Li & Fung : CONTINUING CONNECTED TRANSACTIONS

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

The Board announces that on 17 November 2017, the Company entered into Renewal Agreements with FH 1937 to provide a framework of the terms for (1) the distribution and sale of goods by the Group to the FH 1937 Group and (2) the provision of logistics related services by the Group to the FH 1937 Group, all for a term of three years commencing from 1 January 2018 and ending on 31 December 2020.

Since FH 1937 is a substantial shareholder of the Company, FH 1937 and its associates (other than the Group) are connected persons of the Company. Accordingly, the transactions contemplated under the Renewal Agreements constitute continuing connected transactions of the Company under the Listing Rules. As the relevant applicable percentage ratios are more than 0.1% but less than 5%, such transactions are subject to the reporting, annual review and announcement requirements, but are exempt from the independent shareholders' approval requirement, under Chapter 14A of the Listing Rules.

Reference is made to the announcement of the Company dated 5 December 2014 in connection with the Existing Distribution and Sale of Goods Agreement between the Company and FH 1937 regarding the distribution and sale of goods by the Group to the FH 1937 Group during the three years ending 31 December 2017.

In view of the forthcoming expiry of the Existing Distribution and Sale of Goods Agreement, the Directors consider that it is in the interest of the Group to continue such distribution and sale of goods arrangement and to enter into the Renewal Distribution and Sale of Goods Agreement with FH 1937 to provide a framework of the terms of the distribution and sale of goods by the Group to the FH 1937 Group for a term of three years commencing from 1 January 2018 and ending on 31 December 2020 subject to the annual caps for the Renewal Distribution and Sale of Goods Agreement.

17 November 2017

(1) the Company

(2) FH 1937

The Group distributes and sells consumer products, including but not limited to, softgoods and hardgoods to the FH 1937 Group.

Three years from 1 January 2018 to 31 December 2020

The pricing of each of the transactions will be determined by the relevant members of the FH 1937 Group and the relevant members of the Group at the time of entry into the relevant Subsequent Agreements for such transactions based on the applicable market practices and value.

In determining the fees for the transactions, the Group will make reference to consumer products and distribution services provided to independent third parties in similar scope to ensure that the fees and terms offered by the Group to the FH 1937 Group are fair and reasonable and comparable to those offered to independent third parties.

When determining the terms of the commercial transaction(s), the Group will take into account a number of factors including but not limited to (i) price, (ii) payment and credit terms, (iii) scope of services, (iv) type of products and (v) delivery schedule, and will benchmark these factors with independent third party customers so as to ensure that the terms offered by the Group to the FH 1937 Group are fair, reasonable and competitive.

For the years ended 31 December 2015 and 2016 and the nine months ended 30 September 2017, the aggregate fees paid by the FH 1937 Group to the Group in respect of the distribution and sale of goods under the Existing Distribution and Sale of Goods Agreement are US$28,128,000, US$20,090,000 and US$12,490,000 respectively, which are all within the annual caps of US$80,000,000, US$120,000,000 and US$200,000,000 respectively as set out in the Existing Distribution and Sale of Goods Agreement for the three years ending 31 December 2017.

The annual caps in respect of the transactions contemplated under the Renewal Distribution and Sale of Goods Agreement for the three financial years ending 31 December 2020 are set out below:-

The annual caps under the Renewal Distribution and Sale of Goods Agreement are determined with reference to the aggregate fees paid by the FH 1937 Group to the Group under the existing transactions between them, and after taking into account the historical amounts for the two years ended 31 December 2016 and the nine months ended 30 September 2017 and the growth rates for such transactions as projected by the Group.

Reference is made to the announcement of the Company dated 20 August 2015 in connection with the Existing Logistics Agreement between the Company and FH 1937 to provide a framework of the terms for the provision of logistics related services by the Group to the FH 1937 Group during the three years ending 31 December 2017.

In view of the forthcoming expiry of the Existing Logistics Agreement, the Directors consider that it is in the interest of the Group to continue such provision of logistics related services arrangement and to enter into the Renewal Logistics Agreement with FH 1937 to provide a framework of the terms for the provision of logistics related services by the Group to the FH 1937 Group for a term of three years commencing from 1 January 2018 and ending on 31 December 2020 subject to the annual caps for the Renewal Logistics Agreement.

17 November 2017

(1) the Company

(2) FH 1937

The transactions comprise the provision of logistics related services, which include warehousing, transportation, freight forwarding/shipping and other value-added services, by any member of the Group to any member of the FH 1937 Group under the Renewal Logistics Agreement.

Three years from 1 January 2018 to 31 December 2020

The pricing of each of the transactions will be determined by the relevant members of the FH 1937 Group and the relevant members of the Group at the time of entry into the relevant Subsequent Agreements for such transactions based on the applicable market practices and value. In particular:-

• In relation to services relating to management and operation of warehouse facilities (that is, building management, leasing and licensing management, IT support, human resources, administration and related services) and other value-added services, the service fee shall be determined at the time of entry into the relevant Subsequent Agreements with reference to the type, size and location of the premises and the relevant party/customers' specific requirements as well as the fees charged by independent third party services suppliers. The Group will make reference to services provided to independent third parties in similar scope to ensure that the fees and terms offered by the Group to the FH 1937 Group are fair and reasonable and comparable to those offered to independent third parties.

• In relation to transportation and freight related services, the service fee shall be determined at the time of entry into the relevant Subsequent Agreements with reference to the weight and type of cargo, mode of shipment, freight rate of the carrier. In determining the service fee of transportation and freight related services, the Group will make reference to services provided to independent third parties in similar scope to ensure that the fees and terms offered by the Group to the FH 1937 Group are fair and reasonable and comparable to those offered to independent third parties.

When determining the terms of the commercial transaction(s), the Group will take into account a number of factors including but not limited to (i) price, (ii) payment and credit terms,

(iii) complexity of the services, (iv) service level, (v) capacity, (vi) delivery schedule,

(vii) compliance record, and (viii) quality control capability, and will benchmark these factors with independent third party customers so as to ensure that the terms offered by the Group to the FH 1937 Group are fair, reasonable and competitive.

For the years ended 31 December 2015 and 2016 and the nine months ended 30 September 2017, the aggregate fees paid by the FH 1937 Group to the Group for the provision of logistics related services under the Existing Logistics Agreement are US$10,894,000, US$15,530,000 and US$12,191,000 respectively, which are all within the annual caps of US$20,000,000, US$30,000,000 and US$40,000,000 respectively as set out in the Existing Logistics Agreement for the three years ending 31 December 2017.

The annual caps in respect of the transactions contemplated under the Renewal Logistics Agreement for the three financial years ending 31 December 2020 are set out below:-

The annual caps under the Renewal Logistics Agreement are determined with reference to the aggregate fees paid by the FH 1937 Group to the Group under the existing transactions between them, and after taking into account the historical amounts for the two years ended 31 December 2016 and the nine months ended 30 September 2017, as well as the projected growth of the business, extension of scope of services and cost increase.

The Group has been distributing and selling certain consumer products to the FH 1937 Group in the ordinary course of business of the Group. Such transactions enable the Group to enhance the market coverage and sales performance of these products.

The Group has also been providing the logistics related services to the FH 1937 Group in the ordinary course of business of the Group. Such transactions enable the Group can continue to leverage on the logistics related services offered to the FH 1937 Group in order to enhance the Group's competitiveness as a global logistics services provider.

The Directors (including the Independent Non-executive Directors) consider that the Renewal Agreements (together with the respective annual caps for the Renewal Agreements) have been entered into on normal commercial terms after arm's length negotiations between the parties, and in the ordinary and usual course of business of the Group, and the terms thereof (together with the respective annual caps for the Renewal Agreements) are fair and reasonable and in the interests of the Company and its shareholders as a whole.