When the Fonterra Shareholders' Fund made its debut on the NZX last December, the co-operative was finally able to put its capital structure on a firm footing.
The fund was launched as part of Trading Among Farmers - a unique structure developed to:
Protect 100 per cent farmer control and ownership of the co-operative.
Ensure that Fonterra has a more secure capital base for the future.
Provide more flexibility for farmers to manage their businesses.
Listing the fund on the NZX has helped achieve these objectives.
In addition, there has been a fourth benefit - the fund provides an opportunity for Kiwis to invest in New Zealand's dairy sector.
For the first time in our history, investors can now buy units in the fund, and be part of the continuing performance of our co-operative - a New Zealand success story.
Trading Among Farmers has never been about raising new capital.
It was conceived and remains focused on providing the co-operative with the permanent capital we need to deliver on our strategy for growing the business and delivering the best returns to our farmer shareholders.
Previously, Fonterra was required by legislation to issue and redeem farmers' shares. This posed a challenge when times were tough - for example during a widespread drought or financial crisis - and large numbers of farmers may have been forced to cash up their shares.
Only dairy farmers supplying Fonterra (and the Fonterra Farmer Custodian) can own shares - and they now buy and sell these among themselves on the Fonterra Shareholders' Market.
The fund provides farmers and non-farmers an investment opportunity to buy units that get the benefit of the dividends and capital movement of shares.
Additionally, the fund enables our farmers to free up cash by selling the economic rights of some shares, while retaining the full share-backed Fonterra farmgate milk price and voting rights.
As a key part of our strategy is to grow milk production volumes, this greater flexibility will help farmers planning to increase their supply levels.
Today, units in the fund are openly bought and sold on the NZX, delivering what economists call a 'well-discovered price' for Fonterra shares.
Instead of having to rely on an external valuation process, there is now complete and real time transparency about the value of Fonterra shares.
The fund doesn't bring in new capital and unit holders obtain no voting rights over the shares themselves.
Initially, that might have seemed strange to investors. But protecting 100 per cent farmer control and ownership was always non-negotiable for the co-operative and its farmer shareholders - and achieving that objective has made Fonterra stronger.
It is a legacy of listing that will benefit future generations of Fonterra farmers and their families.
At the same time, many of these key protections - such as robust processes for setting the Fonterra farmgate milk price and appointing independent directors to the Fonterra board - provide enduring safeguards for all stakeholders.
Trading Among Farmers is unique to us, created by us and voted for in the biggest voter turnout in our history.
We are in the very early days but I have no doubt that it will make us a stronger, more successful co-operative - and that will benefit all New Zealanders.
Tomorrow: Summerset Group chief executive Norah Barlow.