Adjunct professor of accounting at Victoria University John Shewan has been appointed by

Fonterra Co-operative Group Limited to chair the establishment board of FSF Fund Management Company Ltd, the managers of the Fonterra Shareholders' Fund.

Fonterra is another step closer to implementing the Trading Among Farmers scheme with the appointment of the establishment board of FSF Fund Management Company Ltd - the managers of the Fonterra Shareholders' Fund.

He is joined on the board by four other well-known members of New Zealand's business and dairy sectors, independent directors Pip Dunphy and Kim Ellis and Fonterra appointed directors Sir Ralph Norris and Jim van der Poel.

Fonterra chairman Sir Henry van der Heyden said the governance of the fund at the time of its launch is likely to be closely scrutinised by farmer shareholders and potential investors.

'The appointment of these five well-known members of New Zealand's business and dairy sectors is another important Trading Among Farmers milestone.”

The initial directors of the establishment board of the manager of the fund have been appointed by Fonterra. However, in the future three directors will be elected by unit holders and two directors will be appointed by Fonterra.

Fonterra is on track to launch Trading Amongst Farmers (TAF) by the end of this year following a vote in June when shareholders voted 66.45 per cent in favour of TAF, which is designed to solve the redemption risk faced by Fonterra.

Currently, as shareholding is linked to milk production, Fonterra is obliged to buy back shares from suppliers leaving the co-op or those whose production has dropped. This means Fonterra must budget for significant and often unpredictable outflows of cash. Conversely, new suppliers, or those whose production is rising, must buy additional shares so cash is continually flowing in and out of the company.

TAF will also see the establishment of the Fonterra Shareholders' Fund, open to outside investors through which farmers will be able to free up cash by selling the economic rights to some of their shares. Farmers will retain the voting rights and full milk price for all production backed shares and vouchers they hold.

Under TAF farmers will be able to trade shares among themselves, reducing the demands on Fonterra's finances. Called the Fonterra's Shareholders' Market, it will be a closed market which only Fonterra shareholders can use. It is designed to ensure 100 per cent control and ownership of the company remains in farmer shareholders' hands.