Fraser and Neave : Responses to Questions for F&N AGM

FRASER AND NEAVE, LIMITED

Company Registration No. 189800001R

Incorporated in Singapore

Annual General Meeting ("AGM") to be held on 18 January 2022

Responses to Substantial and Relevant Questions

Fraser and Neave, Limited ("F&N" or the "Company", and together with our subsidiaries, the "Group") refers to its announcement dated 4 January 2022 on its response to a substantial and relevant question received from a shareholder which is related to resolutions to be tabled for approval at the abovementioned AGM (the "Initial Announcement").

Further to the Initial Announcement, the Company has received substantial and relevant questions from another shareholder and from the Securities Investors Association (Singapore) ("SIAS") which are related to the resolutions to be tabled for approval at the abovementioned AGM. The Company is pleased to be provide its responses below.

A. Response to Substantial and Relevant Question from a Shareholder

1. What is the current growth rate in the new markets of Indonesia, Myanmar, Thailand and Vietnam? What are the challenges? what is the potential growth in these new markets in the next 5 years?

• Most of these new markets (with the exception of Myanmar) are currently growing at about 4% to 5% annually+. Myanmar has been impacted by both the changing political landscape and the Covid-19 pandemic.
• These markets face common challenges brought on by the Covid-19 pandemic: supply chain disruptions, rising materiel cost, cautious consumer sentiment, and forex risks, which - when combined - impact the market growth as well as the Group's profits. Despite these challenges, these new markets represent an attractive market with a young, modernising, curious demographic, rising income levels, and a large opportunity to embed consumer brands. The potential growth beyond the pandemic, in the medium to long term, is envisaged to be much higher than the current rates.
  + Source: Euromonitor

B. Responses to Substantial and Relevant Questions from SIAS

NB: These questions may also be accessed on the website of SIAS at the URL https://sias.org.sg/qa-on-annual-reports/.

1. Can the board/management elaborate how it intends to allocate its capital going forward? Please provide the breakdown by geography and by the following five strategic pillars:
2. • Prioritising innovation
   • Investing in brands
   • Building a sustainable supply chain
   • Infrastructure optimization
   • Expanding into halal food segments.
   • As F&N pursues growth objectives, its capital allocation priorities remain the same - reinvest where appropriate in the business to drive momentum and continue to increase profit.
   • The allocation of capital to support the five strategic pillars is generally funded by operating cashflow as new initiatives are identified. For larger projects for example, in infrastructure optimization for our new plant in Tuas which is still under construction, these are usually funded with a combination of operating cash and debt.
   • The Company does not share detailed breakdown of capital allocation by country as they are considered to be commercially sensitive. The Group announces details of material transactions/initiatives as required, as and when they arise.
   • The Group will continue to prioritize value-adding investments into our business including acquisitions based on strategic and financial considerations.
3. What guidance/target has the board set for management in the "New Markets"? Management has classified
   Indonesia, Myanmar, Thailand (Soft Drinks) and Vietnam as "New Markets".
4. • Business expansion, geographical diversification, innovation and brand building remain the key elements of F&N's growth strategy. We continue to prioritise Southeast Asian ("SEA") markets, particularly Vietnam, Indonesia, Thailand (Soft Drinks) and Myanmar, and to deploy funds to these strategic markets and businesses should opportunities arise. SEA remains of keen interest to the Group and we believe that SEA has tremendous untapped potential and plan to further penetrate this region by strengthening our route-to-market and product development capabilities.
   • The establishment of entities in New Markets offers F&N a low-cost entry mode, allowing us to co- ordinate and liaise with local distributors to establish our brands without having to incur substantial capital costs. Through these local entities, the Group intends to build our brands and increase our market share and volume through marketing initiatives. Once we have achieved sufficient volumes, the Group will look to local production, and expect new income streams in the longer term.
   • Throughout the pandemic, the Group has remained focused on the journey ahead, adapting to changing conditions, enabling us to emerge stronger. The Group's strategy in New Markets is to operate across categories, focusing on the highest growth categories and consumer opportunities most relevant to our core brands. We will combine organic growth with selective acquisitions that complement our strategy.

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Responses to Questions for F&N's 123rd AGM

1. The group has borrowings of $926.8 million and cash and bank deposits of $471.8 million. Net borrowings amounted to $455.0 million (FY2020: $553.1 million) and finance costs for FY2021 were higher at $25.1 million
   (FY2020: $24.8 million) (page 59 of the Company's Annual Report 2021 - Capital Resources). Is the board reviewing how it could reduce its borrowing costs and further optimise its capital structure? What are the reasons to hold $471.8 million in cash and bank deposits when borrowings are as high as $926.8 million?
2. • Approximately 93% of our Group Debt, as at 30 September 2021, was on fixed interest rates. As existing long-term debts reach maturity, there will be opportunities to refinance some of these maturing debts in 2022 at lower interest rates.
   • Achieving an optimal capital structure is a continuing process. The Group aims to keep its net gearing ratio below 0.80 times of total equity and maintain a net debt to EBITDA ratio of below 3.5 times. As at 30 September 2021, the Group has net gearing ratio of 0.13 times of total equity and a net debt to EBITDA ratio of 1.29 times. So there is currently still sufficient debt headroom to allow F&N to make strategic acquisitions when opportunities arise.
   • The cash on hand of approximately $472 million includes $100 million set aside for the repayment of the $160 million Series 13 bond due in March 2022. In addition, $30 million has been earmarked for payment for the construction of our new plant in Tuas which has been delayed due to the pandemic. The balance is held by our subsidiary companies as working capital and for dividend payments.
3. Given that Fraser & Neave Holdings Bhd Group is a major operating subsidiary and is key to the group's strategic plan, has the board considered consolidating the company's ownership of Fraser & Neave Holdings Bhd Group from the current level of 55.5%?
4. • The Group reviews its options for all its businesses from time to time, and will make disclosures as required. Shareholders should remain assured that the Board is fully committed to ensuring that the Group continues to deliver value to our shareholders, and any decisions we make are based on what is best for the Company and all stakeholders.
5. What are the key value drivers of the Printing & Publishing ("P&P") segment? How successful is P&P's digitalisation strategy?
6. • Education Publishing remains the key profit driver for P&P segment, followed by Print and Book Distribution.
   • Education Publishing continues to expand its geographic footprint. Its products and services are now available in over 85 countries through its Marshall Cavendish brand. The transformation from a traditional publisher into a total education solutions provider (print, digital and professional development) remains on track. While the Covid-19 pandemic had been disruptive to the rest of the P&P businesses, Education Publishing was able to quickly capitalize on its digital offerings.
   • Our Print Group has a number of new initiatives to transform the business beyond its traditional commercial print business, which is largely printing of books, magazines and catalogues. Our Print Group is also an integrated marketing and print solutions provider for the out-of-home market, offering one-stopend-to- end printing, events and visual media solutions, targeting the FMCG market and MNCs. In the current financial year (ending 30 September 2022), the Print Group will also expand into sustainable packaging printing, leveraging its existing infrastructure.
   • P&P is now a major distributor of English Books in Singapore and Malaysia. The Book Distribution unit has relationships with the top five international English language trade book publishers (Hachette, HarperCollins, Macmillan, Penguin Random House and Simon & Schuster).
   • Retail has been challenging, and even more so in 2020 and 2021. To stem losses, we have closed and are closing non-performing high street stores. Meanwhile, we continue to drive sales by enhancing online customer experience using third-party marketplaces such as Shopee, Lazada and Qoo10.

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Responses to Questions for F&N's 123rd AGM