Fonterra Shareholders’ Fund Annual Results 2019

Page 1


Results for announcement to the market
Name of issuer Fonterra Shareholders’ Fund
Reporting Period 12 months to 31 July 2019
Previous Reporting Period 12 months to 31 July 2018
Currency New Zealand Dollars
Amount (m’s) Percentage change
Revenue from continuing
operations
$(144) (69)%
Total Revenue $(144) (69)%
Net profit/(loss) from
continuing operations
$nil -%
Total net profit/(loss) $nil -%
Interim/Final Dividend
Amount per Quoted Equity
Security
No final dividend is to be paid
Imputed amount per Quoted
Equity Security
Not Applicable
Record Date Not Applicable
Dividend Payment Date Not Applicable
Current period Prior comparable period
Net tangible assets per
Quoted Equity Security
$3.77 $5.12
A brief explanation of any of
the figures above necessary
to enable the figures to be
understood
Fonterra Shareholders’ Fund financial statements are prepared in accordance
with New Zealand Equivalents to International Financial Reporting Standards.
Revenue from continuing operations comprises net fair value movements of
Economic Rights of Fonterra Shares, and dividend income. This is a loss for
the current reporting period.
Authority for this announcement
Name of person authorised
to make this announcement
Andrew Cordner

Contact person for this
announcement
Simon Till

Contact phone number +64 21 777 807

Contact email address Investor.relations@fonterra.com

Date of release through MAP
26/09/2019


Audited financial statements accompany this announcement.

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Font e r r a
Shareholders’
Fund Annual
Repor t
2019

FONTERRA SHAREHOLDERS’ FUND ANNUAL REPORT 2019
Contents
Chairman's Report01
Our Board02
Financial Statements04
Statutory Information15
Directory20

FONTERRA SHAREHOLDERS’ FUND ANNUAL REPORT 201901
Dear Investors
The Fonterra Shareholders’ Fund (the Fund) underperformed
this year. The unit price is down markedly and no distribution
was paid. This is disappointing and frustrating for the Fund’s
unit holders. Fonterra’s farmer shareholders have experienced
the same unsatisfactory result from their shares in Fonterra.
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 directly to Fonterra’s performance.
Fonterra’s financial performance has continued to be very
poor in 2019. A series of significant steps are being taken
to right this but the turn-a-round will take time. The plan
to reset the business has seen the Board and management
take an end-to-end look at the entire operations, including
re-evaluating all investments, major assets and partnerships.
This process resulted in the sale of Tip Top for $380 million and
the start of the sale process for DFE Pharma. Fonterra has wound
back its relationship with Beingmate and announced its intention
to sell part of its financial stake in the company. Fonterra also
commenced strategic reviews of its two wholly-owned farms in
China and stake in DPA Brazil, as well as exited Venezuela and
closed the Dennington manufacturing site in Australia.
Business performance for FY19
Performance was mixed. New Zealand Ingredients and
the Foodservice businesses were up on last year. However,
there were challenges in Australia Ingredients, the ingredients
and consumer businesses in Latin America and the consumer
businesses in Sri Lanka, Hong Kong and New Zealand. As a
result, the normalised Net Profit After Tax was $280 million,
down 31% from last year.
Significant one-off items, including the asset valuation
write-downs, totalled $885 million. While these items do
not impact the day to day operations of the business, they
are reported in the Income Statement and as a result Fonterra
reported a Net Loss After Tax of $605 million, representing
35 cents per share.
Good progress has been made on reducing operating and
capital expenditure, improving cash flow and reducing debt.
Fonterra’s disappointing earnings and the one-off items
led to the decision not to pay a distribution this year.
Plans to improve performance
Fonterra has released its new strategy which will see it be
a more focused business that prioritises New Zealand milk
and is closer to its customers.
Fonterra intends to focus on four ingredient categories that
reflect the way consumers enjoy dairy as part of their lifestyles:
Core Dairy, Paediatrics, Medical and Ageing, Sports and Active.
It also plans to create new opportunities in foodservice and take
a more targeted approach to opportunities in consumer brands.
Priorities for FY20
FY20 will be the first year of Fonterra delivering the new
strategy. It has outlined four key priorities, which are:
shift to a new market-led operating model, meet financial
targets, support regional New Zealand, and reduce
environmental footprint.
These priorities are intended to help Fonterra achieve its
strategic goals of healthy people, healthy environment
and healthy business.
CEO Miles Hurrell has set milestones and targets for the
year against this strategy which can be viewed in Fonterra’s
annual report.
The Board of FSF Management Company Limited hopes to
see better financial performance from Fonterra and progress
against the new strategy.
John Shewan
Chairman
FSF Management Company Limited
(Australian Registered Body Number 160 539 935, Incorporated In New Zealand)
Chairman's
Report

FONTERRA SHAREHOLDERS’ FUND ANNUAL REPORT 201902
Our Board
1
2
4
1. John Shewan
2. Pip Dunphy
3. Kim Ellis
4. Donna Smit
5. Andrew Macfarlane
5
3

FONTERRA SHAREHOLDERS’ FUND ANNUAL REPORT 201903
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
currently chairs the Boards of Munich Reinsurance Australasia,
China Construction Bank and Wellington Regional Stadium
Trust. John is 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 12 years in a variety of different industries and companies.
Pip currently chairs the Boards of First Gas Limited and
associated companies, Transpower New Zealand Limited
and Abano Healthcare Group Limited.
4. Donna Smit
FCA
Appointed to the Board of the Manager by Fonterra
Donna Smit was elected to the Fonterra Board in December
2016. Donna lives and farms at Edgecumbe, and has dairy
farms in Oamaru. Donna is a Director of EastPack Limited
and Kiwifruit Equities Limited and a Trustee of the Dairy
Women’s Network. Donna is a Fellow Chartered Accountant
and was a company administrator at kiwifruit Co-operative
EastPack for 24 years.
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 Metlifecare Limited. Kim also holds directorships in
Freightways, Ballance Agri-Nutrients and the Port of Tauranga.
5. Andrew Macfarlane
B.Agr.Sc
Appointed to the Board of the Manager by Fonterra
Andy Macfarlane was elected to the Fonterra Board in 2017.
Andy was a farm management consultant for 38 years.
He is a Councillor of Lincoln University and a Director
of ANZCO. Andy was previously a Director of Ngai Tahu
Farming Limited. Andy is an active member of the International
Farm Management Association (IFMA), Global Dairy Farmers
and New Zealand Institute of Primary Industry Management
(NZIPIM). He is the past President of the NZIPIM and chaired
Deer Industry New Zealand for seven years. Andy began
farming in 1989 and lives near Ashburton. He has shareholding
interests in the South Island.

FONTERRA SHAREHOLDERS’ FUND ANNUAL REPORT 201904
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 2019.
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 2019
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 2019
Financial
Statements
FOR THE YEAR ENDED 31 JULY 2019
John Shewan
Chairman
FSF Management Company Limited
25 September 2019
Kim Ellis
Director
FSF Management Company Limited
25 September 2019
Manager's Statement04
Statement of Comprehensive Income05
Statement of Changes In Net Assets
Attributable to Unit Holders
05
Statement of Financial Position06
Cash Flow Statement06
Statement of Significant Accounting Policies07
Notes to the Financial Statements09
Independent Auditor’s Report13
Statutory Information15
Directory20

FONTERRA SHAREHOLDERS’ FUND ANNUAL REPORT 201905
The accompanying notes form part of these financial statements.
$ MILLION
31 JULY 201931 JULY 2018
Net fair value loss on revaluation of Economic Rights of Fonterra shares(144)(124)
Dividend income–39
Investment expense(144)(85)
Net change in fair value of liability to unit holders144124
Distributions to unit holders–(39)
Finance income14485
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 2019

$ MILLION
Net assets attributable to unit holders at 1 August 2018570
Movements:
Revaluation of liability to unit holders(144)
Issue of units82
Redemption of units(120)
Net assets attributable to unit holders at 31 July 2019388
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
Statement of Comprehensive Income
FOR THE YEAR ENDED 31 JULY 2019

FONTERRA SHAREHOLDERS’ FUND ANNUAL REPORT 201906
Statement of Financial Position
AS AT 31 JULY 2019
$ MILLION
NOTES31 JULY 201931 JULY 2018
Assets
Economic Rights of Fonterra shares2388570
Total assets388570
Total liabilities (excluding net assets attributable to unit holders)––
Net assets attributable to unit holders – liability3388570
Cash Flow Statement
FOR THE YEAR ENDED 31 JULY 2019
$ MILLION
NOTES31 JULY 201931 JULY 2018
Cash flows from operating activities
Cash was provided from:
– Sale of Economic Rights of Fonterra shares120198
– Dividends received (net of dividends reinvested)–31
Cash was applied to:
– Purchase of Economic Rights of Fonterra shares(82)(121)
Net cash flows from operating activities438108
Cash flows from financing activities
Cash was provided from:
– Proceeds from issue of units82121
Cash was applied to:
– Outflows on redemption of units(120)(198)
– Distributions paid to unit holders (net of distributions reinvested)–(31)
Net cash flows from financing activities(38)(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 ANNUAL REPORT 201907
Statement of Significant Accounting Policies
FOR THE YEAR ENDED 31 JULY 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 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 25 September 2019.
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 2018.
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 201908
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 effective from 1 August 2018
The Fund adopted NZ IFRS 15 Revenue from Contracts with Customers
from 1 August 2018. As the Fund does not earn revenue from customers,
the adoption of this accounting standard had no impact on the Fund.
Standards issued but not yet effective
NZ IFRS 16 Leases is effective for the Fund from 1 August 2019. As the
Fund has not entered into any lease arrangements the impact of this
accounting standard on the Fund will not be material.
A number of 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 2019

FONTERRA SHAREHOLDERS’ FUND ANNUAL REPORT 201909
Notes to the Financial Statements
FOR THE YEAR ENDED 31 JULY 2019
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.
As at 31 July 2019, the Actual Fund Size relative to total Fonterra
shares on issue is below the target range specified in the Fund Size
Risk Management Policy. Fonterra has taken no specific actions
to address this as it expects the Fund size to increase over time
as Fonterra's performance improves.

FONTERRA SHAREHOLDERS’ FUND ANNUAL REPORT 201910
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 201931 JULY 2018
Value of Economic Rights ($ million)388570
Number of Economic Rights102,934,582111,423,603
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 JULY 2019 31 JULY 2018
Opening value of Economic Rights 570763
Movements:
Purchase of Economic Rights
1
82129
Sale of Economic Rights(120)(198)
Revaluation of Economic Rights(144)(124)
Closing value of Economic Rights388570
1 Purchase of Economic Rights includes $nil Economic Rights acquired in conjunction with Fonterra’s Dividend Reinvestment Plan (31 July 2018: $8.4 million).
3. LIABILITY TO UNIT HOLDERS
31 JULY 201931 JULY 2018
Value of unit holder liability ($ million)
1
388570
Opening number of units on issue
2
111,423,603126,047,304
Number of units issued
3
17,769,33120,946,170
Number of units redeemed (26,258,352)(35,569,871)
Closing number of units on issue102,934,582111,423,603
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 at 31 July 2019 of $3.77 (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 Distribution Reinvestment Plan for the year ended 31 July 2019 (31 July 2018: 1,447,736 units with a total value of $8.4 million).
4. RECONCILIATION OF NET CASH FLOW FROM OPERATING ACTIVITIES TO PROFIT
$ MILLION
31 JULY 2019 31 JULY 2018
Reconciliation of profit for the year to net cash flows from operating activities
Profit for the year––
Adjustments for:
– Fair value loss on revaluation of Economic Rights of Fonterra shares144124
– Net change in fair value of liability to unit holders(144)(124)
– Distributions to unit holders–39
– Non-cash dividend income–(8)
Changes in assets:
Net sale of Economic Rights of Fonterra shares3877
Net cash flows from operating activities38108
Notes to the Financial Statements CONTINUED
FOR THE YEAR ENDED 31 JULY 2019

FONTERRA SHAREHOLDERS’ FUND ANNUAL REPORT 201911
5. NET TANGIBLE ASSETS PER SECURITY
As at 31 July 2019, the net tangible assets per unit on issue was $3.77 (31 July 2018: $5.12).
6. COMMITMENTS AND CONTINGENT LIABILITIES
The Fund has no material commitments or contingent liabilities as at 31 July 2019 (31 July 2018: 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 2019
YEAR ENDED
31 JULY 2018
Purchased–0.06
Sold––
Value at the end of the year0.680.24
At 31 July 2019 179,722 (31 July 2018: 46,192) units were held by Key Management Personnel. The change in the number of units held by
Key Management Personnel is due to the inclusion of units held by the two Directors appointed during the year, and removal of the units
held by the retiring Director.
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.
Under Fonterra’s Contract Fee for Units scheme, Fonterra provides services and financial assistance to The New Zealand Guardian Trust Company, as
trustee of The Contract Fee Trust, to acquire, on market, and hold units on behalf of Fonterra’s contract milk suppliers participating in the scheme.
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 2019 with respect to the Fund are the following
amounts paid to PricewaterhouseCoopers:
– Fees for the annual audit of the financial statements of $33,780 (31 July 2018: $32,780),
– Fees for the review of the interim financial statements of $10,000 (31 July 2018: $nil) and
– Fees for other audit related services comprising agreed upon procedures on Prescribed Investor Rates of $nil (31 July 2018: $7,000),
and Annual Meeting voting of $4,000 (31 July 2018: $3,500)
Notes to the Financial Statements CONTINUED
FOR THE YEAR ENDED 31 JULY 2019

FONTERRA SHAREHOLDERS’ FUND ANNUAL REPORT 201912
Notes to the Financial Statements CONTINUED
FOR THE YEAR ENDED 31 JULY 2019
Fund unit and Fonterra share transactions
As at 31 July 2019, the Custodian holds 102,934,582 (31 July 2018: 111,423,603) Fonterra shares on trust for the Fund.
On 10 October 2018, DCT made a net purchase of 45,164 units for $0.2 million on behalf of Fonterra farmer shareholders participating in the 2019
season Delegated Compliance Trading Scheme. In the prior year on 9 October 2017, DCT made a net sale of 173,568 units for $1.1 million on behalf
of Fonterra farmer shareholders participating in the 2018 season Delegated Compliance Trading Scheme. The sale or purchase of units with the
Fonterra farmer shareholders are transacted on the same day. Therefore, no units are held by DCT on behalf of Fonterra’s farmer shareholders at
the close of trading.
The closing date for the 2020 season applications under the Delegated Compliance Trading Scheme is 1 February 2020.
During the year 513,504 units were purchased for $3.3 million on behalf of Fonterra’s contract suppliers participating in Fonterra’s Contract
Fee for Units scheme. As at 31 July 2019, 513,504 units were held on trust for the participating contract suppliers. There were no transactions
in the prior year.
Dividends received from Fonterra
No dividends were received during the year ended 31 July 2019. The following dividends were received during the year ended 31 July 2018:
$ MILLION
DIVIDENDS
YEAR ENDED
31 JULY 2019
YEAR ENDED
31 JULY 2018
2018 Interim dividend received – 10.0 cents per Economic Right¹–13
2017 Final dividend received – 20.0 cents per Economic Right²–26
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.
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 201913
Independent Auditor’s Report
TO THE UNIT HOLDERS OF FONTERRA SHAREHOLDERS’ FUND
We have audited the financial statements which comprise:
• the statement of financial position as at 31 July 2019;
• 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 accompanying financial statements of Fonterra Shareholders’ Fund (the Fund), present fairly, in all material respects, the financial
position of the Fund as at 31 July 2019, 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 agreed upon procedures in regards to annual meeting voting. The provision of this other service 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: $3.9 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
$190,000 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 201914
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 determines 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 intends 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/assurance-standards/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 opinion
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
25 September 2019

FONTERRA SHAREHOLDERS’ FUND ANNUAL REPORT 201915
Statutory Information
FOR THE YEAR ENDED 31 JULY 2019
TWENTY LARGEST UNIT HOLDERS
As at 31 July 2019
UNIT HOLDER
NUMBER OF
UNITS
% OF TOTAL
ISSUED UNITS
Accident Compensation Corporation3,770,4713.66
Citibank Nominees (New Zealand) Limited3,149,4633.06
National Nominees Limited3,080,1892.99
HSBC Nominees (New Zealand) Limited2,403,0812.33
Craigsmore Dairy II Services Limited2,100,0002.04
FNZ Custodians Limited1,233,4991.20
New Zealand Depository Nominee Limited1,113,1451.08
JPMorgan Chase Bank NA NZ Branch-Segregated Clients Acct1,017,0150.99
JBWere (NZ) Nominees Limited989,8110.96
HSBC Custody Nominees (Australia) Limited 892,9550.87
Michael Douglas Hammond & Helen Mavis Hammond & Leigh Joseph Horton770,2700.75
HSBC Nominees (New Zealand) Limited A/C State Street754,7690.73
Custodial Services Limited <A/C 4>693,1880.67
Ingleton Properties Limited675,3800.66
BNP Paribas Nominees (NZ) Limited – NZCSD <COGN40>672,2380.65
Broad Acres Farms Limited644,6090.63
Custodial Services Limited <A/C 3>541,3630.53
Fonterra Farmer Custodian Limited <Contract Fee Trust>513,5040.50
BNP Paribas Nominees Pty Ltd504,9590.49
Richard Wallace Shapero480,0000.47
Total25,999,90925.26
Total quoted units on issue102,934,581100.00
SPREAD OF UNIT HOLDERS
As at 31 July 2019
SIZE OF HOLDING
NUMBER OF
HOLDERS
NUMBER OF
UNITS
% OF TOTAL
ISSUED UNITS
1 – 1,0002,9721,503,8891.46
1,001 – 5,0003,0387,665,3057. 45
5,001 – 10,0008076,186,3116.01
10,001 – 100,0001,00534,938,52033.94
100,001 and over16852,640,55751.14
Total
1
7,990102,934,582100.00
1 Total includes the Fonterra unit (which is not quoted).
SUBSTANTIAL PRODUCT HOLDERS
As at 31 July 2019 no unit holders had filed substantial product holder notices in accordance with the Financial Markets Conduct Act 2013.
As at 31 July 2019 the Fund had 102,934,581 quoted units, and one Fonterra unit, on issue.

FONTERRA SHAREHOLDERS’ FUND ANNUAL REPORT 201916
HOLDINGS OF DIRECTORS OF THE MANAGER
As at 31 July 2019
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
Donna Maree Smit9,317Power to control and exercise a right to vote and to control the acquisition and disposal
of these units held by Corona Farms Limited
Donna Maree Smit3,063Power to control and exercise a right to vote and to control the acquisition and disposal
of these units held by Seven Mile Farms Limited
Andrew Webster Macfarlane122,150Power to control and exercise a right to vote and to control the acquisition and disposal
of these units held by Pencarrow Farm Limited
Andrew Webster Macfarlane10,000Trustee and non-beneficial interest through Stonylea Trust
INTERESTS REGISTER
The Manager is required to maintain an interests register in which the particulars of certain transactions and matters involving the Directors
of the Manager must be recorded. The interests register is available for inspection on request.
General disclosures of interest
During the financial year, Directors of the Manager disclosed interests (including changes to previously disclosed interests), or a cessation of
interests (indicated by an asterisk (*)), in the following entities pursuant to section 140 of the Companies Act 1993:
DIRECTORNATURE OF INTEREST
John Bruce Shewan (Chairman)Appointed Chair of Munich Reinsurance Company of Australasia Pty Limited, Munich Holdings
of Australasia Pty Limited and Corion Pty Limited. Appointed acting Chair of China Construction
Bank (New Zealand) Limited. Ceased to be Chair of Corion Pty Limited*.
Philippa Jane DunphyAppointed Chair of Abano Healthcare Group Limited and Transpower New Zealand Limited.
Donna Maree SmitDirector of Fonterra Co-operative Group Limited, Fonterra Farmer Custodian Limited, KEL Woodlands Orchard
Limited and KEL Rangiuru Orchard Limited. Shareholder and Director of Corona Farms Limited, Seven Mile
Farms Limited, Kiwifruit Equities Limited, Corona Kiwi Limited and Eastpack Limited. Shareholder of Ballance
Agri-Nutrients Limited, Ravensdown Limited, Farmlands Co-operative Society Limited and Livestock
Improvement Corporation Limited. Trustee of Fonterra Farmer Custodian Trust and Dairy Womans Network.
Andrew Webster MacfarlaneDirector of Fonterra Co-operative Group, Ngai Tahu Farming Limited, Riverbank Farm (Ashburton) Limited,
Broadfields Farm (Ash) Limited, MRB Securities Limited, ANZCO Foods Limited, ANZCO Farmer Nominee
Limited, Melior Genetics Limited (previously Deer Improvement Limited) and Kintore Farms Limited. Relevant
interest in the Deebury Partnership and its associated entities. Director and shareholder of Pencarrow Farm
Limited, Windwhistle Pastoral Limited and M.R.B Trustees Limited. Shareholder of Macfarlane Rural Business
Limited. Councillor at Lincoln University. Trustee and non-beneficiary of Stonylea Trust. Ceased to be a
Director of Ngai Tahu Farming Limited*.
Specific disclosures of interest
During the financial year, no Director of the Manager specifically disclosed any transaction in which that director had entered into with the
Manager.
NZX TRADING HALTS
On 9 August 2018 NZX Regulation (NZXR), at the request of Fonterra Co-operative Group Limited (Fonterra) and Fonterra Shareholders' Fund (FSF),
placed a trading halt on Fonterra and its debt securities (FCG030, FCG040, & FCGHA), and FSF. Fonterra was preparing its annual financial
statements for the financial year ended 31 July 2018 and as a result there was potential for a variation from the earnings guidance previously given
by Fonterra to the market. The trading halt had been requested to allow Fonterra to determine this and to make any required announcement to the
market. On 10 August 2018 Fonterra shared a revision to its forecast 2017/18 Farmgate Milk Price, and updated its normalised earnings per share
and dividend guidance. The trading halt was lifted on 10 August 2018 following this announcement.
Statutory Information CONTINUED
FOR THE YEAR ENDED 31 JULY 2019

FONTERRA SHAREHOLDERS’ FUND ANNUAL REPORT 201917
NZX DIVERSITY REPORTING REQUIREMENTS
As at 31 July 2019, the gender composition of the Board of the Manager
comprised two female and three male Directors. As at 31 July 2018, 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 2019,
can be found at www.fonterra.com in the 'Investors/Fonterra
Shareholders' Fund' section under the heading ‘Exchange Waivers’.
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 2019,
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 under the heading
‘Charters and policies’.
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 (Andrew Macfarlane and
Donna Smit) are both Directors of Fonterra.
Due to the limited nature of the Fund’s operations, the Manager does
not consider it necessary to comply with recommendations 2.4 and 2.6
of the NZX Code.
Statutory Information CONTINUED
FOR THE YEAR ENDED 31 JULY 2019

FONTERRA SHAREHOLDERS’ FUND ANNUAL REPORT 201918
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. 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.
A copy of the Code of Conduct can be found at www.fonterra.com in
the 'Investors/Fonterra Shareholders' Fund' section under the heading
‘Charters and policies’.
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 and
establishes a framework for the Fund’s relationship with its external
auditors. A copy of the Audit Committee Charter can be found at
www.fonterra.com in the 'Investors/Fonterra Shareholders' Fund'
section under the heading ‘Charters and policies’.
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.
As the Fund has no employees, the Manager does not consider it
necessary to comply with recommendation 3.2 of the NZX Code and
specify that employees may only attend meetings by invitation of
the audit committee.
Maximum Holding Restriction
Under the Trust Deed, no Unit Holder and its associates (excluding
Fonterra) can hold, or have a “relevant interest” in, more than 15% of
the Units on issue or 15% of the voting rights in the Fund, whichever
is lower.
The Trust Deed also contains enforcement provisions to ensure
compliance by Unit Holders with this restriction. If Fonterra
determines that a Unit Holder is in breach of this restriction, Fonterra
may determine that the unit holder is not entitled to vote some or
all of the units it holds in breach of the restriction and can require
that the unit holder dispose of the units held in breach of the
restriction. If the Units are not disposed of, the Manager or Fonterra
can arrange for their disposal.
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 of the NZX Code and provide non-financial
disclosures annually given the Fund’s limited operational functions.
Capital Raising
As the Fund has not sought additional equity capital during the year,
the Board has not needed to follow recommendation 8.4 of the NZX
Code which recommends the new equity capital raising be undertaken
on a pro rata basis.
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 of the NZX Code.
Statutory Information CONTINUED
FOR THE YEAR ENDED 31 JULY 2019

FONTERRA SHAREHOLDERS’ FUND ANNUAL REPORT 201919
Statutory Information CONTINUED
FOR THE YEAR ENDED 31 JULY 2019
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 under
the heading ‘Related documents’ 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.
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.

FONTERRA SHAREHOLDERS’ FUND ANNUAL REPORT 201920
Directory
REGISTERED OFFICE OF THE MANAGER OF THE FUND – NEW ZEALAND
109 Fanshawe Street
Auckland Central, Auckland 1010
Telephone: +64 9 374 9000
Webpage: www.fonterra.com in the 'Investors/Fonterra Shareholders' Fund' section.
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
AUDITOR 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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