Units for sale by year's end

The Fonterra Shareholders' Fund, which will allow non-farm investors to gain financial exposure to the dairy co-operative, is expected to be up and running by November or December, according to chief financial officer Jonathan Mason.

The fund will run along unit trust lines and will not involve Fonterra raising fresh capital.

Units in the fund will be issued to members of the public in response to a farmer placing shares with the Fonterra Shareholders' Fund. Unitholders will have the economic rights of a co-operative share but not any voting rights.

Under Fonterra's constitution, up to 25 per cent of the total co-operative shares on issue could be placed with the fund, but the Fonterra board has indicated a lower target of 8-10 per cent of total co-operative shares would form the fund, which will trade on the New Zealand Stock Exchange.

Mason said the co-operative was in the process of selecting managers to advise leading up to the launch.

"We think there will be a lot of interest from both New Zealand retail and institutional investors in Fonterra."

He said the fund would give farmers the opportunity to lighten their Fonterra shareholdings by selling their economic rights to the shares without giving up their vote.

The fund is expected to be worth no less than $500 million. Its launch will follow Mighty River Power's, which is expected to hit the market in September.