Fraser and Neave Plans to Reduce Capital by 14% and Divest OCBC Stake

- Buyback of 1 in 10 shares at $8.57, a 5% premium to market price
- Clears potential overhang in F&N shares
- Realise gains of $85 m on disposal of non-core assets
- Proforma EPS improvement of 14%

SINGAPORE - 23 May 2003 - Mainboard-listed Fraser and Neave Limited (F&N) today announced plans to buyback up to 37.6 million shares from shareholders through two separate capital reduction exercises and dispose 12.1 million shares in Oversea-Chinese Banking Corporation Limited (OCBC).

F&N will pay $8.57 for every 1 in 10 shares held, this is a 5% premium over the average closing share price for the last 5 market days after deducting the 20 cents net dividend declared by the Company on 16 May 2003. This will reduce F&N's issued share capital by 26.8 million shares to around 241 million shares.

"The capital reduction is part of management's continuing efforts to enhance shareholder value and manage its capital. In these very difficult times, we believe Shareholders will welcome the payment of $8.57 for each share repurchased." said Dr Michael Fam, Executive Chairman of F&N. "Not only will they have cash in hand, their proportionate interest in F&N will not be reduced, while the net asset backing for their remaining shares will increase."

The Company is proposing to undertake a second capital reduction to repurchase a further 10.8 million shares held by the OCBC Group. These will be acquired at $8.15, which is the average closing share price for the last 5 market days less the 20 cents dividend. This portion represents the approximately 4% of F&N's share capital the OCBC Group needs to divest in order to satisfy regulatory requirements on the divestment of non-financial businesses. The total consideration for this selective capital reduction amounts to $88 million.

F&N has also agreed to dispose its investment in 12.1 million OCBC shares at $8.63 each under a capital reduction being proposed by OCBC. The consideration was derived from the average closing prices of OCBC shares over the last 5 market days less the final dividend of 11.7 cents and special dividend of 49.75 cents declared by OCBC. The disposal of the OCBC shares will generate proceeds of $105 million and produce an exceptional gain of $85 million for F&N.

"The selective capital reduction is in the interests of all shareholders as the divestment by OCBC will remove a potential overhang for F&N shares in the market. At $8.15 per share, we are buying back our shares at a 30% discount to the net asset value of $11.74 as at 31 March 2003. That the OCBC Group will retain its remaining interest in F&N is a visible demonstration of their faith in our board and management." commented Dr Fam.

He added, "The opportunity to realise our investment in OCBC is timely. As I have indicated in the announcement of our interim results, F&N will continue to maximize the potential of its balance sheet by re-deploying assets to higher-yielding activities. The attraction in buying back our shares is very obvious because of the added benefits for shareholders. The selective capital reduction together with disposal of non-core assets will further enhance earnings per share and is positive for shareholders."

On 16 May 2003, F&N reported another set of strong results for the half year ended 31 March 2003, with interim earnings per share hitting 53 cents. It declared a special dividend of 5 cents per share to commemorate its 120th anniversary in addition to an interim dividend of 15 cents per share, both being net of tax.

F&N anticipates the transactions will complete near or after the financial year ending 30 September 2003, and as such will not have a material impact on the results for the current year. An extraordinary general meeting will be convened for shareholders to vote on resolutions to approve the capital reduction and selective capital reduction. It highlighted that no resolution is conditional on the passing of another.

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For clarification and further enquiries, please contact:
Mr Hui Choon Kit
General Manager (Special Projects & Corporate Communications)
DID: 63189263
Email: huick@fngroup.com.sg