Li & Fung : DISCLOSEABLE TRANSACTION-STRATEGIC DIVESTMENT OF ASIA CONSUMER AND HEALTHCARE DISTRIBUTION BUSINESS

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Incorporated in Bermuda with limited liability Stock Code: 494 DISCLOSEABLE TRANSACTION STRATEGIC DIVESTMENT OF ASIA CONSUMER AND HEALTHCARE DISTRIBUTION BUSINESS

The Company had announced earlier that it was evaluating strategic alternatives with respect to its Asia consumer and healthcare distribution businesses which were acquired by the Company through the privatization of Integrated Distribution Services Group Limited in 2010. Since their acquisition, these distribution businesses have been operated as part of the Group's trading network, which is distinct from the Group's logistics network. As these distribution businesses are not part of the core sourcing and logistics business of the Group, the Directors determined it is in the best interests of the Company to divest these businesses.

The Company and the Seller (a wholly owned subsidiary of the Company) have entered into the Sale and Purchase Agreement with Dah Chong Hong Holdings Limited ("DCH") and Neosota Corp. (being a wholly owned subsidiary of DCH) to dispose of the Distribution Business for a cash consideration of US$350 million (on a cash-free and debt-free basis and subject to closing adjustments).

The Directors are of the view that the divestment of the Distribution Business is part of the Group's strategic objective to allow the Group to continue to focus its resources on its core trading and logistics business. This strategic transaction also has the added advantage of reinforcing the Group's strong cash flow and solid balance sheet with increased flexibility in its capital structure.

LISTING RULES IMPLICATION

As the highest applicable percentage ratio for the Company in respect of the Divestment is 5% or more but is less than 25%, the Divestment constitutes a discloseable transaction for the Company and is subject to the announcement requirement under Chapter 14 of the Listing Rules.

Shareholders and potential investors of the Company should note that the Divestment is subject to a number of Conditions which may or may not be fulfilled. Shareholders and potential investors of the Company are reminded to exercise caution when dealing in the securities of the Company.

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The Company had announced earlier that it was evaluating strategic alternatives with respect to its Asia consumer and healthcare distribution businesses which were acquired by the Company through the privatization of Integrated Distribution Services Group Limited in 2010. Since their acquisition, these distribution businesses have been operated as part of the Group's trading network, which is distinct from the Group's logistics network. As these distribution businesses are not part of the core sourcing and logistics business of the Group, the Directors determined it is in the best interests of the Company to divest these businesses.

The Company and the Seller (a wholly owned subsidiary of the Company) have entered into the Sale and Purchase Agreement with DCH and the Buyer (being a wholly owned subsidiary of DCH) to dispose of the Distribution Business for a cash consideration of US$350 million (on a cash-free and debt-free basis and subject to closing adjustments).

The Directors are of the view that the divestment of the Distribution Business is part of the Group's strategic objective to allow the Group to continue to focus its resources on its core trading and logistics business. This strategic transaction also has the added advantage of reinforcing the Group's strong cash flow and solid balance sheet with increased flexibility in its capital structure.

The Directors are of the view that the terms of the Divestment are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

THE SALE AND PURCHASE AGREEMENT Date

3 May 2016

Parties

1. the Company, as guarantor of the Seller;

2. the Seller, as seller of the Target Shares;

3. DCH, as guarantor of the Buyer; and

4. the Buyer, as buyer of the Target Shares.

To the best of the Directors' knowledge, information and belief having made all reasonable enquiries, DCH, the Buyer and their respective ultimate beneficial owners are third parties independent of and not connected with the Company and its connected persons.

Subject matter

The Target Shares, representing the entire issued share capital of the Target Company.

Upon Completion, the Target Company will cease to be a subsidiary of the Seller and will become a wholly owned subsidiary of the Buyer.

Consideration

The Consideration under the Sale and Purchase Agreement shall be US$350 million, subject to customary closing adjustments by:

1. adding the amount of cash of the Target Group as at the Completion Date;

2. deducting the amount of indebtedness of the Target Group as at the Completion Date; and

3. adjusting for the difference between the amounts of the actual working capital and the target working capital of the Target Group as at the Completion Date.

The Consideration was determined after arm's length negotiations between the Seller and the Buyer with reference to the Target Group's historical performance and future prospects as well as comparable trading and transaction multiples.

Payment

The Consideration shall be payable in cash according to the following schedule:

1. initial payment: at Completion, the Buyer shall pay to the Seller an amount equal to the sum of (i) US$350 million and (ii) an amount representing the cash-free, debt-free and working capital adjustments estimated in accordance with provisions of the Sale and Purchase Agreement as mentioned above (the "Initial Payment"); and

2. adjustment payment: within five Business Days after agreement or determination of the Completion Accounts, the Buyer shall pay to the Seller any amount by which the Consideration (as determined according to the Completion Accounts) exceeds the Initial Payment, or the Seller shall pay to the Buyer any amount by which the Consideration (as determined according to the Completion Accounts) is less than the Initial Payment.

Conditions

Completion is subject to the following Conditions being satisfied (or waived) on or before the Longstop Date:

1. the completion of the Restructuring; and

2. the Sale and Purchase Agreement and other transaction documents to be entered into pursuant to or in connection with the Sale and Purchase Agreement and the transactions contemplated thereunder shall have been approved by the shareholders of DCH in accordance with the requirements of the Listing Rules.

Completion

Completion shall take place on the Completion Date.

Guarantee

The Company has agreed to guarantee the performance of the Seller's obligations under the Sale and Purchase Agreement and DCH has agreed to guarantee the performance of the Buyer's obligations under the Sale and Purchase Agreement.

Non-compete

The Seller has undertaken with the Buyer (for itself as agent for the Target Group) that it will not, and will procure no other member of the Group (excluding the Target Group) will, without the written consent of the Buyer, for a period of three years immediately following the Completion Date, engage in the distribution of fast moving consumer products and healthcare products in Brunei, Hong Kong, Indonesia, Japan, Macau, Malaysia, Myanmar, the Philippines, the PRC, Singapore, Taiwan and Thailand, or employ or solicit or endeavour to entice away from the Target Group any of its material employees.

Restructuring

Prior to the entering into of the Sale and Purchase Agreement, the Distribution Business has been conducted by certain subsidiaries of the Company. Pursuant to the Sale and Purchase Agreement, the Seller has agreed to procure a pre-Completion Restructuring of the Distribution Business, which shall involve an internal transfer of assets, liabilities and shares of such subsidiaries to create the Target Group. The Restructuring is expected to complete by Completion. To the extent legal transfers of certain subsidiaries or businesses to the Target Group is not perfected and pending such perfection, Completion will still proceed on the basis that the economics of these subsidiaries or businesses will be retained by Target Group as from Completion.

INFORMATION ON TARGET GROUP

The Target Group is principally engaged in distribution of consumer and healthcare products across Asia. The Target Group has been operating in geographical areas including the PRC, Hong Kong, Macau, Taiwan, Thailand, Malaysia, Singapore, Philippines, Indonesia and Brunei.