Directors. As at 31 July 2017, the
gender composition of the Board of the Manager comprised two female
and three male Directors. The Manager does not employ any person.
NZX WAIVERS
A summary of waivers and approvals granted by NZX Regulation in
relation to the NZX Main Board Listing Rules (NZX Listing Rules),
which have been relied upon by the Fund in the year ended 31 July
2018, can be found at www.fonterra.com in the ‘Investors/Fonterra
Shareholders Fund’ section.
NZX NON-STANDARD DESIGNATION
The Fonterra Shareholders’ Fund has been granted Listing with a
‘Non-Standard’ (“NS”) designation by NZX Regulation. This
designation was granted because of the unique governance
arrangements and unit holder restrictions.
ASX LISTING
The Fund has an ASX Foreign Exempt Listing with ASX Limited which
means the Fund is primarily regulated by the NZX Listing Rules and is
to be exempt from complying with most of the ASX Listing Rules.
CORPORATE GOVERNANCE
Background
The Fund is a registered managed investment scheme under the
Financial Markets Conduct Act 2013. The Fund is required to have a
supervisor (trustee) and a manager. The role of the trustee is to hold
the economic benefit of shares held by the Fonterra Farmer
Custodian for the benefit of the trustee of the Fund. The role of the
Manager is to issue or offer units in the Fund and to manage the
property of the Fund.
The Trust Deed defines a narrow function of the Fund which is, in
summary to:
• issue units when new Economic Rights of Fonterra shares are held
for the benefit of the Fund;
• redeem units when required by a farmer shareholder, Fonterra or
the registered volume provider and direct that the Fonterra Farmer
Custodian transfers Fonterra shares to the farmer shareholder,
Fonterra or the Fonterra Farmer Custodian on behalf of the
registered volume provider seeking that redemption; and
• not undertake other trading activities.
The Fund is to be ‘passive’, i.e., it does not actively solicit Economic
Rights or the redemption of units except for undertaking the initial
supply offer.
Corporate Governance Principles
The Board’s corporate governance framework takes into
consideration contemporary standards in New Zealand and Australia,
incorporating principles and guidelines issued by the Financial
Markets Authority, the NZX Corporate Governance Code 2017 (NZX
Code) and the ASX Corporate Governance Council Principles and
Recommendations (ASX Principles).
The corporate governance framework adopted by the Board reflects
its role as a manager of a fund with limited operational activity,
which in several ways is different to the corporate governance
structure appropriate for a traditional listed company carrying on
an operating business.
Given the special purpose nature of the Fund, as at 31 July 2018, the
Manager has determined that a number of the recommendations in
the NZX Code and the ASX Principles are not appropriate for the
Fund or are not relevant.
In accordance with the NZX Listing Rules, the Manager has disclosed
in this corporate governance statement a summary of the corporate
governance policies, practices and processes adopted or followed at
the date of this annual report or explained why the Manager has
decided to not comply with any recommendation of the NZX Code.
References to ‘Board’ and ‘Directors’ in this statement are to the
Board and Directors of the Manager.
The Board
The Board has statutory responsibilities for the affairs and activities
of the Manager and the Fund.
The roles and responsibilities of the Board are set out in its Board
Charter. Its roles and responsibilities include:
• monitoring the performance of the Fund and the implementation of
its objectives;
• monitoring compliance with the regulatory requirements and
ethical standards; and
• monitoring compliance with the constituent documents for Trading
Among Farmers as they relate to the Fund.
Given the Fund’s limited operational activity, the Manager has limited
discretion in respect of the day-to-day management of the Fund.
To the extent that any material exercise of discretion or other
decision making authority is required, that discretion or authority is
exercised by the Board.
The Manager does not have any employees. Under the Authorised
Fund Contract, Fonterra has agreed to provide the Fund with
administrative services and to meet the costs of the general business
of the Fund, including paying the fees and expenses of the Directors.
The Manager does not have a CEO so recommendation 2.8 that the
Chair and CEO must be different people is not applicable.
The Manager has written agreements with each of its Directors.
A copy of the Board Charter can be found at www.fonterra.com in the
‘Investors/Fonterra Shareholders Fund’ section.
Diversity Policy
Given the small size of the Board, and as Directors are either elected
by unit holders or appointed by Fonterra, the Manager has not
followed recommendation 2.5 and has not implemented a gender
diversity policy for the Board.
Performance Assessment
The Board assesses its performance against its role and the Board
Charter and the performance of the Audit Committee against the
Audit Committee Charter.
Board Composition
The constitution of the Manager provides for five Directors and sets
out how they are appointed.
In accordance with the procedure set out in the Trust Deed, unit
holders are entitled to elect three Directors (Elected Directors) and
may remove and replace any Elected Director.
The three Elected Directors must be ‘Independent Directors’ for the
purposes of the NZX Listing Rules. At the date of this statement the
three Elected Directors are John Shewan, Pip Dunphy and Kim Ellis.
One Elected Director is required to retire at each annual meeting of
the Fund. The Chair of the Board must be one of the three Elected
Directors. John Shewan is Chair.
The remaining two Directors are appointed, and can be replaced, by
Fonterra. There is no requirement as to who the Fonterra-appointed
Directors must be. While they need not be Directors of Fonterra, the
current people that Fonterra has appointed (Nicola Shadbolt and
Scott St John) are both Directors of Fonterra.
Nominations Committee
Given the small size of the Board, the Manager has not established a
separate Nominations Committee to recommend director
appointments to the Board and therefore has decided not to follow
recommendation 3.4. The Board is appointed in accordance with the
Trust Deed and the constitution of the Manager.
Statutory Information CONTINUED
FOR THE YEAR ENDED 31 JULY 2018

FONTERRA SHAREHOLDERS’ FUND ANNUAL REPORT 201818
The Board is responsible for establishing the criteria for determining
the suitability of potential Elected Directors and recommending
persons suitable for appointment to the Board.
Independent Professional Advice
The Board seeks independent professional advice when it considers
that appropriate. Fonterra pays the costs of independent professional
advice in accordance with the Authorised Fund Contract.
Code of Conduct
The Manager has adopted the Code of Conduct. The Code of Conduct
guides the Directors on:
• the practices necessary to maintain confidence in the Manager’s
integrity; and
• the responsibility and accountability of individuals for reporting and
investigating reports of unethical practices.
Securities Trading Policy
The Manager and Fonterra have adopted trading policies that detail
the policy on, and rules for, trading in units. The policies each apply to
Directors of the Manager and Directors, officers, employees and
contractors of Fonterra and are in addition to legal prohibitions on
insider trading in New Zealand and Australia.
Audit Committee
The Board acts as the Audit Committee for the Fund. The Chair of the
Audit Committee is the Chair of the Board. Due to the limited nature
of the Fund’s operations, the Board does not consider it necessary to
comply with recommendation 3.1 of the NZX Code to have an
independent Chair for the Audit Committee.
The Board acting as Audit Committee is responsible for:
• providing oversight in relation to financial reporting and regulatory
compliance; and
• reviewing financial reporting processes, internal controls, the audit
process and the process for monitoring legal and regulatory
compliance.
The Manager has implemented a formal Audit Committee Charter
which sets out the responsibilities of the Audit Committee in full.
A copy of the Audit Committee Charter can be found at
www.fonterra.com in the ‘Investors/Fonterra Shareholders Fund’ section.
The Board acting as Audit Committee selects and appoints the
external auditor and determines the rotation of external audit
engagement partners. It also acts as a forum for communication
between the Board and external auditors where appropriate. The
Audit Committee asks that the external auditor attend the annual
unit holder meeting and be available to answer questions from unit
holders relevant to the audit.
Due to the nature of the Manager’s role as a manager of a fund with
limited operational activity, recommendation 7.3 of the NZX Code has
not been followed and the Manager has no formal or informal internal
audit functions.
Takeovers Policy
Given the Fund cannot have any controlling interest in Fonterra, the
Manager has not established protocols that set out the procedure to
be followed if there is a takeover offer for the Fund (as contemplated
by recommendation 3.6 of the NZX Code).
Continuous Disclosure
The Board aims to ensure that unit holders are informed of all major
developments affecting the Fund. Information is communicated to
unit holders through NZX and ASX announcements, the Fund’s annual
report and half and full-year results announcements.
Fonterra and the Manager have entered into an arrangement to
co-operate with each other and take all steps reasonably required to
ensure that information to be disclosed by either of them under the
listing rules of the Fonterra Shareholders’ Market, the NZX Listing
Rules or the ASX Listing Rules (as the case may be) is disclosed
simultaneously to the Fonterra Shareholders’ Market, the NZX Main
Board and ASX in relation to the Fund. It is intended that where NZX,
as market operator of the Fonterra Shareholders’ Market, receives
information provided by Fonterra for release under the Fonterra
Shareholders’ Market, NZX simultaneously releases the information
under the code relating to the Fund. This process is intended to
be automatic.
The Manager does not consider it necessary to comply with
recommendation 4.1 of the NZX Code and to have its own continuous
disclosure policy. Due to the relationship between units and Fonterra
shares, the majority of continuous disclosure announcements are
made by Fonterra in relation to matters affecting Fonterra and the
value of Fonterra shares (and by implication the value of units).
The Manager does not consider it necessary to comply with
recommendation 4.3 and provide non-financial disclosures annually
given the Fund’s limited operational functions.
Other Committees
Given the Fund’s limited operational functions, the Board does
not consider it necessary or appropriate to have any other
Board Committees as standing committees as required by
recommendation 3.5.
Communications with Unit Holders
All external communications by the Fund are:
• subject to internal vetting and authorisation before issue;
• reviewed to ensure that they do not omit material information; and
• timely and expressed in a clear and objective manner.
Mechanisms are in place to promote effective two-way
communication with unit holders and to encourage their
participation at unit holder meetings, including:
• the Manager will release to the NZX Main Board and ASX market
announcements platform respectively all information sent to unit
holders, and will comply with the NZX Listing Rules and ASX Listing
Rules with respect to unit holder communications.
• notices of meetings are sent to unit holders at least 14 days before a
meeting and can be found at www.fonterra.com in the ‘Investors/
Fonterra Shareholders Fund’ section at least 28 days beforehand.
• a unit holder may raise matters for discussion or resolution at
general meetings, by giving written notice to the Manager. If the
notice is received more than 25 working days before the last day on
which notice of the meeting is due, the Manager is required to, at
the expense of the Fund, give notice of the unit holder proposal and
the text of any proposed resolution to all unit holders entitled to
receive notice of the meeting. The unit holder proposing the
resolution has the right to prepare a statement in support of the
proposal to include with the notice of meeting (clause 14.1 of the
Schedule to the Trust Deed).
Investors who have provided the Manager with an email address will
be sent annual and interim reports electronically unless they
expressly opt to receive hard copy reports and will receive other
communications electronically where requested. Unit holders are
strongly encouraged to provide an email address.
Statutory Information CONTINUED
FOR THE YEAR ENDED 31 JULY 2018

FONTERRA SHAREHOLDERS’ FUND ANNUAL REPORT 201819
Risk Management
The Board is responsible for the risk management of the Fund, including:
• reviewing the principal risks contained in the risk profile of the Fund
on an annual basis;
• ensuring that a risk management framework is established which
includes policies and procedures to effectively identify, treat and
monitor principal business risks, including consideration of
internal audit;
• at least annually assessing the effectiveness of the implementation of
the risk management system and reporting back to the Board; and
• monitoring compliance with the risk management framework.
Given the Fund’s limited operational functions, its general risk and
health and safety risk profiles are limited. The management of risks
relating to Fonterra’s operations and which may affect the value of
Fonterra shares and dividends (and therefore the value of units and
distributions flowed through to unit holders) is a matter for the Board
and Management of Fonterra and is beyond the control of the
Manager Board. To the extent that there are risks that specifically
impact the operation of the Fund, the Board periodically reviews the
management of those risks. On this basis, the Manager has decided
not to follow recommendations 6.1 and 6.2 of the NZX Code.
Remuneration of Directors
Given the small size of the Board and the fact the Fund has no
employees, the Manager has not established a separate
Remuneration Committee and therefore has decided not to follow
recommendation 3.3 of the NZX Code.
Under the Authorised Fund Contract, Fonterra is responsible for the
payment of all director fees payable to the Directors of the Manager.
Fonterra has currently approved the following amounts of
remuneration for the Directors. These amounts exclude GST,
where applicable:
• $80,000 per year to the Chair of the Board; and
• $53,000 per year to each independent Director.
Currently, the two Directors of the Manager who have been
appointed by Fonterra and who are also Directors of Fonterra are not
to be paid any additional remuneration (in addition to their
remuneration as Directors of Fonterra) for their service on the Board
of the Manager.
The remuneration of the Directors of the Manager may be reviewed
and adjusted from time to time.
The Fund has no employees or CEO and due to the arrangements
around director remuneration with Fonterra, the Manager has
therefore decided not to comply with recommendations 5.1, 5.2 and
5.3 of the NZX Code.
Directors’ Unit Holdings
The independent Directors of Fonterra that are also appointed to the
Board of the Manager are prohibited from acquiring any relevant
interest in units. The other Directors of the Manager (elected by unit
holders) may acquire units, and to the extent any units are acquired,
these acquisitions will be disclosed to the market as required by law.
Statutory Information CONTINUED
FOR THE YEAR ENDED 31 JULY 2018

FONTERRA SHAREHOLDERS’ FUND ANNUAL REPORT 201820
Directory
REGISTERED OFFICE OF THE MANAGER OF THE FUND – NEW ZEALAND
109 Fanshawe Street
Auckland Central, Auckland 1010
Telephone: +64 9 374 9000
REGISTERED OFFICE OF THE MANAGER OF THE FUND – AUSTRALIA
C/o Fonterra Australia Pty. Ltd
Level 2, 40 River Boulevard
Richmond, Victoria 3121
Telephone: +61 3 8541 1588
DIRECTORS OF THE MANAGER OF THE FUND
Philippa Jane Dunphy
Kimmitt Rowland Ellis
Nicola Mary Shadbolt
John Bruce Shewan
Scott Andrew St John
COMPANY SECRETARY
Andrew Cordner
SUPERVISOR
The New Zealand Guardian Trust Company Limited
Level 14, 191 Queen Street
Auckland Central, Auckland 1010
New Zealand
AUDITORS OF THE FUND AND THE MANAGER OF THE FUND
PricewaterhouseCoopers
Level 22, PwC Tower
188 Quay Street, Auckland 1010
New Zealand
LEGAL ADVISERS TO THE MANAGER OF THE FUND
Chapman Tripp
Level 35, ANZ Centre
23 Albert Street, Auckland 1010
New Zealand
SHARE REGISTRAR – NEW ZEALAND
Computershare Investor Services Limited
Level 2, 159 Hurstmere Road
Takapuna, Auckland 0622
Private Bag 92119, Auckland 1142
Telephone: +64 9 488 8777
SHARE REGISTRAR – AUSTRALIA
Computershare Investor Services Pty. Limited
Yarra Falls
452 Johnston Street
Abbotsford, Victoria 3067
GPO Box 3329
Melbourne, Victoria 3001
Telephone: 1800 501 366 (within Australia)
Telephone: +61 3 9415 4083 (outside Australia)

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