To be part of our Co-op, the current minimum requirement is to hold one share for every kgMS supplied. This is based on a three-year rolling average supply. Farmer owners may, but are not required to, hold additional shares, up to 2x the minimum shareholding. For any farmer choosing to leave the Co-op, there’s a requirement to sell shares within three seasons at a minimum rate of one third per season. The number of shares that are matched to milk production are known informally as “wet shares” while the shares that are held in excess of the wet share requirement are known as “dry shares” – although they are in fact all the same single class of share.
Farmers can buy or sell shares on the FSM. Farmers can also sell the economic rights of shares into the Fund (except when a temporary cap is in place). In this case, the farmer-owned Custodian holds legal title to the share and a unit in the Fund is issued, which is then sold on the market. Apart from two supply offers early in the establishment of TAF, farmers have only been allowed to sell the economic benefit of dry shares, not wet shares, into the Fund. Farmers can also exchange units back into shares. In this case the unit is cancelled and the Custodian transfers title to the underlying share back to the farmer owner. When TAF was implemented, certain protections were put in place in relation to the Fund size to help protect farmer ownership and control. These included an Overall Limit on the Fund size of
20% of our total shares on issue, and an Aggregate Threshold of 15% for the number of dry shares as a proportion of total shares on issue. As at 31 March 2021, the Fund size was 6.5% of our total shares on issue and the Aggregate Threshold was 14.0%. If these thresholds are exceeded, our Co-op would need to take action to get back under the thresholds again. The most likely action to achieve this under the current settings would be for our Co-op to allocate capital to buy back units or shares. TAF helped to address some of the challenges we faced when it was implemented in 2012. But it has been important to look at whether it will support our financial sustainability into the future based on how much has changed since then.
17
Made with FlippingBook - Online catalogs