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Shareholders’ Council Re-Appoints Valuer

31 August 2004

Shareholders’ Council Re-Appoints Valuer

The Fonterra Shareholders’ Council has re-appointed Standard & Poor’s Corporate Value Consulting (S&P) as the company’s valuer for the 2005/06 season. The Council is responsible for appointing an independent, qualified and reputable valuer to determine Fonterra’s Fair Value Range. S&P was originally appointed on a three-year contract in 2001 when Fonterra was formed. Following a performance review, the Council extended this contract for the 2005/06 season.

S&P independently values the shares and provides a valuation range to the Fonterra Board which sets the price of the shares for each season.

When deriving the FVS range, S&P considers Fonterra’s financial records and forecasts, interviews management, researches industry trends and the performance of comparable companies, and takes into account current financial, economic and market data. S&P uses this information to perform discounted cash flow analysis, which is the primary valuation method used. The valuation range is then cross-checked against comparable publicly traded shares, mergers and acquisitions.

Before the creation of Fonterra, shares in New Zealand dairy companies had nominal values, which often had little relationship to the underlying value of the company. The FVS was introduced under the Dairy Industry Restructuring Act and Fonterra’s Constitution to more accurately reflect the value of farmers’ investment in their company.

Shareholders’ Council chairman John Monaghan said: “Standard and Poor’s Corporate Value Consulting has developed a sound working knowledge of Fonterra and its businesses.

“The Shareholders’ Council will continue to monitor the independence of the relationship between the valuer and Fonterra’s Board of Directors on behalf of shareholders.”

ENDS

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