Fonterra Shareholders’ Fund Interim Results 2019

Page 1



Reporting Period Six months to 31 January 2019
Previous Reporting Period Six months to 31 January 2018


Amount
(m’s)
Percentage
Change
(Expense) revenue from ordinary activities NZ$(40) (191)%
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 interim dividend is to be paid NZ$- $-

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
Interim Financial
Statements
FOR THE SIX MONTHS ENDED 31 JANUARY 2019

FONTERRA SHAREHOLDERS’ FUND INTERIM FINANCIAL STATEMENTS 201901
Three-point plan
At Fonterra’s Annual Results announcement in September,
CEO Miles Hurrell outlined a three-point plan – take stock of
the business, get the basics right and ensure more realistic
forecasting.
Fonterra has provided the following summary of progress
over the past six months:
1.A full portfolio review of all investments, major assets and
partnerships is underway. This involves a thorough analysis
of whether they give the Co-op a competitive advantage, are
hitting their target return on capital and whether they can be
scaled up and more value driven from them over the next two
to three years.
2
.Good progress is being made on asset sales required to reduce
Fonterra’s debt by $800 million and bring gearing back within
the 40-45% range by the year end.
3
.Fonterra is on track to reduce its capital expenditure for the
year by $200 million to $650 million and is reducing operating
expenses to 2016/17 levels within the next two years.
Strategic Review
These are difficult times for Fonterra and for the Fund.
I view the strategic review and the associated steps to
address performance positively. It is clear that the
Co-op’s performance will not be fixed overnight. However,
the commitment in the Interim Report to take difficult
decisions and to a culture of accountability and
performance right across the organisation is welcome.
John Shewan
Chairman

FSF Management Company Limited
(Australian Registered Body Number 160 539 935, Incorporated In New Zealand)
C
hairman’s
Report
Dear Investors
I am pleased to present the Interim Report for the Fonterra
Shareholders’ Fund for the first half of FY19.
The Fund’s Unit Price has remained under significant pressure
over this half year period, reflecting ongoing concern over
Fonterra’s performance. In its Interim Report Fonterra
acknowledges that its earnings performance is not where it
needs to be and advises that a full strategic review is underway.
Fundamental change will occur and there are no sacred cows.
In February Fonterra announced a reduction in its forecast
e
arnings per share range to 1 5–25 cents per share and advised that
there will be no interim dividend payment. A decision on any full
year dividend will be made once the Board has a complete picture
of the full year earnings and balance sheet position.
The Interim Results and a summary of progress on the
previously announced three-point plan are outlined below
but I encourage you to read Fonterra’s 2019 Interim Report to
gain a full understanding of the Co-operative’s results. This is
available online in the Investor section at www.fonterra.com.
Interim financial results
Fonterra’s interim results are mixed.
The Co-op returned t
o profitability in the first half of FY19
with a reported Net Profit After Tax (NPAT) of $80 million.
However, normalised Earnings Before Interest and Tax (EBIT)
of $323 million, down 29% compared to last year, shows
clearly that its earnings performance is not where it needs to
be.
After three years of growth, the Consumer and Foodservice
business had a slower start in the first half of this year with both
volumes and earnings down due to market specific challenges.
These included: disruptive economic conditions and high input
costs in Latin America; demand slowing in China due to higher
prices at the end of FY18 and growing in-market inventory levels
for butter; and price constraints in Sri Lanka.

Interim Financial
Statements
FOR THE SIX MONTHS ENDED 31 JANUARY 2019
FSF Management Company Limited (the Manager)
presents to the unit holders the interim financial
statements for the Fonterra Shareholders’ Fund (the
Fund) for the six months ended 31 January 2019.
The Manager is responsible for presenting interim
financial statements for the six months which fairly
present the financial position of the Fund and its
financial performance and cash flows for that period.
The Manager considers the interim 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 interim 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
interim financial statements for the six months ended
31 January 2019 presented on pages 3 to 7.
For and on behalf of the Board of the Manager:
Manager’s Statement
FOR THE SIX MONTHS ENDED 31 JANUARY 2019
Manager’s Statement 02
Statement of Comprehensive Income 03
Statement of Changes in Net Assets
Attributable to Unit Holders 03
Statement of Financial Position 04
Cash Flow Statement 04
Statement of Significant Accounting Policies 05
Notes to the Financial Statements 06
Independent Review Report 08
Directory 09
John Shewan
Chairman
FSF Management Company Limited
19 March 2019
Pip Dunphy
Director
FSF Management Company Limited
19 March 2019
FONTERRA SHAREHOLDERS’ FUND INTERIM FINANCIAL STATEMENTS 201902

FONTERRA SHAREHOLDERS’ FUND INTERIM FINANCIAL STATEMENTS 201903
$ MILLION
SIX MONTHS ENDEDYEAR ENDED
31 JAN 2019
UNAUDITED
31 JAN 2018
UNAUDITED
31 JUL 2018
AUDITED
Net fair value (loss)/gain on revaluation of Economic Rights of Fonterra shares(40)18(124)
Dividend income–2639
Investment (expense)/income(40)44(85)
Net change in fair value of liability to unit holders40(18)124
Distributions to unit holders–(26)(39)
Finance income/(cost)40(44)85
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 SIX MONTHS ENDED 31 JANUARY 2019
$ MILLION
Net assets attributable to unit holders at 1 August 2018570
Movements:
Revaluation of liability to unit holders(40)
Issue of units71
Redemption of units(77)
Net assets attributable to unit holders at 31 January 2019 (unaudited)524
Net assets attributable to unit holders at 1 August 2017763
Movements:
Revaluation of liability to unit holders18
Issue of units122
Redemption of units(51)
Net assets attributable to unit holders at 31 January 2018 (unaudited)852
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 2018 (audited)570
Statement of Comprehensive Income
FOR THE SIX MONTHS ENDED 31 JANUARY 2019
The accompanying notes form part of these financial statements.

FONTERRA SHAREHOLDERS’ FUND INTERIM FINANCIAL STATEMENTS 201904
Statement of Financial Position
AS AT 31 JANUARY 2019

$ MILLION
NOTES
31 JAN 2019
UNAUDITED
31 JAN 2018
UNAUDITED
31 JUL 2018
AUDITED
Assets
Economic Rights of Fonterra shares2524852570
Total assets524852570
Total liabilities (excluding net assets attributable to unit holders)–––
Net assets attributable to unit holders – liability3524852570
Cash Flow Statement
FOR THE SIX MONTHS ENDED 31 JANUARY 2019

$ MILLION
SIX MONTHS ENDEDYEAR ENDED
31 JAN 2019
UNAUDITED
31 JAN 2018
UNAUDITED
31 JUL 2018
AUDITED
Cash flows from operating activities
Cash was provided from:
–Sale of Economic Rights of Fonterra shares7751198
–Dividends’ received (net of dividends reinvested)–2031
Cash was applied to:
–Purchase of Economic Rights of Fonterra shares(71)(116)(121)
Net cash flows from operating activities6(45)108
Cash flows from financing activities
Cash was provided from:
–Proceeds from issue of units71116121
Cash was applied to:
–Outflows on redemption of units(77)(51)(198)
–Distributions paid to unit holders (net of distributions reinvested)–(20)(31)
Net cash flows from financing activities(6)45(108)
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 INTERIM FINANCIAL STATEMENTS 201905
Statement of Significant Accounting Policies
FOR THE SIX MONTHS ENDED 31 JANUARY 2019
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 Manager is an FMC reporting entity
under the Financial Markets Conduct Act 2013.
These interim financial statements were authorised for issue by the
Manager on 19 March 2019.
Fonterra interim financial statements
Investors are encouraged to read the interim financial statements of
Fonterra Co-operative Group Limited (Fonterra), together with the
interim financial statements of the Fund, given that the performance
of the Fund is driven by the performance of Fonterra. The Fonterra
interim 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.
B) BASIS OF PREPARATION
These interim financial statements have been prepared in accordance
with International Accounting Standard 34: Interim Financial
Reporting and New Zealand Equivalent to International Accounting
Standard 34: Interim Financial Reporting. They have also been
prepared in accordance with Generally Accepted Accounting Practice
(GAAP) applicable to for-profit entities. These interim financial
statements are as at and for the six months ended 31 January 2019,
and are unaudited. They should be read in conjunction with the
financial statements for the year ended 31 July 2018.
These interim 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 interim financial
statements as were applied in the financial statements for the year
ended 31 July 2018.
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 INTERIM FINANCIAL STATEMENTS 201906
1. FAIR VALUE MEASUREMENT
The Fund measures fair values for recognition of both Economic Rights assets and unit holder liabilities.
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. 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.
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 JAN 2019
UNAUDITED
31 JAN 2018
UNAUDITED
31 JUL 2018
AUDITED
Value of Economic Rights ($ million)524852570
Number of Economic Rights110,573,858137,366,342111,423,603
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 JAN 2019
UNAUDITED
31 JAN 2018
UNAUDITED
31 JUL 2018
AUDITED
Opening value of Economic Rights 570763763
Movements:
Purchase of Economic Rights
1
71122129
Sale of Economic Rights(77)(51)(198)
Revaluation of Economic Rights(40)18(124)
Closing value of Economic Rights524852570
1 Purchase of Economic Rights includes $nil Economic Rights acquired in conjunction with Fonterra’s Dividend Reinvestment Plan (31 January 2018: $5.6 million; 31 July 2018: $8.4 million).
Notes to the Financial Statements
FOR THE SIX MONTHS ENDED 31 JANUARY 2019

FONTERRA SHAREHOLDERS’ FUND INTERIM FINANCIAL STATEMENTS 201907
3. LIABILITY TO UNIT HOLDERS
31 JAN 2019
UNAUDITED
31 JAN 2018
UNAUDITED
31 JUL 2018
AUDITED
Value of unit holder liability ($ million)
1
524852570
Opening number of units on issue
2
111,423,603126,047,304126,047,304
Number of units issued
3
14,923,01019,503,56120,946,170
Number of units redeemed (15,772,755)(8,184,523)(35,569,871)
Closing number of units on issue110,573,858137,366,342111,423,603
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 $4.74 (31 January 2018: $6.20; 31 July 2018: $5.12).
2 Included in the total number of units is one Fonterra unit which was issued at launch.
3 There were no units issued under the Dividend Reinvestment Plan for the six months ended 31 January 2019. (31 January 2018: 934,040 units with a total value of $5.6 million; 31 July
2018: 1,447,736 units with a total value of $8.4 million).
4. NET TANGIBLE ASSETS PER SECURITY
As at 31 January 2019, the net tangible assets per unit on issue was $4.74 (31 January 2018: $6.20; 31 July 2018: $5.12).
5. COMMITMENTS AND CONTINGENT LIABILITIES
The Fund has no material commitments or contingent liabilities as at 31 January 2019 (31 January 2018: nil; 31 July 2018: nil).
6. 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 interim 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.
Notes to the Financial Statements CONTINUED
FOR THE SIX MONTHS ENDED 31 JANUARY 2019

FONTERRA SHAREHOLDERS’ FUND INTERIM FINANCIAL STATEMENTS 201908
Independent
Review Report
TO THE UNIT HOLDERS OF FONTERRA SHAREHOLDERS’ FUND




REPORT ON THE INTERIM FINANCIAL STATEMENTS
We have reviewed the accompanying interim financial statements of Fonterra Shareholders’ Fund (the Fund) on pages 3 to 7, which comprise
the statement of financial position as at 31 January 2019, and the statement of comprehensive income, the statement of changes in net assets
attributable to unit holders and the cash flow statement for the period ended on that date and selected explanatory notes.
RESPONSIBILITIES OF THE MANAGER FOR THE INTERIM FINANCIAL STATEMENTS
The Manager of the Fund is responsible, on behalf of the Fund, for the preparation and fair presentation of these interim financial statements
in accordance with International Accounting Standard 34 Interim Financial Reporting (IAS 34) and New Zealand Equivalent to International
Accounting Standard 34 Interim Financial Reporting (NZ IAS 34) and for such internal control as the Manager determines is necessary to enable
the preparation and fair presentation of interim financial statements that are free from material misstatement, whether due to fraud or error.
OUR RESPONSIBILITY
Our responsibility is to express a conclusion on the accompanying interim financial statements based on our review. We conducted our review in
accordance with the New Zealand Standard on Review Engagements 2410 Review of Financial Statements Performed by the Independent Auditor
of the Entity (NZ SRE 2410). NZ SRE 2410 requires us to conclude whether anything has come to our attention that causes us to believe that the
interim financial statements, taken as a whole, are not prepared in all material respects, in accordance with IAS 34 and NZ IAS 34. As the auditor
of the Fund, NZ SRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial statements.
A review of interim financial statements in accordance with NZ SRE 2410 is a limited assurance engagement. The auditor performs procedures,
primarily consisting of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and
other review procedures. The procedures performed in a review are substantially less than those performed in an audit conducted in
accordance with International Standards on Auditing (New Zealand) and International Standards on Auditing. Accordingly, we do not express
an audit opinion on these interim financial statements.
We are independent of the Fund. Our firm carries out agreed upon procedures in regards to annual meeting voting for the Fund. The provision
of this other service has not impaired our independence.
CONCLUSION
Based on our review, nothing has come to our attention that causes us to believe that these interim financial statements of the Fund do not
present fairly, in all material respects, the financial position of the Fund as at 31 January 2019, and of its financial performance and cash flows
for the period then ended, in accordance with IAS 34 and NZ IAS 34.
WHO WE REPORT TO
This report is made solely to the Fund’s unit holders, as a body. Our review work has been undertaken so that we might state to the Fund’s unit
holders those matters which we are required to state to them in our review 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 review procedures,
for this report, or for the conclusion we have formed.
For and on behalf of:
Chartered Accountants
Auckland
19 March 2019

FONTERRA SHAREHOLDERS’ FUND INTERIM FINANCIAL STATEMENTS 201909
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
Andrew Webster Macfarlane
John Bruce Shewan
Donna Maree Smit
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)
Directory

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