Li & Fung Limited

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COMPANY PROFILE

Li & Fung Limited

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TABLE OF CONTENTS

Company Overview..............................................................................................3

Key Facts...............................................................................................................3

Business Description...........................................................................................4

History...................................................................................................................5

Key Employees.....................................................................................................9

Key Employee Biographies................................................................................10

Major Products and Services............................................................................15

Revenue Analysis...............................................................................................16

SWOT Analysis...................................................................................................17

Top Competitors.................................................................................................21

Company View.....................................................................................................22

Locations and Subsidiaries...............................................................................25

Li & Fung Limited Page 2© MarketLine

Li & Fung LimitedTABLE OF CONTENTS



COMPANY OVERVIEW

Li & Fung Limited (Li & Fung or ‘the company’), is a multinational consumer goods design,development, sourcing and logistics company. It manages the supply chain for retailers and brandsworldwide.The company operates in the US, Europe, Asia and rest of the world. It is headquarteredin Hamilton, Bermuda and employed 25,781 people as of December 31, 2014.

The company recorded revenues of $19,288.5 million during the financial year ended December2014 (FY2014), an increase of 1.4% over FY2013. The operating profit of the company was $723.6million in FY2014, a decrease of 10.9% as compared to FY2013. The net profit of the company was$441.3 million in FY2014, a decrease of 39.2% as compared to FY2013.

KEY FACTS

Li & Fung LimitedHead OfficeCanon’s Court22 Victoria StreetHamilton HM 12BMU

Phone

Fax

http://www.lifung.comWeb Address

19,288.5Revenue / turnover(USD Mn)

DecemberFinancial Year End

25,781Employees

494Hong Kong Ticker


Li & Fung LimitedCompany Overview



BUSINESS DESCRIPTION

Li & Fung is an asset-light supply chain management company engaged in providing consumergoods design, development, sourcing and logistics services. The company specializes in supplychain management of high-volume, time-sensitive goods for retailers and brands worldwide. Itoperates through approximately 300 offices and distribution centers in more than 40 economiesspanning across the Americas, Europe, Africa and Asia.

The company conducts its business through two segments: trading network and logistics network.

The company's trading network focuses on provision of the global sourcing services via multiplechannels, such as buying agent, trading-as-principal for private label merchandise and on-shorewholesale business. It provides sourcing services to retailers, brand owners and wholesalers tosupport their brands on both an agency (commission margin) and a principal (product margin) basis.It also offers design and products to retailers on a wholesale basis. The trading business covers awide range of consumer products, from softgoods (garments and apparel) to hardgoods (non-apparelproducts such as toys, home furnishings, sporting goods, footwear, and health and beauty products).It operates through network of around 15,000 suppliers in more than 40 economies.

The company's logistics network focuses on provision of logistics solutions and freight forwardingservices. It comprises of two businesses, in-country logistics and global freight management. Thein-country logistics offers Asia-focused logistics and supply chain solutions, and specializes in thekey verticals of footwear and apparel, fast-moving consumer goods, food and beverage, retail andelectronics. The global freight management offers cross-border logistics services at origin anddestination to supplement in-country logistics solutions and is particularly relevant for the companyto source customers. The company offers both full container loads and less-than container loadfreight services.


Li & Fung LimitedBusiness Description



HISTORY

Li & Fung was founded in Guangzhou, China in 1906. Initially it traded largely in porcelain and silkbefore diversifying into bamboo and rattan ware, jade, ivory, handicrafts and fireworks. Li & Fungwas established as a limited company in 1937 in Hong Kong.

The Second World War interrupted business following which the company ceased trading for severalyears. Li & Fung began to export garments, toys, electronics and plastic flowers in addition to itsoriginal product lines in 1949. The company was listed on the Hong Kong Stock Exchange in 1973.The company was taken private in 1989. It was then restructured in two core businesses: exporttrading and retail. In 1992, the export trading business was listed on the Hong Kong Stock Exchange.

In 1990s, the company started expanding through acquisitions. In 1995, Li & Fung acquired InchcapeBuying Services and in 1999 further broadened its customer base in the US and Europe throughthe acquisitions of Swire & Maclaine and Camberley Enterprises.

Li & Fung further expanded through the acquisition of Colby Group Holdings in 2000, and JancoOverseas in 2002. In the following year, Li & Fung acquired the sourcing business of FirstworldGarments and International Porcelain. Also in 2003, the company's wholly owned subsidiary acquiredthe remaining one third of the equity interest in International Sourcing Group.

In 2004, Li & Fung signed a licensing agreement to manufacture and market clothing under the LeviStrauss Signature label in the US. In the same year, the company acquired Ralsey Group, aknitwear/sportswear company.

In 2005, the company and Daymon Worldwide, a private label food sales and marketing organization,formed a strategic alliance to supply private label and Li & Fung licensed branded goods formass-market retailers worldwide. In the same year, the company acquired five companies: CometFeuerwerk, a fireworks group in Germany; PromOcean The Netherlands, a corporate premium andpromotional products supply group based in Europe; Briefly Stated Holdings, an apparel group inthe US with a portfolio of more than 40 character brand licenses;Young Stuff Apparel, an apparelgroup focused on supplying private label products to mass-market retailers; and a hard goods agencybusiness sourcing primarily furniture based in Indonesia.

Li & Fung acquired Oxford Womenswear Group, a producer of private-label women's apparelcollections, in 2006. In the same year, RH&A Acquisition Corporation, a wholly-owned subsidiary ofLi & Fung, acquired Rosetti Handbags and Accessories. Later in the year, the company acquiredthe sourcing arm of KarstadtQuelle, the department store and mail order business in Germany.Subsequently, a partnership consisting of Rousso Apparel Group and Li & Fung acquired the assetsof GarfieldMarks.

In 2007, Li & Fung acquired the global sourcing operations of designer Tommy Hilfiger. In the sameyear, the company acquired CGroup, a global supply-chain manager of health, beauty and cosmetic


Li & Fung LimitedHistory



products for cosmetics brands and retailers worldwide. Subsequently, Li & Fung acquired PeterBlack International (PB Group), a supplier of footwear, accessories, gifts and personal caremerchandise for retailers in both the UK and Continental Europe.

Further in 2007, the company acquired Regatta, an apparel and brand management company.Towards the end of 2007, Li & Fung acquired American Marketing Enterprises (AME), a children'sentertainment character licensed private label sleepwear company in the US. In 2008, the companymade seven acquisitions: Imagine, RT Sourcing, Silvereed, Wilson & Wong, Giant Merchandising,Van Zeeland and Miles Fashion.

During 2008, Li & Fung and Liz Claiborne entered into a long-term, exclusive buying agencyagreement, whereby Li & Fung would act as the primary global apparel and accessories sourcingagent for all brands in the Liz Claiborne portfolio, including Lucky Brand, Juicy Couture, Kate Spade,and Liz Claiborne New York with the exception of the jewelry product lines. In the late 2009, theTalbots and Li & Fung entered into a buying agency agreement wherein Li & Fung would serve asthe exclusive agent for substantially all Talbots apparel products.

Towards the end of 2009, LF USA, the wholly-owned subsidiary of the company, acquired all of theassets of Wear Me Apparel, a designer, marketer and seller of men's and children's apparel in theUS. During the same period, the company entered into a global sourcing strategic partnership withHudson's Bay Trading Company for Hudson's Bay Trading Company's four main retail banners, theBay, Zellers, Home Outfitters and Lord & Taylor.

Li & Fung opened a new 7,100 square meter hub in Istanbul at the start of 2010 for the company'ssourcing business in Europe, the Mediterranean, Middle East, Northern Africa and the former SovietUnion republics. In the same period, the company entered into a non-exclusive sourcing arrangementwith Wal-Mart Stores to supply $2 billion worth of goods in the first financial year of operations.Subsequently, the company acquired the entire issued share capital of Visage Group, a private-labelapparel supplier to leading high street and mass retailers in the UK.

During the mid of 2010, the company signed seven deals. These deals included three acquisitionsrelated to health, beauty and cosmetics (HBC) sector, jeans wear, and US onshore businessesrespectively, as well as four licensing deals. The three acquisitions included Jackel Group, HongKong-based HTP Group and Cipriani Accessories and its affiliate, the Max Leather Group.

Integrated Distribution Services Group (IDS Group) became a wholly-owned subsidiary of thecompany in the late 2010. Further during the same period, Li & Fung acquired US-based Jimlar, adesigner, distributor and supplier of footwear in the US and manufactures footwear under licensefor Coach and Calvin Klein, as well as for its own brands Frye, Mountrek and RJ Colt.

Towards the end of 2010, the company signed a sourcing agreement with Li Ning Company. Underthe terms of the agreement, Li & Fung would become a sourcing agent for Li Ning Company's brandsin both international and domestic markets. In the same period, the company's subsidiary LF USAacquired substantially all of the assets of Oxford Apparel for approximately $121.7 million.





In 2011, Li & Fung acquired Beyond Productions, a designer and licensor of women's fashion appareland accessories. Later in the mid of 2011, the company announced signing of five deals, whichincluded three acquisitions for the company's trading network and two acquisitions for its distributionnetwork. The new additions to Li & Fung's trading network included the acquisitions of LoyaltexApparel, Collection 2000 and Exim Designs. In addition, the company acquired TVMania andHampshire Designers for its distribution network.

In the end of 2011, LF USA entered into a strategic partnership with the Council of Fashion Designersof America (CFDA) to become its member.The partnership will also include business programs thatwill give back to CFDA. In the same period, the company entered into a multi-year licensing agreementwith Geoffrey Beene for men's pants including casual, dress and shorts, under the Geoffrey Beenelabel for the US and Canada.

Further in 2011, Li & Fung signed master license agreement with USPA - U.S. Polo Association.According to the agreement, Li & Fung Asia will take over the management of the USPA brand inChina, Hong Kong and Macau including all hardgoods and softgoods for the trademark of USPA.

During 2012, the company acquired the children apparel and toys businesses in Greater China fromRoly Group. In the mid of 2012, Li & Fung entered into an outsourcing agreement with TargetAustralia, an Australian department store chain. The arrangement covers both softgoods andhardgoods.

In the late 2012, the company entered into a new agency agreement with Wal-Mart Stores thatsupersedes the previous buying agency agreements made in 2010. Under the new agency agreement,DSG (Direct Sourcing Group) would continue as the primary direct resource for Sam's Club in theUS and continue to provide buying agency services to Walmart US and certain Walmart Internationalmarkets on a category-specific basis.

In 2013, the company acquired Lornamead Acquisitions Limited which owns and manages a portfolioof traditional and heritage US, German and the UK personal care brands, such as Finesse, CD,Aqua Net, Yardley and Lypsyl, across hair, body, skin and oral care product categories. In the sameyear, the company acquired Four Star Group, a pharmaceutical and medical device distributor inMacau.

In the same year, Li & Fung acquired Group A Limited, a UK based point-of-sale business which isprimarily operating in the beauty business. During the same period, the company acquired atransportation company in Taiwan, Chuan Jui Group which focuses on hypermarket, consumer andretail channels.

In the same year, the company acquired Whalen Furniture, a furniture and furnishing trading companyservicing the US mass retailers with its own proprietary brands as well as private label business. Inthe same year, Li & Fung acquired RM Enterprises Group, a licensing agency for the developmentand promotion of character licensing in Greater China, South Korea, Japan and South East Asia.





In the same year, the company acquired New Concept, a soft home company with nationwidedistribution in China. In the same period, Li & Fung acquired Jiangsu Soho which is a licensee anddistributor of Jeep Kids brand in China.

In the same year, the company acquired Sicem, a licensing company specialized in character licensesin Italy. In addition, the company acquired R-Tsion, the exclusive sales agent for TV Mania in France.

In the same year, Li & Fung acquired a Canadian-based woman footwear company, Marvin KrasnowEnterprises which is specialized in weatherproof, stain resistant technology in Italian leather andsuede.

In January 2014, Li & Fung created a new business unit to focus more intensely on factory andworker safety following tragedies in the garment industry, as well as the on-going needs of its globalvendor base.

In July 2014, the company completed the spin-off and separate listing of global brands group (GBG)on the main board of the stock exchange of Hong Kong limited.

In June 2015, Li & Fung announced a strategic partnership with Shanghai Bailian Group Co. andBeijing Wangfujing Department Store, with the establishment of a joint venture in the Shanghai freetrade zone.

In September 2015, Li & Fung opened a new LEED Platinum certified research and developmentfacility in Thailand.





KEY EMPLOYEES

CompensationBoardJob TitleName

1747000 USDExecutive BoardGroup Chief Executive OfficerSpencer Theodore Fung

4713000 USDExecutive BoardExecutive Director and President ofLF Sourcing

Marc Robert Compagnon

65000 USDNon Executive BoardHonorary ChairmanVictor Fung Kwok King

3169000 USDNon Executive BoardGroup ChairmanWilliam Fung Kwok Lun

69000 USDNon Executive BoardIndependent Non Executive DirectorPaul Edward Selway-Swift

68000 USDNon Executive BoardIndependent Non Executive DirectorAllan Wong Chi Yun

59000 USDNon Executive BoardIndependent Non Executive DirectorMargaret Leung Ko May Yee

64000 USDNon Executive BoardIndependent Non Executive DirectorMartin Tang Yue Nien

Non Executive BoardChief Financial OfficerEdward Lam Sung Lai

Non Executive BoardGroup Chief Technology OfficerManuel Fernandez

Senior ManagementChief Communications Officer andHead of Strategic Engagement

Lale Kesebi

Senior ManagementExecutive Director of Governmentand Public Affairs

Rick Darling

Senior ManagementChief Administrative OfficerEmily Mak Mok Oi Wai

Senior ManagementPresident of LF Asia and LF BeautyGerard Jan Raymond

Senior ManagementPresident of LF FashionAnnabella Leung Wai Ping

Senior ManagementPresident of LF ProductsHenry Chan

Senior ManagementPresident of LF Private LabelStephen Lister

Senior ManagementPresident of LF LogisticsJoseph Phi


Li & Fung LimitedKey Employees



KEY EMPLOYEE BIOGRAPHIES

Spencer Theodore Fung

Board: Executive BoardJob Title: Group Chief Executive OfficerSince: 2014Age: 41

Mr. Fung has been the Group Chief Executive Officer at Li & Fung since 2014. He serves as anIndependent Non Executive Director at Swire Properties. Mr. Fung serves as a Director at YoungPresidents’ Organization. He joined the Fung Group in 2001 and served as the Group Chief OperatingOfficer and President of LF Europe at Li & Fung.

Marc Robert Compagnon

Board: Executive BoardJob Title: Executive Director and President of LF SourcingSince: 2014Age: 56

Mr. Compagnon has been the Executive Director at Li & Fung since 2014. He also serves as thePresident of LF Sourcing at Li & Fung. Mr. Compagnon serves as the Non Executive Chairman atTheAbacaGroup, a hotel and restaurant management group. Mr. Compagnon is a Founding Memberat Cotton’s Revolutions.

Victor Fung Kwok King

Board: Non Executive BoardJob Title: Honorary ChairmanSince: 2012Age: 69

Mr. King has been the Honorary Chairman at Li & Fung since 2012. He serves as the Chairman ofthe Risk Management and Sustainability Committee at Li & Fung. Mr. King serves as a Director atKing Lun Holdings and Fung Holdings. He serves as an Independent Non Executive Director atChow Tai Fook Jewellery Group, Koc Holding and China Petrochemical.

William Fung Kwok Lun

Board: Non Executive BoardJob Title: Group Chairman


Li & Fung LimitedKey Employee Biographies



Since: 2012Age: 66

Mr. Lun has been the Group Chairman at Li & Fung since 2012. He serves as a Non ExecutiveDirector at various companies within the Fung Group, including Convenience retail Asia and trinity.Mr. Lun serves as the Chairman and Non-Executive Director at Global Brands Group Holding. Heserves as a Director at King Lun Holdings and its wholly owned subsidiary, Fung Holdings. Mr. Lunserves as an Independent Non Executive Director at VTech Holdings, Shui On Land, Sun Hung KaiProperties, The Hongkong and Shanghai Hotels and Singapore Airlines.

Paul Edward Selway-Swift

Board: Non Executive BoardJob Title: Independent Non Executive DirectorSince: 1992Age: 70

Mr. Swift has been an Independent Non Executive Director at Li & Fung since 1992. He also servesas the Chairman of Nomination Committee at Li & Fung. Mr. Swift serves as an Independent NonExecutive Director at Global Brands Group Holding. He serves as the Chairman at Pure Circle, aproducer of natural food ingredients. Mr. Swift served as the Deputy Chairman at HSBC InvestmentBank. He also served as a Director at The Hongkong and Shanghai Banking Corporation andTemenos Group.

Allan Wong Chi Yun


Mr.Yun has been an Independent Non Executive Director at Li & Fung since 1999. He serves asthe Chairman of Remuneration Committee at Li & Fung. Mr.Yun serves as the Chairman and GroupChief Executive Officer at VTech Holdings. He Co-founded VTech Group in 1976. Mr.Yun servesas the Deputy Chairman and Independent Non Executive Director at The Bank of East Asia. Heserves as an Independent Non Executive Director at China-Hong Kong Photo Products Holdings,and the MTR Corporation.

Margaret Leung Ko May Yee






Ms.Yee has been an Independent Non Executive Director at Li & Fung since 2013. She serves asthe Chairman of Audit Committee at Li & Fung. Ms.Yee serves as the Deputy Chairman, ManagingDirector and an Executive Director at Chong Hing Bank. She also serves as an Independent NonExecutive Director at First Pacific Company and Sun Hung Kai Properties. Ms.Yee also serves asan Independent Non Executive Director at Hong Kong Exchanges and Clearing, QBE InsuranceGroup and China Construction Bank. She served as the Vice Chairman and Chief Executive Officerat Hang Seng Bank and also as the Chairman at Hang Seng Bank (China).

Martin Tang Yue Nien


Mr. Nien has been an Independent Non Executive Director at Li & Fung since 2009. He serves asan Independent Non Executive Director at CEI Contract Manufacturing and China NT Pharma GroupCompany. Mr. Nien was previously the Chairman of Asia at Spencer Stuart and Associates, a globalexecutive search consulting firm.

Edward Lam Sung Lai

Board: Non Executive BoardJob Title: Chief Financial OfficerSince: 2012Age: 48

Mr. Lai has been the Chief Financial Officer at Li & Fung since 2012. He serves as a Member of theTakeovers and Mergers Panel of Securities and Futures Commission of Hong Kong. Mr. Lai has 20years of experience in banking, finance, and accounting. Prior to joining Li & Fung, he served inSenior Corporate and Investment Banking positions at Citi and Morgan Stanley. He has also practicedPublic Accounting at Coopers & Lybrand.

Manuel Fernandez

Board: Non Executive BoardJob Title: Group Chief Technology OfficerSince: 2006

Mr. Fernandez has been the Group Chief Technology Officer at Li & Fung since 2006. He is theHead of Global Transactional Services at Li & Fung. Mr. Fernandez served as the Regional ITManager of Strategic Applications at Li & Fung Distribution Group. He also served as the ChiefInformation Officer at Integrated Distribution Services Group from 2001 to 2006.





Lale Kesebi

Board: Senior ManagementJob Title: Chief Communications Officer and Head of Strategic Engagement

Ms. Kesebi currently serves as the Chief Communications Officer at Li & Fung. She is the Head ofStrategic Engagement at Li & Fung. Ms. Kesebi joined Li & Fung in 2003 and currently serves asthe Chairman of Corporate Sustainability Committee. She serves as the Co-Chairman of the AlumniNetwork Steering Committee at The Women’s Foundation in Hong Kong.

Rick Darling

Board: Senior ManagementJob Title: Executive Director of Government and Public Affairs

Mr. Darling currently serves as the Executive Director of Government and Public Affairs at Li & Fung.He serves as a Board Member at the American Apparel and Footwear Association. Mr. Darlingfounded The Millwork Trading which was acquired by Li & Fung in 1999.

Emily Mak Mok Oi Wai

Board: Senior ManagementJob Title: Chief Administrative Officer

Ms.Wai currently serves as the Chief Administrative Officer at Li & Fung. She served as the Presidentat LF USA Sourcing and manages all its Asia operations. Ms. Wai joined Li & Fung in 2000 with theacquisition of Colby International.

Gerard Jan Raymond

Board: Senior ManagementJob Title: President of LF Asia and LF Beauty

Mr. Raymond currently serves as the President of LF Asia and LF Beauty at Li & Fung. He servedas an Executive Vice President of Distribution and Regional Managing Director at IntegratedDistribution Services Group Limited.

Annabella Leung Wai Ping

Board: Senior ManagementJob Title: President of LF Fashion





Ms. Ping currently serves as the President of LF Fashion at Li & Fung. She served as an ExecutiveDirector at Li & Fung from 2000 to 2010. Ms. Ping was formerly the Regional Director of North AsiaApparel at Inchcape, a global sourcing network which was acquired by Li & Fung in 1995.

Henry Chan

Board: Senior ManagementJob Title: President of LF Products

Mr. Chan currently serves as the President of LF Products at Li & Fung. He joined Li & Fung in 1972and served as an Executive Director of the company from 1992 to 2009. Mr. Chan is a Member atThe Hong Kong institute of directors and the Advisory Board of the MBA programs of the Faculty ofBusiness Administration at The Chinese University of Hong Kong.

Stephen Lister

Board: Senior ManagementJob Title: President of LF Private Label

Mr. Lister currently serves as the President of LF Private Label at Li & Fung. He served as the ChiefOperating Officer and the President at LF Europe. Mr. Lister served as the Group Chief ExecutiveOfficer at Peter Black Holdings.

Joseph Phi

Board: Senior ManagementJob Title: President of LF Logistics

Mr. Phi currently serves as the President of LF Logistics at Li & Fung. He serves as the Chairmanand Director at GS1 Hong Kong. Mr. Phi joined Li & Fung in 1999 and served as its Executive Directorof Integrated Distribution Services Group Limited from 2004 to 2011.





MAJOR PRODUCTS AND SERVICES

Li & Fung is a multinational consumer goods design, development, sourcing and logistics company.The company's key services include the following:

Services:

Product design and development Raw material sourcing Production planning and management Factory sourcing Shipping Forwarder consolidation Customs clearance Local forwarding consolidation Shipping consolidation Warehousing Distribution center management Transport management Customs brokerage Freight forwarding Supply chain analytics Research, design and logistical advice


Li & Fung LimitedMajor Products and Services



REVENUE ANALYSIS

Overview

The company recorded revenues of $19,288.5 million during the financial year ended December2014 (FY2014), an increase of 1.4% over FY2013. In FY2014, the US, the company's largestgeographic market, accounted for 60.1% of the total revenues.

Li & Fung generates revenues through two business segments: trading network (95.5% of the totalrevenues in FY2014 before eliminations) and logistics network (4.5%).

Revenues by Segment

In FY2014, the trading network segment recorded revenues of $18,430.8 million, a decrease of 0.5%as compared to FY2013.

The logistics network segment recorded revenues of $873.6 million in FY2014, an increase of 66%over FY2013.

Revenues by Geography

The US, Li & Fung’s largest geographical market, accounted for 60.1% of the total revenues inFY2014. Revenues from the US reached $11,587.1 million in FY2014, an increase of 0.1% overFY2013.

Europe accounted for 18.1% of the total revenues in FY2014. Revenues from Europe reached$3,488.1 million in FY2014, a decrease of 1.2% as compared to FY2013.

Asia accounted for 14.2% of the total revenues in FY2014. Revenues from Asia reached $2,744.3million in FY2014, an increase of 14.3% over FY2013.

Rest of the world accounted for 7.6% of the total revenues in FY2014. Revenues from rest of theworld reached $1,469 million in FY2014, a decrease of 3.4% as compared to FY2013.


Li & Fung LimitedRevenue Analysis



SWOT ANALYSIS

Li & Fung is a multinational consumer goods design, development, sourcing and logistics company.The company’s extensive operational network enables it to source its goods from various locationsand distribute it in different countries thus reducing the business risk. However, long term changesin currency exchange rates could have major impact on the company's financial results.

WeaknessesStrengths

Largely dependent on few customersExtensive operational networkHigh dependence on the US for businessRobust presence across the sourcing value

chain

ThreatsOpportunities

Foreign currency riskStrong outlook for the global ecommercemarket Changing regulationSpin-off and separate listing of GlobalBrands Group

Intense competition

Strengths

Extensive operational network

Li & Fung operates globally through an extensive operational network. The company operatesthrough more than 300 offices and distribution centers in more than 40 economies spanning acrossthe Americas, Europe, Africa and Asia.Through this network, Li & Fung has an access to a sourcingnetwork of about 15,000 suppliers. The company's network extends outside Asia and into othermarkets, including the US, Europe, Canada, Australasia, Central and Latin America, and SouthAfrica.

In addition, Li & Fung has an extensive logistics network around the world that offers a comprehensiveset of logistics solutions.The company's logistics network focuses on provision of logistics solutionsand freight forwarding services to key verticals of footwear and apparel, fast-moving consumergoods, food and beverage, retail and electronics.The global freight management offers cross-borderlogistics services at origin and destination to supplement in-country logistics solutions and isparticularly relevant for the company to source its customers.

Hence, an extensive operational network enables the company to source its goods from variouslocations and distribute it in different countries thus reducing the business risk.


Li & Fung LimitedSWOT Analysis



Robust presence across the sourcing value chain

The company has robust presence across the sourcing value chain, from initial conceptualizationto delivery of finished products. In the initial stages, the company works closely with customers,assessing their needs and using market research, retail and fashion trend forecasts, and innovativetechnology to design the right supply chains. Further it also helps customers in conceptualizingproducts, brainstorming, designing and prototyping. Li & Fung also works with over 15,000 suppliersin multiple ways to meet its customers’ needs. The company also operates leading-edge systemsand programs to help its customers meet quality needs, industry standards and local requirement.Lastly, the company offers a customizable menu of logistics solutions, from warehousing, transport,repacking, customs brokerage, freight forwarding, hubbing and consolidation, and other value-addedservices to make appropriate delivery.

The company’s presence across the sourcing value chain enables it to offer complete solutions,thus enabling it to attract new customers and boost topline performance.

Weaknesses

Largely dependent on few customers

Li & Fung derives a significant portion of its revenues from few key customers. During FY2014,approximately 14% of the company's turnover is derived from a single external customer. Also, thepercentage of sales attributable to the company's five largest customers combined was around 35%of its total sales in FY2014. Overdependence on few customers for majority of revenues reducesbargaining power of the company as the customers can use their financial strength to press forunfavorable terms and conditions for business. Also, the loss of one or more of these customerscould have a material adverse effect on the company, as a whole, or on the respective segment inwhich the customer's sales are reported.

High dependence on the US for business

Although Li & Fung has presence in Latin America, Europe, Africa and Asia, it depends on the USmarkets for a major part of its revenues. In FY2014, the US, the company's largest geographicmarket, accounted for approximately 60.1% of the total revenues. This heavy dependence on theUS may have a dampening effect on the company's revenues if the economy or the company'sbusiness in the US does not grow as expected.

High dependence on a single country makes the company susceptible to changes associated withthe economic and political situation of the country. The company's high reliance on one market thusexposes it to the risk of downturns in the country's macroeconomic conditions and amplifies itsbusiness risk.

Opportunities





Strong outlook for the global ecommerce market

The outlook for the global ecommerce market is robust. According to industry estimates, globalecommerce spending is expected to reach $1.672 trillion in 2015, which accounted for 7.3% of theoverall global retail sales, which are expected to be $22.822 trillion in 2015. Furthermore, the marketis expected to reach $3.551 trillion, or 12.4% of total retail sales by 2019, representing a compoundannual growth rate (CAGR) of 20.7% for the 2014-19 periods.

The company is well positioned to benefit from the booming global e-commerce market. Li & Fungspecializes in supply chain management of high-volume, time-sensitive goods for retailers andbrands worldwide.The company covers a wide range of consumer products, from softgoods (garmentsand apparel) to hardgoods (non-apparel products such as toys, home furnishings, sporting goods,footwear, and health and beauty products). Therefore the company’s distribution business couldgrow significantly due to the growth in the global demand for luxury.Which would lead to an increasein Li & Fung's revenues and profits.

Spin-off and separate listing of Global Brands Group

Li & Fung completed the spin-off and separate listing of Global Brands Group on the Main Board ofthe Stock Exchange of Hong Kong.The company has reorganized the distribution network by aligningthe private label business to the trading network and creating the new standalone Global BrandsGroup (GBG), which consists of the brands and licensing businesses.

Given the separate needs and different business models of Li & Fung and GBG, creating twocompanies will enable the management of each to pursue their own specific and focused strategy.Li & Fung will be able to concentrate on its sourcing and logistics business, which requires sourcingskills and product development and supply chain management for retailers and brands globally. Onthe other hand, DBG requires fashion-forward design capabilities as well as brand development,licensing, and marketing skills.

For Li & Fung, this will allow for a simplification of the business and will help the company streamlineoperations into its core areas. Li & Fung will also continue to benefit from GBG's growth through aseven year sourcing agreement. For GBG, an uninterrupted focus on the brands business will allowits management team to fully build out the business.

Thus, separating Li & Fung and GBG into two distinct companies is expected to deliver meaningfulbenefits to each of the businesses, its customers, and its shareholders.

Threats

Foreign currency risk





The company is subject to exchange rate fluctuations which could impact its margins. Most of Li &Fung's cash balances were deposits in Hong Kong dollar (HK$) and US dollar with major globalfinancial institutions, and most of the company's assets, liabilities, revenues and payments wereheld in either HK$ or US dollar. Fluctuation of relevant currencies against the US dollar will result inunrealized gain or loss from time to time, which is reflected as movement in exchange reserve inthe consolidated statement of changes in equity. The company is exposed to currency fluctuationon operating costs in sourcing countries such as China, Bangladesh, Vietnam, Korea and India toa certain extent.

Hence, long term changes in currency exchange rates could have major impact on the company'sfinancial results.

Changing regulation

The company is subject to regulatory changes in the countries that it conducts its business in. Forinstance, China has changed policies to promote domestic consumption as a more sustainablegrowth engine for the future. Part of this policy change is to increase wages dramatically in thisFive-Year Plan (2011–2015). This has resulted in a substantial decanting of lower value-addedproduction out of China to less developed markets. This trend will complicate the supply chainprocess and disconnect raw material infrastructure in China from actual production countries. Sincethe company conducts its business in China it could be effected by this change which could havean impact on its overall revenues.

Intense competition

The company operates in highly competitive sourcing and logistics industry. The company facecompetition from other players in the industry, which have higher volume and greater geographicreach. The company’s key competitors are Global Sources, William E. Connor & Associates andAPL logistics Americas. Hence, extensive competition could prevent implementation of price increasesand could force the company to reduce prices, which may impact the bargaining power of thecompany and strain its margins.





TOP COMPETITORS

The following companies are the major competitors of Li & Fung Limited

Global Sources Ltd.APL LogisticsWilliam E. Connor & Associates Ltd


Li & Fung LimitedTop Competitors



COMPANY VIEW

A statement by William Fung Kwok Lun, the Group Chairman at Li & Fung Limited, is given below.The statement has been taken from the company's 2014 annual report.

Year of Transition

2014 was a year of transition as we spun-off our brands and licensing business (Global Brands) tobe a separately listed entity.The spin-off allows Li & Fung to simplify and focus on our core businessas a pure play supply chain management company. As part of this transition, Spencer Fung, ourCOO, assumed the role of Group CEO of Li & Fung, effective July 2014.

Given our scale and the breadth of the vendor network we have built over several decades, togetherwith unparalleled local market knowledge and market analysis capabilities, Li & Fung continues tobe the world’s leading global supply chain manager. In addition, our Logistics business offers logisticssolutions across Asia both within-country as well as global freight forwarding. With the acquisitionof China Container Line (CCL) in March last year, we have strengthened our freight forwardingcapabilities. CCL’s container volume provides us with the leverage to negotiate competitive freightrates with all the major global shipping lines and allows us to cross-sell these services to Li & Fungcustomers in a more scalable and price-competitive manner.

Following the Global Brands spin-off, Li & Fung has returned to its earlier business model of strongcash flow generation, less volatility on earnings and a strong balance sheet. Going forward, we willcontinue to evaluate the changing dynamics of the consumer goods industry and allocate capitalwhere necessary to invest in high growth and underserved areas.

Year of Investment

2014 was the first year of our current Three-Year Plan (2014-2016). As with previous three-yearplans, the first year is always an investment year. To strengthen our platform to drive organic growthand build a sustainable enterprise, we increased our spending on several growth initiatives such asexpanding our logistics platform, initiating Vendor Support Services to help our vendors, enhancingour existing people infrastructure to match our expanding business, as well as expanding our productcategories, and entering new geographies to build new vendor bases and customer relationships.

Performance

In 2014, global retail sales were tepid and marked by a highly promotional environment. Retail salesin the United States fared better than other regions due to higher levels of discounts and promotions,but this put pressure on margins for our customers and correspondingly on our Principal Tradingbusiness. In the closing weeks of 2014, we saw some early signs of recovery as sales in the US,aided by the sudden decline in oil prices, picked up towards the end of the Christmas selling period.Europe remained challenging. Geopolitical turmoil and the drop in oil prices had a negative impact


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on Russian and Central European consumers. That in turn has affected our European customerswho had previously relied on Russia as their fastest growing market. In addition, the advent ofquantitative easing in Europe will lead to a drop in the Euro exchange rate which may furthernegatively impact European buyers. Asia was impacted by geopolitical events in Thailand, Vietnam,China and Hong Kong, which slowed consumer spending. Given the challenging environment,turnover increased by 1% while our total margin was down 2%. As with previous three-year plans,investments made in the first year resulted in an increase in operating costs and this held true for2014 as we geared up to reach our Three- Year Plan targets. Core operating profit decreased 18%to US$604 million. Profit attributable to Shareholders (excluding the loss from Global Brands)decreased by 12% to US$539 million. The Board has resolved to declare a final dividend of 21 HKcents and a special dividend of 7 HK cents per share.

Key Challenges and Opportunities

Escalating minimum wages in China will continue to transition the production base to manufacturinghigher-value products. While the recent drop in oil and commodity prices has slowed the expectedproduction migration out of China, new frontier regions such as Myanmar and Africa have startedto develop production bases and will be competitors for future orders. As pioneers in managingglobal supply chains, we will continue to expand our global production network to help customersdiversify their production bases and, through the application of our standards and capacity-buildinginitiatives, support the sustainable development of these supply chains.

Over the course of 2014, we have been building our Vendor Support Services team to offer a newarray of services such as procurement support, compliance capabilities, product testing and tradecredit services, to our base of over 15,000 vendors. This initiative is targeted to provide services tothe vendor community, which has been an underserved market segment. These services areunderpinned by our Vendor Portal, which is the data and information center for our vendors, andhas and will continue to improve the efficiency of the whole supply chain in a data-driven manner.

The growth of e-commerce continues to accelerate and end consumers are demanding that theirbrowsing, buying and merchandise-returning needs be met in both offline and online experiences.To tackle this challenge, both the e-commerce pure plays and brick-and-mortar retailers are mergingto compete with an omni-channel strategy. We are a supply chain facilitator, regardless of ourcustomer’s selling channels. When we source products for our customers, these products are forboth online and offline distribution. The distribution centers and stores have become the main stockroom, where products are sorted for both store distribution and direct-to-consumer delivery. Overthe past decade, we have anticipated this trend and designed better means of packaging our productsbefore they leave the production regions and our e-logistics capabilities are amongst the best in theregion. We also see that online retailers would increasingly want their own private labels to capturemore value from the traffic their distribution platforms bring and to differentiate themselves from theircompetitors. In many respects, their buying requirements closely resemble those of our fast fashioncustomers. Both require supply chain providers to offer a wide variety of designs, in small order lots,with short delivery times. In this respect, we are the leading supplier for brands and private labelsin the world for our product categories.





Prospects

Entering into 2015, we are seeing some early signs of recovery in consumer spending in the USdue to improved consumer confidence and the fall in oil prices. However, the uncertainties in theEurozone mentioned above still persist and Asia poses a macro concern and headwind for the otherconsumer markets. Overall, we are cautious about 2015. We will continue to focus on growing ourtrading business organically by increasing market share with existing customers and winning newcustomers. Our logistics services will continue to grow strongly on the back of winning new mandatesfrom new customers and from cross-selling to Li & Fung’s trading customers. We will continue tonurture our Vendor Support Services business to support our suppliers to enhance operationalefficiencies, improve working conditions and innovate for systematic and sustainable change. Inclosing, I would like to thank all my colleagues for their dedication and hard work over the past year.





LOCATIONS AND SUBSIDIARIESHead Office

Li & Fung LimitedCanon’s Court22 Victoria StreetHamilton HM 12BMUhttp://www.lifung.com

Other Locations and Subsidiaries

Phil Henson GmbHLi & Fung LimitedDEU11th Floor

LiFung Tower888 Cheung Sha Wan RoadKowloonHKG

Ralsey Group LimitedPromOcean Spain SLUSAESP

Texnorte Industrial LimitedTVMania UK LimitedHKGGBR

PT Direct Sourcing IndonesiaShiu Fung Fireworks Trading (Changsha)Limited IDNCHN

Wilson Textile LimitedPromOcean France SASHKGFRA


Li & Fung LimitedLocations and Subsidiaries



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