LC Logistics, Inc.

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in LC Logistics, Inc., you should at once hand this circular to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

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

LC Logistics, Inc. 樂艙物流股份有限公司 (Incorporated in the Cayman Islands with limited liability) (Stock Code: 2490)

VERY SUBSTANTIAL ACQUISITION AND CONNECTED TRANSACTION ACQUISITION OF TWO VESSELS AND

NOTICE OF THE EXTRAORDINARY GENERAL MEETING

Capitalised terms on this cover page shall have the same meanings as those defined in “Definitions” in this circular, unless the context requires otherwise.

A notice convening the EGM to be held at the conference room at East Side of Floor 7, No. 168, Yangshupu Road, Hongkou District, Shanghai, PRC on Monday, 14 October 2024 at 10:00 a.m. is set out on pages 56 to 57 of this circular. A form of proxy for use at the EGM is also enclosed. Such form of proxy is also published on the website of the Stock Exchange (www.hkexnews.hk). Whether or not you are able to attend the EGM, you are requested to complete the form of proxy in accordance with the instructions printed thereon and return it to the Company’s Hong Kong share registrar, Computershare Hong Kong Investor Services Limited, at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong, as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the EGM (i.e. before 10:00 a.m. on Saturday, 12 October 2024) or any adjournment thereof. Completion and return of the form of proxy will not preclude the Shareholders from attending and voting at the EGM or any adjournment thereof if they so wish and in such event, the proxy shall be deemed to be revoked.

23 September 2024

CONTENTS

		Page
DEFINITIONS	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM	THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
LETTER FROM	THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . .	18
LETTER FROM	THE INDEPENDENT FINANCIAL ADVISER . . . . . . . . . . . . .	20
APPENDIX I	– FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . .	33
APPENDIX II	– APPRAISAL REPORT . . . . . . . . . . . . . . . . . . . . . . . . . .	35
APPENDIX III	– EXPLANATORY NOTES TO APPRAISAL REPORT . .	45
APPENDIX IV	– GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . .	49
NOTICE OF THE EXTRAORDINARY GENERAL MEETING . . . . . . . . . . . . . .		56

– i –

DEFINITIONS

In this circular, the following expressions have the following meanings unless the context indicates otherwise:

“Acting in Concert Deed”
the acting in concert deed dated 15 October 2022 and executed by Mr. Xu Xin (許昕), Ms. Li Yan (李艷) and Ms. Liu Quanxiang (劉泉香), details of which have been disclosed in the Prospectus
“Bal Container”
Bal Container Line Co., Limited, a company incorporated in Hong Kong with limited liability
“Board”
the board of directors of the Company
“China Shipbuilding”
China Shipbuilding Trading Co., Ltd. (中國船舶工業貿易有限公司), a corporation organized and existing under the laws of the PRC
“Company”
LC Logistics, Inc. (樂艙物流股份有限公司), an exempted company incorporated in the Cayman Islands with limited liability
“connected person”
has the meaning ascribed to it under the Listing Rules
“Controlling Shareholders”
Mr. Xu Xin, Ms. Li Yan, Ms. Liu Quanxiang, Lecang Boundless Limited, Lecang Fantasy, Grand Sailing Limited, Lecang Altitude Limited, Peace Seaworld Limited, Lecang Shining Limited, Spring Wealth Limited, Lecang Flourishing Limited and Glorious Sailing Limited
“Directors”
the directors of the Company
“EGM”

the extraordinary general meeting of the Company to be convened and held for the purpose of, among other things, considering and, if thought fit, approving the Heads of Agreements and the Novation Agreements and the transactions respectively contemplated thereunder, or any adjournment thereof

“Group”
the Company and its subsidiaries

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DEFINITIONS

“Heads of Agreements”
“Hong Kong”
“Independent Board Committee”
“Independent Financial Adviser”
“Independent Shareholders”
“Independent Third Parties”
“Jiangnan Shipyard”
“Latest Practicable Date”
“Lecang Fantasy”

the two heads of agreements dated 2 September 2024, which are identical in all material respect, entered into among Lecang Fantasy and Bal Container, in relation to the novation of all rights and obligations under the Shipbuilding Agreements for the order for construction of the Vessels to Bal Container

the Hong Kong Special Administrative Region of the People’s Republic of China
an independent committee of the Board, comprising all the independent non-executive Directors, namely Dr. Gu Lin, Mr. Du Haibo, and Mr. Qi Yinliang, to advise the Independent Shareholders in respect of the Novation
Altus Capital Limited, a corporation licensed to carry out Type 4 (advising on securities), Type 6 (advising on corporate finance) and Type 9 (asset management) regulated activities under the Securities and Futures Ordinance (Chapter 571 of Laws of Hong Kong), and appointed by the Company as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Novation
independent shareholders of the Company who do not have a material interest in the Novation
individual(s) or company(ies) which, to the best of our Directors’ knowledge, information, and belief, having made all reasonable enquiries, is/are independent of the Company and its connected persons
Jiangnan Shipyard (Group) Co., Ltd. (江南造船(集團)有限責任公司), a corporation organized and existing under the laws of the PRC
20 September 2024, being the latest practicable date for ascertaining certain information referred to in this circular
Lecang Fantasy Limited, a company incorporated in the British Virgin Islands with limited liability

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DEFINITIONS

“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange “Novation” the novation of all rights and obligations under the Shipbuilding Agreements to Bal Container pursuant to the Novation Agreements “Novation Agreements” the two novation agreements dated 2 September 2024, which are identical in all material respect, entered into among Lecang Fantasy, Bal Container, China Shipbuilding and Jiangnan Shipyard in relation to the novation of all rights and obligations under the Shipbuilding Agreements for the order for construction of the Vessels to Bal Container

“PRC” the People’s Republic of China, and for the purpose of this circular only, excluding Hong Kong, the Macau Special Administrative Region of the People’s Republic of China and Taiwan
“Prospectus” the prospectus of the Company dated 13 September 2023
“RMB” Renminbi, the lawful currency of the PRC “SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

“Shandong Lcang” Shandong Lcang International Logistics Inc. Corp. Ltd (山東樂艙網國際物流股份有限公司), a company established in the PRC with limited liability “Shares” ordinary shares of the Company “Shareholder(s)” shareholder(s) of the Company “Shipbuilding Agreement(s)” the two shipbuilding agreements dated 6 June 2024, entered into among the Lecang Fantasy, China Shipbuilding and Jiangnan Shipyard in relation to the order for construction of the Vessels “Stock Exchange” The Stock Exchange of Hong Kong Limited

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DEFINITIONS

“TEU(s)”

“US$”

“Vessels”

“%”

twenty-foot equivalent unit, a standard unit of measurement of the volume of a container with a length of 20 feet, height of eight feet six inches and width of eight feet

United States dollar, the lawful currency of the United States of America

the two large container vessels, with Hull No. H2871 and Hull No. H2872 respectively, each with a capacity of 14,000 TEUs under construction as contemplated under the Shipbuilding Agreements

per cent

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LETTER FROM THE BOARD

LC Logistics, Inc. 樂艙物流股份有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 2490)

Executive Directors: Mr. Xu Xin Ms. Li Yan Ms. Zhu Jiali Mr. Yu Zhenrong

Independent Non-executive Directors: Dr. Gu Lin Mr. Du Haibo Mr. Qi Yinliang

Registered office: Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands

Headquarters and principal place of business in the PRC: 9/F, China Stone Building 37 Hong Kong Middle Road Shinan District Qingdao, Shandong Province PRC

Principal place of business in Hong Kong:

31/F., Tower Two Times Square 1 Matheson Street Causeway Bay Hong Kong

23 September 2024

To the Shareholders,

Dear Sir or Madam,

VERY SUBSTANTIAL ACQUISITION AND CONNECTED TRANSACTION ACQUISITION OF TWO VESSELS AND NOTICE OF THE EXTRAORDINARY GENERAL MEETING

INTRODUCTION

Reference is made to the announcement of the Company dated 2 September 2024 in relation to the acquisition of the Vessels. The purpose of this circular is to provide you with (i) further details of the Heads of Agreements, Novation Agreements and Shipbuilding Agreements; (ii) a letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders regarding its advice on the terms of the Heads of Agreements and the Novation Agreements; (iii) the recommendations from the Independent Board Committee to the Independent Shareholders; and (iv) a notice of the EGM.

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LETTER FROM THE BOARD

On 2 September 2024, Bal Container, a subsidiary of the Company, entered into the Heads of Agreements with Lecang Fantasy, pursuant to which, Lecang Fantasy shall novate all rights and obligations under the Shipbuilding Agreements to Bal Container pursuant to the Novation Agreements while Bal Container shall pay to Lecang Fantasy a consideration in the aggregate amount of US$57.92 million, equivalent to the First Instalment (as defined below) already been paid by Lecang Fantasy to China Shipbuilding and Jiangnan Shipyard pursuant to the terms of the Shipbuilding Agreements.

In light of the Heads of Agreements, on the same date, Bal Container, Lecang Fantasy, China Shipbuilding and Jiangnan Shipyard entered into the Novation Agreements, pursuant to which, Lecang Fantasy shall be substituted in place of Bal Container as the purchaser under the Shipbuilding Agreements and Bal Container shall take over and assume all the rights and obligations of Lecang Fantasy under the Shipbuilding Agreements.

HEADS OF AGREEMENTS

The principal terms of the Heads of Agreements are identical in all material respect, which are summarized as follows:

Date: 2 September 2024 Parties: Lecang Fantasy; and Bal Container Subject Lecang Fantasy shall novate all rights and obligations under the Matter: Shipbuilding Agreements to Bal Container pursuant to the Novation Agreements while Bal Container shall pay to Lecang Fantasy a consideration in the aggregate amount of US$57.92 million, equivalent to the First Instalment (as defined below) already been paid by Lecang Fantasy to China Shipbuilding and Jiangnan Shipyard pursuant to the terms of the Shipbuilding Agreements.

Purchase Bal Container shall pay US$57.92 million (the “ First Instalment ”) in Price: aggregate for the Vessels, representing 20% of the total purchase price contemplated under the Shipbuilding Agreements, within five banking days upon receipt by Bal Container of the refund guarantee acknowledgment (the “ Refund Guarantee Acknowledgment ”) provided by the refund guarantor (the “ Refund Guarantor ”) designated by Jiangnan Shipyard and China Shipbuilding under the Shipbuilding Agreements for the purpose of guaranteeing the refund of the First Instalment paid for the purchase of the Vessels pursuant to the Shipbuilding Agreements.

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LETTER FROM THE BOARD

The remaining instalments being US$231.68 million for the purchase of the Vessels shall be paid by Bal Container to Jiangnan Shipyard and China Shipbuilding pursuant to the terms of the Shipbuilding Agreements.

Conditions The obligations of Bal Container are conditional on the following Precedent: conditions precedent being satisfied or expressly waived in writing by the parties to the Heads of Agreements:

(i) the execution of the Heads of Agreements by Lecang Fantasy and Bal Container;
(ii) the approval by the Independent Shareholders;
(iii) due execution and effectiveness of the Novation Agreements; and
(iv) receipt by Bal Container of the Refund Guarantee Acknowledgment.

None of the conditions precedent above are waivable. As at the Latest Practicable Date, the condition precedent (i) has been fulfilled. It is expected the Heads of Agreements will be completed by the end of November 2024 after obtaining the approval from Independent Shareholders.

NOVATION AGREEMENTS

The principal terms of the Novation Agreements are identical in all material respect, which are summarized as follows:

Date: 2 September 2024 Parties: Lecang Fantasy; Bal Container; Jiangnan Shipyard; and

China Shipbuilding

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LETTER FROM THE BOARD

Subject Lecang Fantasy shall be substituted in place of Bal Container as the Matter: purchaser under the Shipbuilding Agreements and Bal Container shall take over and assume all the rights and obligations of Lecang Fantasy under the Shipbuilding Agreements. The First Instalment paid by Lecang Fantasy shall be deemed as being paid by Bal Container while the second instalment (in the amount of US$28.96 million in aggregate) (the “ Second Instalment ”), the third instalment (in the amount of US$28.96 million in aggregate) (the “ Third Instalment ”) and the fourth instalment (in the amount of US$173.76 million in aggregate) (the “ Fourth Instalment ”) and any further cost or expenses shall be paid by Bal Container pursuant to the Shipbuilding Agreements.

Subject to the terms and conditions of the Novation Agreements, Jiangnan Shipyard and China Shipbuilding shall procure the Refund Guarantor to issue the Refund Guarantee Acknowledgment in favour of Bal Container.

Guarantee: The Bal Container shall engage a first class international bank to secure its payment obligations (the “ Payment Guarantee ”) for the Second Instalment and the Third Instalment in favour of Jiangnan Shipyard and China Shipbuilding before 20 November 2024.

Conditions The Novation Agreements shall only become effective upon the Precedent: satisfaction of the following condition precedents:

(i) the execution of the Novation Agreements;
(ii) approval by the Independent Shareholders at the EGM;
(iii) receipt by Bal Container of the Refund Guarantee Acknowledgment; and
(iv) receipt by Jiangnan Shipyard and China Shipbuilding of the Payment Guarantee.

None of the conditions precedent above are waivable. As at the Latest Practicable Date, the condition precedent (i) has been fulfilled. It is expected the Novation Agreements will be completed by the end of November 2024 after obtaining the approval from Independent Shareholders.

Long Stop If, due to any reason whatsoever, any of the aforesaid condition Date: precedents fail to be fulfilled on or by 4:00 p.m. of 31 December 2024 (Beijing time) at the latest, the Novation Agreements shall become null and void and having no effect whatsoever and no party shall be liable to the other for any loss or damage (if any) whether under the Novation Agreements or under any applicable law.

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LETTER FROM THE BOARD

SHIPBUILDING AGREEMENTS

The principal terms of the Shipbuilding Agreements are identical in all material respect, which are summarized as follows:

Date: 6 June 2024

Parties: Lecang Fantasy (as purchaser);

Jiangnan Shipyard; and

China Shipbuilding (together with Jiangnan Shipyard, as seller)

Subject Jiangnan Shipyard and China Shipbuilding shall build, launch, equip Matter: and complete the Vessels with specifications as fully described in the Shipbuilding Agreements, and sell and deliver to Lecang Fantasy the Vessels after their completion and trial.

Description: Each of the Vessels is a 14,000 TEU container vessel, at scantling draft moulded of 17.0 meters. The guaranteed service speed is to be not less than 22.0 nautical miles per hour. The Vessel is to have a deadweight of not less than 155,000 metric tons at the scantling draft moulded of 17.0 meters in sea water of 1.025 specific gravity at even keel condition.

Payment: The purchase price of the Vessels is US$289.6 million in aggregate (US$144.8 million for each Vessel). The First Instalment being US$57.92 million in aggregate has been paid by Lecang Fantasy pursuant to the terms and condition of the Shipbuilding Agreements.

The Second Instalment being US$28.96 million in aggregate shall become due and payable within three banking days after the cutting of the first steel plate of the Vessels and the purchaser’s receipt of the refund guarantee provided by the refund guarantor designated by Jiangnan Shipyard and China Shipbuilding under the Shipbuilding Agreements for the purpose of guaranteeing the refund of the Second Instalment and Third Instalment to be paid for the purchase of the Vessels pursuant to the Shipbuilding Agreements.

The Third Instalment being US$28.96 million in aggregate shall become due and payable within three banking days after keel-laying of the first section of the Vessels.

The Fourth Instalment being US$173.76 million in aggregate and other cost or expenses (if any) shall become due and payable concurrently with delivery of the Vessels.

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LETTER FROM THE BOARD

Expected The Vessels shall be delivered safely afloat by Jiangnan Shipyard and delivery China Shipbuilding to the purchaser at the Jiangnan Shipyard’s date: shipyard. The Vessels are currently expected to be delivered on or before 28 February 2027.

THE CONSIDERATION

The total consideration for the acquisition of the Vessels are US$289.6 million comprising (i) US$57.92 million payable to Lecang Fantasy which is equivalent to the First Instalment paid by Lecang Fantasy to China Shipbuilding and Jiangnan Shipyard; and (ii) US$231.68 million payable to China Shipbuilding and Jiangnan Shipyard pursuant to the terms of the Shipbuilding Agreements.

The purchase price of the Vessels being US$289.6 million was determined by reference to (i) the valuation of the Vessels being approximately US$327.57 million in aggregate as at 28 February 2027 (the “ Base Date ”) (being the expected delivery date for the Vessels) (being approximately US$163.79 million for each Vessel) valued by Shanghai Gillion Assets Appraisal Co., Ltd. (“ Shanghai Gillion ”), an independent valuer by using the cost approach; and (ii) the market intelligence gathered by the Company from shipbrokers and its own analysis of recently concluded sale and purchase transactions of vessels of comparable size in the market.

Shanghai Gillion is a professional appraisal institution approved by Shanghai State Owned Assets Management Office since 1996 and holds an appraisal qualification certificate issued by the Bureau of Finance of Shanghai. It has the qualifications for various appraisal including but not limited to enterprise appraisal, real estate appraisal, intangible assets appraisal, machinery and equipment appraisal. As at the Latest Practicable Date, except for the appraisal engagement, neither Shanghai Gallion nor its appraisal team members has any personal or financial relationships with the Company and its connected persons.

There are three generally-adopted methods for appraising the asset value, namely the market approach, the income approach, and the cost approach. These three approaches measure asset value from different perspectives. Theoretically, in a perfect scenario, the results yielded by the three approaches should be nearly identical. However, due to market conditions, the purpose of the appraisal, the target being evaluated, the information available, the outcomes of these three approaches can vary significantly.

The market approach will require sufficient information and comparable transactions for determining the value of asset. However, there are very limited ultra large container vessel transactions for comparison in the market. Meanwhile, there are many factors which may affect the value of a vessel including but not limited to the age, the size, the equipment, the shipyard where the vessel was originally built and the date for next drydocking inspection. Such information is private to the transaction parties and may not be obtained by the Company for comparison purpose. Thus the market approach is not practicable for appraising the value of

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LETTER FROM THE BOARD

the Vessels. Meanwhile, as the Vessels are still under construction and no income has been generated by the Vessels in the past, the income approach is also not appropriate for appraising the value of the Vessels. By contrast, the cost approach is to inquire the market price of the target asset as at the base date. Pursuant to the cost approach, the value of asset is calculated by the sum of the replacement cost of the asset on the base date, management costs, and capital costs which is a more appropriate methodology for appraisal of the Vessels under the construction. The key assumptions (the “ Assumptions ”) for appraising the value of the Vessels include (i) the Vessels can be completed and delivered according to the schedule; and (ii) the cost standard, interest rate, exchange rate and tax rate as of the Base Date is consistent with that on the date of the appraisal report (the “ Appraisal Report ”) prepared by Shanghai Gillion. When considered the fairness and reasonableness of the Assumptions, the Board has (i) been maintaining an engaged and critical attitude towards the Appraisal Report; and (ii) reviewed the Appraisal Report and inquired with Shanghai Gillion to satisfy itself about the valuation, the cost approach adopted and the Assumptions. As disclosed in Appendix III to this circular, pursuant to the cost approach, the value of Vessel is equal to the sum of (i) the replacement cost of the Vessel on the Base Date; (ii) management costs; and (iii) capital costs. The replacement costs of the Vessel are calculated based on the cost standard, interest rate, exchange rate and tax rate. As the Base Date is a future date and it would be unpractical to expect the cost standard, interest rate, exchange rate and tax rate of a future date, it is fair and reasonable to assume such cost standard, interest rate, exchange rate and tax rate as of the Base Date should be consistent with that on the date of the Appraisal Report for the purpose of calculating the replacement cost of the Vessel. Meanwhile, as the management costs and capital costs are correlated with the length of the delivery schedule, the assumption that the Vessels can be completed and delivered according to the schedule is critical for the calculation of management costs and capital costs. After considering the factors above, the Board understands that the Assumptions are general market practice and frequently adopted by valuers for the cost approach for the asset value appraisal, thus the Board is of the view that the Assumptions are fair and reasonable for the appraisal of the Vessles.

Having reviewed the Appraisal Report as set out in Appendix II to this circular and the analysis (including the Explanatory Notes to Appraisal Report as set out in Appendix III to this circular) prepared by Shanghai Gillion, the Board is of view that valuation (including the cost approach and relevant multiples adopted) is fair and reasonable. The Board understand that Clarksons Research is a world-leading shipping and offshore research and consulting company, offering comprehensive data, analysis, and consulting services. Considering that the research arm of Clarksons Research comprises more than 150 experts with over 10,000 platform users, including leading organisations across the maritime sector, the Board is of the view that the research report of Clarksons as mentioned in Appendix III to this circular is authoritative and reliable.

The market intelligence mentioned above are gathered by the Company from market reports (the “ Market Reports ”) issued from time to time by prestigious shipbrokers with worldwide presence including Clarksons and MB Shipbrokers. The Company has referred to the recent containership newbuilding price assessment data in the Market Reports, according

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LETTER FROM THE BOARD

to which, during April 2024 to July 2024, the worldwide newbuilding price for containership with a size of 13,000 TEU to 15,000 TEU are ranging from US$148.5 million to US$173 million (the “ Comparable Quotations ”).

Clarksons is a shipbroking group in London and operates throughout the worldwide. Clarksons also provides research services and is a market leader in providing timely and authoritative information in all aspects of shipping. By leveraging its global presence, Clarksons’ intelligence covers over 150,000 vessels worldwide. MB Shipbrokers is a professional shipbrokers company specializing in providing buying, selling, chartering and ship management services to the global shipping industry. MB Shipbrokers has an extensive market network and deep industry knowledge, and is committed to providing customers with personalized solutions to meet their diverse needs in ship transactions. Compared with Clarksons, MB Shipbrokers is more active in the field of ship buying and selling, whose reports can quickly reflect the latest developments in the market. Meanwhile, MB Shipbrokers has a good professionalism in specific areas research especially transaction of ultra-large containership in Asian-Pacific. After considering the factors above, the Board is of the view that despite the Comparable Quotations may not be exhaustive, the intelligence as contained in the Market Reports is representative and authoritative. After considering the Appraisal Report as set out in Appendix II to this circular (including the Explanatory Notes to Appraisal Report as set out in Appendix III to this circular), the Comparable Quotations as contained in the Market Reports and the factors above, the Board is of the view that the purchase price of the Vessels under the Shipbuilding Agreements is fair and reasonable.

It is currently expected that 30% of the purchase price for the Vessels being US$86.88 million will be satisfied by internal resources of the Company including the profit generated from the operation of the Group and 70% of the purchase price being US$202.72 million will be satisfied by the external financing. The Company will pay the First Instalment by using its internal resources. According to the current schedule, the Second Instalment is expected to be paid by the Company around June 2025 which is still remote, thus the Company has not commenced the obtaining of external financing as at the Latest Practicable Date. The Company confirms it will not use the proceeds from its listing on the Stock Exchange to settle the purchase price of the Vessels.

THE TWO VESSELS

As the Vessels are still under construction pursuant to the Shipbuilding Agreements, no net profits were attributable to the Vessels. The unaudited net book value of the Vessels as at 31 July 2024 is expected to be US$57.92 million, which is equivalent to the First Instalment paid by Lecang Fantasy to Jiangnan Shipyard and China Shipbuilding pursuant to the Shipbuilding Agreements as at the Latest Practicable Date.

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LETTER FROM THE BOARD

FINANCIAL EFFECT OF THE NOVATION

The Group’s current assets will be decreased by approximately US$86.88 million, being approximately 30% of the total consideration to be paid for the Vessels from bank and cash balance, and the Group’s total liabilities will be increased by approximately US$202.72 million, being the remaining consideration to be paid for the Vessels from external financing. Upon delivery of the two Vessels, it is expected that the Group’s non-current assets will be increased by approximately US$289.60 million, being the recognition of the Vessels as property, plant and equipment. The consideration for the purchase of the Vessels will be paid pursuant to the Shipbuilding Agreements.

Upon the completion and delivery, the Vessels are expected to generate recurring time charter income or cross border logistics service income which will be recorded as revenue of the Group and the relevant shipping related expense and depreciation will be recorded as expenses of the Group.

REASONS FOR AND BENEFITS OF THE NOVATION

The Group is an integrated cross-border seaborne logistics service provider in the PRC. The Group currently operates a self-owned fleet of vessels. In the past years, the Group generally utilized its shipping capacity in time charter services after securing sufficient shipping capacity for its integrated cross-border logistics services, with reference to market conditions and charter rates. The Group may adjust its allocation of shipping resources between two business lines based on market conditions from time to time.

Purchasing ultra large vessels has a high entry barrier as the capable shipbuilders is limited and any order for construction will subject to the capacity of the shipbuilders. A buyer needs to have strong overall credibility and competency to operate vessels at this level of capacity. The Novation represents a good opportunity for the Group to further expand its fleet of vessels, achieve economies of scale and enhance its competitiveness and profitability.

Given the Group’s experience in operating deep-sea routes, the Directors believe the Vessels will be able to supplement its existing fleet of vessels and allow the Group to significantly reduce its cost of sales per TEU, offer a competitive price to its customers and improve its sustainability in light of the current volatile market conditions. When demand for cross-border logistics services is high, the Group may deploy the Vessels to a variety of major routes to provide self-operated cross-border logistics service. When the market condition is fluctuating, the Group may consider chartering out the Vessels to maintain stable profitability due to their good adaptability and economies of scale.

The Company is actively looking for direct and/or indirect investment opportunity to optimize its industrial layout and is currently conducting negotiation on investment in upstream and downstream industry which is supplemental to the business of the Group. As at the Latest Practicable Date, no legally binding agreement or undertaking which is required to be disclosed pursuant to the Listing Rules or applicable law has been entered into by the Group. As the

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LETTER FROM THE BOARD

negotiation is still at the preliminary stage, it is not practicable to estimate the expected timeline and the above may or may not be proceeded after further negotiation. The Company confirms that it will comply with the Listing Rules requirements upon any commitment which triggers the announcement and/or shareholders’ approval requirements under Chapter 14 of the Listing Rules. Save as disclosed above, as at the Latest Practicable Date, the Company has not entered into any arrangement, agreement, undertaking and negotiation for any acquisition of new business and/or disposal of existing business.

As at the Latest Practicable Date, the Board is not aware of any disadvantages of the Novation for the Company. In view of the above, the Directors (including the independent non-executive Directors) whose views have been set out in the “Letter from the Independent Board Committee” to this circular consider that, the Heads of Agreements and the Novation Agreements are not entered in the ordinary and usual course of business of the Group but the terms of which are on normal commercial terms and are fair and reasonable, in the interests of the Company and the Shareholders as a whole.

INFORMATION ON THE GROUP AND THE PARTIES TO THE HEADS OF AGREEMENTS, NOVATION AGREEMENTS AND SHIPBUILDING AGREEMENTS

Information on the Group and Bal Container

The Group is an integrated cross-border seaborne logistics service provider in the PRC, the Shares of which are listed on the Main Board of the Stock Exchange.

Bal Container is a company incorporated in Hong Kong with limited liability and is principally engaged in the provision of cross-border transportation services. Bal Container is indirectly wholly-owned by Shandong Lcang. Shandong Lcang is a company established in the PRC with limited liability and is principally engaged in the provision of cross-border transportation services. Shandong Lcang is an approximately 99%-owned subsidiary of the Company and the remaining approximately 1% equity interests of Shandong Lcang is indirectly held by 40 shareholders, each of whom is an Independent Third Party save for Mr. Zhao Chengbin (趙成斌) who is uncle in law of Ms. Zhu Jiali (an executive Director) and indirectly held less than 0.5% of the total equity interests of Shandong Lcang as at the Latest Practicable Date.

Information on Lecang Fantasy

Lecang Fantasy, a company incorporated in the British Virgin Islands with limited liability and is principally engaged in the investment holding. As at the Latest Practicable Date, Lecang Fantasy is indirectly wholly owned by Mr. Xu Xin, an executive Director and one of the Controlling Shareholder. Thus, Lecang Fantasy is a connected person of the Company under Chapter 14A of the Listing Rules.

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LETTER FROM THE BOARD

Information on China Shipbuilding and Jiangnan Shipyard

China Shipbuilding is a corporation organized and existing under the laws of the PRC and is principally engaged in the trading of ships and related equipment. China Shipbuilding is indirectly wholly-owned by State-owned Assets Supervision and Administration Commission of the State Council (國務院國有資產監督管理委員會) in the PRC.

Jiangnan Shipyard is a corporation organized and existing under the laws of the PRC and is principally engaged in the construction of ships. Jiangnan Shipyard is a wholly-owned subsidiary of China CSSC Holdings Limited (中國船舶工業股份有限公司), a company listed on Shanghai Stock Exchange (Stock Code: 600150).

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, China Shipbuilding, Jiangnan Shipyard and their ultimate beneficial owners are Independent Third Parties.

LISTING RULES IMPLICATIONS

The transactions contemplated under the Heads of Agreements and the Novation Agreements will constitute an acquisition of the Vessels by the Group. As one or more of the applicable percentage ratios in respect thereof exceeds 100%, the transactions contemplated under the Heads of Agreements and the Novation Agreements constitute a very substantial acquisition for the Company and is subject to the reporting and announcement, circular and shareholders’ approval requirements under Chapter 14 of the Listing Rules.

As at the Latest Practicable Date, Lecang Fantasy being a company indirectly wholly owned by Mr. Xu Xin, an executive Director and one of the Controlling Shareholder, is a connected person of the Company under the Listing Rules. The transactions contemplated under the Heads of Agreements and the Novation Agreements also constitute a connected transaction for the Company under Chapter 14A of the Listing Rules. As one or more of the applicable percentage ratios in respect thereof exceed 5%, the transactions contemplated under the Heads of Agreements and the Novation Agreements are subject to the reporting, annual review, announcement, circular (including independent financial advice) and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

BOARD APPROVAL

At the Board meeting held to approve the Heads of Agreements and the Novation Agreements, Mr. Xu Xin and Ms. Li Yan, who have material interests in the Novation, have abstained from voting on the relevant Board resolution. Apart from Mr. Xu Xin and Ms. Li Yan, none of the Directors has or is deemed to have a material interest in the Heads of Agreements and the Novation Agreements and is required to abstain from voting on the relevant Board resolution approving the Heads of Agreements and the Novation Agreements.

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LETTER FROM THE BOARD

CLOSURE OF REGISTER OF MEMBERS

For the purpose of determining the Independent Shareholders’ eligibility to attend and vote at the EGM, the register of members of the Company will be closed from Tuesday, 8 October 2024 to Monday, 14 October 2024 (both days inclusive), during which period no transfer of Shares will be registered. In order to qualify for attending and voting at the EGM, all share transfer documents accompanied by the relevant share certificates must be lodged with the Company’s Hong Kong share registrar, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong, no later than 4:30 p.m. on Monday, 7 October 2024.

NOTICE OF EXTRAORDINARY GENERAL MEETING

Set out on pages 56 to 57 of this circular is the notice of EGM at which, inter alia, ordinary resolution will be proposed to Independent Shareholders to consider and approve, among others, the acquisition of the Vessels.

FORM OF PROXY

A form of proxy for use at the EGM is enclosed. Such form of proxy is also published on the website of the Stock Exchange (www.hkexnews.hk). Whether or not you intend to attend the EGM, you are requested to complete the form of proxy in accordance with the instructions printed thereon and return it to the Company’s Hong Kong share registrar, Computershare Hong Kong Investor Services Limited, at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong, as soon as possible but in any event not less than 48 hours before the time fixed for the holding of the EGM (i.e. before 10:00 a.m. on Saturday, 12 October 2024) or any adjournment thereof.

Completion and return of the form of proxy will not preclude you from attending and voting at the EGM or any adjournment thereof should you so wish and in such event, the proxy shall be deemed to be revoked.

VOTING BY WAY OF POLL

Pursuant to Rule 13.39(4) of the Listing Rules, any vote of shareholders at a general meeting must be taken by poll except where the chairman of the general meeting, in good faith, decides to allow a resolution which relates purely to a procedural or administrative matter to be voted on by a show of hands. Accordingly, the resolution set out in the notice of EGM will be taken by way of poll. The Controlling Shareholders, who together directly holds 158,553,294 Shares, representing approximately 55.39% of the entire issued share capital of the Company shall abstain from voting on the proposed resolution approving the Heads of Agreements and the Novation Agreements and the transactions contemplated thereunder at the EGM. The Independent Board Committee comprising all the independent non-executive Directors has been formed to advise the Independent Shareholders on the terms of Heads of Agreements and the Novation Agreements and the transactions contemplated thereunder. The Independent Financial Adviser has been appointed to advise the Independent Board Committee

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LETTER FROM THE BOARD

and the Independent Shareholders on the terms of the Heads of Agreements and the Novation Agreements and the transactions contemplated thereunder. As at the Latest Practicable Date, to the best of Directors’ knowledge, information and belief after having made all reasonable enquiries, save for the Controlling Shareholders, none of the other Shareholders has a material interest in the Heads of Agreements and the Novation Agreements and the transactions contemplated thereunder and is required to abstain from voting on the relevant resolution in the EGM.

RECOMMENDATION

The Independent Board Committee (comprising all the independent non-executive Directors) has been formed to advise the Independent Shareholders on the terms of the Heads of Agreements and the Novation Agreements. Having taken into account the terms of the Heads of Agreements and the Novation Agreements, the information provided in the “Letter from the Board” and the “Letter from the Independent Financial Adviser”, the Independent Board Committee considers that the entering of the Heads of Agreements and the Novation Agreements are not in the ordinary and usual course of business of the Group, but the terms contemplated thereunder are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned, and are in the interests of the Company and the Independent Shareholders as a whole. Accordingly, the Independent Board Committee recommends the Independent Shareholders to vote in favour of the ordinary resolution in relation to the Heads of Agreements and the Novation Agreements and the transactions contemplated thereunder to be proposed at the EGM.

ADDITIONAL INFORMATION

Your attention is drawn to the letter from the Independent Board Committee as set out on pages 18 to 19 of this circular which contains its recommendations to the Independent Shareholders in respect of the terms of the Heads of Agreements and the Novation Agreements. Your attention is also drawn to the letter of advice from the Independent Financial Adviser which contains, amongst other matters, its advice to the Independent Board Committee and the Independent Shareholders. The letter from the Independent Financial Adviser is set out on pages 20 to 32 of this circular.

Your attention is also drawn to the appendices of this circular.

Yours faithfully, By order of the Board LC Logistics, Inc. Mr. Xu Xin

Chairman of the Board

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

The following is the text of the letter of recommendations, prepared for the purpose of incorporation in the circular, from the Independent Board Committee to the Independent Shareholders regarding the terms of the Heads of Agreements and the Novation Agreements and the transactions contemplated respectively thereunder.

LC Logistics, Inc. 樂艙物流股份有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 2490)

23 September 2024

To the Independent Shareholders

Dear Sir or Madam,

VERY SUBSTANTIAL ACQUISITION AND CONNECTED TRANSACTION ACQUISITION OF TWO VESSELS

We refer to the circular of the Company to the Shareholders dated 23 September 2024 (the “ Circular ”), in which this letter forms a part. Unless the context requires otherwise, capitalized terms used in this letter will have the same meanings given to them in the section headed “Definitions” of the Circular.

We have been authorised by the Board to form the Independent Board Committee to advise the Independent Shareholders on whether the terms of the Heads of Agreements and the Novation Agreements are fair and reasonable so far as the Independent Shareholders are concerned.

We wish to draw your attention to the letter of advice from Altus Capital Limited, the Independent Financial Adviser appointed to advise the Independent Board Committee and the Independent Shareholders on the terms of the Heads of Agreements and the Novation Agreements as set out on page 20 to 32 of the Circular and the letter from the Board as set out on pages 5 to 17 of the Circular.

Having considered, among other matters, the factors and reasons considered by, and the opinion of the Independent Financial Adviser as stated in its letter of advice, we consider that the entering of the Heads of Agreements and the Novation Agreements are not in the ordinary and usual course of business of the Group, but the terms of the Heads of Agreements and the Novation Agreements are on normal commercial terms, are fair and reasonable and in the

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolution in relation to the Heads of Agreements and the Novation Agreements and the transactions contemplated thereunder to be proposed at the EGM.

Yours faithfully, For and on behalf of

Independent Board Committee

Dr. Gu Lin

Mr. Du Haibo

Mr. Qi Yinliang

Independent non-executive Directors

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the text of a letter of advice from Altus Capital Limited to the Independent Board Committee and the Independent Shareholders in respect of the Heads of Agreements and the Novation Agreements, which has been prepared for the purpose of incorporation in the Circular.

Altus Capital Limited 21 Wing Wo Street Central Hong Kong

23 September 2024

To the Independent Board Committee and the Independent Shareholders

9/F, China Stone Building 37 Hong Kong Middle Road Shinan District Qingdao, Shandong Province PRC

Dear Sir and Madam,

VERY SUBSTANTIAL ACQUISITION AND CONNECTED TRANSACTION ACQUISITION OF TWO VESSELS

INTRODUCTION

We refer to our appointment as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Heads of Agreements and the Novation Agreements. The details are set out in the “Letter from the Board” contained in the circular of the Company dated 23 September 2024 (the “ Circular ”), of which this letter forms part. Terms used in this letter shall have the same meanings as those defined in the Circular unless otherwise defined herein or required by the context.

On 2 September 2024, Bal Container entered into the Heads of Agreements with Lecang Fantasy pursuant to which, Lecang Fantasy shall novate all rights and obligations under the Shipbuilding Agreements to Bal Container pursuant to the Novation Agreements while Bal Container shall pay to Lecang Fantasy a consideration in the aggregate amount of US$57.92 million, equivalent to the First Instalment (as defined below) already been paid by Lecang Fantasy to China Shipbuilding and Jiangnan Shipyard pursuant to the terms of the Shipbuilding Agreements.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

LISTING RULES IMPLICATIONS

THE INDEPENDENT BOARD COMMITTEE

The Independent Board Committee comprising all the independent non-executive Directors, namely Dr. Gu Lin, Mr. Du Haibo and Mr. Qi Yinliang, has been formed to advise the Independent Shareholders as to (i) whether the terms of the Heads of Agreements and the Novation Agreements and the transactions contemplated thereunder are fair and reasonable; (ii) whether the entering into of the Heads of Agreements and the Novation Agreements are on normal commercial terms, in the ordinary and usual course of business of the Group and in the interests of the Company and the Shareholders as a whole; and (iii) how the Independent Shareholders should vote in respect of the resolution related thereto to be proposed at the EGM, after taking into account the recommendation from the Independent Financial Adviser.

THE INDEPENDENT FINANCIAL ADVISER

As the Independent Financial Adviser, our role is to give an independent opinion to the Independent Board Committee and the Independent Shareholders as to (i) whether the terms of the Heads of Agreements and the Novation Agreements and the transactions contemplated thereunder are fair and reasonable; (ii) whether the entering into of the Heads of Agreements and the Novation Agreements are on normal commercial terms, in the ordinary and usual course of business of the Group and in the interests of the Company and the Shareholders as a whole; and (iii) how the Independent Shareholders should vote in respect of the resolution related thereto to be proposed at the EGM.

We have not acted as the independent financial adviser or financial adviser in relation to any transactions of the Company or provided any other service(s) to the Company in the last two years prior to the date of the Circular. Pursuant to Rule 13.84 of the Listing Rules, and given that remuneration for our engagement to opine on the terms of the Heads of Agreements and the Novation Agreements and the transactions contemplated thereunder is at market level and not conditional upon successful passing of the resolution to be proposed at the EGM, and that our engagement is on normal commercial terms, we are independent of the Company.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

BASIS OF OUR ADVICE

In formulating our opinion, we have reviewed, amongst others, (i) the Heads of Agreements; (ii) the Novation Agreements; (iii) the Shipbuilding Agreements; (iv) the appraisal report (the “ Appraisal Report ”) and explanatory notes to appraisal report of the Vessels as set out in Appendices II and III to the Circular respectively; (v) the interim results announcement of the Company for the six months ended 30 June 2024 (the “ 2024 Interim Results Announcement ”); (vi) the annual report of the Company for the year ended 31 December 2023 (the “ 2023 Annual Report ”); and (vii) other information as set out in the Circular.

We have also relied on the statements, information, opinions and representations contained or referred to in the Circular and/or provided to us by the Company, the Directors and the management of the Company (the “ Management ”). We have assumed that all the statements, information, opinions and representations contained or referred to in the Circular and/or provided to us were true, accurate and complete at the time they were made and will continue to be so up to the date of the EGM. The Directors collectively and individually accept full responsibility, including particulars given in compliance with the Listing Rules for the purpose of giving information with regards to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief, the information contained in the Circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other facts the omission of which would make any statement in the Circular misleading.

We have no reason to believe that any statements, information, opinions or representations relied on by us in forming our opinion is untrue, inaccurate or misleading, nor are we aware of any material facts the omission of which would render the statements, information, opinions or representations provided to us untrue, inaccurate or misleading.

We consider that we have been provided with, and have reviewed, sufficient information to reach an informed view and to provide a reasonable basis for our opinion. We have not, however, conducted any independent investigation into the business, financial conditions and affairs or future prospects of the Group.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Background information of the Group and Bal Container

1.1 Principal business of the Group and Bal Container

The Group is an integrated cross-border seaborne logistics service provider in the PRC, the Shares of which are listed on the Main Board of the Stock Exchange.

1.2 Financial information of the Group

Set out below is a summary of financial information of the Group extracted from the 2023 Annual Report and 2024 Interim Results Announcement.

	For the year ended	For the year ended	For the six months	For the six months
	31 December		ended	30 June
	2022	2023	2023	2024
	(“FY2022”)	(“FY2023”)	(“1H2023”)	(“1H2024”)
	RMB’000	RMB’000	RMB’000	RMB’000
	(audited)	(audited)	(unaudited)	(unaudited)
Revenue	4,607,929	1,238,471	655,843	754,238
Cross-border logistics
services	4,389,175	996,654	498,196	689,020
Time charter services	218,754	218,233	152,230	40,343
Others	–	23,584	5,417	24,875
Profit for the year/period	386,307	119,587	105,055	12,806

FY2023 vs FY2022

The Group derives its revenue from (i) cross-border logistics services; (ii) time charter services; and (iii) others, being the trading of import goods under the Group’s supply chain solution services, which commenced in February 2023. Cross-border logistics services and time charter services contributed to approximately 80.5% and 17.6% of the Group’s total revenue for the year ended 31 December 2023 respectively. The substantial decrease in revenue from approximately RMB4.6 billion in FY2022 to RMB1.2 billion in FY2023 was mainly due to (i) a decrease in average price per TEU from RMB12,300 for FY2022 to RMB4,000 for FY2023 as a result of decrease in market freight rates, as well as the decrease in provision of self-operating cross border logistics services during the year; and (ii) a decrease in service volume from 355,663 TEUs in FY2022 to 233,903 TEUs in FY2023. As a consequence, the Group’s profit for the year decreased from approximately RMB386.3 million in FY2022 to RMB119.6 million in FY2023.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

1H2024 vs 1H2023

The increase in the Group’s revenue from approximately RMB655.8 million in 1H2023 to RMB754.2 million in 1H2024 was mainly attributable to an increase in revenue generated from cross-border logistics services from approximately RMB498.2 million in 1H2023 to RMB689.0 million in 1H2024 due to (i) an increase in average price per TEU from RMB3,985.3 in 1H2023 to RMB4,402.0 in 1H2024; (ii) an increase in service volume from 118,656 TEUs for 1H2023 to 140,355 TEUs for 1H2024, favored by the market conditions; (iii) the commencement of the overseas warehousing business; and (iv) the commencement of the break bulk cargo shipping route between China and Africa.

However, the Group’s cost of sales also substantially increased by approximately 35.2% as a result of increased costs in relation to bunker costs, vessel chartering costs, port charges, freight fees etc. In addition, the Group’s gross profit margin decreased from approximately 22.6% in 1H2023 to 9.0% in 1H2024 due to the decrease in average daily charter rate charge by the Group for the time charter services, from RMB179,100.4 in 1H2023 to RMB81,865.7 in 1H2024. Alongside with an increase in administrative fee of approximately 57.0%, from approximately RMB29.1 million in 1H2023 to RMB45.7 million in 1H2024 due to the increase in consulting fees, salaries and welfare expenses, the Group recorded a decrease in profit for the period from approximately RMB105.1 million in 1H2023 to RMB12.8 million in 1H2024.

1.3 Outlook and strategy of the Group

In order to further expand its capacity in respect of cargo pick-up and sorting, customs clearance, warehouse transit and last-mile delivery, the Group has commenced the overseas warehousing business during 1H2024.

In the second half of 2024, the performance of cross-border seaborne transportation provided by third parties is expected to improve compared to the first half of the year because the second half of the year is the traditional peak season for China-Americas and China-Europe shipping routes, as overseas countries are to prepare for the Christmas and New Year holidays, and the traditional peak season for the China-Asia shipping routes is the fourth quarter and before Chinese New Year. For time charter services, with the general increase in market charter rates in 2024, it is expected that the performance of time charter services will improve in the second half of 2024.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

2. Background information of Lecang Fantasy and the Vessels

2.1 Information of Lecang Fantasy

Lecang Fantasy, a company incorporated in the British Virgin Islands with limited liability and is principally engaged in the investment holding.

2.2 Information of the Vessels

Jiangnan Shipyard and China Shipbuilding shall build, launch, equip and complete the Vessels with specifications as fully described in the Shipbuilding Agreements. Each of the Vessels is a 14,000 TEU container vessel, at scantling draft moulded of 17.0 meters. The guaranteed service speed is to be not less than 22.0 nautical miles per hour. The Vessel is to have a deadweight of not less than 155,000 metric tons at the scantling draft moulded of 17.0 meters in sea water of 1.025 specific gravity at even keel condition.

3. Principal terms of the Heads of Agreements and the Novation Agreements

Major terms of the Heads of Agreements and the Novation Agreements are set out below. Please refer to the “Letter from the Board” of the Circular for further details.

3.1 Principal terms of the Heads of Agreements

Date: 2 September 2024 Parties: (i) Lecang Fantasy; and (ii) Bal Container Subject matter: Lecang Fantasy shall novate all rights and obligations under the Shipbuilding Agreements to Bal Container pursuant to the Novation Agreements while Bal Container shall pay to Lecang Fantasy a consideration in the aggregate amount of US$57.92 million, equivalent to the First Instalment already been paid by Lecang Fantasy to China Shipbuilding and Jiangnan Shipyard pursuant to the terms of the Shipbuilding Agreements.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Purchase price: Bal Container shall pay US$57.92 million (the “ First Instalment ”) in aggregate for the Vessels, representing 20% of the total purchase price contemplated under the Shipbuilding Agreements, within five banking days upon receipt by Bal Container of the refund guarantee acknowledgment (the “ Refund Guarantee Acknowledgment ”) provided by the refund guarantor (the “ Refund Guarantor ”) designated by Jiangnan Shipyard and China Shipbuilding under the Shipbuilding Agreements for the purpose of guaranteeing the refund of the First Instalment paid for the purchase of the Vessels pursuant to the Shipbuilding Agreements. The remaining instalments being US$231.68 million for the purchase of the Vessels shall be paid by Bal Container to Jiangnan Shipyard and China Shipbuilding pursuant to the terms of the Shipbuilding Agreements.

3.2 Principal terms of the Novation Agreements

Date: 2 September 2024

Parties: (i) Lecang Fantasy;

(ii) Bal Container;

(iii) Jiangnan Shipyard; and
(iv) China Shipbuilding

Subject matter: Lecang Fantasy shall be substituted in place of Bal Container as the purchaser under the Shipbuilding Agreements and Bal Container shall take over and assume all the rights and obligations of Lecang Fantasy under the Shipbuilding Agreements. The First Instalment paid by Lecang Fantasy shall be deemed as being paid by Bal Container while the second instalment (in the amount of US$28.96 million in aggregate) (the “ Second Instalment ”), the third instalment (in the amount of US$28.96 million in aggregate) (the “ Third Instalment ”) and the fourth instalment (in the amount of US$173.76 million in aggregate) (the “ Fourth Instalment ”) and any further cost or expenses shall be paid by Bal Container pursuant to the Shipbuilding Agreements.

Guarantee: The Bal Container shall engage a first class international bank to secure its payment obligations (the “ Payment Guarantee ”) for the Second Instalment and the Third Instalment in favour of Jiangnan Shipyard and China Shipbuilding before 20 November 2024.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Overall, the entering into of the Heads of Agreements and Novation Agreements essentially enables the Group to acquire the Vessels at a total consideration of US$289.60 million. We understand that the Group currently expects that 30% of the purchase price for the Vessels being US$86.88 million will be satisfied by internal resources of the Company and 70% of the purchase price being US$202.72 million will be satisfied by the external financing. The Company will pay the First Instalment by using its internal resources. According to the current schedule, the Second Instalment is expected to be paid by the Company by June 2025 which is still remote, thus the Company has not commenced the obtaining of external financing as at the Latest Practicable Date.

When assessing the fairness and reasonableness of the purchase price of the Vessels, we have in particular considered the Appraisal Report as discussed in the paragraph headed “3.3 Valuation of the Vessels” below.

3.3 Valuation of the Vessels

We note that Shanghai Gillion Assets Appraisal Co., Ltd. (the “ Shanghai Gillion ”) has been engaged to issue the Appraisal Report in relation to the market value of the Vessels. According to the Appraisal Report, the details of which are set out in Appendix II to the Circular, the valuation of the Vessels amounted to approximately US$327.57 million (the “ Appraised Value ”) in aggregate as at 28 February 2027 (the “ Base Date ”), being the expected delivery date of the Vessels. The purchase price of the Vessels as stipulated under the Heads of Agreements of US$289.60 million in total (i.e. First Installment of US$57.92 million and the remaining instalments of US$231.68 million) represents an approximate 11.6% discount to the Appraised Value.

We have considered the following factors in assessing the fairness and reasonableness of the Appraised Value.

3.3.1 Shanghai Gillion’s qualification

We have conducted an independent interview with Shanghai Gillion where we have enquired, and Shanghai Gillion has confirmed, its independence from the Company. In addition to Shanghai Gillion’s firm wide experience and expertise, we have obtained relevant qualifications and credentials of the specific team members involved in this appraisal exercise.

We note that the key personnel of Shanghai Gillion responsible for signing the Appraisal Report have obtained the professional qualification certificates for asset appraisal issued by the China Appraisal Society. We also note that Shanghai Gillion is a professional appraisal institution approved by Shanghai State Owned Assets Management Office since 1996 and holds an appraisal qualification certificate issued by the Bureau of Finance of Shanghai. It possess a wide range of qualifications for appraisal including enterprise appraisal, real estate appraisal, intangible assets appraisal, machinery and equipment appraisal. We note that Shanghai Gillion has been appointed as valuer by a number of state owned enterprises in the PRC as well as listed companies. We have also obtained and reviewed the terms of the engagement of Shanghai

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Gillion as well as due diligence exercise conducted by Shanghai Gillion in preparing the Appraisal Report and noted that the scope of work is appropriate to the assessment required to be given and we are not aware of any limitation on the scope of work which might have an adverse impact on the degree of assurance given by the Appraisal Report.

Based on the above, we are satisfied that Shanghai Gillion is qualified to give the opinion as set out in the Appraisal Report having taken into account its relevant experience and expertise, its independence, and its scope of work.

3.3.2 Valuation methodology

We note that Shanghai Gillion, having considered the suitability of three valuation methodologies, being market approach, income approach and cost approach, has adopted the cost approach in conducting valuation of the Vessels. We have discussed with Shanghai Gillion with regards to its rationale for adopting the cost approach as follows:

(i) Market approach : the market approach provides an indication of value by comparing the subject asset to similar assets that have been sold in the market, with appropriate adjustments for the differences between the subject asset and the assets that are considered to be comparable to the subject asset. Assets for which there is an established secondary market may be valued by this approach. We understand that Shanghai Gillion has not adopted the market approach due to the scarcity of public transactions involving assets similar to the Vessels in the market; therefore, there is insufficient data available for such analysis.
(ii) Income approach : the income approach involves converting the expected periodic benefits of ownership into an indication of value. It is based on the principle that an informed buyer would pay no more for the asset than an amount equal to the present value of anticipated future benefits (income) from the same or a substantially similar asset with a similar risk profile. We understand that Shanghai Gillion has not adopted the income approach due to the Vessels being in a construction state, where it is difficult to reasonably predict their expected return and may rely on inputs that are unobservable and subjective.
(iii) Cost approach : the cost approach considers the cost to reproduce or replace in new condition the assets appraised in accordance with current market prices for similar assets, with allowance for accrued depreciation arising from condition, utility, age, wear and tear, or obsolescence (physical, functional or economical). The underlying theory of cost approach is that the asset should, at least, be valued at the replacement cost of the remaining service potential of the asset being appraised. We understand that Shanghai Gillion, having considered (i) the Vessels are still in a construction state; and (ii) the limitations of the market and income approaches as discussed above, the cost approach has been adopted.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Having considered the above and Shanghai Gillion’s rationale for not adopting the market and income approaches that has been explained in the Appraisal Report, we concur with Shanghai Gillion that the cost approach is the most appropriate for valuing the Vessels, in particular, having considered that the Vessels are in a construction state, where there is limited relevant sales evidence available for such ultra large vessels and there is insufficient objective supporting data in compiling operational information and long-term financial projects of such vessels.

3.3.3 Basis and assumptions

Shanghai Gillion’s valuation is conducted in accordance with the applicable valuation standards, including but not limited to, the Asset Appraisal Law of the People’s Republic of China[1] (中華人民共和國資產評估法), the Basic Standards for Asset Appraisal[1] (Capital (2017) No. 43) (資產評估基本準則(財資(2017)43號)), and other relevant laws, rules, standards and regulations in the PRC. We understand that the Appraised Value was determined subject to certain general valuation assumptions, such as no significant adverse changes in the external economic environment, including relevant national laws, macroeconomic, financial and industrial policies. We have discussed with Shanghai Gillion and understand that these assumptions are commonly adopted for valuing assets of similar type and nature. Having reviewed the assumptions, we are of the view that the assumptions adopted by Shanghai Gillion are fair and reasonable.

When applying the cost approach, we note that Shanghai Gillion has adopted the following formula to derive the Appraised Value:

Appraisal date replacement cost + Management costs + Capital costs

In assessing the fairness and reasonableness of the valuation basis adopted by Shanghai Gillion, we have considered the follow aspects:

Appraisal date replacement cost

In assessing the replacement cost of the Vessels, Shanghai Gillion first referred to a research report issued by Clarksons (克拉克森) for recent new shipbuilding price of Neo-Panamax size vessels, which amounted to approximately US$148 million. Shanghai Gillion then adjusted this reference price with the latest containership index under the China Newbuilding Price Index to account for latest price levels for components used in shipbuilding.

In this regard, we have obtained and reviewed the aforementioned research report issued by Clarksons (克拉克森) and noted that it is published in April 2024 with information including, amongst others, containership newbuilding price of vessels of

1 For reference only

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

various capacities. Shanghai Gillion’s reference to the Neo-Panamax size vessel corresponds to a capacity ranging from 12,000 to 15,000 TEU, in which the Vessels’ capacity of 14,000 TEU falls within the aforementioned range. We have conducted independent desktop search and note that Clarksons (克拉克森) is one of the world’s leading providers of shipbroking and integrated shipping services. Its research arm comprises more than 150 experts with over 10,000 platform users, including leading organisations across the maritime sector. As such, we are of the view that Shanghai Gillion had made reference to a reliable and representative source.

We consider that Shanghai Gillion’s reference to Clarksons (克拉克森)’s research report on Neo-Panamax size vessels to be appropriate for determining the replacement cost of the Vessels. We also consider that it is reasonable to adjust this information with China Newbuilding Price Index to reflect the most recent price levels.

Management costs

As the Base Date is a future date that corresponds to the expected delivery date of the Vessels, Shanghai Gillion has also taken into account the Group’s management costs (as the buyer), including expenses related to coordinating and communicating with shipyards.

According to Shanghai Gillion, given the substantial size of the Vessels, these management costs can be disregarded during this valuation exercise. We understand from Shanghai Gillion that such management costs mainly pertain to the remuneration of a few employees, which is minimal compared to the replacement cost of the Vessels.

Capital costs

Capital costs refer to cost of capital involved in making prepayments for the purchase of Vessels. Shanghai Gillion has taken into account the current return on invested capital (or ROIC) of the shipping industry of 9.77%, along with the payment milestones as stipulated in the Shipping Agreements, to determine the capital costs. We have reviewed the calculation and find it reasonable.

Regarding the return rate adopted by Shanghai Gillion, we understand that it is derived from Shanghai Gillion’s own database. We have cross-checked this with the Group’s cost of debt and noted that it aligns with the high end of the Group’s interest rate range for bank and other borrowings, which stands at 3.2% to 9.6% according to the 2024 Interim Results Announcement.

Overall, we consider that the capital costs, which take into account the prepayment schedule in accordance to the Shipping Agreements, to be reasonable.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

3.3.4 Section conclusion

Taking into account the above, we are of the view that the purchase price of the Vessels, which represents an approximate 11.6% discount to the Appraised Value, is fair and reasonable.

3.4 Section summary

Having considered the factors above, we are of the view that the terms of the Heads of Agreements and the Novation Agreements and the transactions contemplated thereunder are on normal commercial terms and are fair and reasonable.

4. Reasons for and benefits of the entering into the Heads of Agreements and the Novation Agreements

As an integrated cross-border seaborne logistics service provider in the PRC, we understand that the Group is able to adapt its service offering strategy and adjust its business focus to allocate its shipping resources between the two business lines of cross-border logistics services and time charter services from time to time. For example, in 2021, the Group commenced self-operated cross-border logistics services when the market freight rate went up to capture market opportunities. While during the second half of 2022 when the market freight rates decreased significantly, the Group paused the offering of self-operated cross-border logistic services. The Group generally utilised its shipping capacity in time charter services after securing sufficient shipping capacity for it integrated cross-border logistics services, with reference to market conditions and charter rates.

Furthermore, as mentioned in the paragraph headed “1.2 Financial information of the Group” above, the Group’s operating results are largely affected by the Group’s cost of sales and hence, its gross profit margin. Upon the completion and delivery, the Vessels are expected to generate recurring time charter income or cross border logistics service income which will be recorded as revenue of the Group and the relevant shipping related expense and depreciation will be recorded as expenses of the Group. We note that subsequent to the addition of the Vessels, the Group has the flexibility to deploy the Vessels to a variety of major routes to provide self-operated cross-border logistics services when demand for cross-border logistics services is high; the Group also has the flexibility to charter out the Vessels to maintain stable profitability when the market consideration is fluctuating.

As such, we concur with the Management that the entering into of the Heads of Agreements and the Novation Agreements for the purchase of the Vessels are in the interests of the Company and the Shareholders as a whole as the addition of the Vessels will supplement the Group’s existing fleet of vessels and allow the Group to reduce its cost of sales per TEU, where it can offer competitive prices to its customers and improve sustainability in light of the current volatile market conditions.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In addition, taking into account that the entering into of the Heads of Agreement and Novation Agreements allow the Group to expand its fleet of vessels, achieve economies of scale and enhance its competitiveness in the market, which is in-line with the Group’s overall business strategies, despite acquiring ultra large vessels via the entering into of such agreements is not in the ordinary and usual course of business of the Group, we concur with the Management that it is in the interests of the Company and the Shareholders as a whole.

RECOMMENDATION

Having considered the above principal factors, we are of the view that, while the entering into of the Heads of Agreements and the Novation Agreements are not in the ordinary and usual course of business of the Group, (i) the terms of the Heads of Agreements and the Novation Agreements and the transactions contemplated thereunder are fair and reasonable; and (ii) the entering into of the Heads of Agreements and the Novation Agreements are on normal commercial terms and in the interests of the Company and the Shareholders as a whole.

Accordingly, we recommend the Independent Shareholders, as well as the Independent Board Committee to advise the Independent Shareholders, to vote in favour of the resolution to be proposed at the EGM to approve the Heads of Agreements and the Novation Agreements and the transactions contemplated thereunder.

Yours faithfully, For and on behalf of

Altus Capital Limited

Leo Tam

Responsible Officer

Mr. Leo Tam (“ Mr. Tam ”) is a Responsible Officer of Altus Capital Limited licensed to carry on Type 6 (advising on corporate finance) regulated activity under the SFO and permitted to undertake work as a sponsor. He has over nine years of experience in corporate finance and advisory in Hong Kong, in particular, he has participated in sponsorship work for initial public offerings and acted as financial adviser or independent financial adviser in various corporate finance transactions. Mr. Tam is a certified public accountant of the Hong Kong Institute of Certified Public Accountants.

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FINANCIAL INFORMATION

APPENDIX I

(1) FINANCIAL INFORMATION OF THE GROUP

Financial information of the Group for each of the three financial years ended 31 December 2021, 2022 and 2023 are disclosed in the following documents which have been published on the websites of the Stock Exchange (http://www.hkexnews.hk) and the Company (https://www.lcang.com/):

Prospectus of the Company (pages I-1 to I-87) https://www1.hkexnews.hk/listedco/listconews/sehk/2023/0913/2023091300017.pdf
Annual report of the Company for the year ended 31 December 2023 (pages 100 to 190) https://www1.hkexnews.hk/listedco/listconews/sehk/2024/0423/2024042301216.pdf

(2) INDEBTEDNESS

As at the close of business on 31 July 2024, being the latest practicable date for the purpose of this indebtedness statement, (i) the Group had outstanding interest-bearing bank borrowings of approximately RMB20,000,000 which were unsecured and guaranteed by related parties within the Group and a non-controlling shareholder of a subsidiary and independent third parties, and other borrowings of approximately RMB12,797,000 which were unguaranteed and secured by mortgages over the container vessels. Other borrowings were used for the purchase of container vessels in 2022; (ii) the Group had outstanding lease liabilities of approximately RMB90,619,000; (iii) and the Group did not have any contingent liabilities.

Save as aforesaid, and apart from intra-group liabilities, at the close of business on 31 July 2024, the Group had no other outstanding mortgages, charges, debentures or other loan capital or bank overdrafts or loans or other similar indebtedness, finance lease or hire purchase commitments, liabilities under acceptance or acceptance (other than normal trade bills) credits, debt securities, guarantees or other material contingent liabilities.

(3) FINANCIAL AND TRADING PROSPECTS

The Group continues to operate in the cross-border logistics service and ship leasing sectors, maintaining and operating a fleet of vessels throughout the current fiscal year. The Board expects that, with the available cash on hand, and accessible credit facilities, the Group possesses sufficient financial resources to meet its commitments and working capital requirements. However, the Group recognizes certain special trade factors and risks that may impact its financial and operational performance. These include fluctuations in global trade volumes, changes in international shipping regulations, and volatility in fuel prices, which could affect operating costs and profitability. Additionally, geopolitical tensions and economic uncertainties in key markets pose potential challenges to trade flows and demand for logistics services. To mitigate these risks, the Group is actively monitoring market conditions and adjusting its strategies accordingly. The Board remains confident in the Group’s ability to navigate these challenges and capitalize on opportunities to ensure sustained growth and financial stability in the upcoming fiscal period.

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FINANCIAL INFORMATION

APPENDIX I

(4) WORKING CAPITAL

The Directors are of the opinion that after taking into account its internal resources, the existing available credit facilities, the indebtedness statement of the Group as set out in the section headed “(2) INDEBTEDNESS” above and the Novation, the Group has sufficient working capital for its present requirements for the next twelve-month period from the date of this circular.

The Company has obtained a letter from its auditor confirming the statement above has been made by the Directors after due and careful enquiry.

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APPRAISAL REPORT

APPENDIX II

Appraisal Report of Value After Completion of Two Ships To be Constructed (The Jiangnan Shipyard Numbers HULL NO. H2871 and HULL NO. H2872) for Transfer by BAL Container Line Co., Limited HJLPBZ (2024) No. 1085

BAL Container Line Co., Limited:

In accordance with relevant laws, administrative regulations, and asset appraisal standards, we adhere to the principles of independence, objectivity, and justice. We adopt the cost approach and follow the necessary appraisal procedures for the two ships to be constructed at Jiangnan Shipyard, numbered HULL NO. H2871 and HULL NO. H2872. The market value after their completion has been assessed. The asset appraisal situation is now reported as follows:

I. INTRODUCTION TO THE CLIENT, THE PROPERTY RIGHT HOLDER AND OTHER USERS OF THE APPRAISAL REPORT DESIGNATED IN THE ENGAGEMENT LETTER

(i) Client

Name: BAL Container Line Co., Limited

Registration place: Hong Kong, China

Registration Certificate No.: 60222474-000-08-23-0

(ii) Property Right Holder

Name: Lecang Fantasy Limited

Registration place: British Virgin Islands

Registration Certificate No.: 2103717

(iii) Relationship between the Client and the Property Right Holder

As of the report date, BAL Container Line Co., Limited, the Client, and Lecang Fantasy Limited, the Property Right Holder, are related parties under the same control. The Client intends to acquire the two vessels to be constructed held by the Property Right Holder, identified by Jiangnan Shipyard Numbers HULL NO. H2871 and HULL NO. H2872.

(iv) Other Users of the Report Designated in the Engagement Letter

No users other than those permitted by relevant laws and regulations for economic activities are provided for in this report.

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II. PURPOSE OF ASSET APPRAISAL

BAL Container Line Co., Limited intends to acquire two vessels to be constructed, which are held by Lecang Fantasy Limited (Jiangnan Shipyard Nos. HULL NO. H2871 and HULL NO. H2872). The company has entrusted Shanghai Gillion Asset Appraisal Co., LTD. to estimate the value of these two vessels upon completion and to issue a professional opinion.

III. TARGET AND SCOPE OF APPRAISAL

The target of this appraisal is the value of the two ships completed by Jiangnan Shipyard; the scope of the appraisal encompasses the transfer of two 14,000 TEU container ships, specifically HULL NO. H2871 and HULL NO. H2872, as numbered by Jiangnan Shipyard.

The contract price for each of the two vessels to be constructed is US$144.8 million. As of the report date, the property right Holder has paid a total of US$57.92 million in deposits to the builders, in accordance with the relevant provisions of the construction contracts.

The relevant construction parameters of the two vessels are as follows:

Item	Parameter
Vessel Type	Container Ship
Manufacturer	Jiangnan Shipyard
Principal Dimensions	335m × 51m × 30m
Designed Draft	Approximately 117,700 metric tons
Scantling Draft	Approximately 155,000 metric tons
Material	Steel
Service Speed	22.0 knots
Main Engine Type	WinGD 8X92-B LLT, LPSCR
Continuous Service Rating	37,800kW × 74.0RPM
Side Thruster	Tunnel type, with a capacity of approx. 3,000 kW
Auxiliary Engine	3,800 kW x 2 sets, 4,300 kW x 2 sets
Lifeboat Equipment	Lifeboats, liferafts, lifebuoys

The contract for the construction of the two commissioned vessels was signed in June 2024 for construction by Jiangnan Shipyard with a planned construction schedule as shown in the table below:

				Estimated
Hull No.	Steel Cutting	Docking	Undocking	Delivery
H2871	2025/6/3	2026/2/10	2026/5/22	2026/11/30
H2872	2025/10/10	2026/7/6	2026/9/29	2027/2/28

The aforementioned targets and scope of appraisal are the same as the targets and scope of appraisal involved in economic behaviors.

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IV. TYPE AND DEFINITION OF VALUE

Type of Value and Definition: In accordance with the objectives of this appraisal, the value type in question is the market value. Market value is the estimated worth of the appraisal subject for a typical arms-length transaction on the appraisal date, assuming that both a willing buyer and a willing seller are acting rationally and without duress.

This value type is selected for the appraisal primarily based on the appraisal objectives, market conditions, assumptions, and the specific circumstances of the appraisal subject. It is important to note that the value of the same asset can vary across different markets.

V. APPRAISAL BASE DATE

Considering the specific circumstances of the assets under appraisal, the base date for this appraisal has been set as the completion and delivery date of the vessels under appraisal, which is February 28, 2027. This decision was made by mutual agreement between the Appraisal Agency and the Client, in order to accurately reflect the market value of the appraisal subject and to facilitate the smooth achievement of the Validity Period objectives for this project.

The appraisal assumes that the pricing standards, interest rates, exchange rates, and tax rates at the future base date will be consistent with those at the report date. All pricing standards, interest rates, exchange rates, and tax rates applied in this appraisal are as effective as of the report date.

VI. BASES FOR REFERENCE

(i) Basis of Laws and Regulations

Asset Appraisal Law of the People’s Republic of China (Order of the President of the People’s Republic of China promulgated in 2016)
The Civil Code of the People’s Republic of China (Order No. 45 of the President of the People’s Republic of China on October 15, 2020)
Other pertinent laws and regulations.

(ii) Bases of Appraisal Standards

The basic Standards for Asset Appraisal (Capital (2017) No. 43)
The Assets Appraisal Professional Ethics Standards (China Appraisal Association (2017) No. 30)
The Assets Appraisal Standards-Asset Appraisal procedures (China Appraisal Association (2018) No. 36)

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APPRAISAL REPORT

APPENDIX II

The Assets Appraisal Standards-Asset Appraisal Report (China Appraisal Association (2018) No. 35)
The Assets Appraisal Standards-Asset Appraisal Entrustment Contract (China Appraisal Association (2017) No. 33)
The Assets Appraisal Standards-Asset Appraisal Archives (China Appraisal Association (2018) No. 37)
The Assets Appraisal Standards-Machinery and Equipment (China Appraisal Association (2017) No. 39)
The Assets Appraisal Standards-Asset Appraisal Method (China Appraisal Association (2019) No. 35)
The Guiding Opinions for Types of Value under Asset Appraisal (China Appraisal Association (2017) No. 47)
The Guiding Opinions of Certified Assets Appraiser on Legal Authority of Appraisal Object (China Appraisal Association (2017) No. 48)
The Guiding Opinions of Business Quality Control of Asset Appraisal Institutions (China Appraisal Association (2017) No. 46)

(iii) Basis of Ownership

Purchase contract
Proof of payment of the deposit, as agreed in the construction contract
Letter of commitment from the Client and the Property Right Holder
Other documents proving property rights

(iv) Basis of Pricing

Local rules and regulations on pricing and charging standards
Statistics materials issued by relevant government authorities
Common Methods and Parameter Handbook for Asset Appraisal (China Machine Press)
Related price indices and related research reports

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APPRAISAL REPORT

APPENDIX II

Interest rate, exchange rate, and tax rate in effect as of the report issuance date
Various appraisal-related evidence materials collected by the appraisers

VII. METHOD OF APPRAISAL

(1) Adaptability Analysis of Method of Appraisals

Generally, there are three methods for appraising enterprise value: the market approach, the income approach, and the cost approach. These three fundamental approaches measure asset value from different perspectives. Theoretically, in a perfect market, the results yielded by the three approaches should be nearly identical. However, due to market conditions, the purpose of the appraisal, the target being evaluated, the information available, and differing opinions, the outcomes of these approaches can vary significantly.

Given the scarcity of public trading cases for similar assets in the market, quantifying the expected return is challenging, and predicting the return period with reasonable accuracy is also difficult. Consequently, the market approach and the income method are not applicable for this appraisal.

Based on the aforementioned applicability analysis, the regulations governing asset appraisal principles, and the specific circumstances of the asset under evaluation, the cost approach has been selected to determine the asset’s value. The Appraisers have analyzed the preliminary valuation conclusions and have developed reasonable final conclusions. This development was based on a comprehensive assessment of the reasonableness of the preliminary conclusions, as well as the quality and quantity of the data utilized.

(2) Introduction to Appraisal Methods

A market survey has been conducted to inquire and determine the market price of the vessel as of the base date. Additionally, other costs associated with the purchaser have been taken into account to calculate the full replacement value of the vessel.

Calculation Formula: The appraisal value is determined by the sum of the replacement cost on the base date, management costs, and capital costs.

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APPENDIX II

VIII. IMPLEMENTATION PROCESS AND CONDITIONS OF APPRAISAL PROCEDURES

To understand the general information about the appraisal target, the purposes of the appraisal, and the conditions of the project, and to conduct a preliminary risk assessment.
To accept the appraisal commission, negotiate the scope and objectives of the appraisal in line with the appraisal purpose, determine the appraisal date, enter into an asset appraisal engagement letter with the Client, and establish relevant agreements.
To form an appraisal project team and develop an appraisal plan.
To instruct the Holder to inspect the appraisal target, complete the asset inspection list, and prepare and provide various materials necessary for the appraisal.
To visit the asset site to hear from relevant parties about the history and current status of the asset and the appraisal target, verify the ownership and cost data of the main assets under evaluation, inspect the physical objects according to the content and quantity listed in various asset appraisal declaration forms completed by the Holder, verify the content and data of various documents and financial vouchers of the Holder through testing, and obtain evidence if necessary.
To collect relevant information on market prices and relevant parameter data based on the appraisal objectives, conditions at the appraisal site, and the Holder’s detailed information, and to evaluate the appraisal target.
The appraisal project team collects and analyzes data according to the preliminary appraisal results for the appraisal target to avoid repetition or omission, and then makes adjustments, corrections, and improvements to the preliminary appraisal results.
To draft an asset appraisal report based on the appraisal progress, analyze the improved appraisal results, and after a 3-level internal review and receiving the Client’s feedback, issue a formal asset appraisal report to the Client.

IX. ASSUMPTIONS

According to the requirements of the asset appraisal standards, the Appraisers have identified the following assumptions to exist as of the appraisal base date. In the event of significant changes in the economic environment thereafter, the Appraisers will not be responsible for any different appraisal results deduced due to changes in these assumptions.

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APPRAISAL REPORT

APPENDIX II

(1) Basic Assumptions

1. Trading Assumption

The trading assumption is that all assets to be evaluated are already in the process of being traded, and the asset appraiser evaluates the value based on the simulated market conditions of the assets to be evaluated. The trading assumption is one of the most fundamental assumptions in asset appraisal.

2. Open-Market Assumption

The open-market assumption pertains to the market conditions under which the asset is intended to be transacted and the influences it will be subject to under such conditions. An open market refers to a fully developed and perfect market with voluntary buyers and sellers in a competitive environment. In this market, buyers and sellers of equal status have ample opportunity to obtain market information and time, and transactions are voluntary, rational, and free from coercion or restrictions. The open-market assumption is based on the premise that assets can be publicly bought and sold in the market.

(2) General Assumptions

This appraisal assumes that there will be no unforeseeable and significant adverse changes in the external economic environment after the valuation reference date, including the relevant national laws, macroeconomic, financial, and industrial policies. It also assumes that there will be no other significant impacts from factors that are both human-irresistible and unforeseeable.
The appraisal does not consider any mortgage or guarantee matters that the evaluated assets may be subject to, nor the price that may be paid by special transaction methods, which could affect the appraisal conclusion.
No significant changes are expected in the socio-economic environment where the property right Holder is located, nor in the fiscal policies such as taxation and tax rates. Additionally, it is assumed that financial policies, including credit policies, interest rates, and exchange rates, will remain essentially stable.
The assets subject to appraisal are to be valued based on their actual inventory as of the appraisal base date, and their current market value should reflect the effective prices in China on that date.

(3) Special Assumptions

It is assumed that the vessels in question can be completed and delivered within the planned period.

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The appraisal assumes that the cost standards for the future appraisal base date will be consistent with the interest rate, exchange rate, and tax rate on the report date.

X. APPRAISAL CONCLUSION

After the appraisal, based on the existing assumptions, the appraised value of the two vessels upon completion as of the appraisal base date, February 28, 2027, is RMB2,340.46 million, which amounts to USD327.5708 million (calculated using the exchange rate on the report date).

Details are as follows:

Jiangnan Shipyard Number HULL NO. H2871 HULL NO. H2872 Total	Appraised Value (RMB ten thousand Yuan) 117,023.00 117,023.00 234,046.00	Appraised Value (Ten thousand US dollars) 16,378.54 16,378.54
		32,757.08

XI. EXPLANATORY NOTES ON SPECIAL ISSUES

(i) For the purpose of this Report, ‘Appraised Value’ refers to the market value determined on the principle of a public market under the prevailing external economic conditions on the appraisal base date. This value presumes that the evaluated assets are being used, and will continue to be used, for their existing purposes, without regard to potential future mortgages, guarantees, or the effects on appraisal from contingent additional prices due to special transaction methods. Meanwhile, the Report does not take into account the effects on the value of the evaluated assets from significant changes in state macro-economic policies, acts of God, or other force majeure events.
(ii) The appraisal results do not consider the potential impacts of taxes and duties that may be imposed due to increases or decreases in the value of the asset appraisal.
(iii) In the event of relevant flaws in the Company that could affect the results of the asset appraisal, and if the Company has not provided special instructions, and the Appraisers, based on their working experience, cannot identify such issues, neither the Asset Appraisal Agency nor the Appraisers will assume any liabilities arising therefrom.
(iv) The following are relevant matters that may affect the appraisal conclusions but are beyond the scope of the appraisal practice level and ability:
Since the appraisal base date is a future date, the cost standard, interest rate, exchange rate, and tax rate are assumed to be the same as those on the report date. The assumption that the vessels can be completed and delivered within the planned period does not constitute a guarantee for the construction timeframe. Users of the Report should pay attention to the above information and make independent judgments.

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APPRAISAL REPORT

APPENDIX II

As of the appraisal base date, the entity undertaking the appraisal has promised that there are no material issues such as mortgages, guarantees, litigation, or contingent liabilities in the assets appraised that could affect the appraisal results.

Up to the date of the Appraisal Report, the Appraisers have not discovered, and the Client has not reported, any special issues that may affect the appraisal conclusions and should be expressly announced.

Special issues may affect the appraisal conclusions. Users of the Report are expected to pay attention to these special issues.

XII. LIMITS ON USE

The Report may be used by the Client and the users designated herein solely for the purposes of appraisal listed herein and may be submitted to the competent property appraisal authority for review. The Client reserves the right to use the Report. Except for required submissions to relevant government authorities or necessary disclosures in accordance with the law, neither the Asset Appraisal Agency nor the Client may extract, quote, or disclose any content hereof to any public media without the other party’s permission.
The Client or other users of the asset appraisal Report shall use the Report in accordance with the provisions of the laws, administrative regulations, and the scope stated in the asset appraisal Report. If the Client or other users violate the aforementioned provisions in the use of the asset appraisal Report, the asset appraisal agency and the asset appraisal professionals shall not be held liable.
The asset appraisal Report shall be used by the Client, other users of the Report, and the users as prescribed by laws and administrative regulations. Additionally, no other institution or individual may use the asset appraisal Report.
The asset appraisal agency and asset appraisal professionals suggest that the users of the asset appraisal Report should correctly understand the appraisal conclusions. The appraisal conclusion is not the same as evaluating the price of a consulting object and should not be considered a guarantee for evaluating the price of a consulting object. The appraisal conclusions shall not be directly applied to major issues that occur within the term hereof.
Should there be significant changes after the issuance date of the appraisal Report and within its validity period, the appraisal conclusion cannot be used directly. If there are any changes in the quantity of assets after the appraisal date and within the validity period of the appraisal results, the asset amounts should be adjusted according to the original appraisal methodology. Additionally, if there are any changes in the assets’ price standards, the Client should make corresponding

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APPRAISAL REPORT

APPENDIX II

adjustments based on the actual valuation of the assets. However, if there is a significant impact on the appraisal price of the assets, the Client must promptly engage an appraisal institution to re-determine the appraisal value.

When policy adjustments significantly impact the appraisal conclusions, a new appraisal base date should be established for the reappraisal.
The validity period for the use of the appraisal conclusions in this Report is from the Report’s issuance date to the delivery date of the two vessels, specifically from August 9, 2024, to February 28, 2027.
The Asset Appraisal Agency issuing the Report reserves the right to express and interpret the Report. Unless otherwise provided for in laws and regulations, no other unit or department shall have the right of interpretation.

XIII. REPORT DATE

The Appraisal Report is issued on August 9, 2024.

XIV. ASSET APPRAISAL AGENCY

Shanghai Gillion Asset Appraisal Co., LTD provides the asset appraisal services. Office address: 2nd floor, No. 433, Chifeng Road, Hongkou District, Shanghai Post code: 200083 Tel.: 021-62601923 Fax: 021-51219296

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EXPLANATORY NOTES TO APPRAISAL REPORT

APPENDIX III

EXPLANATIONS ON THE VALUE APPRAISAL TECHNIQUES UPON COMPLETION OF HULL NO. H2871 AND HULL NO. H2872 OF JIANGNAN SHIPYARD

Based on the list of the appraised assets provided by the property right holders, the appraisal professionals of the Company conducted a comprehensive check, review and appraisal of the assets using the cost approach. The details of the appraisal are as follows:

I. INTRODUCTION TO APPRAISAL METHODS

Through market research, inquire and determine the market price of the vessel on the appraisal date, and consider the other costs associated with the buyer to obtain the full replacement price of the vessel.

Calculation Formula: The appraisal value is determined by the sum of the replacement cost on the base date, management costs, and capital costs.

The appraisal is based on the following special assumptions:

It is assumed that the vessels in question can be completed and delivered within the planned period.
The appraisal assumes that the cost standards for the future appraisal base date will be consistent with the interest rate, exchange rate, and tax rate on the report date.

II. APPRAISAL EXAMPLE

No. 1 HULL NO. H2871 in the detailed list.

1. Determination of the full replacement price

1.1 The purchase price of new vessels

The main factors affecting the price of vessels are: market supply and demand, steel prices, exchange rate fluctuations and other factors.

In terms of the market: The international market share of China’s shipbuilding industry continues to expand, with shipbuilding completion, new orders received, and orders held accounting for 55.0%, 74.7%, and 58.9% of the global total in terms of deadweight tons, respectively, demonstrating China’s dominant position in the global shipbuilding industry. At the same time, China’s shipbuilding industry has made significant progress in technological innovation and green development, with an international share of 71.7% in green powered ship

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EXPLANATORY NOTES TO APPRAISAL REPORT

APPENDIX III

orders, achieving full coverage of mainstream ship types. In the first half of 2024, the export value of Chinese ships maintained steady growth, reaching 20.67 billion US dollars, a year-on-year increase of 85.2%. The orders of major shipyards increased sharply, showing a saturation trend.

In terms of materials: The recent price of steel has shown a fluctuating but have maintained a relatively stable level.

In terms of the exchange rate: Since the signing date of the vessel contract, there has been no significant fluctuation in the exchange rate between the US dollar and the Chinese yuan.

In summary, the sharp increase in order volume in recent years, as well as the relatively stable prices and exchange rates of raw materials such as steel, resulting in the continuous growth in the profitability of shipping enterprises and the high prosperity of the vessels market.

In considering the cost of the new vessel, Shanghai Gillion referred to a research report issued by Clarksons (克拉克森). Clarksons Research is a world-leading shipping and offshore research and consulting company, offering comprehensive data, analysis, and consulting services. Its research arm comprises more than 150 experts with over 10,000 platform users, including leading organisations across the maritime sector.

According to the relevant research report issued by Clarksons (克拉克森), the recent newbuilding price of this size (Neo-Panamax) is approximately US$148 million. The Neo-Panamax vessels typically have a loading capacity ranging from 12,000 to 15,000 TEU, with a maximum width of 51.25 meters and a maximum length of 366 meters. This type of vessel was designed to accommodate the new waterway and lock sizes after the expansion of the Panama Canal. The Vessels being appraised have a loading capacity of 14,000 TEU, with dimensions of 335 meters in length and 51 meters in width. Based on its loading capacity and size, the Vessels are classified as Neo-Panamax. Therefore, the data from this research report is highly relevant for reference purposes. The contract price for shipbuilding is US$144.80 million. As the prices may vary due to the different components used in the various components of the vessels, the newbuilding price in the appraisal (Appraisal date replacement cost) is determined upon revising by applying an index based on the contract price.

After inquiring about the China Newbuilding Price Index, the containership index in June 2024, when the original purchase was made, was 1,091, while the index at the end of July 2024 was 1,094, and upon inquiring, the index was found to be dominated in USD, so the revision was made directly based on the newbuilding price in USD:

Newbuilding price = 14,480× (1,094/1,091) = 14,480 × 1.0027 = 14,519.10 (ten thousand of USD)

Based on the central parity rate of RMB against USD, which was 7.1364 on July 30, 2024, the index date, the newbuilding price was RMB1,036.1411 million.

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APPENDIX III

1.2 Other relevant costs and expenses of the buyer (shipowner)

As researched, the other costs and expenses of the buyer are management costs and capital costs.

① Management costs

Management costs are mainly related to docking with shipyards, coordination details and supervision, and the proportion of this part of the amount can be neglected in view of the large size of the vessels.

② Capital costs

Capital costs are related to the capital return transferred from prepayments at the earlier stage by the buyer.

The payment nodes and payment percentages pursuant to the originally signed contract are that: 20% of the instalment shall be paid after signing the contract, 10% of the instalment shall be paid during the steel cutting phase, 10% of the instalment shall be paid during the keel-laying phase, and the remaining 60% of the instalment shall be paid upon final delivery.

In view of the high total shipbuilding price, the long shipbuilding cycle, and as the financial leverage is generally not available for prepayments, the buyer bears great financial pressure at the earlier stage. Meanwhile, the order volume of major shipyards has currently increased significantly and the schedule is long. Based on market research and interviews with shipyards, it currently takes at least 4 years from the signing of the contract to the delivery of the vessel. Therefore, the appraisal of the capital costs is determined as follows based on a reasonable market cycle and the current return on invested capital (or ROIC) (9.77%, TTM data for the first quarter of 2024) of the shipping industry:

Unit: RMB ten thousand

Payment nodes Total shipbuilding price Percentage Amounts Reasonable period before delivery (years) Initial payment 103,614.11 20% 20,722.82 4.00 Steel cutting 10% 10,361.41 3.00 Keel laying 10% 10,361.41 0.70 Delivery 60% 62,168.46 0 Total	Capital costs 9,365.91 3,343.78 698.74 –
	13,408.43

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APPENDIX III EXPLANATORY NOTES TO APPRAISAL REPORT

In summary, the total value of the vessel upon completion is:

Full replacement price = 103,614.11 + 13,408.43

= 117,023.00 (RMB ten thousand rounded)

The amount was converted to US$163,785,400 at the exchange rate of 7.1449 of USD against RMB as at the date of the issuance date of the report.

The appraisal methods and results of another vessel HULL NO. H2872 within the scope of the appraisal are the same.

– 48 –

GENERAL INFORMATION

APPENDIX IV

RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

DISCLOSURE OF INTERESTS

As at the Latest Practicable Date, the interests and short positions of each Director and chief executives of the Company in the shares, underlying shares and debentures of the Company or any of its specified undertakings, and associated corporations (within the meaning of Part XV of the SFO) which are required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which he or she is taken or deemed to have under such provisions of the SFO) or which are required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein or are required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers were as follows:

		Number of Shares	Approximate
Name of		or underlying	percentage of
Director	Nature of Interest	*Shares(Note 1)***	*shareholding(Note 1)***
Mr. Xu Xin	Interest in controlled	158,553,294 (L)	55.39%
	corporations
Ms. Li Yan	Interest in controlled	158,553,294 (L)	55.39%
	corporations

Note 1: As at the Latest Practicable Date, the Company issued 286,269,156 Shares. The letter (L) denotes the entity’s long position in the relevant Shares.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or chief executives of the Company had any interests or short positions in the shares, underlying shares and debentures of the Company or any of its specified undertakings, and associated corporations (within the meaning of Part XV of the SFO) which is required to be recorded and kept in the register in accordance with Section 352 of the SFO, or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers.

As at the Latest Practicable Date, (i) none of the Directors has any existing or proposed service contracts with any member of the Group not determinable by the Company within one year without payment of compensation (other than statutory compensation); (ii) none of the

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GENERAL INFORMATION

APPENDIX IV

Directors or their respective associates has any interests in any company or business which competes or may compete with the businesses of the Group; (iii) save for the Novation as disclosed in this circular, none of the Directors has or has had direct or indirect interest in any assets acquired or disposed of by or leased to or by or proposed to be acquired or disposed of by or leased to or by any member of the Group since the date to which the latest published audited annual financial statements of the Group were made up; and (iv) there is no contract or arrangement subsisting at the date of this circular in which any of the Directors is materially interested and which is significant in relation to the business of the Group.

SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, so far as was known to any Director or chief executive of the Company, the following persons (other than a Director or chief executive of the Company) have, or were deemed or taken to have interests or short positions in the shares and underlying shares of the Company which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO or which were recorded in the register required to be kept by the Company under Section 336 of the SFO:

		Number of Shares	Approximate
Name of		or underlying	percentage of
shareholders	Nature of Interest	*Shares(Note 1)***	*shareholding(Note 1)***
Grand Sailing	Interest in controlled	75,896,322 (L)	26.51%
Limited_(Notes 2, 3)_	corporation
Lecang Altitude	Beneficial owner	75,896,322 (L)	26.51%
Limited_(Notes 2, 3)_
Peace Seaworld	Interest in controlled	19,616,322 (L)	6.85%
Limited_(Notes 2, 4)_	corporation
Lecang Shining	Beneficial owner	19,616,322 (L)	6.85%
Limited_(Notes 2, 4)_
Ms. Liu	Interest in controlled	158,553,294 (L)	55.39%
Quanxiang_(Notes 2, 5)_	corporation
Spring Wealth	Interest in controlled	24,292,260 (L)	8.49%
Limited_(Notes 2, 5)_	corporation
Lecang Flourishing	Beneficial owner	24,292,260 (L)	8.49%
Limited_(Notes 2, 5)_
Glorious Sailing	Beneficial owner	30,252,600 (L)	10.57%
Limited_(Note 6)_

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GENERAL INFORMATION

APPENDIX IV

Notes:

As at the Latest Practicable Date, the Company issued 286,269,156 Shares. The letter (L) denotes the entity’s long position in the relevant Shares.
Pursuant to the Acting in Concert Deed, each of Mr. Xu Xin, Ms. Li Yan and Ms. Liu Quanxiang had agreed and confirmed that from the date they became the registered owners and/or beneficial owners of the equity interests in the Group to the date when any of them ceases to be the controlling shareholder of the Company: (a) they had been and would continue to be parties acting in concert and they had agreed to consult with each other and reach a unanimous consensus among themselves before the decision, implementation and agreement on all material management affairs, voting and/or commercial decisions, including but not limited to financial and operational matters, of any member of the Group; (b) they had casted and would continue to cast their votes as directors and/or shareholders (as the case may be) unanimously for or against all resolutions in all board and shareholders’ meetings and discussions of any member of the Group; and (c) they had cooperated and would continue to cooperate with one another to acquire, maintain and consolidate the control and management of the Group. By virtue of the SFO, each of the ultimate controlling shareholders of the Company together with investment holding companies held or controlled by them (being Lecang Boundless Limited, Lecang Fantasy Limited, Grand Sailing Limited, Lecang Altitude Limited, Peace Seaworld Limited, Lecang Shining Limited, Spring Wealth Limited, Lecang Flourishing Limited and Glorious Sailing Limited) are all deemed to be interested in the total Shares directly held by Lecang Fantasy Limited, Lecang Altitude Limited, Lecang Shining Limited, Lecang Flourishing Limited and Glorious Sailing Limited.

Lecang Fantasy Limited is wholly owned by Lecang Boundless Limited, which is in turn wholly owned by Mr. Xu Xin. By virtue of the SFO, each of Mr. Xu Xin and Lecang Boundless Limited is deemed to be interested in the 8,495,790 Shares held by Lecang Fantasy Limited.

Lecang Altitude Limited is wholly owned by Grand Sailing Limited, which is in turn wholly owned by Mr. Xu Xin. Accordingly, each of Mr. Xu Xin and Grand Sailing Limited is deemed under the SFO to be interested in the Shares directly held by Lecang Altitude Limited.
Lecang Shining Limited is wholly owned by Peace Seaworld Limited, which is in turn wholly owned by Ms. Li Yan. Accordingly, each of Ms. Li Yan and Peace Seaworld Limited is deemed under the SFO to be interested in the Shares directly held by Lecang Shining Limited.
Lecang Flourishing Limited is wholly owned by Spring Wealth Limited, which is in turn wholly owned by Ms. Liu Quanxiang. Accordingly, each of Ms. Liu Quanxiang and Spring Wealth Limited is deemed under the SFO to be interested in the Shares directly held by Lecang Flourishing Limited.
Glorious Sailing Limited is owned as to approximately 79.53% by Mr. Xu Xin (a Controlling Shareholder and executive Director), 4.96% by Ms. Zhu Jiali (朱佳麗) (an executive Director), 3.97% by Mr. Zhang Feng (張峰) (a senior management member), 0.50% by Ms. Ding Sujun (丁素君) (the joint company secretary) and 11.04% by other 10 existing employees of the Group, each of whom is an Independent Third Party save for being an employee of the Group. By virtue of the SFO, Mr. Xu Xin is deemed to be interested in the Shares held by Glorious Sailing Limited.

Save as disclosed herein, as at the Latest Practicable Date, the Company has not been notified of any person (other than Directors or chief executives of the Company) who had an interest or short position in the shares and underlying shares of the Company as recorded in the register required to be kept under Section 336 of the SFO.

MATERIAL ADVERSE CHANGE

As disclosed in the interim results announcement of the Company dated 20 August 2024, the profit before tax of the Company decreased by approximately 87.4% from RMB103.1 million for the six months ended 30 June 2023 to RMB13.0 million for the six months ended 30 June 2024. The decrease is primarily attributable to the decrease of time charter rate charged

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GENERAL INFORMATION

APPENDIX IV

by the Group during the six months ended 30 June 2024. The average daily charter rate was approximately RMB81,865.7 in the six months ended 30 June 2024, which was lower than that of approximately RMB179,100.4 in the same period in 2023. The time charter rate charged by the Group is affected by the overall market rate and demand at the time when the Group contracted with the customers and will therefore often fluctuate. The time charter rate charged by the Group during the six months ended 30 June 2024 was mainly contracted by the Group during the period from May 2023 to April 2024 when the market time charter rate is relatively low while the time charter rate charged by the Group during the six months ended 30 June 2023 is much higher due to the favourable market condition at the time when the time charter rate was contracted by the Group.

Save as disclosed, as at the Latest Practicable Date, the Directors are not aware of other material adverse change in the financial or trading position of the Group since 31 December 2023, being the date to which the latest published audited accounts of the Group were made up.

LITIGATION

As at the Latest Practicable Date, no litigation or claim of material importance is known to the Directors to be pending or threatened against any member of the Group.

EXPERTS AND CONSENTS

The qualification of the experts who have given opinions and advice in this circular is as follows:

Name Qualification Shanghai Gillion Asset Professional valuer Appraisal Co., Ltd. Altus Capital Limited a corporation licensed to carry out Type 4 (advising on securities), Type 6 (advising on corporate finance) and Type 9 (asset management) regulated activities under the Securities and Futures Ordinance (Chapter 571 of Laws of Hong Kong)

As at the Latest Practicable Date, each of the expert listed above had no shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group and had no direct or indirect interest in any assets acquired or disposed of by or leased to any members of the Group or was proposed to be acquired or disposed of by or leased to any member of the Group since 31 December 2023, being the date to which the latest published audited accounts of the Company was made up.

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GENERAL INFORMATION

APPENDIX IV

Each of the expert listed above has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its expert’s statement included in the form and context in which it appears.

MATERIAL CONTRACTS

Set out below are the material contracts (not being contracts entered into in the ordinary course of business) entered into by the members of the Group within the two years immediately preceding the date of this circular:

(1) a capital increase agreement (增資協議) dated 26 September 2022 entered into among Qingdao Lcang Technology Co., Ltd. (青島樂艙科技有限公司), PCW (Hong Kong) International Limited and Shandong Lcang Enterprise Management Service Co., Ltd. (山東樂艙企業管理服務有限公司), pursuant to which PCW (Hong Kong) International Limited agreed to inject USD equivalent of RMB8,132,808, of which USD equivalent of RMB60,000 as the registered capital and the remaining as the capital reserve of Shandong Lcang Enterprise Management Service Co., Ltd. (山東樂艙企業管理服務有限公司), to acquire 1% of the equity interest in Shandong Lcang Enterprise Management Service Co., Ltd. (山東樂艙企業管理服務有限公司);
(2) a share swap agreement (換股協議) dated 7 October 2022 entered into between PCW Limited and LC Logistics, Inc. (樂艙物流股份有限公司), pursuant to which PCW Limited agreed to transfer 100% issued share capital of PCW Investment Limited to LC Logistics, Inc. in exchange of 426,004 ordinary shares of LC Logistics, Inc. equivalent of RMB8,134,055 as consideration;
(3) a capital increase agreement (增資協議) dated 9 October 2022 entered into among Qingdao Lcang Technology Co., Ltd. (青島樂艙科技有限公司), PCW (Hong Kong) International Limited, Lcang (Qingdao) Logistics Supply Chain Co., Ltd. (樂艙(青島)物流供應鏈有限公司) and Shandong Lcang Enterprise Management Service Co., Ltd. (山東樂艙企業管理服務有限公司), pursuant to which Lcang (Qingdao) Logistics Supply Chain Co., Ltd. (樂艙(青島)物流供應鏈有限公司) agreed to inject RMB80,000,000 as the registered capital of Shandong Lcang Enterprise Management Service Co., Ltd. (山東樂艙企業管理服務有限公司), to acquire 93.02% of the equity interest in Shandong Lcang Enterprise Management Service Co., Ltd. (山東樂艙企業管理服務有限公司);
(4) an equity transfer agreement (股權轉讓協議) dated 10 October 2022 entered into between Qingdao Lcang Technology Co., Ltd. (青島樂艙科技有限公司) as transferor and Lcang (Qingdao) Logistics Supply Chain Co., Ltd. (樂艙(青島)物流供應鏈有限公司) as transferee, pursuant to which Qingdao Lcang Technology Co., Ltd. (青島樂艙科技有限公司) agreed to transfer 6.91% equity interest in Shandong Lcang Enterprise Management Service Co., Ltd. (山東樂艙企業管理服務有限公司) to Lcang (Qingdao) Logistics Supply Chain Co., Ltd. (樂艙(青島)物流供應鏈有限公司) at a consideration of RMB62,287,680.3;

– 53 –

GENERAL INFORMATION

APPENDIX IV

(5) the Deed of Indemnity (as defined in the Prospectus) dated 10 September 2023 and executed by Mr. Xu Xin, Ms. Li Yan, Ms. Liu Quanxiang, Lecang Boundless Limited, Lecang Fantasy Limited, Grand Sailing Limited, Lecang Altitude Limited, Peace Seaworld Limited, Lecang Shining Limited, Spring Wealth Limited, Lecang Flourishing Limited and Glorious Sailing Limited in favor of the Company;
(6) the Hong Kong Underwriting Agreement (as defined in the Prospectus) dated 11 September 2023 in relation to the offer for subscription of the 2,839,000 offer shares of the Company to the public in Hong Kong, entered into among the Company, Mr. Xu Xin, Ms. Li Yan, Ms. Liu Quanxiang, Lecang Boundless Limited, Lecang Fantasy Limited, Grand Sailing Limited, Lecang Altitude Limited, Peace Seaworld Limited, Lecang Shining Limited, Spring Wealth Limited, Lecang Flourishing Limited, Glorious Sailing Limited, ABCI Capital Limited, CLSA Limited, ABCI Securities Company Limited, Shenwan Hongyuan Securities (H.K.) Limited, CMB International Capital Limited, SPDB International Capital Limited, Guotai Junan Securities (Hong Kong) Limited, BOCOM International Securities Limited, CMBC Securities Company Limited, Livermore Holdings Limited and Valuable Capital Limited;
(7) two novation agreements dated 28 June 2024, entered into among Bal Container, Lehang Boundless, Jiangnan Shipyard and China Shipbuilding in relation to the novation of shipbuilding agreements dated 10 June 2022, details of which are disclosed in the announcement of the Company dated 28 June 2024;
(8) two heads of agreements dated 3 July 2024, entered into among Lehang Boundless, Shandong Lcang, Laudine Oceanway Limited (for the vessel with Hull No. H2789), Aludra Oceanway Limited (for vessel with Hull No. H2790) and Conglomerate Maritime Limited S.A. in relation to the novation of shipbuilding agreements dated 10 June 2022 in the aggregate amount of US$133.3 million, details of which are disclosed in the announcement and circular of the Company dated 3 July 2024 and 26 July 2024 respectively;
(9) two novation agreements dated 3 July 2024, entered into among Lehang Boundless, Laudine Oceanway Limited (for the vessel with Hull No. H2789), Aludra Oceanway Limited (for vessel with Hull No. H2790), Jiangnan Shipyard and China Shipbuilding in relation to the novation of shipbuilding agreements dated 10 June 2022, details of which are disclosed in the announcement and circular of the Company dated 3 July 2024 and 26 July 2024 respectively;
(10) the Heads of Agreements; and
(11) the Novation Agreements.

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GENERAL INFORMATION

APPENDIX IV

DOCUMENTS ON DISPLAY

Copies of the following documents will be published and displayed on the websites of the Stock Exchange (http://www.hkexnews.hk) and the Company (https://www.lcang.com/) for a period of 14 days from the date of this circular (both days inclusive):

(i) the Heads of Agreements;
(ii) the Novation Agreements;
(iii) the Shipbuilding Agreements;
(iv) the appraisal report prepared by Shanghai Gillion Asset Appraisal Co., Ltd. in relation to the Vessels, the text of which is set out in Appendix II to this circular;
(v) the written consents referred to in the paragraph headed “Experts and Consents” in this appendix.

GENERAL

(a) The joint company secretaries of the Company are Ms. Ng Sau Mei, a fellow member of The Hong Kong Chartered Governance Institute and The Chartered Governance Institute in the United Kingdom and Ms. Ding Sujun.
(b) The registered office of the Company is situated at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands.
(c) The head office of the Company is situated at 9/F, China Stone Building, 37 Hong Kong Middle Road, Shinan District, Qingdao, Shandong Province, PRC.
(d) The principal share registrar and transfer office of the Company in Hong Kong is Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17th Floor Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.
(e) The English text of this circular shall prevail over the Chinese text.

– 55 –

NOTICE OF THE EXTRAORDINARY GENERAL MEETING

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

LC Logistics, Inc. 樂艙物流股份有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 2490)

NOTICE OF THE EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN THAT the extraordinary general meeting of LC Logistics, Inc. (the “ Company ”) will be convened and held at the conference room at East Side of Floor 7, No. 168, Yangshupu Road, Hongkou District, Shanghai, PRC on Monday, 14 October 2024 at 10:00 a.m. for the purpose of considering and, if thought fit, passing the following resolution. Unless the context requires otherwise, capitalised terms used in this notice shall have the same meanings as those defined in the circular of the Company dated 23 September 2024.

Ordinary Resolution

“ THAT the Heads of Agreements and the Novation Agreements, copies of which are tabled at the EGM and marked “A” and initialed by the chairman of the EGM for identification purpose, the terms thereof and the transactions contemplated thereunder be and are hereby approved, ratified and confirmed; any one Director be and is hereby authorised for and on behalf of the Company to execute all such other documents, instruments and agreements and to do all such acts or things deemed by him/her to be incidental to, ancillary to or in connection with the matters contemplated in the Heads of Agreements and the Novation Agreements.”

By order of the Board LC Logistics, Inc. Mr. Xu Xin Chairman of the Board

Hong Kong, 23 September 2024

Headquarters and principal Principal place of business Registered office: place of business in the PRC: in Hong Kong: Cricket Square 9/F, China Stone Building 31/F., Tower Two Hutchins Drive 37 Hong Kong Middle Road Times Square P.O. Box 2681 Shinan District 1 Matheson Street Grand Cayman Qingdao, Shandong Province Causeway Bay KY1-1111 PRC Hong Kong Cayman Islands

– 56 –

NOTICE OF THE EXTRAORDINARY GENERAL MEETING

Notes:

(i) The resolution at the EGM will be taken by poll pursuant to the Listing Rules. The results of the poll will be published on the websites of the Stock Exchange (www.hkexnews.hk) and the Company (https://www.lcang.com/) in accordance with the Listing Rules.
(ii) Shareholder entitled to attend and vote at the EGM is entitled to appoint another person as his/her/its proxy to attend and vote instead of him/her/it; a proxy need not be a Shareholder. In the case of joint holders, the vote of the senior who tenders a vote, whether in person or by proxy, will be accepted to the exclusion of the vote(s) of the other joint holder(s) and for this purpose seniority shall be determined as that one of the said persons so present whose name stands first on the register in respect of such share shall alone be entitled to vote in respect thereof.
(iii) In order to be valid, a form of proxy must be deposited at the Company’s Hong Kong share registrar, Computershare Hong Kong Investor Services Limited, at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong, together with the power of attorney or other authority (if any) under which it is signed (or a notarially certified copy thereof) not less than 48 hours before the time appointed for the holding of the EGM (i.e. before 10:00 a.m. on Saturday, 12 October 2024) or any adjournment thereof. The completion and return of the form of proxy shall not preclude the Shareholders from attending and voting in person at the EGM (or any adjourned meeting thereof) if they so wish.
(iv) For the purpose of determining the shareholders’ eligibility to attend and vote at the EGM to be held on Monday, 14 October 2024, the register of members of the Company will be closed from Tuesday, 8 October 2024 to Monday, 14 October 2024 (both days inclusive), during which period no transfers of the Shares will be registered. In order to qualify for attending and voting at the EGM, all share transfer documents accompanied by the relevant share certificates must be lodged with the Company’s Hong Kong share registrar, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong, not later than 4:30 p.m. on Monday, 7 October 2024.
(v) The EGM (or any adjournment thereof) is expected to take no more than half a day. Shareholders or their proxies attending the EGM (or any adjournment thereof) shall bear their own travelling and accommodation expenses.

As at the date of this notice, the Board comprises Mr. Xu Xin, Ms. Li Yan, Ms. Zhu Jiali and Mr. Yu Zhenrong as executive Directors, Dr. Gu Lin, Mr. Du Haibo and Mr. Qi Yinliang as independent non-executive Directors.

– 57 –

AI assistant

LC Logistics, Inc. — Proxy Solicitation & Information Statement 2024

50624_rns_2024-09-23_a120ff74-9d25-4706-8645-178580bb662f.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

VERY SUBSTANTIAL ACQUISITION AND CONNECTED TRANSACTION ACQUISITION OF TWO VESSELS AND

NOTICE OF THE EXTRAORDINARY GENERAL MEETING

DEFINITIONS

DEFINITIONS

DEFINITIONS

LC Logistics, Inc. 樂艙物流股份有限公司

(Stock Code: 2490)

VERY SUBSTANTIAL ACQUISITION AND CONNECTED TRANSACTION ACQUISITION OF TWO VESSELS AND NOTICE OF THE EXTRAORDINARY GENERAL MEETING

INTRODUCTION

LETTER FROM THE BOARD

HEADS OF AGREEMENTS

NOVATION AGREEMENTS

LETTER FROM THE BOARD

SHIPBUILDING AGREEMENTS

THE CONSIDERATION

LETTER FROM THE BOARD

THE TWO VESSELS

FINANCIAL EFFECT OF THE NOVATION

REASONS FOR AND BENEFITS OF THE NOVATION

INFORMATION ON THE GROUP AND THE PARTIES TO THE HEADS OF AGREEMENTS, NOVATION AGREEMENTS AND SHIPBUILDING AGREEMENTS

Information on the Group and Bal Container

Information on Lecang Fantasy

Information on China Shipbuilding and Jiangnan Shipyard

LISTING RULES IMPLICATIONS

BOARD APPROVAL

CLOSURE OF REGISTER OF MEMBERS

NOTICE OF EXTRAORDINARY GENERAL MEETING

FORM OF PROXY

VOTING BY WAY OF POLL

LETTER FROM THE BOARD

RECOMMENDATION

ADDITIONAL INFORMATION

LC Logistics, Inc. 樂艙物流股份有限公司

VERY SUBSTANTIAL ACQUISITION AND CONNECTED TRANSACTION ACQUISITION OF TWO VESSELS

Dr. Gu Lin

LC Logistics, Inc.

VERY SUBSTANTIAL ACQUISITION AND CONNECTED TRANSACTION ACQUISITION OF TWO VESSELS

INTRODUCTION

LISTING RULES IMPLICATIONS

THE INDEPENDENT BOARD COMMITTEE

THE INDEPENDENT FINANCIAL ADVISER

BASIS OF OUR ADVICE

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Background information of the Group and Bal Container

1.1 Principal business of the Group and Bal Container

1.2 Financial information of the Group

FY2023 vs FY2022

1H2024 vs 1H2023

1.3 Outlook and strategy of the Group

2. Background information of Lecang Fantasy and the Vessels

2.1 Information of Lecang Fantasy

2.2 Information of the Vessels

3. Principal terms of the Heads of Agreements and the Novation Agreements

3.1 Principal terms of the Heads of Agreements

3.2 Principal terms of the Novation Agreements

3.3 Valuation of the Vessels

3.3.1 Shanghai Gillion’s qualification

3.3.2 Valuation methodology

3.3.3 Basis and assumptions

Management costs

Capital costs

3.3.4 Section conclusion

3.4 Section summary

4. Reasons for and benefits of the entering into the Heads of Agreements and the Novation Agreements

RECOMMENDATION

Altus Capital Limited

Leo Tam

(1) FINANCIAL INFORMATION OF THE GROUP

(2) INDEBTEDNESS

(3) FINANCIAL AND TRADING PROSPECTS

(4) WORKING CAPITAL

Appraisal Report of Value After Completion of Two Ships To be Constructed (The Jiangnan Shipyard Numbers HULL NO. H2871 and HULL NO. H2872) for Transfer by BAL Container Line Co., Limited HJLPBZ (2024) No. 1085

I. INTRODUCTION TO THE CLIENT, THE PROPERTY RIGHT HOLDER AND OTHER USERS OF THE APPRAISAL REPORT DESIGNATED IN THE ENGAGEMENT LETTER

(i) Client

Name: BAL Container Line Co., Limited

(ii) Property Right Holder

LC Logistics, Inc. Proxy Solicitation & Information Statement 2024