Communication to Fonterra farmers

28 March 2023


Communication to Fonterra farmers

The attached communication was provided to Fonterra Co-operative Group Limited farmers by the Chief
Executive Officer, Miles Hurrell, on 28 March 2023.

-ENDS-.

For further information contact:

Fonterra Communications
24-hour media line
Phone: +64 21 507 072

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Chief Executive Officer’s Email

28 March 2023


Subject: Flexible Shareholding comes into effect today

Kia ora [name],

Today marks the start of our new capital structure.

Flexible Shareholding makes it easier for new farmers to join our Co-op and for existing farmers
to remain by allowing greater flexibility in the level of investment required.

We believe the changes will help us make further progress on our strategy by supporting a
sustainable milk supply and stable balance sheet, while protecting farmer ownership and control.

While this is an important milestone for our Co-op, there’s nothing you need to do if you don’t
want to. For anyone who wants to trade, the Farm Source website provides information about
share trading options and tools, which are the same as what was available previously.

Supporting liquidity in the farmer-only market

I’d like to briefly recap what we’re doing to support liquidity in the farmer-only market. We’ve
allocated up to NZD300m for a package of liquidity measures, including new market maker
arrangements and an on-market share buyback (Transitional Buyback).

Having two market makers is intended to support liquidity over the long term, while the
Transitional Buyback is designed to provide short-term liquidity support if required during the
transition – you can read more on this here.

We’ll provide weekly updates via the My Co-op app on what shares have been purchased and
the average price they were bought for under the Transitional Buyback. This will be done each
Monday, if purchases have been made over the course of the previous week. If you prefer more
frequent updates, you can check the NZX website where we’ll report any share buyback
purchases the day after each purchase.

Key features of Flexible Shareholding

Hopefully you’re already aware that you can now hold up to 4x your milk supply in shares or a
minimum of 33% of your milk supply. Please note that share compliance will remain on hold for
this season, but for the 2023/24 season the Compliance Date has been set for 1 December 2023.
That’s when you’ll need to be within your new minimum and maximum holdings.

Entry and exit provisions are being extended and more types of farmers can be part of our Co-op.
Sharemilkers, contract milkers and farm lessors can apply to become what we’ve termed
Associated Shareholders and Secondary Shareholders. Meanwhile ceased farmers are able to
transfer shares to their relatives and related parties, which are known as Permitted Transferees.

We’ve kept the Share Standard at 1:1. This has been a feature of our Co-op for many years, it
represents our Co-operative Principles and encourages alignment between farmer shareholders.
Voting rights also remain the same for Supplying Shareholders at a ratio of 1 vote per 1,000
kgMS of share-backed supply – so to have maximum votes, you’ll need to be at the 1:1 Share
Standard.

Your go-to contacts and resources

Here’s where to go if you want to know more about Flexible Shareholding:

• Talk to a local Farm Source representative such as your Area Manager
• Call our 24/7 Farmer Support Team on 0800 65 65 68
• Use our step-by-step online tool at Fonterra.com/FlexibleShareholding
• Check out our one-page summary here
• Watch video explainers and previous farmer webinars here
• Download the booklet that serves as a complete guide here

Finally, I would like to thank you for the support you gave Flexible Shareholding through the
farmer vote back in December 2021, and for your patience since then as we worked with the
Government to make the necessary changes to DIRA.

Ngā mihi,

Miles