Proposed Capital Reduction and Cash Distribution to Shareholders

1. CONFIRMATION OF THE CAPITAL REDUCTION EXERCISE

The Directors of Fraser and Neave, Limited ("F&N" or the "Company") are pleased to announce that the capital reduction exercise (the "Capital Reduction Exercise") pursuant to Section 73 of the Companies Act, Chapter 50 Singapore was confirmed by the High Court of Singapore today. The Capital Reduction Exercise will become effective when a copy of the Order of Court confirming the same has been lodged with the Registrar of Companies and Businesses of Singapore for registration. The Company intends to lodge the said Order of Court on 5 September 2003.

2. NOTICE OF BOOKS CLOSURE

2.1 Notice of Books Closure. Notice is hereby given that the Transfer Books and Register of Members of the Company will be closed from 5.00 p.m. on 5 September 2003 (the "Books Closure Date") up to and including 6 September 2003 for the purpose of determining (a) the entitlements of Shareholders to the Cash Distribution pursuant to the F&N Pro Rata Capital Reduction and (b) the number of F&N Shares to be cancelled under the F&N Pro Rata Capital Reduction.

2.2 Definitions. Unless otherwise defined, terms used in this Announcement shall have the same meanings as defined in the circular (the "Circular") dated 4 July 2003, which was despatched to Shareholders.

3. ADMINISTRATIVE PROCEDURES FOR THE CAPITAL REDUCTION EXERCISE

3.1 Books Closure Date. Persons registered in the Register of Members of the Company and Depositors whose Securities Accounts are credited with F&N Shares as at the Books Closure Date will be entitled to receive a Cash Distribution of S$8.57 for each F&N Share held as at the Books Closure Date, which will be cancelled pursuant to the F&N Pro Rata Capital Reduction, being a number equal to approximately 10% of the F&N Shares held as at the Books Closure Date. Any fraction of an F&N Share arising from such cancellation will be disregarded.

3.2 Shareholders holding Scrip F&N Shares. Shareholders who hold F&N Shares registered in their own names in the Register of Members of the Company and who wish to deposit their F&N Shares with CDP prior to the Books Closure Date must deliver their existing share certificates ("Old Share Certificates") in respect of their F&N Shares, together with the duly executed instruments of transfer in favour of CDP, at least five (5) Market Days prior to the Books Closure Date in order for their Securities Accounts maintained with CDP to be credited with the relevant F&N Shares prior to the Books Closure Date.

Accordingly, Shareholders who hold Old Share Certificates and who wish to deposit their F&N Shares with CDP must deliver their Old Share Certificates to CDP on or before 28 August 2003. CDP will not accept Old Share Certificates in respect of F&N Shares for deposit after 28 August 2003.

3.3 Issue of New Share Certificates relating to Adjusted F&N Shares. The following sets out the administrative procedures which the Company proposes to adopt to facilitate the issue of new share certificates arising from the Capital Reduction Exercise:

(a) The Company will cancel all Old Share Certificates relating to the F&N Shares in issue as at the Books Closure Date. The cancellation of the Old Share Certificates will be made on the date on which the Capital Reduction Exercise takes effect and, upon such cancellation, the Company will issue to the Shareholders with F&N Shares registered in their names in the Register of Members new share certificates ("New Share Certificates") in respect of the number of Adjusted F&N Shares.

(b) In respect of Shareholders who have deposited their Old Share Certificates with CDP at least five (5) Market Days prior to the Books Closure Date, arrangements will be made with CDP for the New Share Certificates in respect of the Adjusted F&N Shares attributable to such Shareholders to be issued to CDP.

In respect of Shareholders with F&N Shares standing to the credit of their Securities Accounts as at the Books Closure Date, no further action needs to be taken as arrangements will be made by the Company with CDP for all the Old Share Certificates issued in the name of CDP or its nominee as at the Books Closure Date to be cancelled and for the New Share Certificates in respect of the Adjusted F&N Shares attributable to such Shareholders to be issued to CDP or its nominee and deposited with CDP.

(c) Upon cancellation, the Old Share Certificates shall be void and will cease to have any effect or be valid for any purpose.

(d) To facilitate destruction of the Old Share Certificates, Shareholders with F&N Shares registered in their names in the Register of Members of the Company as at the Books Closure Date are encouraged to return to the share registration office of the Company, Barbinder & Co Pte Ltd at 8 Cross Street, #11-00 PWC Building, Singapore 048424 ("Share Registration Office") their Old Share Certificates in respect of such F&N Shares.

However, whether or not the Old Share Certificates in respect of such F&N Shares are delivered to the Share Registration Office, the Old Share Certificates shall be cancelled and New Share Certificates will be issued to such Shareholders in respect of the Adjusted F&N Shares attributable to such Shareholders. The New Share Certificates will be sent to them at their own risk by ordinary post within ten (10) Market Days from the Books Closure Date. Where the F&N Shares are registered jointly in the names of several persons, the New Share Certificates in respect of the Adjusted F&N Shares shall be sent to the person whose name stands first in the Register of Members. Shareholders who wish to record any change in their registered address should notify the Share Registration Office of such change before the Books Closure Date.

3.4 Payment of the Cash Distribution. Payment of the Cash Distribution pursuant to the Capital Reduction Exercise will be made in the following manner:

(a) Scripless Shareholders

Depositors having F&N Shares standing to the credit of their Securities Accounts as at the Books Closure Date will have the cheques for payment of their respective entitlements to the Cash Distribution under the F&N Pro Rata Capital Reduction despatched to them by CDP by ordinary post at their own risk within ten (10) Market Days from the Books Closure Date. On or after the date on which the F&N Pro Rata Capital Reduction takes effect (which will be 5 September 2003), CDP will debit F&N Shares from the Securities Accounts of the Depositors by a number equal to approximately 10% of the F&N Shares standing to the credit of the Securities Accounts of the Depositors as at the Books Closure Date. Any fraction of an F&N Share resulting from such cancellation will be disregarded.

(b) Shareholders holding Scrip F&N Shares

Shareholders whose names are registered in the Register of Members of the Company as at the Books Closure Date will have the cheques for payment of their entitlements to the Cash Distribution under the F&N Pro Rata Capital Reduction despatched to them together with the New Share Certificates, by ordinary post at their own risk within ten (10) Market Days from the Books Closure Date.

4. TAXATION

4.1 Income Tax Act. Section 10I of the Income Tax Act, Chapter 134 provides that where a resident company makes a payment to its shareholders upon a reduction of its share capital and such a capital reduction is made out of "contributed capital" of the company, the payment to the shareholders will be treated as a return of capital and not as a payment of dividend.

For Singapore income tax purposes, a return of capital would generally be treated as capital in nature and would not be taxable to the shareholders in Singapore, except in certain cases, such as shareholders who are traders in securities or who have classified their investments as trading stocks, marketable securities or short term investments.

4.2 Singapore Tax Implications. The Company has obtained confirmation from Ernst & Young, its tax advisers, on the Singapore tax implications to the Company in respect of the F&N Pro Rata Capital Reduction that out of the cash distribution of S$8.57 to be made for every F&N Share cancelled pursuant to the F&N Pro Rata Capital Reduction:

(a) the sum of S$6.57 per F&N Share will be regarded as a return of capital and will not be treated as a distribution of dividend to the Shareholders for purposes of Singapore income tax; and

(b) the balance sum of S$2.00 (net of 22% tax) per F&N Share, being made from revenue reserve, will be deemed as a distribution of dividend to the Shareholders.

Each Shareholder will receive tax voucher(s) from the Company or CDP, as the case may be, advising him on the proportion of the Capital Distribution received by him as a return of capital and the proportion which is deemed as a distribution of dividend plus the tax deducted at source. Shareholders are generally not subject to tax on the proportion representing a return of capital unless they are traders in securities, or who have classified their investments as trading stocks, marketable securities or short term securities. In respect of the amount deemed as a distribution of dividend, Shareholders may, subject to the circumstances of their respective tax affairs, be able to claim tax credit of the tax deducted at source when they file their respective tax returns in due course reporting the dividend received in the same manner as the usual types of dividends received.

Shareholders should note that the foregoing statement is not to be regarded as advice on the tax position of any Shareholder or on any tax implications arising from the Capital Reduction Exercise. Shareholders who are in doubt as to their respective tax positions or any such tax implications or who may be subject to tax in a jurisdiction outside Singapore should consult their own professional advisers.

5. Trading, Listing and Quotation of F&N Shares

5.1 Trading of F&N Shares. F&N Shares traded from 9.00 a.m. on 3 September 2003 (Wednesday) will not be entitled to the Cash Distribution pursuant to the F&N Pro Rata Capital Reduction. This means that, with effect from 9.00 a.m. on 3 September 2003 (Wednesday), Shareholders can only sell up to a maximum number of F&N Shares which is equivalent to 90% of the number of F&N Shares held by them as at the close of trading on 2 September 2003 (Tuesday) and the purchasers of such F&N Shares from these Shareholders will not be entitled to the Cash Distribution pursuant to the F&N Pro Rata Capital Reduction nor will such F&N Shares purchased be subject to the F&N Pro Rata Capital Reduction. Any sales of F&N Shares by Shareholders at or after 9.00 a.m. on 3 September 2003 (Wednesday) of an aggregate number which is in excess of 90% of their holdings of F&N Shares as at the close of trading on 2 September 2003 (Tuesday) will constitute short selling, for which the usual buying-in procedures will be applied by the SGX-ST.

5.2 Illustration. As an illustration, Shareholder X who held 1,000 F&N Shares as at the close of trading on 2 September 2003 (Tuesday) will only be allowed to sell up to a maximum of 900 F&N Shares at or after 9.00 a.m. on 3 September 2003 (Wednesday). Shareholder X will be entitled to receive a return of capital of S$857 in cash, but the purchaser of F&N Shares from Shareholder X at or after 9.00 a.m. on 3 September 2003 (Wednesday) will not receive any return of capital nor will such F&N Shares purchased be subject to the F&N Pro Rata Capital Reduction. If Shareholder X sells 1,000 F&N Shares at or after 9.00 a.m. on 3 September 2003 (Wednesday), he will be short of 100 F&N Shares in his Securities Account on the settlement date and he will be subject to the usual buying-in procedures applied by the SGX-ST.

The listing and quotation for the F&N Shares in board lots of 100 F&N Shares will commence at 9.00 a.m. on 3 September 2003 (Wednesday) and will cease at 5.00 p.m. on 3 November 2003 (Monday).

6. Important Events and Dates

Shareholders should note the following events and dates:

Event Date

Last day to deposit Old Share Certificates with CDP Thursday, 28 August 2003

Last day for the F&N Shares to trade "cum" Tuesday, 2 September 2003
entitlement to the Cash Distribution
pursuant to the F&N Pro Rata Capital Reduction

First day for the F&N Shares to trade "ex" Wednesday, 3 September 2003
entitlement to the Cash Distribution
pursuant to the F&N Pro Rata Capital Reduction

First day for the F&N Shares to trade in Wednesday, 3 September 2003
board lots of 100 F&N Shares

Books Closure Date Friday, 5 September 2003 at 5.00 p.m.

Expected Payment date for the Cash Distribution Wednesday, 17 September 2003
pursuant to the F&N Pro Rata Capital Reduction

Last day for the F&N Shares to trade in Monday, 3 November 2003
board lots of 100 F&N Shares

By Order of the Board
Anthony Cheong Fook Seng
Group Company Secretary

15 August 2003

Submitted by Anthony Cheong Fook Seng, Group Company Secretary on 15/8/2003 to the SGX