Fonterra Shareholders’ Fund 2023 Annual Meeting materials

13 November 2023

2
FSF Chair
Welcome and
Introduction

3
3
Unit holder & Proxyholder Q&A Participation
Written Questions:
•Questions may be submitted ahead of the meeting
•If you have a question to submit during the live
meeting, please select the Q&A tab on the right half
of your screen at anytime
•Type your question into the field and press submit
•Your question will be immediately submitted
Help:
•The Q&A tab can also be used for immediate help
•If you need assistance, please submit your query in
the same manner as typing a question and a
Computershare representative will respond to
you directly

4
4
Unit holder & Proxyholder Voting
•Once the voting has been opened, the resolution and
voting options will allow voting
•To vote, simply click on the Vote tab, and select
your voting direction from the options shown on
the screen
•Your vote has been cast when the tick appears
•To change your vote, select ‘Change Your Vote’

5
Welcome and
Introduction
FSF
Management
Company
Chair’s
address
Fonterra
Chair’s
address
Fonterra
Chief
Executive
Officer’s
address
QuestionsResolution to
re-elect
MJ Daly
General
Business

MJ Daly
Chair
Carlie Eve
Alastair Hercus
John NichollsAndy Macfarlane
Peter McBrideMiles HurrellSimon TillSelena RobbJackie Floyd
6

7
FSF Chair
FSF
Management
Company
Chair’s address

•Strong financial result driven by Fonterra’s protein and
cheese portfolios
•Capital return of $804 million was paid to Fonterra
shareholders and unit holders
•Total cash distribution of $1.00 per unit
•50 cents from dividends
•50 cents from capital return
•Flexible Shareholding capital structure implemented on 28
March 2023
¹
¹
²
Note: For the year ended 31 July 2023.
1.Includes Continuing and Discontinued Operations. Includes amounts attributable to non-controlling interests.
2.Excludes amounts attributable to non-controlling interests.
8

9
•
•
Note: Total Shareholder Return (TSR) is calculated from value weighted average traded prices for the period 14 November 2022 to 10 November 2023.
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Nov 22Dec 22Jan 23Jan 23Feb 23Mar 23Apr 23May 23May 23Jun 23Jul 23Aug 23Aug 23Sep 23Oct 23Nov 23
NZX50FCGFSF

5%
9%
15%
71%
5%
9%
15%
71%
7%7%
16%
70%
Private Wealth
Management
Farmer
Shareholder
InstitutionRetail
202120222023
2%2%
8%
88%
2%2%
8%
88%
4%
1%
7%
88%
OtherUnited StatesAustraliaNew Zealand
202120222023
•
•
Note: Register data is as at 31 October.
10

Units on Issue¹no change
Fund Market Capitalisation¹$12m
Fonterra Market Capitalisation¹$0.6b
Fund Size¹
,
²no change
Unit Price 12-month High/Low³(14 Aug 23) /(10 May 23)
1.At 10 November 2023, relative to 11 November 2022.
2.Fonterra Shareholders’ Fund units on issue as a percentage of Fonterra Co-operative Group shares on issue.
3.12 month period, 11 November 2022 –10 November 2023.
11

12
Fonterra Chair
Fonterra Chair’s
address

from 6.8%
from $9.30
from $0.20
from $583m
6.0
5.2
4.3
5.3
3.2
20192020202120222023

14
•Discretionary shares have increased from 15% to 72% under Flexible Shareholding
•Increased alignment between FSF unit holders and farmers in FCG
FSF
FCG Discretionary
FCG Compliance

15
©FONTERRA
•Current Board operating well. Changes are future
focused
•Smaller groups usually encourage:
•Dissenting views
•More meaningful sharing of perspectives
•Faster, robust decision making
•6:3 composition strikes a balance between a
strong and diverse level of perspectives, skills and
experiences, and manageable workloads.
•Changes would take effect after 2024 Annual
Meeting
Board size reduced from 11 to 9
Directors
Farmer Elected Directors
Appointed Directors
Chair still selected from
Farmer Elected Directors

per kgMS
per share

17
Fonterra CEO
Fonterra Chief
Executive Officer’s
address

from $9.30
from $0.20
from 6.8%
from $583m
from 36c
4.3%3.7%

6.0
5.2
4.3
5.3
3.2
20192020202120222023
50%
44%
39%
42%
29%
4.3x
3.3x
2.7x
3.2x
1.3x
20192020202120222023
Gearing Ratio (%)Debt to EBITDA (x)

©FONTERRA
7.00
8.00
9.00
10.00
2021202220232024202520262027202820292030
($/kgMS)
Inflation Adjusted
Long-term Aspiration
($/kgMS)
0.00
0.50
1.00
1.50
2.00
2.50
3.00
200420072010201320162019202220252028

Sustaining CapitalCollect and Process Milk
IngredientsFoodserviceConsumer
DebtDividendsCapital Returns
Growth Capital Innovation
Share Buybacks
Total Shareholder ReturnsFarm Profitability
Strong Balance Sheet

The range reflects:
•Ongoingreduced demand for
whole milk powder, although we
have seen strengthening in prices
recently as supply and demand
dynamics improve.
per kgMS
Reference product shipment price
Average reference product shipment price for the season
Reference product contract shipment price
USD/MT
1,000
2,000
3,000
4,000
5,000
6,000
May-21May-22May-23
Feb-24
2021/22 Season
2023/24
Season
Forecast
2022/23 Season
$9.30
$8.22

FY24FY23
USD/MT
Feb-24
2,000
3,000
4,000
5,000
6,000
Jul-22Jan-23Jul-23
Non-Reference Product shipment price
Reference Product Shipment price
Non-Reference Product contract shipment price
Reference Product contract shipment price
The range reflects:
•Favourable Ingredients margins
continue but lower than FY23
•Lower milk costs assisting
improved margins in Foodservice
and Consumer channels
per share

24

25
25

We have set a new target
related to on-farm emissions
*per tonneof Fat and Protein Corrected Milk

Supporting farmers to
continue to adopt best
practice farming
Scaled up and
commercially viable
novel technologies
Carbon removals from
existing and new
vegetation
Historical land-use
change conversions
into dairy land
Reduction in on-farm emissions per tonneof Fat and Protein
Corrected Milk (FPCM)by 2030 from a 2018 baseline

Progressive target achieved
We’ve already made progress against the on-farm actions portion of our target
Progress assessed against Emissions/kgMS incl. Organic soil and Land Use Change
2018201920202021202220232024202520262027202820292030
Target ReductionSingle year on-farm (cumulative)

29

30

32
To re-elect Mary-Jane Daly who retires by
rotation and stands for re-election as a
director of the Manager of theFund
32

33
As at 9am Saturday 11 November 2023
33
AGAINSTFORDISCRETIONARY

34
34
Unit holder & Proxyholder Voting
•Once the voting has been opened, the resolution and
voting options will allow voting
•To vote, simply click on the Vote tab, and select
your voting direction from the options shown on
the screen
•Your vote has been cast when the tick appears
•To change your vote, select ‘Change Your Vote’

•In respect of the resolution, please tick the “for”, “against” or “abstain” box.
•Once you have completed your voting, please place your vote in a ballot box.
•Please raise your hand if you require a pen.
•Results will be announced to the NZX and ASX as soon as they areavailable.
35

13 November 2023

37

---

FONTERRA SHAREHOLDERS’ FUND 2023 ANNUAL MEETING
13 NOVEMBER 2023
FSF CHAIR’S ADDRESS

Tēnā Koutou Katoa.
I am MJ Daly, Chair of the FSF Management Company, the manager of the Fonterra
Shareholders’ Fund.
Welcome to the 2023 Annual Meeting of unit holders of the Fund. We appreciate your
attendance online and in person.
Today provides an opportunity to discuss the performance of the past year, the future outlook
for Fonterra and the Fund, and any other questions you may have.
I declare the meeting open.
-------------------------------------

It has been a great year for Fonterra:
• delivering a record profit,
• implementing its new flexible shareholding capital structure,
• and completing the sale of Soprole, which culminated in an $804 million capital return
to shareholders and unit holders.
Peter and Miles will speak to this, but it’s appropriate that I highlight a few aspects of particular
relevance to the Fund.
Fonterra’s reported profit after tax was $1.6 billion, and normalised earnings per share came
in at the top end of the forecast range, at 80 cents per share.
Fonterra declared a total dividend of 50 cents per share which fully flows through to unit
holders as a distribution of 50 cents per unit.
This was made up of an interim distribution of 10 cents per share and a final distribution of 40
cents per share the latter being paid on 13 October.
Unit holders also received a 50 cent distribution in August, following the successful sale of
Soprole and Fonterra undertaking a 50 cents per share capital return to Fonterra shareholders.
This brought total cash distributions to $1.00 per unit in 2023.
In December 2022, Fonterra shareholders voted in favour of the Flexible Shareholding capital
structure, and in March 2023 the structure was implemented.
Before I move on to discuss the performance of the Fund in more detail it is important to
acknowledge the role of the Board of the Manager.
The Fonterra Shareholders’ Fund Board has statutory responsibilities for the activities of the
Management Company and the Fund. These include monitoring compliance with regulatory

requirements and ensuring that unit holders’ interests are managed and protected in
accordance with the constituent documents that relate to the Fund.
Directors of the Fund have no role in the governance or operation of Fonterra.
Although we have no decision-making role in these areas, we do consider it important to
actively represent the interests and views of unit holders to Fonterra, and we do that.
In speaking to this year’s performance, I am under no illusion that the historical performance
of the Fund has not been satisfactory for unit holders.
However, it is pleasing to see Fonterra’s continued focus on its strategy is delivering value,
and this has been reflected in the Total Shareholder Return since the last annual meeting in
November 2022.
The Fund has returned 36.5%, while FCG and the S&P NZX50 Index for the same period have
returned 23.6% and (0.8)%, respectively.
The Fund Board has seen several positive steps by Fonterra over the past 12 months, that
demonstrates the greater alignment between unit holders and shareholders’ interests under
Fonterra’s new flexible shareholding capital structure.
Fonterra Chair, Peter McBride, will provide his thoughts on this greater alignment shortly.
For the Fund Board, a positive step in the alignment has been Fonterra’s transparency on its
Resource Allocation Framework, which is focused on disciplined allocation of its resources,
namely milk and financial resources. And Fonterra senior management being aligned to the
delivery of value to shareholders and unit holders under this framework through incentives
linked to Total Shareholder Return and Farm Profitability.
As mentioned earlier the Fund Board before you is relatively new – with the average tenor
under 2 years.
At the end of the 2022 AGM, I assumed the position of Chair and Carlie Eve and Alastair
Hercus, the other two independent directors were appointed to the Fund Board.
And Fonterra also appointed John Nicholls to the Fund Board at the end of 2022.
To this end, the Fund Board has been proactive in engaging Fonterra management to enhance
its understanding of Fonterra. This year the Board has:
• engaged with Fonterra management to understand and provide feedback on
Fonterra’s equity strategy and Fund strategy with a unit holder lens;
• requested Fonterra management provide regular education sessions on areas of
particular interest to provide more transparency of what is happening in Fonterra and
understanding of the key drivers that can impact the Fund – such as sustainability,
and its optimisation function - namely the allocation of milk to products;
• and finally, the Independent Directors formed a capital return subcommittee – to
make sure unit holders were being considered fairly during the capital return process.

Looking now at the current make-up of the Fund’s unit register.
There has been a slight shift in the investor type since the last annual meeting, with a small
increase in units held by private wealth and institutions. Both driven by New Zealand based
investors responding to the improved performance of Fonterra and the yield on offer.
Units held by supplying farmer shareholders reduced from 9% to 7% of the register. This is
not an unexpected outcome given the shares can no longer flow through to the Fund.
Retail investors reduced from 71% to 70% of the register. Of the 76 million units held by retail
investors around 45 million are held by former supplying farmers. When combined with the
nearly 8 million units held by supplying shareholders, around 50% of the Fund is held by
current or former supplying farmers.
The location of the Fund’s investor base remains New Zealand dominated and remains stable
at 88%, due to the increase in private wealth and institutions offset by the decrease in
supplying Fonterra farmer shareholders and ceased farmers that are reported as retail
investors.
There was a small change of around 2 million units moving from Australia and USA to other
offshore locations, namely the UK, Hong Kong, and Switzerland.
Lastly from me, I will briefly touch on some of the key Fund statistics.
With the cap on the Fund a permanent feature of the new capital structure and the lower value
of a Fonterra share relative to the Fund unit, there has been no change in the 107 million units
on issue.
Fonterra’s market capitalisation is down $600 million, in part due to the $804 million, or 50
cents per share, capital return. However, the Fund’s market capitalisation has increased
slightly relative to this time last year.
The Fund’s $12 million increase in market capitalisation to $337 million is due to an increase
in the unit price, from $3.03 this time last year to a closing unit price of $3.14 last Friday.
Despite several Fonterra Co-operative Group share buyback programmes taking place over
the period, the Fund size as a percentage of the total Fonterra shares remains largely
unchanged year-on-year at 6.7%.
We have the opportunity now to hear from the Fonterra team on the performance and outlook
that will deliver value to shareholders and unit holders alike.

ENDS

---

FONTERRA SHAREHOLDERS’ FUND 2023 ANNUAL MEETING
13 NOVEMBER 2023
FONTERRA CHAIR’S ADDRESS

Thank you MJ, and good morning everyone.
I’d like to make a few short comments outlining the Fonterra Board’s perspective on the Co-
op’s performance this year, which Miles will then go into in more detail.
I also want to acknowledge the changes to the size and composition of the Fonterra Board
which were approved by shareholders last week.
Performance is always first and foremost for us, so I will start there.
Miles and the team delivered a third consecutive year of strong performance overall, despite
facing into difficult market conditions in a number of channels and regions.
Top line, the team can be proud of delivering a reported profit after tax of $1.58 billion,
equivalent to 95 cents per share and up 170% on last year.
Our final milk price for the 2022/23 season was $8.22 per kgMS, down from the high forecast
midpoint of $9.50 in June 2022, when we witnessed the impact of lower than anticipated
demand for imported products, particularly from China.
The impact would have been greater, if not for the team’s efforts to utilise the scale of the Co-
op and shift milk into the products and places that were delivering the most value at the time.
While on the one hand, our milk price was negatively impacted by market forces, on the other,
our earnings did benefit from favourable market conditions, including strong margins in our
Ingredients channel, in particular the cheese and protein portfolios.
In other words, the market presented us with an opportunity, and the diversity of the Co-op’s
product mix meant our teams could go after it, where others may have struggled.
There’s one other key performance indicator that I’d like to call out.
Improving the strength of our balance sheet and reducing debt has been a priority for us over
recent years.
As you can see from the slide, we have made significant progress over a number of years
through a combination of improved performance and increased financial discipline.
Our net debt is down $2.1 billion to $3.2 billion, reflecting our lift in earnings, reduction in
working capital and divestment proceeds.
By reducing our overall debt position we have been able to increase dividends, pay the capital
return and make changes to our advanced rate schedule.
In acknowledgement of the strength of Fonterra’s balance sheet, the Board made the decision
to pay a final dividend of 40 cents per share, which was slightly above our dividend policy.
Combined with the interim dividend of 10 cents per share, it brought the full year dividend to
50 cents per share and unit.

Sitting behind these excellent numbers were some real challenges, particularly here in New
Zealand.
Our Flexible Shareholding capital structure has been in place since March this year and is
working broadly as expected.
One of the key principals of the Flexible Shareholding design was a desire to give all
shareholders a degree of choice with their shareholding, rather than the old model which was
one of compulsion.
With farmers now having the flexibility to, at the top end, hold up to four times their milk supply,
or at the bottom end hold as little as the equivalent of 33% of their milk supply, there is a
significant level of discretion in their investment choices – akin to the choice you have as unit
holders.
As you can see from the slide, the number of discretionary shares in the Co-op has increased
from around 250 million under the previous Trading Among Farmers structure, to
approximately 1.2 billion discretionary shares under our Flexible Shareholding structure.
As a result, there is a greater degree of alignment between the commercial interests of the
Co-op’s farmer shareholders and unit holders.
We know the Co-op needs to continue to perform and deliver strong earnings if it is to remain
an attractive place to invest capital, regardless of whether you are a farmer or a unit holder.
The last topic I want to cover off this morning is the changes to Fonterra’s Board size and
composition. At last week’s Fonterra Annual Meeting 88.49% of votes cast were in support of
the Board’s proposal to reduce the size of the Fonterra Board from 11 down to 9.
The current balance between Farmer Elected and Appointed Directors will be maintained, with
a composition of 6 Farmer Elected Directors and 3 Appointed Directors. As is the case today,
the Chairman will still be selected from within the pool of Farmer Elected Directors.
My personal experience leading or being part of leadership groups is that in smaller groups
people are more engaged and able to share their perspectives in a more meaningful way.
Smaller groups encourage greater sharing of dissenting ideas and opinions - which is a good
thing - and are proven to support faster, robust decision making.
Having now been part of the Co-op's Board for 5 years, the last 3 as Chair, I'm confident that
reducing the size of our Board will improve the dynamics within the group, encouraging greater
participation from directors, and maintaining access to the necessary skills and experience to
govern the Co-op into the future.
We are still anticipating a challenging operating environment for the year ahead, particularly
for our farmers. However, we are still forecasting a solid earnings performance this financial
year.
The Co-op is entirely focused on performance and, as our farmers will be on farm, reducing
its costs to offset the impact of inflation over the coming years.

Farming is a long-term game and as an exporter, we need to accept that we are impacted by
demand and supply dynamics, commodity prices and geopolitical events. The Co-op does its
best to try and smooth the edges and optimise value, but there will always be volatility.
Ultimately, strong performance, through the milk price and earnings, is the best way we can
support our farmers through this difficult period. That remains our focus for the year ahead.
Despite the very real challenges the industry faces this season, the longer-term outlook for
New Zealand dairy remains positive.
The world wants our sustainable New Zealand milk. Fonterra is in a strong position to meet
this demand. Our current balance sheet gives us a lot of options to create more value – which
is exciting for our future.
ENDS

---

FONTERRA SHAREHOLDERS’ FUND 2023 ANNUAL MEETING
13 NOVEMBER 2023
FONTERRA CEO’S ADDRESS

Kia ora and thanks Mary-Jane.
The Co-op delivered strong results for FY23 and made good progress on its strategic
initiatives.
During the year, we implemented our new Flexible Shareholding capital structure, completed
the divestment of our China Farms and Chilean Soprole businesses, and launched our new
nutrition science corporate ventures arm Ki Tua.
These milestones were several years in the making and I’m proud the team delivered upon
the commitments we made to our shareholders and unit holders.
Our FY23 financial performance was shaped by market dynamics which we worked hard to
make the most of where possible.
Our profit after tax was $1.6 billion, up 170% on last year, and our return on capital was 12.4%,
up from 6.8%. This was primarily driven by high protein prices, which we captured in our
Ingredients channel.
Our earnings performance put us in the position to pay a full year dividend of 50 cents per
share, including the interim dividend of 10 cents per share.
In addition, we returned tax-free 50 cents per share and unit in early FY24 following the
divestment of our Chilean Soprole business.
However, these strong returns were against the backdrop of a Farmgate Milk Price which fell
across the season. This was a result of reduced demand for Whole Milk Powder, in particular
from key importing regions.
To optimise our Farmgate Milk Price, we moved milk into higher performing reference product
categories, such as skim milk powder and cream where possible, and ended the season with
a final Farmgate Milk Price of $8.22 per kgMS.
Fonterra’s balance sheet metrics are better than target levels, even after adjusting for the
impact of the Capital Return, thanks to a dedicated focus on lowering debt and financial
discipline.
This has allowed us to introduce a new Advance Rate Schedule which gets cash to farmers
sooner. It has also supported our ability to pay a full year dividend slightly above our dividend
policy range of 40% to 60% of earnings.
At all times, we focus on what’s within our control to maximise overall returns to our
shareholders and unit holders.
We are continuing our disciplined approach through the introduction of two new efficiency
measures and a new resource allocation framework.

The new efficiency measures will assist us to stay on track for our short and long-term targets
by ensuring that our costs are managed relative to the value we can generate and the milk
volumes we collect.
The two new core metrics are:
• a 4% cash operating cost improvement per year, which will assist long-term discipline
in our global operating expenses; and
• a 2% New Zealand cash manufacturing cost improvement every year. This is to
support efficient New Zealand operations while ensuring we remain laser focused on
delivering value.
We expect application of these two measures will see us reduce costs across our business by
$1 billion by 2030.
We are also increasing our focus on the efficient allocation of our farmers’ milk and capital,
guided by our new resource allocation framework.
Our first priority is safe and efficient operations. We then allocate our farmers’ milk toward
either our Ingredients, Foodservice or Consumer channels according to where we believe we
will see the highest returns.
Following this, we allocate the cash generated from these channels to either dividends, capital
returns, paying down debt, growth capital, innovation or share buybacks – whichever will
generate the best outcome for our shareholders and unit holders over time.
Looking now at FY24, our current forecast Farmgate Milk Price range for the season is $6.50
- $8.00 per kgMS, with a midpoint of $7.25 per kgMS.
This reflects ongoing reduced demand for whole milk powder, although we have seen a
strengthening in prices recently as supply and demand dynamics improve.
New Zealand’s milk collections are forecast to be slightly lower than last season, while
aggregate milk growth in key export markets is also expected to be below average.
On the demand side, it is not yet clear whether the stronger demand seen in recent Global
Dairy Trade events will be sustained so we are cautious in our outlook.
Looking at our forecast earnings for FY24, the favourable price relativities that we experienced
across FY23, and which drove our Ingredients channel performance, have reduced from their
peaks.
But we are forecasting improvement in our Consumer and Foodservice channels as our
markets capture improved margins. As such, our FY24 forecast earnings range for continuing
operations is 45-60 cents per share.
Turning now to strategy, over the medium to long-term, the outlook for New Zealand dairy
remains positive.
Demand for sustainable nutrition is continuing to grow and by implementing our strategic plans
we are well positioned to meet this demand.

As we know, being a leader in sustainability is a fundamental part of our strategy. We already
have a competitive advantage, thanks to our pasture-based farming model that produces
some of the lowest carbon dairy in the world.
But we also know we need to keep moving to retain our competitive edge.
This is why we have decided to introduce a target of a 30% reduction in our on-farm emissions
intensity by 2030, from a 2018 baseline.
Fonterra farmers have built a world leading business on the back of innovation and hard work.
We know farmers will continue this tradition and continue to lead the way in producing high
quality sustainable dairy, which gives us confidence to set this target.
It’s important to note that our target will be measured at the Co-op level, not the farm level.
But collectively achieving it will need action by all farmers.
Also, an intensity target means we are seeking to reduce the number of emissions produced
per kilogram of milk solids, which is all about finding efficiencies on-farm.
We see a credible pathway to deliver the 30% reduction, which looks like:
• A 7% reduction through farming best practices, including feed quality and herd
performance.
• A 7% reduction through the application of new technologies, such as Kowbucha.
• An 8% reduction through carbon removals from existing and new vegetation.
• An 8% reduction from historical land-use change conversions from dairy.
While everyone will have opportunities for efficiency gains, the action plan will look different
for each farm.
Farm Insights Reports provided to farmers by the Co-op identify the opportunities on farm,
and our Farm Source team also provides tools, services and industry resources to help realise
those gains.
As our target will be measured from a 2018 baseline, any change made since 2018 will
contribute to our 2030 goal.
Progress has already been made in the areas of sequestration and land use change. More
importantly, of the seven percent we’re looking to achieve through on-farm best practices,
we’ve already achieved 2%.
During visits this year to Europe, China and the US it’s been very clear to me that sustainability
is top of the agenda for our customers and that our competitors are moving at pace.
Having a target will assist us to retain and grow customer partnerships, as well as access
finance and export markets.
The target we have introduced is credible and internationally recognised. It will help to future
proof both the Co-op and our farmers’ businesses, supporting our ambition to be a long-term
sustainable Co-op for generations to come.

Thank you for your time.
ENDS