2

3

•

•

•

•

•

•

Proceed with Preferred

Option(if change is recommended, then

this would likely include a

shareholder vote)

Further Regional

Meetings

Review and

address

feedback

Refine options

Further

Consultation

Director

Meetings

4

6.5% 16.6%

$525m* $1,330m*

*Based on a $5 share price; Actual Fund Size and Potential Fund Size are as at 31 March 2021

To create superior value

for our customers and

our Co-operative

To do what is right for the

long term good and meet

consumer and community needs

Unlock greater value from

our scale efficiency and

focus on execution

8

Volume Value

Global Milk PoolsPrioritise New Zealand Milk

+ complementary components

Maximum volume into consumer Focus on key categories to deliver superior value

Dairy only Supplement with non-dairy where makes sense

Partner with cash investments Partner with IP and skills and lift R&D

Debt funded growth Conservative balance sheet

Global giant with HQ

in New Zealand

Celebrate Aotearoa New Zealand

and take it to the world

Invest widely based on

aggressive growth plans

Divest non-core businesses and

focus where we have a competitive advantage

9

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000New Zealand Milk Supply

NZ Milk Supply Scenario

Fonterra Milk Supply

Scenario 1

Scenario 2

10Source: NZ Milk Supply: Dairy NZ – New Zealand Dairy Statistics 2019-20, Summary of milk production statistics for the last 35 seasons

Significant and sustained expansion of dairy We need to be

prepared for flat to

declining NZ milk

Flattening

11

$-

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

Supply Corporate Supply Fonterra

Shares

Cows

Land

Source: DairyNZ Economic Survey 2018/19

Based on a $5 share price

12

• Under the current structure, dry shares can

be exchanged into units in the Fund at any

time

• When TAF was set up we created

thresholds to protect farmer ownership and

control

• We are approaching some of those

thresholds today

• Declining milk or more flexibility for farmers

could cause us to exceed those thresholds

*Not to scale

13

-

50

100

150

200

250

2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27 2027/28 2028/29 2029/30 2030/31

Dry

Sh

are

s (

m)

Scenario 1 Scenario 2

•

•

•

•

•

17

Does the

structure

support our

ability to attract

and retain high

quality,

sustainable milk

and provide

financial

flexibility for

farmers?

Does the

structure align

incentives

between

shareholders,

unitholders and

management,

to maximise

value?

Is the transition

to a potential

new structure

affordable,

achievable and

fair to

unitholders and

farmer

shareholders?

Is the structure

simple to

understand and

simple to

operate for

both farmers

and the Co-

operative?

Does the

structure

manage

redemption risk

and economic

shocks in a way

that makes the

Co-operative

resilient?

Does the

structure

preserve

balance sheet

strength and

provide access

to capital at a

reasonable

cost in the

future?

Does the

structure

protect value

for current Co-

op members

and allow

farmers to

transact their

membership /

shareholding in

a way that is

fair?

Does the

structure

preserve farmer

ownership and

control of the

Co-operative for

the long term?

18

19

• Of the options that we reviewed, Reduced

Share Standard with either No Fund or

Capped Fund best met our three criteria

• This is because it:

• Provides capital flexibility for farmers

• Secures farmer ownership by removing

or capping the Fund

• Maintains balance sheet strength

20

Limited flexibility Increased flexibility

1:1 minimum share standard 1:4 minimum share standard

Maximum share ownership 2x supply Maximum share ownership 4x supply

Share/Unit exchangeability Capped Fund or No Fund

Share price set in public and farmer markets Share price set in farmer-only market

1 vote per 1000 kgMS supplied backed by

shares

1 vote per 1000 kgMS supplied backed by

shares

21

•

•

•

•

•

•

•

22

Fund size is permanently capped Fund is removed

No offer is made to buy back the Fund An offer is made to buy back the Fund

No unit holder vote requiredRequires approval of 75% of unit holders entitled to

vote and voting

No capital allocation required Capital is allocated to buy back the Fund

FSF and FSM both operate but independently Only FSM operates

Shares and units could trade at different prices Share price only in the farmer-only market

24

•

•

•

•

•

•

Proceed with Preferred

Option(if change is recommended, then

this would likely include a

shareholder vote)

Further Regional

Meetings

Review and

address

feedback

Refine options

Further

Consultation

Director

Meetings

26

Link 5Link 4Link 3Link 2Link 1Fonterra Capital Structure Review Slide #

28

Further

development

of options

Farmer

survey

Problems to

Solve &

Principles

Detailed analysis

of options, trade-

offs, risk and

benefits

Research into

Co-operatives

around the world

Proceed with

Preferred Option(if change is

recommended, then this

would likely include a

shareholder vote)

Further Regional

Meetings

Review and

address

feedback

Refine options

Further

Consultation

Director

Meetings

29

•

•

•

•

•

30

•

•

•

•

•

31

•

•

•

32

•

•

•

•

•

33

0%

25%

50%

75%

100%

2017 2030 Target 2050 Target

Me

tha

ne E

mis

sio

n (

201

7 E

qvu

i)

NZ Biogenic Methane Emission Targets (2017 baseline) 3

Target Range

-

500

1,000

1,500

2,000

kg

MS

(m)

New Zealand and Fonterra Milk Supply 1

Fonterra Milk Supply New Zealand Milk Supply

TAF

Source: 1) Dairy NZ – New Zealand Dairy Statistics 2019-20, Summary of milk production statistics for the last 35 seasons

2) Dairy NZ – New Zealand Dairy Statistics 2019-20, Summary of herd statistics since 1975/76

3) Dairy NZ - DairyNZ's position on the Zero Carbon Bill

-50,000

0

50,000

100,000

150,000

200,000

Hec

tare

s

Change in Total NZ Dairy Hectares 2

2008/9 to

2011/122012/13 to

2015/16

2016/17 to

2019/20

34

FONTERRA FARMERS FUND INVESTORS

Shares

Custodian

Units