Hong Kong Exchanges and Clearing : ANNOUNCEMENT OF RESULTS FOR THE HALF YEAR ENDED 30 JUNE 2019

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Incorporated in Bermuda with limited liability | Stock Code: 494

Announcement of Results for the Half Year Ended 30 June 2019

• Temasek's US$300M investment in LF Logistics at US$1.4B valuation to accelerate the growth of our logistics business and strengthen capital structure of the Group
• Group turnover declined 8.4% but stabilizing as a result of improvement in operations and customer engagement
• Core Operating Profit at US$105M; Net profit swung back to positive
• Restructured global sourcing network enabling prompt action to minimize tariffs and business development focus yielding solid customer wins
• 3D virtual design disrupting traditional supply chain and starting to generate revenue
• Complex global trading environment presents the biggest opportunity for Li & Fung's business model in 20 years

HIGHLIGHTS	Group Results1
(US$ million)	1H 2019	1H 2018	Change
		(Restated)3	%
Turnover	5,356	5,850	-8.4%
Total Margin	583	614	-5.0%
As % of Turnover	10.9%	10.5%
Operating Costs	478	485	-1.4%
As % of Turnover	8.9%	8.3%
Core Operating Profit	105	129	-18.6%
As % of Turnover	2.0%	2.2%
Profit for the Period
- Continuing Operations	37	77
- Discontinued Operations	-	(137)
- Total	37	(60)
Profit Attributable to Shareholders2
- Continuing Operations	21	48
- Discontinued Operations1	-	(134)
- Total	21	(86)
Earnings per Share from Continuing Operations
- Basic (HK cents)	1.9	4.5
(equivalent to) (US cents)	0.25	0.58
Dividend per Share (HK cents)	1	3

1. Group results with Discontinued Operations separately presented given the strategic divestment of the three Product Verticals in April 2018. The loss attributable to Shareholders of US$134 million in 2018 is the result of an operating loss of the discontinued business of the three Product Verticals of US$20 million primarily during the first three months of 2018 and final disposal losses resulting from the discontinued business of US$114 million.
2. Excluding profit attributable to holders of perpetual capital securities and non-controlling interests.
3. 2018 comparatives restated with adoption of new accounting standard, HKFRS 16 (Note 1 of the condensed interim financial information).

Li & Fung Limited Interim Results 2019 | 2

MANAGEMENT DISCUSSION AND ANALYSIS

Key Highlights

• Temasek's US$300M investment in LF Logistics at US$1.4B valuation to accelerate the growth of our logistics business and strengthen capital structure of the Group
• Group turnover declined 8.4% but stabilizing as a result of improvement in operations and customer engagement
• Core Operating Profit at US$105M; Net profit swung back to positive
• Restructured global sourcing network enabling prompt action to minimize tariffs and business development focus yielding solid customer wins
• 3D virtual design disrupting traditional supply chain and starting to generate revenue
• Complex global trading environment presents the biggest opportunity for Li & Fung's business model in 20 years

Results Overview

Trade War Can Present an Opportunity for Our Large Global Network

The trade war between China and the US has become more protracted than expected given the complex geopolitical and ideological backdrop. While the continued uncertainty presents big challenges to the global retail supply chain, it can also present us with an opportunity. We have always maintained the largest diversified sourcing network of consumer goods in the world and are well-positioned to move production between countries and manage any potential shocks from tariff increases. The proliferation of bilateral free trade agreements seems to be the new norm, and this presents Li & Fung's business model with opportunities not seen for the last 20 years.

Across our network of more than 50 economies, we have cultivated deep relationships with factories, local business communities, and governments over the decades. These relationships allow us to move production to mitigate the impact of tariff hikes or other factors impacting the supply chain. As an example, we helped a US womenswear retailer formulate and execute a plan to reduce its reliance on China from 70% to 20% within 2 years by diversifying its sourcing to eight other economies across our network. Another customer, an accessories retailer, will decrease its China- sourcing from 40% to 10% by the end of 2020 by redirecting its orders to seven other economies.

Besides helping our customers diversify their production, we are playing an active role in helping our vendor base adapt to the seismic shift in trade. First, many Chinese vendors experienced sudden declines in their capacity utilization rates as production of US-bound goods moved to other countries. We were able to help them fill idle capacity with orders from Europe and elsewhere. At the same time, we continued to consolidate our vendor base, directing orders to key vendors to help them counter this headwind. Second, many Chinese factory-owners want to expand and diversify their own production to other countries such as Vietnam, Pakistan and Bangladesh. Leveraging our local connections and deep government relationships in these countries, we are assisting our Chinese vendor base in navigating administrative procedures such as permit applications, understanding regulatory requirements and local labor conditions. Such knowledge-sharing further cements our relationships with vendors, especially in this moment of crisis.

While US-China tension has taken center stage now, uncertainties also loom between the US and multiple production countries, which may cause new disruptions in the future. We expect a realignment of global trade relationships to happen over the course of many years, and that a new, stable norm will take time to emerge. The value of our global network will remain even more apparent in this period of great uncertainty.

Li & Fung Limited Interim Results 2019 | 3

New Management Team Spearheading Reorganization

In August 2018, we announced a fundamental reorganization of our Supply Chain Solutions business. This included the forming of a sourcing and production platform across countries to focus on operational excellence, achieving separation of account management and business development responsibilities for customer-facing functions to gain market share, and creating of a digital platform for the entire organization. This reorganization was followed by the appointment of a Chief Operating Officer (COO) in October 2018 for the sourcing and production platform, the appointment of a Chief Digital Officer (CDO) in early January 2019 for the digital platform, and the promotion of a new Group President in late January 2019 to focus on account management and business development. These new senior management team members each have deep specialty knowledge and strong executional track records. Shortly after assuming their positions, the new leaders appointed the next layer of management, and changes will continue to permeate their organizations for the rest of this reporting year to reflect the new business strategy.

Focused Reorganization

The Group President oversees both account management and business development at Supply Chain Solutions. We have adopted a "3x3 Strategy" through which we place equal emphasis on the "soft" and "hard" aspects of customer relationship management. On the soft side, we have instilled the philosophy that revenue will come from customers who are delighted by the experiences we create, operations-centric behaviors that are measured and incentivized, and an obsession with improving customer satisfaction.

On the hard side, we have put in place a key performance indicator (KPI) dashboard that tracks operational excellence metrics which are aligned with the individual goals of customers and vendors. Following the system's implementation, KPIs such as on-time delivery rates and claim rates improved and customer satisfaction increased.

Dedicated account managers now have more time to focus on serving top customers and driving wallet share gain. Parallel to focusing on key customers, we began reviewing the tail of our customer base, with emphasis on sustainable profitability and risk management. We proactively pulled back from some higher-risk customers as well as small-scale customers despite the higher margins that came with their orders. This resulted in temporary pressure on turnover and total margin but stronger risk control and resource allocation.

Li & Fung Limited Interim Results 2019 | 4

On the business development side, our efforts were strengthened by our leadership in digital services and the geographic diversity of our sourcing network. We secured encouraging customer wins early in this six-month reporting period as many customers view us as their change agent to enhance the competitiveness of their global supply chains, and our conversion momentum to date suggests that 2019 may become one of our most prolific years in over a decade in terms of business development. As activities at these new accounts gradually ramp up, incremental business should begin to flow in as early as 2020.

Under the leadership of the new COO, the old, siloed model that was in place for many years has been replaced by a country-centric model, in which all businesses within a country integrate their resources for increased leverage, better communications and improved vendor management. Historical silos have been broken down; what in place now is a unified platform that transcends geographical borders and truly capitalizes on our scale. In each production country, new leaders with production knowledge and experience have been appointed, taking over from account managers who made decisions remotely under the old structure. These new country leaders are empowered to manage the execution of all sourcing and production activities with vendors to enable faster, more accurate decisions on the ground and be better positioned to support account management teams. Operating with more autonomy, country leaders will also be able to foster deeper relationships with vendors. With this new sourcing and production platform, we aim to replicate our successful productivity experiment in India, where we demonstrated positive jaws between revenue and operating costs over multiple years.

Quality assurance (QA) and quality control (QC) functions, historically siloed and customer-specific, have also been restructured. We consolidated multiple siloed QA/QC teams into a global quality account team that is organized to work better with our vendor base and deliver improved service to our customers. A quality center of excellence (COE) has been established as the focal point for our QA and QC initiatives and will set the benchmark, not only for us but for the industry as well. Standard harmonization across countries on a unified platform will also further strengthen our abilities to move production within our network amid trade war uncertainties.

Digitalization

Our digitalization initiatives began in 2017 when we earmarked US$150 million for related spending over the current Three-Year Plan. Our digital offering has gained significant traction among customers in the last two and a half years, and accelerated investment since 2018 has helped firmly secure our leadership in the 3D virtual design space. Since taking on the role in January 2019, our CDO has organized various applications into a unified platform to accelerate the build-out of our digital services. More customers have come to us for digital services and assistance with integrating digital product development into their business processes. We are also helping customers take their own digital leaps with design and development, visual planning and assorting, and digital selling. Currently, more than 25% of our supply chain solutions customers are engaged with our end-to-end virtual design center of excellence, and monetization has already begun with certain customers.

We have adopted flexible pricing models that cater to the specific business needs of our customers. Models range from charging a fee per style, to full subscription to the LF Digital Platform. The unique value proposition we offer our customers enables us to enjoy higher margins compared with traditional supply chain solutions services.

The Li & Fung digital platform is the nucleus of our future service offerings and warrants continued investment. Based on the current Three-Year Plan budget, spending on digitalization - which consists of capital expenditure and operating expenses - will amount to approximately US$60 million this year. Investment areas will include digital platform infrastructure, 3D virtual design, materials platform, and total sourcing portal. Furthermore, our corporate development team has also been active in working with our ecosystem partners to further accelerate and improve our digital services.

Li & Fung Limited Interim Results 2019 | 5

Temasek's US$300 Million Investment in Logistics business

Our Logistics business ("LF Logistics") achieved double digit top-line and bottom-line growth, on an annualized basis, since it became part of Li & Fung in 2010. It continues to benefit from the tailwind of rising middle-class consumption in Asia, the growth of e-commerce logistics, and geographic and vertical expansion. As preparatory work in connection with the proposed spin-off IPO of LF Logistics was underway, we continued to evaluate strategic alternatives for the business. After considering market conditions and geopolitical uncertainties, we decided to bring in Temasek as our pre-IPO strategic investor, who invested US$300 million for a 21.7% stake in LF Logistics. This values the Logistics business at approximately US$1.4 billion on a post-money basis and further validates its potential and management track record.

Through this transaction, we have not only accomplished some of the objectives of the proposed IPO, but also brought in a reputable long-term investor. Temasek's investment will help accelerate LF Logistics' business growth and enhance the Group's capital structure and financial flexibility. We will remain the controlling shareholder of LF Logistics and consolidate its results in our financial statements. Subsequent to the balance sheet date for the 2019 Interim Results, we completed the transaction on 8 August 2019. As a result of this transaction, the spin-off IPO will be postponed. In the next couple of years, we will continue to focus on growing LF Logistics and creating value for our shareholders before we reactivate the spin-off IPO.