Trading Among Farmers


Trading Among Farmers has two key components


  • Fonterra Shareholders’ Market. This is a private market on which Farmer Shareholders can now buy and sell Shares among themselves, not with Fonterra. It is a private market because only Farmer Shareholders, Fonterra, and a specially appointed market maker will be allowed to trade Shares.

  • The Fonterra Shareholders’ Fund. The Fund is intended to:

− supplement liquidity in the Fonterra Shareholders’ Market through a liquid market for Units which can effectively be “exchanged” or Fonterra Shares (by Farmer Shareholders, Fonterra and the market maker) and vice versa;

− provide additional financial flexibility for Farmer Shareholders, who will have the opportunity to sell Economic Rights of Shares to the Fund; and

− permit a broader range of investors to buy a security (a Unit in the Fonterra Shareholders’ Fund) that essentially passes through the Economic Rights.


      TAF: A high level overview


      Fonterra Shareholders’ Market

      • The Fonterra Shareholders’ Market is operated by NZX. It is a registered market on which only FSM Participants accredited by NZX may trade on behalf of Farmer Shareholders. The Fonterra Shareholders’ Market is regulated and monitored by NZX (whose regulatory role will include monitoring compliance with and enforcing the FSM Rules and the NZX Participant Rules) and the Financial Markets Authority, in the same way as other markets operated by NZX.

      • There is a market maker (known as the Registered Volume Provider or RVP) who is continuously active in offering to buy and sell Shares on the Fonterra Shareholders’ Market during the periods of operation of the Fonterra Shareholders’ Market (other than in the case of a temporary halt in, or suspension of, trading in Shares). This is intended to assist the liquidity of trading on the Fonterra Shareholders’ Market to make it easier for Farmer Shareholders to buy or sell Shares on that market. Craigs Investment Partners Limited has been initially appointed as the Registered Volume Provider.


      Fonterra Shareholders’ Fund

      • The Fund is a unit trust formed under the Unit Trusts Act. It is managed by the Manager and the Trustee is appointed to act as trustee of the Fund for the benefit of Unit Holders.

      • Units are listed on the NZX Main Board and on ASX and are able to be freely bought and sold, in the same way as any other listed security.

      • The Manager of the Fund has a board of five directors. Three directors will be elected by Unit Holders. However, the first three directors have been selected by Fonterra so that the Fund can commence operations. The other two directors of the Manager are appointed by Fonterra.

      • Units are able to be exchanged for Shares (and vice versa) by Farmer Shareholders, Fonterra and the market maker (discussed below) on a one-for-one basis.

      • Other investors will not be able to exchange Units for Shares (or vice versa).

      • The Economic Rights of Shares are held on trust for the Fund by the Fonterra Farmer Custodian (a special purpose company) under a trust called the Fonterra Economic Rights Trust.

      • The Fonterra Farmer Custodian is owned by the trustees of a specially created trust. This trust has three trustees. Farmer Shareholders, Fonterra and the Shareholders’ Council each appoint one trustee.

      • The Fund will elect to be a “foreign investment variable-rate PIE” for New Zealand income tax purposes. 


      Relationship between the two markets

      Although the markets are separate, they have been designed to work together. Farmer Shareholders, Fonterra and the RVP can buy or sell Shares in the Fonterra Shareholders’ Market, and buy or sell Units on the NZX Main Board or ASX. They can effectively exchange Shares for Units and vice versa and therefore can shift between the two markets.


      Other investors will not be able to transact in the Fonterra Shareholders’ Market and exchange Units for Shares.


      The Economic Rights of a Share are the rights to receive dividends and other economic benefits derived from a Share, as well as other rights derived from owning a Share.


      However, these rights do not include the right to hold legal title to the Share (i.e. to become registered as the holder of the Share), or to exercise voting rights, except in very limited circumstances. These circumstances are described in further detail later in this section.