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Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong
Limited take no responsibility for the contents of this document, 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 document.



(Incorporated in Bermuda with limited liability)
(Stock Code: 494)


CLARIFICATION ANNOUNCEMENT

This announcement is intended to clarify certain inaccurate statements in an
investment research report prepared by UBS Securities Asia Limited on
25 May 2011 relating to the Company.

This announcement is made by Li & Fung Limited (the Company) pursuant to
Rule 13.09(1) of the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited.

The Company noted an investment research report prepared by UBS Securities
Asia Limited on 25 May 2011 relating to the Company (the Report). The
Company would like to clarify that certain contents of the Report are not factually
accurate. The Company intends to clarify on the following matters:-

1. It is stated on page 11 of the Report that Under the new accounting rule,
goodwill associated with the acquired operation will not be impaired,
even when the present value of expected earnings generated by the
acquired operation is less than the amount of goodwill ; and the
new accounting rules state that any adjustment to acquisition
consideration payments will be reflected in the income statement, while
goodwill recognized will not be challenged . It is also stated on page 23
of the Report that goodwill is not tested annually for impairment or
when there are indications of impairment . These statements are all
fundamentally incorrect. Pursuant to the prevailing Hong Kong Accounting
Standard 36 Impairment of Assets, goodwill is required to be tested for
impairment annually or whenever there are indications of impairment. As
such, it is a misrepresentation to state that the Company could on one hand
recognize downward adjustment of contingent consideration as a gain in the
income statement, while the goodwill recognized could be free from test for
impairment. The Company has disclosed the relevant accounting policies in
note 1.7 of its 2010 accounts, which have been audited by
PricewaterhouseCoopers and are in full compliance with the Hong Kong
Financial Reporting Standards (HKFRS).


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2. It is stated on page 11 of the Report that New rule allows earn-outs to
earning conversion ; and L&F has recently adopted a new accounting
rule, HKFRS 3 (revised). This potentially allows companies to convert
earn-out payments to earnings . These statements are
misleading. HKFRS does not allow conversion of earn-outs to earning per
discretion of the management. In fact, requirement of HKFRS 3 (revised) is
that contingent considerations have to be accrued based on the best
estimated fair value prevailing as of the acquisition date. Any subsequent
changes in fair value of contingent consideration payable would have to be
reflected as fair value gain/loss in subsequent periods. It is also worth noting
that the adoption of HKFRS 3 (revised) is mandatory for all companies
applying HKFRS. It is not optional at the discretion of the Companys
management. The Company has disclosed the relevant accounting policies
in note 1.1 of its 2010 accounts, which have been audited by
PricewaterhouseCoopers and are in full compliance with the HKFRS.


3. It is stated on page 18 of the Report that L&F announced IDS had
cont r i but ed a l oss of US$5m based on i t s f i r st t wo mont hs'
contribution . This statement is incorrect. IDS contributed profit before tax
of approximately US$5m to the Company during the two months
post-acquisition period in 2010. The quoted US$5m loss represented only
the post-acquisition core operating result of the Logistics Business of IDS,
but not the entirety of IDS.


4. It is stated on page 16 of the Report that estimate HK$500m/
1,500m/2,500m of purchase consideration payable will be converted to
earnings in 2011/12/13 . The purchase consideration payables as of
31 December 2010 were stated at the fair value in note 27 of the Companys
2010 accounts, which have been audited by PricewaterhouseCoopers. At
this point in time, the Company is not aware of any changes in
circumstances which would result in the write back of the purchase
consideration. For this reason, it is not clear to the Company how these
estimates were arrived at.

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As at the date hereof, the Board of Directors of the Company comprises the
following Directors:-

Non-Executive Directors: Executive Directors:
Victor Fung Kwok King (Chairman) William Fung Kwok Lun (Deputy Chairman)
Paul Edward Selway-Swift* Bruce Philip Rockowitz (Chief Executive Officer)
Allan Wong Chi Yun* Spencer Theodore Fung
Franklin Warren McFarlan*
Martin Tang Yue Nien*
Benedict Chang Yew Teck

* Independent Non-executive Directors







Hong Kong, 27 May 2011


Websites: www.lifung.com
www.irasia.com/listco/hk/lifung



The Chinese version of this announcement is an unofficial translation of its English version
prepared for reference only. In case of any discrepancy between the two versions, the English
version shall prevail.
By Order of the Board
Terry WAN Mei Chow
Company Secretary