Fraser and Neave : F&N Sustainability Report 2018

LETTER TO SHAREHOLDERS

FRASER AND NEAVE, LIMITED

(Incorporated in Singapore) (Company Registration No.189800001R)

Directors:

Registered Office:

Mr Charoen Sirivadhanabhakdi

(Non-independent and non-executive Chairman) Khunying Wanna Sirivadhanabhakdi

438 Alexandra Road #20-00 Alexandra Point

Singapore 119958

(Non-independent and non-executive Vice-Chairman) Tengku Syed Badarudin Jamalullail

(Lead independent and non-executive Director)

Mrs Siripen Sitasuwan (Independent and non-executive Director)

Mr Timothy Chia Chee Ming (Independent and non-executive Director) Mr Charles Mak Ming Ying (Independent and non-executive Director) Mr Chan Heng Wing (Independent and non-executive Director)

Dr Sujittra Sombuntham (Independent and non-executive Director) Mr Koh Poh Tiong (Non-independent and non-executive Director)

Mr Chotiphat Bijananda (Non-independent and non-executive Director) Mr Thapana Sirivadhanabhakdi

(Non-independent and non-executive Director)

Mr Sithichai Chaikriangkrai (Non-independent and non-executive Director) Mr Michael Chye Hin Fah (Non-independent and non-executive

Alternate Director to Mr Thapana Sirivadhanabhakdi)

Mr Prapakon Thongtheppairot (Non-independent and non-executive

Alternate Director to Mr Sithichai Chaikriangkrai)

4 January 2019

To:The Shareholders of Fraser and Neave, Limited (the "Company")Dear Sir/Madam

1.

INTRODUCTION

1.1

Background. We refer to:

• (a) the Notice of the 120th Annual General Meeting ("AGM") of the Company dated 4 January 2019 (the "Notice"), accompanying the Annual Report for the financial year ended 30 September 2018, convening the 120th AGM of the Company to be held on

  29 January 2019 (the "2019 AGM");

• (b) Ordinary Resolution No. 9 relating to the proposed renewal of the IPT Mandate (as defined in paragraph 2.1 below, as proposed in the Notice);

• (c) Ordinary Resolution No. 10 relating to the proposed renewal of the Share Purchase Mandate (as defined in paragraph 3.1 below, as proposed in the Notice); and

(d)Ordinary Resolution No. 11 relating to the proposed adoption of the F&N RSP 2019 (as defined in paragraph 4.1 below, as proposed in the Notice).

• 1.2 Letter to Shareholders. The purpose of this Letter is to provide shareholders of the Company ("Shareholders") with information relating to Ordinary Resolution Nos. 9, 10 and 11 proposed in the Notice (collectively, the "Proposals").

• 1.3 SGX-ST. The Singapore Exchange Securities Trading Limited (the "SGX-ST") takes no responsibility for the accuracy of any statements or opinions made or reports contained in this Letter.

• 1.4 Advice to Shareholders. Shareholders who are in any doubt as to the course of action they should take should consult their stockbroker, bank manager, solicitor, accountant or other professional advisers immediately.

• 2. THE PROPOSED RENEWAL OF THE IPT MANDATE

• 2.1 IPT Mandate. At the 119th AGM of the Company held on 29 January 2018 (the "2018 AGM"), Shareholders approved the renewal of a mandate (the "IPT Mandate") to enable the Company, its subsidiaries and associated companies that are considered to be "entities at risk" under Chapter 9 of the listing manual of the SGX-ST (the "Listing Manual"), or any of them, to enter into certain interested person transactions with specified classes of interested persons, provided that such transactions are made on normal commercial terms and in accordance with the review procedures for such interested person transactions.

• 2.2 Proposed Renewal of IPT Mandate. The IPT Mandate was expressed to take effect until the conclusion of the next AGM of the Company, being the 2019 AGM which is scheduled to be held on 29 January 2019. Accordingly, the directors of the Company (the "Directors")

  propose that the IPT Mandate be renewed at the 2019 AGM, to take effect until the 121st AGM of the Company.

• 2.3 Particulars of IPT Mandate. The nature of the interested person transactions and the classes of interested persons in respect of which the IPT Mandate is sought to be renewed remains unchanged. As at 12 December 2018 (the "Latest Practicable Date"), Mr Charoen Sirivadhanabhakdi and Khunying Wanna Sirivadhanabhakdi are each Directors and controlling shareholders of the Company, and their respective associates include Thai Beverage Public Company Limited, TCC Assets Limited and Frasers Property Limited. Mr Charoen Sirivadhanabhakdi, Khunying Wanna Sirivadhanabhakdi and their respective associates are regarded as "interested persons" of the Company for the purposes of Chapter 9 of the Listing Manual. Particulars of the IPT Mandate, including the rationale for the IPT Mandate, the benefits to be derived by the Company, as well as the review procedures for determining transaction prices with the specified classes of interested persons (including the persons who shall abstain from participating in the review and approval process of the Audit

  Committee of the Company ("Audit Committee") in relation to the interested person transactions1), and other general information relating to Chapter 9 of the Listing Manual, are set out in the Appendix to this Letter.

1

In particular, if a member of the Audit Committee has an interest in a transaction or is a nominee for the time being of an

Interested Person (as described in paragraph 4 of the Appendix to this Letter), he shall abstain from participating in the review and approval process of the Audit Committee in relation to that transaction.

• 2.4 Audit Committee Confirmation. The Audit Committee, comprising Mrs Siripen Sitasuwan, Mr Timothy Chia Chee Ming and Mr Sithichai Chaikriangkrai as at the Latest Practicable Date, confirms (with Mr Sithichai Chaikriangkrai abstaining) that:

  • (a) the methods or procedures for determining the transaction prices under the IPT Mandate have not changed since the 2018 AGM; and

  • (b) the methods or procedures referred to in sub-paragraph (a) above are sufficient to ensure that the transactions will be carried out on normal commercial terms and will not be prejudicial to the interests of the Company and its minority Shareholders.

• 2.5 Rationale. The IPT Mandate (and its subsequent renewal thereafter on an annual basis) will enhance the ability of companies in the EAR Group (as described in paragraph 2 of the Appendix to this Letter) to pursue business opportunities which are time-sensitive in nature, and will eliminate the need for the Company to announce, or to announce and convene separate general meetings, on each occasion to seek Shareholders' prior approval for the entry by the relevant company in the EAR Group into such transactions. This will substantially reduce the expenses associated with the convening of general meetings on an ad hoc basis, improve administrative efficacy considerably, and allow manpower resources and time to be channelled towards attaining corporate objectives.

• 3. THE PROPOSED RENEWAL OF THE SHARE PURCHASE MANDATE

• 3.1 Share Purchase Mandate. At the 2018 AGM, Shareholders approved the renewal of a mandate (the "Share Purchase Mandate") to enable the Company to purchase or otherwise acquire issued ordinary shares of the Company ("Shares"). The rationale for, the authority and limitations on, and the financial effects of, the Share Purchase Mandate were set out in the Letter to Shareholders dated 4 January 2018 and Ordinary Resolution No. 10 set out in the Notice of the 2018 AGM.

  The Share Purchase Mandate was expressed to take effect on the date of the passing of Ordinary Resolution No. 10 at the 2018 AGM and will expire on the date of the forthcoming 2019 AGM which is scheduled to be held on 29 January 2019. Accordingly, Shareholders' approval is being sought for the renewal of the Share Purchase Mandate at the 2019 AGM.

• 3.2 Rationale. The rationale for the Company to undertake the purchase or acquisition of its Shares is as follows:

  • (a) In managing the business of the Company and its subsidiaries (the "Group"), management will strive to increase Shareholders' value by improving, inter alia, the return on equity ("ROE") of the Company. In addition to growth and expansion of the business, share purchases may be considered as one of the ways through which the ROE of the Company may be enhanced.

  • (b) In line with international practice, the Share Purchase Mandate will provide the Company with greater flexibility in managing its capital and maximising returns to its Shareholders.

    To the extent that the Company has capital and surplus funds which are in excess of its financial needs, taking into account its growth and expansion plans, the Share

Purchase Mandate will facilitate the return of excess cash and surplus funds to Shareholders in an expedient, effective and cost-efficient manner.

• (c) The Share Purchase Mandate will provide the Company the flexibility to undertake share repurchases at any time, subject to market conditions, during the period when the Share Purchase Mandate is in force.

• (d) Shares which are purchased by the Company pursuant to the Share Purchase Mandate and held in treasury may be transferred for the purposes of employee share schemes implemented by the Company, to enable the Company to claim relevant tax deductions under the current taxation regime. The use of treasury shares in lieu of issuing new Shares would also mitigate the dilution impact on existing Shareholders.

The purchase or acquisition of Shares will only be undertaken if it can benefit the Company and Shareholders. Shareholders should note that purchases or acquisitions of Shares pursuant to the Share Purchase Mandate may not be carried out to the full limit as authorised. No purchase or acquisition of Shares will be made in circumstances which would have or may have a material adverse effect on the financial condition of the Group as a whole and/or affect the listing status of the Company on the SGX-ST.

3.3

Authority and Limits. The authority and limitations placed on the Share Purchase Mandate, if renewed at the 2019 AGM, are substantially the same as previously approved by Shareholders at the 2018 AGM. These are summarised below:

3.3.1

Maximum Number of Shares

The total number of Shares which may be purchased or acquired by the Company is limited to that number of Shares representing not more than 7% of the issued Shares as at the date of the 2019 AGM at which the renewal of the Share Purchase Mandate is approved. Treasury shares and subsidiary holdings (as defined in the Listing Manual)2 will be disregarded for purposes of computing the 7% limit.

As at the Latest Practicable Date, the Company had 131,126 treasury shares and no subsidiary holdings.

Purely for illustrative purposes, on the basis of 1,448,252,279 Shares in issue as at the Latest Practicable Date and disregarding 131,126 Shares held in treasury as at the Latest Practicable Date, and assuming that on or prior to the 2019 AGM:

• (a) no further Shares are issued;

• (b) no further Shares are purchased or acquired by the Company;

• (c) no further Shares are held by the Company as treasury shares; and

• (d) no Shares are held as subsidiary holdings,

2

"Subsidiary holdings" is defined in the Listing Manual to mean shares referred to in Sections 21(4), 21(4B), 21(6A) and 21(6C) of the Companies Act, Chapter 50 of Singapore.

the purchase or acquisition by the Company of up to the maximum limit of 7% of its issued Shares will result in the purchase or acquisition of 101,368,480 Shares.

However, as stated in paragraph 3.2 above and paragraph 3.8 below, purchases or acquisitions pursuant to the Share Purchase Mandate need not be carried out to the full extent mandated, and, in any case, would not be carried out to such an extent that would result in the Company being delisted from the SGX-ST. Thus, notwithstanding that the Share Purchase Mandate may enable purchases or acquisitions of up to 7% of the issued Shares (excluding treasury shares and subsidiary holdings) to be carried out, it should be noted that in order to maintain the listing status of the Shares on the SGX-ST, the Company must ensure (pursuant to Rule 723 of the Listing

Manual) that there is at all times a public float of not less than 10% of the issued Shares (excluding treasury shares). Accordingly, assuming solely for illustrative purposes that 173,774,538 Shares (or approximately 12% of the issued Shares (excluding treasury shares)) are held in public hands as at the Latest Practicable Date, in order to preserve the listing status of the Shares on the SGX-ST by maintaining a public float of not less than 10% in the issued Shares (excluding treasury shares), the Company would not purchase or acquire more than 28,962,423

Shares (or 2% of the issued Shares (excluding treasury shares) as at that date) pursuant to the Share Purchase Mandate as at the Latest Practicable Date. The public float in the issued Shares as at the Latest Practicable Date is disclosed in paragraph 3.8 below.

Notwithstanding the above, the Company anticipates that the public float percentage of the issued Shares will change from time to time consequent upon the dynamic changing profile of public shareholders of the Company. For this reason, the

Company is therefore seeking Shareholders' approval to enable the Company to purchase or acquire Shares up to a maximum of 7% of the issued Shares (excluding treasury shares and subsidiary holdings) for flexibility to prospectively cater to any future increase in the number of issued Shares held in public hands of up to 17%. If this occurs, the Company will be able to purchase or acquire in excess of 2% of its issued Shares (excluding treasury shares and subsidiary holdings) up to a maximum of 7%.

3.3.2

Duration of Authority

Purchases or acquisitions of Shares may be made, at any time and from time to time, on and from the date of the 2019 AGM, at which the renewal of the Share Purchase Mandate is approved, up to:

• (a) the date on which the next AGM of the Company is held or required by law to be held;

• (b) the date on which the authority conferred by the Share Purchase Mandate is revoked or varied; or

• (c) the date on which purchases and acquisitions of Shares pursuant to the Share Purchase Mandate are carried out to the full extent mandated,

whichever is the earliest.