Fonterra Shareholders Fund (FSF) Earnings Call Transcript & Summary

[Foreign Language] I'm Mary-Jane Daly, the Chair of the FSF Management Company, the manager of the Fonterra Shareholders Fund. Welcome to the 2024 Annual Meeting of unitholders of the Fund. We appreciate your attendance, both 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 that you may have. I formally declare the meeting open. For those that are here with us at Fonterra's offices in Auckland, there's a few health and safety items I need to cover. In the unlikely event of an emergency, an alarm will sound, and we will evacuate the building. Please leave your belongings and exit the building via a door with a green light over it. We've got one just over there, and gather in the plaza outside our main front doors. Remain outside of the building until advised by a Fonterra's staff member that it is safe to return. Bathrooms are located out of the doors and behind the lift lobby. The Notice of Meeting was sent to the unitholders on the 17th of October. Unitholders are eligible to vote -- unitholders eligible to vote are those that had units as at 5:00 p.m. on the 15th of November 2024. The notice of meeting will be taken as read. We have the required quorum of 5 or more unitholders and accordingly, the meeting is properly constituted. Today's meeting is being held in person at Fonterra's offices and online. Online attendees can watch a live broadcast of the meeting and view the associated slides. Unitholders and proxies can also ask questions and submit votes online. Online questions can be submitted at any time. They will be answered at the relevant time in the meeting. [Operator Instructions] Should you require assistance, type your query into the chat window and one of the Computershare team will assist through the chat function. Voting today on the resolution before the meeting will be conducted by way of a poll. Online voting for that will open shortly. For those online, you'll be able to cast your vote -- oh, this is a repeat of the last but for those online, I now declare voting open on the resolution. I will let you know before online voting closes. For those in the room, you have received voting papers, and I will provide further instruction later in the meeting when we get to that agenda item. The agenda for the meeting was set out in the items for business in the notice of meeting. The first item is the Chair's address for FSF management company, the company that manages the fund. Peter McBride, Fonterra's Chair; and Miles Hurrell, Fonterra's Chief Executive, will then address the meeting to speak about Fonterra's performance and future plans. After that, we will open the meeting for questions on the 3 presentations. I will then take you through the resolution to reelect Alastair Hercus as a Director of the FSF Management Company. Alastair will take the opportunity to say a few words, and then the resolution will then be moved. Finally, we will open the meeting for general business. We expect the meeting to take just over an hour. And for those of you in the room today, we invite you to join us afterwards for light refreshments in the lobby at the conclusion of the meeting. I'd now like to introduce my fellow directors of the FSF Board and the senior representatives of Fonterra who are joining us today. On my right are our Fonterra Directors: Carlie Eve, [Audio Gap] [ Alastair Hercus ] who are independent directors appointed by unitholders; and next to them are John Nicholls and Andy Macfarlane, who are appointed to the FSF Board by Fonterra. On my left are senior representatives of Fonterra, Peter McBride, the Fonterra Chair; Miles Hurrell, the Chief Executive Officer; Richard Whiteman, Director Group Finance; Selena Robb, Director Capital Markets and M&A; and Jackie Floyd, who's Director Legal and also serves as the FSF Company Secretary. Moving to the second agenda item. I'd now like to take the opportunity to address the meeting as the Chair of the FSF Management Company and discuss the performance of the fund and some of the activities that FSF directors had undertaken this year. It's been another good year for Fonterra, delivering a strong profit off the back of a record high last year. Fonterra's continuing operations profit after tax was $1.17 billion, meaning earnings per share came in at the top end of the forecast range at $0.70 per share. Fonterra declared a total dividend of $0.55 per share, which fully flows through to unitholders as a distribution of $0.55 per unit. This was made up of an interim distribution of $0.15 per unit and a final distribution of $0.40 per unit. Fonterra has also released a refreshed strategy and more recently confirmed its intention to divest its consumer business. In addition to the strong financial performance, these announcements have also positively impacted the fund's performance. Peter and Miles will speak to Fonterra's operational performance in their presentations. Before I move on to discuss the fund's performance 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 unitholders' 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 unitholders to Fonterra, and we do, do that. One of the items we addressed this year was a request for Fonterra to review the fund unit buyout price formula in the authorized fund contract. The purpose of the buyout formula is to set a proxy for a fair market value for certain termination events. To date, this had been based on a volume weighted average price, 50% weighted to the Fonterra share price and 50% weighted to the fund unit price. Under the flexible shareholding capital structure, where the price of Fonterra shares and fund units was delinked, FSF Board considered it appropriate to amend the authorized fund contract so that the pricing formula only references the volume-weighted average price of fund units. Whilst this change has been made to reflect a fair buyout price under certain termination provisions, I emphasize there is no intention at this time to terminate the fund. The Board has also continued to engage with Fonterra management to understand and provide feedback on Fonterra's equity strategy and fund strategy with the unitholder lens. We've also had 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 optimization function, namely the allocation of milk to products. Fonterra's strong performance and market communications on strategy and the divestment of its consumer business is reflected in the total shareholder returns. Total returns for the fund since the last AGM is 90% -- 95%, made up of [ $0.239 ] in unit price appreciation and $0.55 in distributions. This level of return is pleasing to see, particularly given that in the prior period from the fund's '22 AGM to '23 AGM it was 37%. And that was made up of $0.11 in unit price and $1 in distributions, which included the $0.50 capital return on completion of the Soprole divestment. Over the same period, FCG and the S&P NZX 50 Index returned 151% and 14%, respectively. Considering the historical performance of the fund, these returns are very pleasing to see. Looking at the composition of the register, there continues to be a healthy shift from retail and supplying Fonterra farmers to private wealth and institutions. The drop-off in units held by supplying farmers is expected as shares can no longer flow through to the fund under Fonterra's capital structure. Of the 66% or 71 million units held by retail investors, around half are held by former supplying farmers. When combined with the nearly 10 million units held by supplying farmer shareholders, around 40% of the fund is held by current or former supplying farmers. This is a material decrease on the prior year, where roughly half the fund was held by this group. The Fund Board are pleased to see this improving spread of ownership type, which supports liquidity through different investment horizons and trading behaviors. This month Fonterra having completed a review of its equity listings, announced its intention to shift Fonterra Cooperative Group from its private market operated by NZX to the NZX Main Board. In addition, it has also decided to delist FSF from the ASX and have a sole listing on the NZX. Fonterra consulted with the FSF Board on this matter, and we are supportive of the shift to a single listing for FSF. Broadly speaking, dual listings are becoming less popular due to the increased cost, regulatory complexities and administrative burdens of complying with multiple exchanges. In addition, advances in global trading technology make it easier for companies to access international investors through a single primary listing. You can see on this slide that units held geographically in Australia represents 7% of the fund. However, units registered to trade on the ASX are actually only 4% with the 96% of units registered under the NZX. With several Australian institutions preferring to hold and trade units in the bigger pool of liquidity here in New Zealand. As mentioned, a single FSF listing will reduce cost and complexity as well as support liquidity in the fund with all capital trading on 1 exchange. Fonterra management are currently working with the ASX and will provide further communications to unitholders as the process progresses. 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 capital structure and the lower value of the Fonterra share relative to the fund unit, there has been no change in the 107 million units on issue. Fonterra's market capitalization is up $4.3 billion to $7.7 billion, and the fund's market capitalization is $581 million, up $259 million. The fund's increase in market capitalization is due to an increase in the unit price from $3.14 this time last year to a closing unit price on Friday of $5.41. The fund size as a percentage of the total Fonterra shares remains unchanged year-on-year at 6.7% due to no buyback of Fonterra shares over this period. We now have the opportunity to hear from the Fonterra team on the performance and outlook for Fonterra that will deliver value to shareholders and unitholders alike. Accordingly, I invite Fonterra's Chair, Peter McBride, to address the meeting.

Thank you. Good morning, everyone, and thanks for attending today. In a few minutes, Miles will talk you through a short summary of our financial performance. I know many of you will also be keen to hear his comments on our strategy refresh and the intended divestment of consumer. Before we hear from Miles, I thought it would be informative to talk you through a couple of key insights that the Board considers important in the development of strategy. These from the background of the conversations we have as a leadership team, when we consider options around the strategy, including the decision to divest our consumer business. The first insight is our global operating context, which continues to change and the second is risk, how we manage risk on your behalf and the way we treat your capital. We are and always will be a New Zealand farmer-owned Co-op, but we're also a global export business. When considering our strategy, we need to challenge ourselves to look past the here and now. The world is changing, and we are moving out of an era of trade liberalization and corporation into a world that's more expensive, competitive and inherently volatile, where expectations are evolving and New Zealand milk is also becoming more scarce. Customers are increasingly calling on us to partner with them to improve their sustainability and innovation capabilities, and is even more focused on sustainability from banks, regulators and from a market access perspective. The cost of capital has increased in many industries, including agriculture, and our bankers face higher capital requirements. In this new global context, Fonterra also faces increasing competition for both milk and capital here at home. That all sounds inherently negative and it's certainly not without risk, but the opportunity for us still absolutely exists. Demand for dairy continues to grow and in a rapidly changing world, we are uniquely positioned to capitalize on any shifts. We have high-quality New Zealand milk, which is becoming more scarce. And most critically, we have scale. That gives us great confidence in the future of our Co-op. Success will come by focusing on our comparative advantages, simplifying the business to meet that and in aligning our people to achieve that singular vision. The second insight that we consider as risk. Fonterra is an extension of our farmers' businesses that exist to provide certainty and manage risk on their behalf, while also maximizing returns via a competitive and sustainable milk price, and a respectable return on the capital you invest in the Co-op. We govern Fonterra through a set of financial settings and a risk appetite that is now more appropriately aligned to that of our farmer owners. As you have seen from our recent financial performance, this approach has served us well in recent years and has set a strong platform for this next phase in Fonterra's evolution. Fonterra adds value for all dairy farmers by creating stability for the industry -- excuse me, in derisking the on-farm investment. We add value through the milk price delivering a return on the $50 billion invested in on-farm capital and by generating a return on the $12 billion worth of capital, farmers and unitholders have invested in the Co-op. This last piece is central to the conversation on our strategy and the divestment of our consumer business. Right now, we estimate the weighted average cost of capital for an average dairy farmer is somewhere around 10%. Consumer businesses are inherently more capital-intensive, riskier businesses to operate. You've seen that play out over time in our own operation. Overlay that with the potentially higher geographic risk in the markets where our consumer businesses operate and respectable return on capital for the consumer business should be something north of 15%. Our consumer business had one of its better years in 2024, but despite that, its return on capital was just 6.8%, up from negative 3.9% in '23 and 0.2% in 2022. We cannot justify investing money into a business that generates returns lower than our farmers' opportunity cost of capital whilst at the same time exposing shareholders and unitholders to more risk. We are better off returning that capital to you, reinvesting it into parts of our business where we have a comparative advantage or a mixture of both. That might seem like a cold message to the people in the room that have an emotional connection to those brands. We understand that. Those brands and the associated assets that go with them do hold a lot of value but to the right owner. Fonterra as a farmer-owned cooperative and the associated cost of capital that comes with that model is not the natural owner of a consumer business. Having reached that conclusion, our focus from here is on running a process that maximizes the value in a way that is in the best long-term interest of shareholders and unitholders alike. The evolved Fonterra that remains will be a simplified business, focused on our comparative advantages. It will be lower risk, be less capital intensive and achieve an increased return on capital overall. I hope that's a useful insight into the way that the Board looks at these strategic choices. Having options is a good thing, and you are right to want more information around these big decisions. Ultimately, this will be a decision for our farmer shareholders to make. We will keep you updated as much as possible along the way and provide you with the details that sit behind any final decision. Miles will give you his perspective shortly, but before we go there, I need to quickly cover off some of the governance matters. Given the heightened uncertainty and volatility I mentioned earlier, the Co-op can be proud of the set of financial results it has put up this year. We did have some tailwinds in terms of favorable price relativities but the team worked hard to take full advantage of those and our underlying performance has significantly improved over time. In my opinion, the shift in the unit price reflects performance and the returning confidence investors have in Fonterra. As MJ mentioned earlier, over the past 12 months, unit price has increased from $3.14 to $5.41. You should have seen an announcement last week that we are moving cooperative -- Fonterra cooperative group shares onto the NZX Main Board. I want to reiterate that there is no change to how can buy shares in the Co-op or units in the fund. This is a simple but important cost-saving exercise that we have initiated, as MJ has already mentioned, and was supported by the Fonterra Shareholders Fund Board. Lastly, I'd like to touch on the Board changes that came into effect at the conclusion of last week's Fonterra Annual Meeting. Last year, just over 88% of voting farmers supported the recommendation for the Board's size to reduce from 11 to 9. That change came into effect at the end of last week, and Fonterra's Board now comprises 6 farmer-elected directors and 3 appointed independent directors. One of those independent directors is Alistair Field, who we welcomed to the Board earlier this month. As I told our farmers last week, our Co-op is in good health. The sentiment we are receiving from stakeholders right now is overwhelmingly positive, and there is a huge amount of positive momentum in the Co-op. Our teams are confident and energized, which is important as we look to lean into the increasing competition overseas and back here at home in New Zealand. Thank you, everyone. I look forward to answering any questions that you have and any comments you may have later in the meeting. Thank you.

Thank you, Peter. I now invite Miles Hurrell, Chief Executive Officer, to address the meeting.

Thank you, and good morning. And today, I'm going to cover off the Co-op's F '24 performance. And then the plans for the year ahead as we implement our revised strategy. Looking first at the F '24 annual results, I'm proud to say that Co-op had a strong year and maintained the positive momentum we saw in F '23. We delivered earnings of $1.6 billion, which was driven by strong performance across all 3 of our sales channels. Our Foodservice margins improved, and we allocated more milk to this high-performing channel. Our consumer business also improved its margins and lowered its operating expenses also. While our Ingredients earnings were down when compared to last year's historic highs, this channel still delivered a substantial proportion of the Co-op's earnings for the year. As a result, our net earnings were at the top end of our guidance range at $0.70 per share. And this allowed us to pay a $0.15 interim dividend during the year and a $0.25 final dividend. Our ongoing balance sheet strength also enabled us to return an extra $0.15 through a special dividend, making the total dividend payment for the F '24 season, $0.55 per share. When combined with our final Farmgate milk price of $7.83, our total payout for fully shared up farmers was $8.38 a kilogram. Looking at the year ahead, I'm pleased to say we're forecasting a stronger milk price. Last week, we lifted our midpoint by $0.50 a share to $9.50, giving a new forecast range of $9 to $10 a kilogram. This lift was largely driven by demand out of China, where we're starting to see domestic milk production slow. And we continue to monitor global factors, including New Zealand milk supply. Looking at our earnings for FY '25, we have a forecast range of $0.40 to $0.60 per share. This outlook signals another year of stable performance from the corporative. With Fonterra delivering consistent and reliable results over the last few years, we've seen steady lift and farmer confidence and sentiment. It's this foundation that has allowed us to think ahead and have conversations about our strategy. Recently, we conducted a strategic review honing in on where we create value today and see long-term growth. This has resulted in us focusing even further on foodservice and ingredients. By streamlining the business to focus on these areas, we can grow greater value for the Co-op even if we divest our consumer business. As an example of the strategy in action, I want to touch on a recent announcement regarding our foodservice business. Recently, I was in China at the Annual China International Import Expo. It's an impressive event where we showcase to our customers and stakeholders with lots of energy around dairy nutrition and our innovative products. At this event, we launched a new anchor UHT cream product designed to grow our share of the Chinese growing foodservice category. We already have a strong foodservice business in China, primarily targeted at the premium end of the market. This new Cream product will target the mid-tier market, the fastest-growing segment in the UHT cream category. Often to achieve the lower price point needed to access the mid-tier market, products are made using plant-based fats. Using our innovative expertise, we've developed 100% dairy product with the right functionality and at a competitive price point. This move will help us attract new foodservice customers and consolidate our leadership position in the UHT market. Our investment in a new UHT plant at a Edendale site will support this ongoing growth as we look to allocate more milk to our foodservice channel. It's examples such as these that give us the confidence in our revised strategy and our potential to create further value for shareholders and unitholders. Our revised strategy has lifted -- sorry, has allowed us to lift our targeted average return on capital to 10% to 12%, up from 9% to 10%. We've also committed to returning more of the Co-op's earnings through an enhanced dividend policy of 60% to 80% of earnings up from 40% to 60% currently. We're confident we can achieve these outcomes while continuing to invest in the Co-op and maintaining the strong balance sheet we've worked so hard to rebuild over recent years. We're making choices about where we want to focus, so we can go further faster. This is why we believe a divestment of the global consumer businesses is in the best interests of the Co-operative and are the proceeding with a sales process. As announced last week, we have assessed both the trade sale and IPO as attractive options for us both to pursue now. I recognize there is significant interest in this process, and we'll keep you updated as this work progresses. This is a pivotal time for the Co-operative. We're in a strong position today and have an exciting future. Thank you.

Thank you, Miles. We now move to questions or comments on Peter and Miles' presentations or on my own remarks.

We will start with questions from the floor and then move to online questions. For those of you in the room, if you have a question or comments on the resolutions being dealt with later in the meeting or other matters of general business, please wait until the appropriate time later in the meeting to put those questions. Whilst we take questions from the room, I invite online attendees to submit questions on any items of business, and I'll address them at the relevant time in the meeting. For those present, if you'd like to ask a question, please raise your hand and an usher will bring a microphone to you. Please wait for the microphone and introduce yourself so everybody can hear the question. I now open the meeting for questions. Are there any questions from the floor?

My name is [ Cierge Chen ], a shareholder. I'm very impressed with the dividends and the performance of the company and surprisingly impressed how well it did. I have some questions related to, for example, environmental sustainability. How does the company, for example, mitigate, for example, soil erosion, water pollution and the climate change issues?

Thank you for your question. I'll ask Miles to take that question, please.

So we have -- the COP's put out Scope 3 and Scope and 2 emissions targets up to 2030. More recently, we have increased or reduced whichever way you look at it, to reduce our Scope 1 and 2 emissions by 50% by 2030 and are making good, strong progress on that. You see that with implementation of the likes of an electrified boiler at Edendale more recently. And we've just exited the last coal-fired boiler in the North Island, just a couple of weeks ago. Scope 3, which is sort of -- which on-farm emissions, we're working closely with our farmers on what that looks like over the next few years. A lot of that will come from on-farm efficiency gains that our farmers are working hard on, but we also need to think about novel technologies. And so we have a joint venture industry and government have a joint venture of 50-50 that joint venture is called AgriZero NZ and they're working hard on what these novel technologies may look like. And so there are some of the things that we're working on. I also have some strong focus on water allocation from sites, water use and water discharge and all that's governed, of course, by the regional councils across New Zealand.

Go on to stand here.

Thank you for your comments, by the way, on the results. I appreciate that.

My name is [ Shabir ]. I'm a shareholder. My question and my coming to this meeting is for -- on the main purpose. I give full regards to the Board for their decisions, okay? You are taking the best decisions in the interest of the company, in the interest of the shareholders. But I have to express my opinion also, so I have come here. Now you say that divesting from the consumer business will, in the long term, help the company in management of the capital and all that. That is a big figure crunching thing and all that far from my understanding. You are best people to understand that. But my understanding is that the goodwill and the brand loyalty, which you have captured over the years, in the long run, actually, I think you have to spread the risk. So if you are only focusing on your core business, these things also may give you a good return after a few years. Actually, in fact, if you see your previous performance, the consumers have -- the consumer brand has given you a better return every year. It is going on increasing from 0.6% to 3 point -- and now it has become 3.6%. It may become even 10% also. I don't know how much it will become. But that is my observation that we should retain the consumer business also. At the same time, I leave it to the Board how to manage that because you see you have to spread the risk also, as you say, that you have to -- because this thing also is a cyclic -- cyclical -- the business of getting the milk and all that is a cyclical thing. And we had faced so many downtrends. The farm -- the milk price has gone down. Now it has come up, and it is giving us better return. And now we have got competition also like Synlait has come in. So this is capturing your farmers also. So all these things taking into perspective, I think the consumer business should be held for some time more.

Okay. Thank you for your observations. Peter or Miles, would you like to respond?

Well, the only thing I'd say, I mean, when you look at our consumer business over a number of years, it is positive from an EBIT perspective. But you think about the $3.4 billion of capital tied up in that business, it's certainly not returning anywhere near. As Peter mentioned earlier, our farmers cost of capital and I say a fair amount of the cost of capital for yourselves in this room. And we believe that, that cash has been either reinvested or will potentially return to shareholders and unitholders.

Yes, that's why I alluded to you.

Okay.

My point of view was what...

The other thing I'll just touch on is that our global competitors, yes, their base or their starting point are huge domestic markets that are highly protected. So the history of Fonterra and the Dairy Board was to go into higher-risk jurisdictions from a very small unprotected domestic base. Also, our sources of capital primarily are our farmers, which is quite different to a public listed entity offshore. So our sources of capital are different. Our risk profile is significantly different when we look at this. The other thing to consider is that 3.5% of New Zealand milk is exported on a consumer brand or a packaged consumer good. So we need to keep that in context. The other 3.5% is in New Zealand, which is primarily liquid milk, okay? So from a New Zealand cooperative farmer perspective, we just got to understand the context. And then we've got to think about the complexity that, that overlays over this business, which is massive in the overhead. So it's quite a complex conversation...

Thank you.

[ David Snow ] Congratulations for the good results. Can I just ask about the consumer business? What's the rough spread of the assets between New Zealand and other countries around the world. And is it more likely that you'll be selling it in parts? Or is it better -- or is it more likely that you'd sell it as 1 complete package?

Yes. So we haven't determined to answer your first question -- sorry, your last question. We've determined that a trade sale and IPO are both options we are pursuing. Whether the final decision is made to break that up will be determined through the conversations we have with potential buyers. But at this point, that decision hasn't been made. In terms of the capital that's invested, most of the capital is tied up between Australia and New Zealand. I don't have the split on me right now, but it's about -- that's just over $2 billion between Australia and New Zealand of the $3.4 billion...

Are there any other questions from the floor? I'll now move to check with Jackie. Are there any questions online, Jackie?

Several questions online.

Okay.

The first one is from [ David Reeth ], our tax losses from previous years, the reason why there have been no imputation credits on Fonterra dividends to date and when will this change?

Okay, I'll hand that one to Richard.

Yes, the short answer is that historically, we have been consuming tax losses and because we've been consuming tax losses, we haven't been in a position to provide imputation credits, and that will change from the '25 season going forward.

Second question from [ David Reeth ] is last year, the company announced a target of reducing costs by $1 billion by 2030, what progress has been made to date?

I'll give that one to Miles.

Yes. So costs have reduced year-on-year, although there was some impairments, obviously, in the year prior which get classified as operating expenses. We have withdrawn that target while we undertake the sales process and business is potentially going to be completely different through -- at the end of this process. And so that target has been withdrawn. That said, we do have operating expense targets for the business on a line-by-line basis.

Great. I now have a question from [ Stephen Mayne ]. Will the FSF Chair consider publishing its remuneration report?

The fund does not directly employ any staff, so it's not really relevant to produce a remuneration report. So that's a no.

Second question from [ Stephen Mayne ]. As a Melbourne-based shareholder in FSF, it is disappointing to hear about the plans to delist from the ASX. He refers to the unprecedented deluge of takeovers that has contributed to listed entities on the ASX falling by 7.5% to 2,118 since June '22 with 21 straight months of decline and says, please don't go. The ASX is thinning out, and we need support from our Kiwi friends to keep the numbers up on the ASX. Have we attempted to negotiate a discounted annual listing fee?

Well, Fonterra management are working through the delisting with the ASX. But as we mentioned in my remarks, a single delisting will actually reduce cost and complexity. So we overall see it as beneficial to FSF rather than staying on both exchanges. Are there any more online questions? Okay. So we'll move on to the next item of business. Just for a moment, bear with me. Right. We now move to the sole resolution for the meeting, which is the proposal to reelect Alastair Hercus, who retires by rotation and stands for reelection as a director of the manager of the fund. The resolution to be proposed has been set out in the Notice of Meeting and will be taken as read. Voting on the resolution will be by way of poll. Computershare will scrutineer the process and will ensure the voting process is managed correctly. The proposed resolution is an ordinary resolution and as such, must be agreed to by a majority of the votes of unitholders entitled to vote for it to be passed. I will shortly invite Alastair to say a few words before the resolution for his reelection is moved and seconded by a director. I will then invite questions and comments on the resolution. After discussion on the resolution has been concluded, I will then ask you to vote on the resolution. For those online who have been able to vote through the online platform as detailed earlier, the results of the voting on the resolution will be released to the market and then posted on the Fonterra website as soon as possible. Resolution 1 seeks the reelection of Alastair Hercus as a Director of the Manager of the Fonterra Shareholders Fund. Alastair is an Independent Director for the purposes of the NZX listing rules. He has been a Director of the fund for the last 2 years. Having recently retired after 29 years as a partner at Buddle Findlay, he is now a consultant to the firm. This followed an earlier career as a diplomat in the Ministry of Foreign Affairs and Trade. Alastair has significant professional experience working with cooperatives in the primary sector businesses and also on corporate governance and economic regulation. He's an experienced director, particularly in the cooperative and mutual sector. He's a former Chair of the Medical Assurance Society and is currently Chair of Cooperative Life Limited. In the public sector [Audio Gap] is a Commissioner of the Natural Hazards Commission, Toka Tu Ake, a Director of Invercargill Airport Limited and a Chair of the Risk and Advisory Committee at the Ministry of Business Innovation and Employment. I will now invite Alastair to say a few words.

Thank you, MJ, and good morning, everybody. I'm delighted to offer myself for reelection as a director of the manager of the fund. I very much enjoyed working with the Board to promote the interest of the unitholders over the last 2 years. This has included some specific tasks such as ensuring that the return of capital to the unitholders following the divestment of Soprole was efficient and effective for unitholders. And more recently, as mentioned by MJ in her introduction, the change to the unit buyout price formula. Works also included a general role in monitoring the arrangements in the fund establishment documents, ensuring the distinction between milk price and earnings and being satisfied that they are operating as intended. I thank unitholders for your support, and I look forward to another term working in your interest. Thank you.

Thank you, Alastair. I'd now like to call on Carlie Eve to move Resolution 1.

I move that the meeting resolved to reelect Alastair Hercus, who retires by rotation and stands for reelection as a Director of the manager of the fund.

Thank you, Carlie. I'd now like to call on John Nicholls to second that motion.

Thank you, MJ. I second the motion and fully support it.

Thank you, John. For the purposes of transparency, as at 10 a.m. on Saturday, 16th of November, the following proxy votes have been received: for 89.6%, against 1.5% and discretionary, 8.9%. I now open the resolution for discussion. We will start with questions in the room. Please raise your hand and an usher will bring a microphone to you. Please introduce yourself before asking your question. Do we have any questions in the room? Jackie, are there any questions online?

No questions online.

Okay. I will now put Resolution 1 to the vote. As previously mentioned, for those online, if you're eligible to vote at this meeting, you'll be able to cast your vote through the Computershare platform under the Vote tab. In the room, each unitholder received a voting paper with the notice of meeting. Please place a tick in the for, against or abstain box alongside the resolution on your voting paper. Do not use any other marks or indicators. The scrutineers will treat noncompliant votes as invalid, so please take care to follow the instructions. Collection boxes for your voting papers will be passed around the room. If you need assistance or a pen, please raise your hand. For those online, please bear with us. It should take us no longer than a couple of minutes to collect voting papers in the room. [Voting]

Thank you for taking the time to vote. Voting online will close in 1 minute. We will have the final results of the votes released to the NZX and available on [Audio Gap]. com as soon as possible. At this point, I'd like to provide an opportunity for any items of general business to be received. Once again, we will start with questions in the room. If you'd like to ask a question, please raise your hand and an usher will bring a microphone to you. Please again wait for the microphone so that everybody online as well as in the room can hear your question and also introduce yourself. We will address any online questions after taking the questions in the room. Are there any questions of general business in the room? No. Okay. Jackie, have you got any questions online?

No further questions.

Right. If there are no further matters of general business, we will bring the meeting to a close. That concludes the business of the 2024 Annual Meeting of the Fonterra Shareholders Fund. Thank you for joining us online and here in person. And for those of you here, please join us for refreshments. [Foreign Language] Thank you.