REDUCED SHARE STANDARD WITH EITHER NO FUND OR CAPPED FUND
Our preferred option at this stage is for a Reduced Share Standard, with either No Fund or a Capped Fund. In this section we walk through how this could work, some key things to consider and why this is our preference.
This involves reducing the share standard so that the minimum requirement for farmer owners would be one share for every four kgMS supplied to the Co-operative (1:4), rather than the current share standard ratio of 1:1.
FROM (BEFORE TEMPORARY CAP)
TO
Limited flexibility:
Increased flexibility:
» Share standard of 1 share/1 kgMS (1:1)
» Share standard of 1 share/4 kgMS (1:4)
» Maximum shareholding of: – 2x supply; or – For shares held in excess of supply, up to 5% of the Co-operative on a look-through basis Minimum shareholding requirements based on milk supply over a rolling three-season average. Dividends are discretionary and paid in respect of each share held. Farmer owners have 1 vote per 1,000 kgMS supplied in the previous season to the extent the supply is backed 1:1 by shares. Shares traded on the Fonterra Shareholders’ Market (FSM) (or a similar farmer-only market) and able to be exchanged into units in the Fund. Share price set by reference to public unit market alongside the farmer-only market.
» Maximum shareholding of: – 4x supply; or – No change
No change.
No change.
No change, so long as you continue to hold shares on a 1:1 basis relative to your supply in the previous season. If you choose to only hold the minimum required shareholding of 1:4, you would have fewer votes than a farmer who holds 1:1. See also the scenarios on pages 10-11. Shares traded on the FSM (or a similar farmer-only market) only. Fund bought back or capped, so no ability to exchange shares into units.
Share price set in a farmer-only market.
Share-Up Over Time and MyMilk contracts.
Share-Up Over Time and MyMilk contract supply options would be phased out (although all existing commitments would be honoured). Under current tax legislation, the amount of dividend that can be passed through to farmers pre-tax would reduce. However, the Co-op would be able to impute these dividends with income tax paid by the Co-op after tax losses are used. See further discussion on page 13.
The Co-op can deduct, for tax purposes, dividends paid on supply-backed shares, so shareholders are paid a pre-tax dividend on those supply-backed shares. Farmer shareholders are then required to pay tax on these dividends.
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