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 licensed securities dealer 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 KLN Logistics Group Limited, you should at once hand this circular and the enclosed form of proxy to the purchaser or transferee or to the bank, licensed securities dealer 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.

KLN Logistics Group Limited

(Incorporated in the British Virgin Islands and continued into Bermuda as an exempted company with limited liability)

Stock Code 636

CONTINUING CONNECTED TRANSACTIONS

REVISION OF ANNUAL CAPS UNDER

(1) THE 2024 KLN LOGISTICS SERVICES FRAMEWORK AGREEMENT; AND

(2) THE 2024 SF LOGISTICS SERVICES FRAMEWORK AGREEMENT

AND

NOTICE OF SPECIAL GENERAL MEETING

Independent Financial Adviser to

the Independent Board Committee and the Independent Shareholders

Capitalised terms used in this cover page shall have the same meanings as those defined in the section headed "Definitions" of this circular.

A letter from the Board is set out on pages 8 to 21 of this circular. A letter from the Independent Board Committee to the Independent Shareholders is set out on pages 22 and 23 of this circular. A letter from the Independent Financial Adviser containing its advice and recommendation to the Independent Board Committee and the Independent Shareholders is set out on pages 24 to 41 of this circular.

A notice convening the SGM to be held as a hybrid meeting at Kowloon Room, Mezzanine Floor, Kowloon Shangri-La, 64 Mody Road, Tsimshatsui East, Kowloon, Hong Kong with online access via the eVoting Portal on Monday, 26 May 2025 at 2:45 p.m. (or as soon thereafter as the annual general meeting of the Company to be held at the same place and on the same date at 2:30 p.m. shall have been concluded or adjourned) (or any adjournment thereof) is set out on pages 49 to 51 of this circular.

A form of proxy for use at the SGM is enclosed with this circular and such form of proxy is also published on the websites of Hong Kong Exchanges and Clearing Limited (www.hkexnews.hk) and the Company (www.kln.com).

Whether or not you are able to attend the meeting physically or via the eVoting Portal, 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 branch share registrar and transfer office, Tricor Investor Services Limited, at 17/F, Far East Finance Centre, 16 Harcourt Road, Hong Kong, or submit it via the designated URL (https://evoting.vistra.com/#/303) by using the log-in username and password provided on the notification letter sent by the Company, not less than 48 hours before the time appointed for holding the SGM, i.e. by no later than 2:45 p.m. on Saturday, 24 May 2025. Completion and return of the form of proxy shall not preclude you from attending and voting physically at the Principal Meeting Place or electronically via the eVoting Portal at the SGM or any adjourned meeting thereof should you so desire.

6 May 2025

CONTENTS

Page

DEFINITIONS ... 1
SPECIAL ARRANGEMENTS FOR THE SGM ... 7
LETTER FROM THE BOARD ... 8
LETTER FROM THE INDEPENDENT BOARD COMMITTEE ... 22
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER ... 24
APPENDIX - GENERAL INFORMATION ... 42
NOTICE OF SGM ... 49

-i-

DEFINITIONS

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

"2022 KLN Logistics Services Framework Agreement"
the framework agreement dated 29 July 2022 (as amended and supplemented by the supplemental agreement dated 28 October 2022) entered into between the Company and SFTS to set out a framework for the provision of the KLN Logistics Services by the Group to SFTS Group

"2022 SF Logistics Services Framework Agreement"
the framework agreement dated 28 June 2022 (as amended and supplemented by the supplemental agreement dated 28 October 2022) entered into between the Company and SFTS to set out a framework for the provision of the SF Logistics Services by SFTS Group to the Group

"2024 Announcement"
the announcement of the Company dated 31 July 2024 in relation to, amongst other things, the continuing connected transactions under the 2024 KLN Logistics Services Framework Agreement and the 2024 SF Logistics Services Framework Agreement

"2024 Circular"
the circular of the Company dated 27 August 2024 in relation to, amongst other things, the continuing connected transactions under the 2024 KLN Logistics Services Framework Agreement and the 2024 SF Logistics Services Framework Agreement

"2024 KLN Logistics Services Framework Agreement"
the framework agreement dated 31 July 2024 entered into between the Company and SFTS to set out a framework for the provision of the KLN Logistics Services by the Group to SFTS Group

"2024 SF Logistics Services Framework Agreement"
the framework agreement dated 31 July 2024 entered into between the Company and SFTS to set out a framework for the provision of the SF Logistics Services by SFTS Group to the Group

"associate(s)"
has the meaning ascribed to it under the Listing Rules

"Board"
the board of Directors

"close associate(s)"
has the meaning given to it under the Listing Rules

"Company"
KLN Logistics Group Limited (formerly Kerry Logistics Network Limited), a company incorporated in the British Virgin Islands and continued into Bermuda to become an exempted company with limited liability, the Shares of which are listed on the Main Board of the Stock Exchange (Stock Code: 636)

"connected person(s)"
has the meaning ascribed to it under the Listing Rules

– 1 –

DEFINITIONS

"controlling shareholder(s)"	has the meaning ascribed to it under the Listing Rules
"Director(s)"	director(s) of the Company
"eVoting Portal"	electronic platform for the registered Shareholders, proxies and corporate representatives attending the SGM via internet
"Existing KLN Annual Cap(s)"	the existing annual cap(s) on the maximum aggregate amounts payable by SFTS Group to the Group for the three years ending 31 December 2027 with respect to the transactions contemplated under 2024 KLN Logistics Services Framework Agreement as disclosed in the 2024 Announcement and the 2024 Circular
"Existing SF Annual Cap(s)"	the existing annual cap(s) on the maximum aggregate amounts payable by the Group to SFTS Group for the three years ending 31 December 2027 with respect to the transactions contemplated under the 2024 SF Logistics Services Framework Agreement as disclosed in the 2024 Announcement and the 2024 Circular
"Flourish Harmony"	Flourish Harmony Holdings Company Limited, an indirect wholly-owned subsidiary of SF Holding
"FY2022"	for the year ended 31 December 2022
"FY2023"	for the year ended 31 December 2023
"FY2024"	for the year ended 31 December 2024
"FY2025"	for the year ending 31 December 2025
"FY2026"	for the year ending 31 December 2026
"FY2027"	for the year ending 31 December 2027
"Group"	the Company and its subsidiaries
"HK$"	Hong Kong dollars, the lawful currency of Hong Kong
"Hong Kong"	the Hong Kong Special Administrative Region of the PRC

DEFINITIONS

"Independent Board Committee"
the independent committee of the Board comprising Dr CHEUNG Wai Man, Mr LAI Sau Cheong Simon, Mr TAN Chuen Yan Paul and Ms WONG Yu Pok Marina, being all the INEDs, established for the purpose of advising the Independent Shareholders in respect of the revision of the annual caps under the 2024 KLN Logistics Services Framework Agreement and the 2024 SF Logistics Services Framework Agreement and the transactions contemplated under such agreements, as well as the adoption of the Revised KLN Annual Caps and the Revised SF Annual Caps

"Independent Financial Adviser" or "Ignite Capital"
Ignite Capital (Asia Pacific) Limited, a licensed corporation to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO, being the independent financial adviser appointed by the Company to advise the Independent Board Committee and the Independent Shareholders in respect of the revision of the annual caps under the 2024 KLN Logistics Services Framework Agreement and the 2024 SF Logistics Services Framework Agreement and the transactions contemplated under such agreements, as well as the adoption of the Revised KLN Annual Caps and the Revised SF Annual Caps

"Independent Shareholders"
the Shareholders other than those who are required to abstain from voting on the proposed resolutions at the SGM approving the revision of the annual caps under the 2024 KLN Logistics Services Framework Agreement and the 2024 SF Logistics Services Framework Agreement and the transactions contemplated under such agreements, as well as the adoption of the Revised KLN Annual Caps and the Revised SF Annual Caps

"independent third party(ies)"
any entity or person who, to the best knowledge of our Directors, is independent of the Company and its connected persons

"INEDs"
the independent non-executive Directors of the Company

"Kerry TJ"
Kerry TJ Logistics Company Limited, incorporated under the laws of Taiwan and listed on Taiwan Stock Exchange (stock code: 2608)

"KGL"
Kerry Group Limited, one of the controlling shareholders of the Company

"KHL"
Kerry Holdings Limited, a wholly-owned subsidiary of KGL and one of the controlling shareholders of the Company

DEFINITIONS

"KLN Logistics Services"
(a) international freight forwarding services, including cross-border international cargo carriage services for SFTS Group's cargo and parcels and various ancillary services through the Group's global network; and
(b) integrated logistics services, including storage, inventory management and other value-added services, trucking and distribution, returns management and various ancillary services mainly outside the Mainland of China, Hong Kong and Macau

"KLN Transaction(s)"
transaction(s) entered into and to be entered into between the Group and SFTS Group with respect to the KLN Logistics Services

"KPL"
Kerry Properties Limited, an exempted company incorporated in Bermuda with limited liability, the shares of which are listed on the Main Board of the Stock Exchange (Stock Code: 683) and a substantial shareholder of the Company

"Latest Practicable Date"
28 April 2025, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained in this circular

"Listing Rules"
the Rules Governing the Listing of Securities on the Stock Exchange, as amended from time to time

"Macau"
the Macao Special Administrative Region of the PRC

"Mainland of China"
the PRC and, for the purpose of this circular, shall exclude Hong Kong, Macau and Taiwan

"Model Code"
the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix C3 to the Listing Rules

"PRC"
the People's Republic of China

"Principal Meeting Place"
Kowloon Room, Mezzanine Floor, Kowloon Shangri-La, 64 Mody Road, Tsimshatsui East, Kowloon, Hong Kong

"Revised KLN Annual Cap(s)"
the revised annual cap(s) on the maximum aggregate amounts payable by SFTS Group to the Group for the three years ending 31 December 2027 with respect to the transactions contemplated under the 2024 KLN Logistics Services Framework Agreement

DEFINITIONS

"Revised SF Annual Cap(s)"
the revised annual cap(s) on the maximum aggregate amounts payable by the Group to SFTS Group for the three years ending 31 December 2027 with respect to the transactions contemplated under the 2024 SF Logistics Services Framework Agreement

"SF Holding"
S.F. Holding Co., Ltd., a joint stock company established in the PRC with limited liability, the domestic ordinary shares of which are listed on the Shenzhen Stock Exchange (stock code: 002352.SZ) and the overseas listed foreign ordinary shares of which are listed on the Main Board of the Stock Exchange (stock code: 06936), and one of the controlling shareholders of the Company

"SF Holding HK"
SF Holding (HK) Limited, a company incorporated in Hong Kong, an indirect wholly-owned subsidiary of SF Holding

"SF Logistics Services"
(a) the carriage of cargoes by air flight operations through SFTS Group's flight network (comprising scheduled flights and charter flights) and various ancillary services;
(b) freight forwarding services, including co-loading of cargoes;
(c) express services of (i) collecting and obtaining customs clearance of cargoes and parcels at designated international arrival ports for, and (ii) sorting, distribution and delivery of such cargoes and parcels to, customers of the Group and/or their designated consignees; and
(d) integrated logistics services, including storage, inventory management and other value-added services, trucking and distribution, returns management and various ancillary services, within the Mainland of China, Hong Kong and Macau

"SF Transaction(s)"
transaction(s) entered into and to be entered into between the Group and SFTS Group with respect to the SF Logistics Services

"SFO"
Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), as amended from time to time

"SFTS"
Shenzhen S.F. Taisen Holding (Group) Co., Ltd.* (深圳順豐泰森控股(集團)有限公司), a company incorporated in the PRC with limited liability and a connected person of the Company

"SFTS Group"
SFTS and its subsidiaries

DEFINITIONS

"SGM"
the special general meeting of the Company to be held as a hybrid meeting at Kowloon Room, Mezzanine Floor, Kowloon Shangri-La, 64 Mody Road, Tsimshatsui East, Kowloon, Hong Kong with online access via the eVoting Portal on Monday, 26 May 2025 at 2:45 p.m. (or as soon thereafter as the annual general meeting of the Company to be held at the same place and on the same date at 2:30 p.m. shall have been concluded or adjourned), or where the context so admits, any adjournment thereof

"Share(s)"
share(s) of nominal value of HK$0.50 each of the Company, or, if there has been a subdivision, consolidation, reclassification or reconstruction of the share capital of the Company, shares forming part of the ordinary share capital of the Company

"Share Award Scheme"
share aware scheme of the Company

"Shareholder(s)"
holder(s) of any Share(s)

"Shenzhen Mingde"
Shenzhen Mingde Holding Development Co., Ltd., one of the controlling shareholders of the Company

"Stock Exchange"
The Stock Exchange of Hong Kong Limited

"subsidiary(ies)"
has the meaning ascribed to it under the Listing Rules

"substantial shareholder(s)"
has the meaning ascribed to it under the Listing Rules

"United States" or "US"
the United States of America, its territories and possessions, any State of the United States, and the District of Columbia

"%"
per cent

For identification purpose only

SPECIAL ARRANGEMENTS FOR THE SGM

The SGM will be a hybrid meeting. All registered Shareholders have the option of attending, participating and voting at the SGM physically at Kowloon Room, Mezzanine Floor, Kowloon Shangri-La, 64 Mody Road, Tsimshatsui East, Kowloon, Hong Kong (i.e. the Principal Meeting Place) or electronically via the eVoting Portal.

Through the eVoting Portal, registered Shareholders will be able to view the live video broadcast of the SGM and participate in voting and submit questions online. The eVoting Portal can be accessed from any location with access to the internet via any smartphone, tablet device or computer.

ATTENDANCE AT THE SGM

The Company reminds Shareholders that physical attendance at the SGM is not necessary for the purpose of exercising their voting rights, and recommends Shareholders to vote via the eVoting Portal where applicable or by appointing the chairman of the SGM as their proxy and submit their proxy form as early as possible and in any event no later than 48 hours before the time appointed for holding the SGM or any adjournment thereof.

HOW TO ATTEND AND VOTE VIA THE EVOTING PORTAL

Shareholders attending and participating in the SGM electronically will also be counted towards the quorum and they will be able to cast their votes and submit questions through the eVoting Portal. Shareholders who wish to attend the SGM and exercise their voting rights electronically can do one of the following:

(1) attend the SGM via the eVoting Portal which enables live streaming and interactive platform for submitting questions and voting online; or
(2) appoint the chairman of the SGM or other person(s) as your proxy(ies) by providing their email address(es) for receiving the designated log-in username and password to attend and vote on your behalf via the eVoting Portal.

Your proxy's authority and instruction will be revoked if you attend and vote physically at the Principal Meeting Place or via the eVoting Portal at the SGM.

Login details and information will be included in our letters to registered Shareholders regarding the eVoting Portal which will be despatched on 6 May 2025. If you are a non-registered Shareholder, you may consult directly with your banks, brokers, custodians or Hong Kong Securities Clearing Company Limited (as the case may be) for necessary arrangement to attend and vote via the eVoting Portal at the SGM if you wish.

If you have any questions relating to the SGM, please contact the Company's Hong Kong branch share registrar and transfer office, Tricor Investor Services Limited, as follows:

Address: 17/F, Far East Finance Centre, 16 Harcourt Road, Hong Kong

Email: [email protected]

Telephone: (852) 2980 1333 during business hours from 9:00 a.m. to 6:00 p.m., Monday to Friday, excluding Hong Kong public holidays

LETTER FROM THE BOARD

KLN Logistics Group Limited

(Incorporated in the British Virgin Islands and continued into Bermuda as an exempted company with limited liability)

Stock Code 636

Chairman, Non-executive Director:
Mr WANG Wei

Vice Chairman, Non-executive Director:
Mr KUOK Khoon Hua

Executive Directors:
Mr CHEUNG Ping Chuen Vicky (Chief Executive Officer)
Mr CHENG Chi Wai
Mr HO Chit

Non-executive Directors:
Ms CHEN Keren
Ms OOI Bee Ti

Independent Non-executive Directors:
Dr CHEUNG Wai Man
Mr LAI Sau Cheong Simon
Mr TAN Chuen Yan Paul
Ms WONG Yu Pok Marina

Registered Office:
Victoria Place, 5th Floor
31 Victoria Street
Hamilton HM 10
Bermuda

Corporate Headquarters and Principal Place of Business in Hong Kong:
16/F, Kerry Cargo Centre
55 Wing Kei Road
Kwai Chung
New Territories
Hong Kong

6 May 2025

To the Shareholders

Dear Sir or Madam

CONTINUING CONNECTED TRANSACTIONS

REVISION OF ANNUAL CAPS UNDER

(1) THE 2024 KLN LOGISTICS SERVICES FRAMEWORK AGREEMENT; AND
(2) THE 2024 SF LOGISTICS SERVICES FRAMEWORK AGREEMENT
AND
NOTICE OF SPECIAL GENERAL MEETING

1. INTRODUCTION

Reference is made to the announcement of the Company dated 28 March 2025, in relation to, among others, the revision of annual caps under the 2024 KLN Logistics Services Framework Agreement and the 2024 SF Logistics Services Framework Agreement.

LETTER FROM THE BOARD

The purpose of this circular is to provide you with, inter alia, (i) further details of the 2024 KLN Logistics Services Framework Agreement and the 2024 SF Logistics Services Framework Agreement, and the transactions contemplated under such agreements, as well as the Revised KLN Annual Caps and the Revised SF Annual Caps in connection thereto; (ii) a letter from the Independent Board Committee to the Independent Shareholders; (iii) a letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders, and to give you the notice of the SGM.

2. 2024 KLN LOGISTICS SERVICES FRAMEWORK AGREEMENT

On 31 July 2024 (after trading hours), the Company and SFTS entered into the 2024 KLN Logistics Services Framework Agreement to set out a framework for the provision of the KLN Logistics Services by the Group to SFTS Group. The principal terms of the 2024 KLN Logistics Services Framework Agreement are set out below:

Date

31 July 2024

Parties

(1) the Company; and
(2) SFTS.

Term

The 2024 KLN Logistics Services Framework Agreement has a term which commenced on 1 January 2025 and will expire on 31 December 2027, unless earlier terminated pursuant to its terms. The 2024 KLN Logistics Services Framework Agreement can be extended for a further term of three years with mutual agreement of the Company and SFTS, subject to the compliance with applicable Listing Rules requirements.

Subject Matter

Pursuant to the 2024 KLN Logistics Services Framework Agreement, the Group has agreed to provide to SFTS Group the KLN Logistics Services as set out below on normal commercial terms or better and on an arm's length basis, or on terms no less favourable than those made available by the Group or to SFTS Group to or from their respective independent third parties:

(a) international freight forwarding services, including cross-border international cargo carriage services for SFTS Group's cargo and parcels and various ancillary services through the Group's global network; and
(b) integrated logistics services, including storage, inventory management and other value-added services, trucking and distribution, returns management and various ancillary services mainly outside the Mainland of China, Hong Kong and Macau.

The Group and SFTS Group have entered into and will from time to time enter into individual air waybill(s), invoice(s), receipt(s), or other definitive agreement(s) with respect to the KLN Transactions. Each such agreement contains and will contain only provisions which are in all material respects consistent with the terms of the 2024 KLN Logistics Services Framework Agreement.

LETTER FROM THE BOARD

Condition Precedent

The 2024 KLN Logistics Services Framework Agreement was conditional upon the passing by the Independent Shareholders of an ordinary resolution to approve the 2024 KLN Logistics Services Framework Agreement and the transactions contemplated thereunder.

Pricing policy

For each KLN Transaction, the Group shall be entitled to a service fee determined with reference to various factors (as applicable) including but not limited to: (i) weight, volume, value and type of cargo/parcel; (ii) type and availability of cargo/parcel/storage space required; (iii) prevailing cargo tariff and/or fees charged by independent third party carriers, local handling agents and/or service providers for similar services; (iv) cost of providing the KLN Logistics Services; and/or (v) contemporaneous quotations from at least two independent third party providers in respect of similar services or quotations provided by the Group to other independent third parties for similar services.

Payment terms

The Group and the SFTS Group may, from time to time enter into individual definitive agreements pursuant to the terms of the 2024 KLN Logistics Services Framework Agreement to determine the pricing and specific payment terms of the relevant transactions. The specific payment terms may vary based on several factors, mainly including freight or logistics mode, transaction volume, applicable market practice and industry norms. Generally, the services fees shall be payable by cheque payment or bank transfer, with credit period ranging from 30-60 days.

Historical transaction amounts

The table below sets out the (i) the historical actual transaction amounts paid by SFTS Group to the Group for the provision of KLN Logistics Services based on the audited accounts of the Company; (ii) the historical approved annual caps under the 2022 KLN Logistics Services Framework Agreement; and (iii) the respective utilisation rate of the historical approved annual caps, for each of the three years ended 31 December 2024:

	Year ended 31 December
	2022	2023	2024
	(HK$' million)
Historical transaction amounts	311.0	301.3	1,858.2
Historical approved annual caps	531.0	2,340.0	2,931.0
Utilisation rates	58.6%	12.9%	63.4%

The historical transaction amount paid by SFTS Group to the Group for the provision of KLN Logistics Services for the two months ended 28 February 2025 based on the unaudited management accounts of the Company was approximately HK$336.6 million.

LETTER FROM THE BOARD

The Existing KLN Annual Caps and the Revised KLN Annual Caps

The table below sets out the Existing KLN Annual Caps and the Revised KLN Annual Caps:

	Year ending 31 December
	2025	2026	2027
	(HK$)
Existing KLN Annual Caps	1,960.4 million	2,367.5 million	2,860.1 million
Revised KLN Annual Caps	2,718.0 million	3,288.7 million	3,979.4 million

For the year ended 31 December 2024, the aggregate fees paid by SFTS Group to the Group for the provision of KLN Logistics Services was approximately HK$1,858.2 million. The transaction amount in respect of the KLN Logistics Services increased substantially in the second half of 2024 primarily due to the overall upsurge of the prevailing market freight rates, which positively impacted the international freight forwarding sector. Furthermore, there was a significant boost in the inter-group business volumes in the second half of 2024 due to the enhanced business collaboration between the Company and SFTS Group, particularly in key regions such as the Mainland of China, the United States and several Asian countries. The continuous expansion of SFTS Group's businesses in the second half of 2024 also contributed to the increase in demand for KLN Logistics Services, thereby raising the transaction volume, reflecting the successful synergy between the Company and SFTS Group in capturing market opportunities and meeting increased logistical needs.

In light of the increasing trend in the transaction volume and the expected growth in demand from SFTS Group for KLN Logistics Services over time, the Board foresees that the actual transaction amounts with respect to the KLN Logistics Services for the remainder of the year and the two years ending 31 December 2027 will continue to increase, and the Existing KLN Annual Caps will not be sufficient to meet the expected transaction amounts under the 2024 KLN Logistics Services Framework Agreement. In particular, the aggregate fees to be received by the Group for the year ending 31 December 2025 with respect to the KLN Logistics Services are projected to be approximately HK$2,395.7 million, which represents a utilisation rate of approximately 122% of the Existing KLN Annual Cap for the year ending 31 December 2025.

The Revised KLN Annual Caps have been determined with reference to (i) the historical transaction amounts incurred by the parties, including the transaction amounts in the second half of 2024 and for the two months ended 28 February 2025; (ii) prevailing market rate charged by independent third parties for providing similar services; and (iii) inflation and expected growth of SFTS Group's demand for the KLN Logistics Services.

11 -

LETTER FROM THE BOARD

The table below sets out a breakdown of the components of the Revised KLN Annual Caps:

	Year ended 31 December
	2025	2026	2027
	(HK$' million)
Amounts receivable by the Group from SFTS Group
International freight forwarding services income – the Mainland outbound	250.2	302.8	366.4
International freight forwarding services income – the Mainland inbound	252.7	305.7	369.9
Ground handling management services income	147.4	178.3	215.8
Express delivery services income	1,913.8	2,315.7	2,801.9
Miscellaneous logistics services income	153.9	186.2	225.4
Total	2,718.0	3,288.7	3,979.4

Each of the key components of the Revised KLN Annual Caps for the year ending 31 December 2025 were derived by (i) annualising the actual transaction amounts of each of the key components for the second half of 2024; (ii) applying an annual incremental rate of approximately $10\%$; and (iii) applying an annual buffer rate of approximately $10\%$. An annual incremental rate of approximately $10\%$ and an additional buffer rate of approximately $10\%$ would then be applied on the Revised KLN Annual Caps for the year ending 31 December 2025 (i.e. approximately HK$2,718.0 million) and for the year ending 31 December 2026 (i.e. approximately HK$3,288.7 million), respectively, when setting the annual caps for the two years ending 31 December 2026 and 2027, to anticipate any unexpected growth should they arise in such services between the Group and SFTS Group for such years. When the Group determined and applied an annual incremental rate of approximately $10\%$ to the annual caps, they have considered factors such as (i) the anticipated increasing trend in the transaction volume and expected growth in demand for KLN Logistics Services for the three years ending 31 December 2027, in view of the increased transaction volume for the KLN Transactions in the second half of 2024 of over $50\%$ as compared to the first half of 2024, which was mainly attributable to the enhanced business collaboration between the Company and SFTS Group; (ii) the business collaboration and integration between the Company and SFTS Group which is expected to be more extensive during the three years ending 31 December 2027; (iii) the growth in the revenue of the Group in 2024; (iv) the freight forwarding services cost, air freight volume and express delivery services which are expected to grow by approximately $10\%$ per annum during the three years ending 31 December 2027 after considering the historical growth trend for 2024; and (v) growth in the revenue of SF Holding of approximately $11.6\%$ in the second half of 2024 as compared to the first half of 2024. The Group applied an additional buffer rate of approximately $10\%$ to the annual caps to account for any additional demand for related services, currency fluctuations, any potential increase in market price of the relevant services and other unforeseeable circumstances. Based on the above, the Board considers that each of the annual incremental rate and annual buffer rate is fair and reasonable and in the interest of the Company and the Shareholders as a whole.

3. 2024 SF LOGISTICS SERVICES FRAMEWORK AGREEMENT

On 31 July 2024 (after trading hours), the Company and SFTS entered into the 2024 SF Logistics Services Framework Agreement to set out a framework for the provision of the SF Logistics Services by SFTS Group to the Group. The principal terms of the 2024 SF Logistics Services Framework Agreement are set out below:

Date

31 July 2024

Parties

(1) the Company; and
(2) SFTS.

LETTER FROM THE BOARD

Term

The 2024 SF Logistics Services Framework Agreement has a term which commenced on 1 January 2025 and will expire on 31 December 2027, unless earlier terminated pursuant to its terms. The 2024 SF Logistics Services Framework Agreement can be extended for a further term of three years with mutual agreement of the Company and SFTS, subject to the compliance with applicable Listing Rules requirements.

Subject Matter

Pursuant to the 2024 SF Logistics Services Framework Agreement, SFTS Group has agreed to provide to the Group the SF Logistics Services as set out below on normal commercial terms or better and on an arm's length basis, or on terms no less favourable than those made available by SFTS Group or to the Group to or from their respective independent third parties:

(a) the carriage of cargoes by air flight operations through SFTS Group's flight network (comprising scheduled flights and charter flights) and various ancillary services;

(b) freight forwarding services, including co-loading of cargoes;

(c) express services of (i) collecting and obtaining customs clearance of cargoes and parcels at designated international arrival ports for, and (ii) sorting, distribution and delivery of such cargoes and parcels to, customers of the Group and/or their designated consignees; and

(d) integrated logistics services, including storage, inventory management and other value-added services, trucking and distribution, returns management and various ancillary services, within the Mainland of China, Hong Kong and Macau.

The Group and SFTS Group have entered into and will from time to time enter into individual air waybill(s), invoice(s), receipt(s), or other definitive agreement(s) with respect to the SF Transactions. Each such agreement contains and will contain only provisions which are in all material respects consistent with the terms of the 2024 SF Logistics Services Framework Agreement.

Condition Precedent

The 2024 SF Logistics Services Framework Agreement was conditional upon the passing by the Independent Shareholders of the Company of an ordinary resolution to approve the 2024 SF Logistics Services Framework Agreement and the transactions contemplated thereunder.

Pricing policy

For each SF Transaction, the Group shall pay a service fee to SFTS Group determined with reference to various factors (as applicable) including but not limited to: (i) the cargo freight tariff applicable to the relevant flight route as pre-determined by the parties on a quarterly basis with reference to prevailing freight rates charged by independent third party carriers for similar services; (ii) weight, volume, value and type of cargo/parcel; (iii) type and

LETTER FROM THE BOARD

availability of cargo/parcel/storage space required; (iv) prevailing fees chargeable by independent third party local handling agents or service providers for similar services; (v) (in relation to charter flight service) billable flight time; and/or (vi) quotations obtained by the Group from at least two independent third parties.

Payment terms

The Group and the SFTS Group may, from time to time enter into individual definitive agreements pursuant to the terms of the 2024 SF Logistics Services Framework Agreement to determine the pricing and specific payment terms of the relevant transactions. The specific payment terms may vary based on several factors, mainly including freight or logistics mode, transaction volume, applicable market practice and industry norms. Generally, the services fees shall be payable by cheque payment or bank transfer, with credit period ranging from 30-60 days.

Historical transaction amounts

The table below sets out (i) the historical actual transaction amounts paid by the Group to SFTS Group for the provision of SF Logistics Services based on the audited accounts of the Company; (ii) the historical approved annual caps under the 2022 SF Logistics Services Framework Agreement; and (iii) the respective utilisation rate of the historical approved annual caps, for each of the three years ended 31 December 2024:

	Year ended 31 December
	2022	2023	2024
	(HK$' million)
Historical transaction amounts	797.0	911.7	1,201.6
Historical approved annual caps	1,068.0	4,189.0	5,844.0
Percentage ratio of utilisation rate	74.6%	21.8%	20.6%

The historical transaction amount paid by the Group to SFTS Group for the provision of SF Logistics Services for the two months ended 28 February 2025 based on the unaudited management accounts of the Company was approximately HK$245.4 million.

The Existing SF Annual Caps and the Revised SF Annual Caps

The table below sets out the Existing SF Annual Caps and the Revised SF Annual Caps:

	Year ending 31 December
	2025	2026	2027
	(HK$)
Existing SF Annual Caps	793.4 million	960.0 million	1,161.6 million
Revised SF Annual Caps	1,981.5 million	2,397.6 million	2,901.1 million

LETTER FROM THE BOARD

For the year ended 31 December 2024, the aggregate fees paid by the Group to SFTS Group for the provision of SF Logistics Services for the year ended 31 December 2024 was approximately HK$1,201.6 million. The transaction amount in respect of the SF Logistics Services increased substantially in the second half of 2024. This growth in transaction amount was driven by several factors, including the increase in the number of flights and routes operated by SF Airlines Company Limited, as well as the increase in the prevailing market freight rates. These factors, collectively contributed to a significant increase in transaction volume within the freight forwarding sector. Additionally, there was a notable boost in the inter-group business volumes during the second half of 2024 as a result of the enhanced business collaboration between the Company and SFTS Group, particularly in key regions such as the Mainland of China, the United States and several Asian countries. In the Mainland of China, the Company is increasingly leveraging SFTS Group's well-established infrastructure network, which has significantly boosted transaction volumes within the integrated logistics sector.

In light of the increasing trend in the transaction volume and the expected growth in demand from the Group for SF Logistics Services over time, the Board foresees that the actual transaction amounts with respect to the SF Logistics Services for the remainder of the year and the two years ending 31 December 2027 will continue to increase, and the Existing SF Annual Caps will not be sufficient to meet the expected transaction amounts under the 2024 SF Logistics Services Framework Agreement. In particular, the aggregate fees to be paid by the Group for the year ending 31 December 2025 with respect to the SF Logistics Services are projected to be approximately HK$1,746.5 million, which represents a utilisation rate of approximately 220% of the Existing SF Annual Cap for the year ending 31 December 2025.

The Revised SF Annual Caps have been determined with reference to (i) the historical transaction amounts incurred by the parties, including the transaction amounts in the second half of 2024 and for the two months ended 28 February 2025; (ii) prevailing market rates and forecasted rates that may be charged by independent third parties for similar services; (iii) maximum available cargo/parcel/storage capacity; (iv) (in relation to sale of cargo space) existing flight routes and schedules; and (v) inflation and expected growth of the Group's demand for the SF Logistics Services.

The table below sets out a breakdown of the components of the Revised SF Annual Caps:

	Year ended 31 December
	2025	2026	2027
	(HK$' million)
Amounts payable by the Group to SFTS Group
Scheduled flight services cost – the Mainland outbound	818.0	989.7	1,197.5
Scheduled flight services cost – the Mainland inbound	58.3	70.6	85.4
Charter flight services cost	359.1	434.5	525.8
Express delivery services cost	385.3	466.2	564.1
Miscellaneous logistics services cost	360.8	436.6	528.3
Total	1,981.5	2,397.6	2,901.1

Each of the key components of the Revised SF Annual Caps for the year ending 31 December 2025 were derived by (i) annualising the actual transaction amounts of each of the key components for the second half of 2024; (ii) applying an annual incremental rate of approximately 10%; and (iii) applying an annual buffer rate of approximately 10%. An annual incremental rate of approximately 10% and an additional buffer rate of approximately 10% would then be applied on the Revised SF Annual Caps for the year ending 31 December 2025 (i.e. approximately HK$1,981.5 million) and for the year ended 31 December 2026 (i.e. approximately HK$2,397.6 million), respectively, when setting the annual caps for the two years ending 31 December 2026 and 2027, to anticipate any unexpected growth

15 -

LETTER FROM THE BOARD

should they arise in such services between the Group and SFTS Group for such years. When the Group determined and applied an annual incremental rate of approximately 10% to the annual caps, they have considered factors such as (i) the anticipated increasing trend in the transaction volume and expected growth in demand for SF Logistics Services for the three years ending 31 December 2027, in view of the increased transaction volume for the SF Transactions in the second half of 2024 of over 100% as compared to the first half of 2024; (ii) the business collaboration and integration between the Company and SFTS Group which is expected to be more extensive during the three years ending 31 December 2027, including, among other things, (a) the potential increase in the procurement of freight services provided by SFTS Group as SF Airline Company Limited has been operating increasing number of flights and routes; and (b) broadening the usage of the well-established express delivery services and integrated logistics services provided by SFTS Group in the Mainland of China; (iii) flight service and express delivery service costs which are expected to grow by approximately 10% per annum during the three years ending 31 December 2027 after considering the historical growth trend for 2023 and 2024; and (iv) the growth in the revenue of the Group in 2024. The Group applied an additional buffer rate of approximately 10% to the annual caps to account for any additional demand for related services, currency fluctuations, any potential increase in market price of the relevant services and other unforeseeable circumstances. Based on the above, the Board considers that each of the annual incremental rate and annual buffer rate is fair and reasonable and in the interest of the Company and the Shareholders as a whole.

4. LISTING RULES IMPLICATIONS

SFTS is a wholly-owned subsidiary of SF Holding, which is a controlling shareholder of the Company. SFTS is therefore a connected person of the Company. As such, each of the 2024 KLN Logistics Services Framework Agreement and the 2024 SF Logistics Services Framework Agreement and the transactions contemplated under such agreements constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules.

Pursuant to Rule 14A.54(1) of the Listing Rules, if the Company proposes to revise the Existing KLN Annual Caps and Existing SF Annual Caps, the Company will have to re-comply with the applicable requirements under Chapter 14A of the Listing Rules.

As one or more of the applicable percentage ratios (as defined in Rule 14.07 of the Listing Rules) in respect of the Revised KLN Annual Caps exceeds 5%, the revision of the annual caps under the 2024 KLN Logistics Services Framework Agreement is subject to the reporting, announcement, circular, annual review and independent shareholders' approval requirements under Chapter 14A of the Listing Rules.

As one or more of the applicable percentage ratios (as defined in Rule 14.07 of the Listing Rules) in respect of the Revised SF Annual Caps exceeds 5%, the revision of the annual caps under the 2024 SF Logistics Services Framework Agreement is subject to the reporting, announcement, circular, annual review and independent shareholders' approval requirements under Chapter 14A of the Listing Rules.

5. REASONS FOR AND BENEFITS OF REVISION OF THE EXISTING KLN ANNUAL CAPS AND THE EXISTING SF ANNUAL CAPS

The Group is principally engaged in the integrated logistics and international freight forwarding businesses. Following the strategic alliance made between the Company and SF Holding since 2021, the Board is of the view that the Group's competitive position in the market will continue to be enhanced by creating synergies with SF Holding through extensive collaborations.

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LETTER FROM THE BOARD

By engaging each other for the relevant services under the 2024 KLN Logistics Services Framework Agreement and the 2024 SF Logistics Services Framework Agreement, respectively, the Group and SFTS Group can coordinate and streamline their operations, reconfigure resources and refocus on the services where the Group and SFTS Group have the respective strengths and core competencies, thereby bringing efficiencies of scale to their business operations. By engaging the cargo flight services, express and last-mile fulfilment services, and ancillary logistics services of SFTS Group in the Mainland of China and, in tandem, providing to SFTS Group increasing international freight forwarding services and integrated logistics business mainly outside of the Mainland of China, Hong Kong and Macau, the Group is able to (i) leverage on SFTS Group's flight network and the SF Airline flight services, the resources and extensive infrastructure in Mainland of China, thereby reducing administrative costs and allowing it to grow and further expand the scale and geographical coverage of its operations, and (ii) focus on its strategic plans and centre resources on its core business of international freight forwarding and integrated logistics, with an aim to enhancing its overall performance and prospects. On the other hand, SFTS Group would benefit from the Company's (i) extensive overseas international freight forwarding network, (ii) well-developed logistics infrastructure throughout Asia, and (iii) other manpower and strong local support capabilities in various countries outside of Mainland of China, in providing comprehensive and complementary support to SFTS Group's business operations.

Based on the Group's historical transaction amounts in the second half of 2024, the unaudited management accounts of the Company and operational data for the two months ended 28 February 2025, it has come to the attention of the Board that the actual transaction amounts contemplated under the 2024 KLN Logistics Services Framework Agreement and the 2024 SF Logistics Services Framework Agreement may exceed the Existing KLN Annual Caps and Existing SF Annual Caps, respectively.

In view of the expected growth in demand from the Group and SFTS Group (as applicable) of the relevant services and the actual transaction amounts incurred or made to date under the 2024 KLN Logistics Services Framework Agreement and the 2024 SF Logistics Services Framework Agreement, the Board anticipates that the Existing KLN Annual Caps and Existing SF Annual Caps for the financial years ending 31 December 2025, 2026 and 2027 will not be sufficient to meet the expected transaction amounts under the respective agreements. The Revised KLN Annual Caps and the Revised SF Annual Caps would enable the Group and SFTS Group to continue and expand their cooperation and utilisation of their respective resources, services and strengths, thereby bring efficiencies of scale to their business operations, further enhancing the business collaboration between the Company and SFTS Group, enabling both the Group and SFTS Group to serve customers seamlessly, efficiently, and cost-effectively. Accordingly, the Board proposes and considers it beneficial for the Company to increase the annual caps to the Revised KLN Annual Caps and the Revised SF Annual Caps.

Save for the revision of the Existing KLN Annual Caps and Existing SF Annual Caps, all the terms of the 2024 KLN Logistics Services Framework Agreement and the 2024 SF Logistics Services Framework Agreement, including the pricing policies and principal payment terms, and the internal control measures, remain unchanged.

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LETTER FROM THE BOARD

under the 2024 KLN Logistics Services Framework Agreement and the 2024 SF Logistics Services Framework Agreement and the transactions contemplated under such agreements are in the ordinary and usual course of business of the Group, on an arm's length basis and on normal commercial terms which are fair and reasonable, will not have material adverse impact on the Company's financial position or operation results nor will it affect the independence of the Company, and in the interests of the Company and the Shareholders as a whole, and that the Revised KLN Annual Caps and the Revised SF Annual Caps are fair and reasonable.

Mr WANG Wei, the chairman of the Board and a non-executive Director, is an executive director, chairman of the board of directors and general manager and controlling shareholder of SF Holding. Mr HO Chit, an executive Director, is an executive director, deputy general manager and chief financial officer of SF Holding and he is interested in 122,000 ordinary shares (A Shares) in SF Holding and options granted under the 2022 stock option incentive plan of SF Holding to subscribe for 366,000 ordinary shares (A Shares) in SF Holding (representing approximately 0.01% in the issued share capital (A Shares) of SF Holding). Ms OOI Bee Ti, a non-executive Director, is the head of treasury center of SF Holding and she is interested in 71,400 ordinary shares (A Shares) in SF Holding and options granted under the 2022 stock option incentive plan of SF Holding to subscribe for 204,000 ordinary shares (A Shares) in SF Holding (representing approximately 0.01% in the issued share capital (A Shares) of SF Holding). Each of Mr WANG Wei, Mr HO Chit and Ms OOI Bee Ti therefore abstained from voting on the relevant resolutions of the Board approving the revision of annual caps under the 2024 KLN Logistics Services Framework Agreement and the 2024 SF Logistics Services Framework Agreement and the transactions contemplated under such agreements (including the Revised KLN Annual Caps and the Revised SF Annual Caps). Save as disclosed above, none of the other Directors has a material interest in the Revised KLN Annual Caps and the Revised SF Annual Caps, or was required to abstain from voting on the relevant resolutions of the Board.

To the best knowledge, information and belief of the Directors having made all reasonable enquiries, as at the Latest Practicable Date, Mr WANG Wei is interested in 931,209,117 Shares indirectly held through SF Holding, which constituted approximately 51.52% of the total number of issued Shares, and SF Holding and its associates will abstain from voting on the resolutions in respect of the revision of annual caps under the 2024 KLN Logistics Services Framework Agreement and the 2024 SF Logistics Services Framework Agreement to be proposed at the SGM.

6. INFORMATION ON THE PARTIES

Information about the Group

The Group operates as a leading logistics service provider in Asia with a highly diversified business portfolio and global presence in 59 countries and territories. Headquartered in Hong Kong, the Group offers a broad range of supply chain solutions from integrated logistics, international freight forwarding (air, ocean, road, rail and multimodal), industrial project logistics, to cross-border e-commerce and infrastructure investment.

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LETTER FROM THE BOARD

Information about SFTS and SF Holding

SFTS is a company incorporated in the PRC with limited liability, and is principally engaged in investments in industrial businesses, investment consulting and other information consulting, supply chain management, asset management, capital management and investment management. SFTS is a wholly-owned subsidiary of SF Holding, which is a leading global integrated logistics services provider. Among other businesses, SFTS Group operates a fleet of freight aircrafts and carries on the business of carriage of cargoes by air flight operations and provides international courier services to carry cargoes, parcels and goods into and out of the PRC.

7. INTERNAL CONTROL MEASURES

The Company has implemented internal control procedures for monitoring, reporting and ensuring that the Group conducts the transactions entered into or to be entered into under the 2024 KLN Logistics Services Framework Agreement and the 2024 SF Logistics Services Framework Agreement in accordance with the pricing policy and guidelines stated above, and in compliance with the Listing Rules.

Prior to agreeing with SFTS Group on:

(i) the service fees payable in relation to the KLN Logistics Services, the Group will obtain and compare contemporaneous quotations from at least two independent third party providers in respect of similar services or quotations provided by the Group to other independent third parties for similar services. The service fees will be determined by the heads of local business units after taking into consideration such quotations. The entire process will be documented to facilitate the review by the Group's finance team; and

(ii) in relation to the SF Logistics Services, (a) the cargo freight tariffs applicable to relevant flight routes at the beginning of each financial quarter, the Group will obtain and compare contemporaneous quotations from at least two independent third party carriers for similar services; (b) the rates chargeable for express delivery services at the beginning of each financial quarter, the Group will obtain and compare contemporaneous quotations from at least two independent third party service providers for similar services; and (c) the rates chargeable for integrated logistics services, the Group will obtain and compare contemporaneous quotations from at least two independent third party service providers for similar services. The service fees will be determined by the heads of local business units after taking into consideration such quotations. The entire process will be documented to facilitate the review by the Group's finance team.

The Company's finance team will (i) monitor the continuing connected transactions by communicating regularly with the regional heads of the finance teams of the Group in respect of the terms and pricing policies of the continuing connected transactions, and collect monthly financial data together with underlying agreements for analysis and reporting; and (ii) review the actual transaction amounts incurred under the continuing connected transactions on a regular basis to ensure that these are conducted in accordance with established procedures and internal controls, to assess the effectiveness of such measures and to report to management where it expects that any of the relevant annual caps will soon be exceeded. If, based on monthly management accounts and management updates, adjustment(s) to the relevant annual cap(s) becomes necessary, or a material change to the terms of any of the framework agreements is required, the Company will re-comply with the relevant Listing Rules requirements.

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LETTER FROM THE BOARD

The INEDs will conduct an annual review of the continuing connected transactions, and confirm the matters required under Rule 14A.55 of the Listing Rules in the Company's subsequent annual reports. Further, the Company will engage external auditors to conduct an annual review of its continuing connected transactions, and to report to the Board on matters required under Rule 14A.56 of the Listing Rules.

8. VOTING BY POLL

All the resolutions set out in the notice of the SGM would be decided by poll in accordance with the Listing Rules and the Company's bye-laws. The chairman of the SGM would explain the detailed procedures for conducting a poll at the commencement of the SGM.

The poll results will be published on the Company's website at (www.kln.com) and the Stock Exchange's website at (www.hkexnews.hk) after the conclusion of the SGM.

9. SGM

The SGM will be held as a hybrid meeting at Kowloon Room, Mezzanine Floor, Kowloon Shangri-La, 64 Mody Road, Tsimshatsui East, Kowloon, Hong Kong with online access via the eVoting Portal on Monday, 26 May 2025 at 2:45 p.m. (or as soon thereafter as the annual general meeting of the Company to be held at the same place and on the same date at 2:30 p.m. shall have been concluded or adjourned), or where the context so admits, any adjournment thereof for considering and, if thought fit, approving the revision of the annual caps under the 2024 KLN Logistics Services Framework Agreement and the 2024 SF Logistics Services Framework Agreement and the transactions contemplated under such agreements, as well as the adoption of the Revised KLN Annual Caps and the Revised SF Annual Caps.

Notice of the SGM is set out on pages 49 to 51 of this circular. A form of proxy for use at the SGM is enclosed with this circular. Whether or not you are able to attend the meeting physically or via the eVoting Portal, 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 branch share registrar and transfer office, Tricor Investor Services Limited, at 17/F, Far East Finance Centre, 16 Harcourt Road, Hong Kong, or submit it via the designated URL (https://evoting.vistra.com/#/303) by using the log-in username and password provided on the notification letter sent by the Company, not less than 48 hours before the time appointed for holding the SGM, i.e. by no later than 2:45 p.m. on Saturday, 24 May 2025. Completion and return of the form of proxy will not prevent you from attending and voting physically at the Principal Meeting Place or electronically via the eVoting Portal at the SGM if you so wish.

To the best knowledge, information and belief of the Directors having made all reasonable enquiries, as at the Latest Practicable Date, (i) SF Holding and its associate(s) are interested in 931,209,117 Shares, which constituted approximately $51.52\%$ of the total number of issued Shares and (ii) the trustee of the Share Award Scheme held 5,432,733 Shares (including 131,728 unvested Shares awarded under the Share Award Scheme) (the "Trustee"). Save for SF Holding and its associate(s) who will abstain from voting on the resolutions in respect of the Revised KLN Annual Caps and the Revised SF Annual Caps to be proposed at the SGM, to the best knowledge of the Company having made all reasonable enquiries, no other Shareholder is materially interested in the Revised KLN Annual Caps and the Revised SF Annual Caps and the transactions contemplated thereunder and is required to abstain from voting at the SGM. The Trustee is required to and will abstain from voting at the SGM pursuant to Rule 17.05A of the Listing Rules.

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LETTER FROM THE BOARD

10. INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER

The Independent Board Committee comprising all the independent non-executive Directors (namely, Dr CHEUNG Wai Man, Mr LAI Sau Cheong Simon, Mr TAN Chuen Yan Paul and Ms WONG Yu Pok Marina) has been formed to advise the Independent Shareholders, and Ignite Capital has been appointed by the Company as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders, in relation to the revision of the annual caps under the 2024 KLN Logistics Services Framework Agreement and the 2024 SF Logistics Services Framework Agreement and the transactions contemplated under such agreements, as well as the adoption of the Revised KLN Annual Caps and the Revised SF Annual Caps.

11. RECOMMENDATION

Your attention is drawn to (i) the letter of advice from the Independent Board Committee to the Independent Shareholders advising on the revision of the annual caps under the 2024 KLN Logistics Services Framework Agreement and the 2024 SF Logistics Services Framework Agreement and the transactions contemplated under such agreements, as well as the adoption of the Revised KLN Annual Caps and the Revised SF Annual Caps and (ii) the letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders advising on the revision of the annual caps under the 2024 KLN Logistics Services Framework Agreement and the 2024 SF Logistics Services Framework Agreement and the transactions contemplated under such agreements, as well as the adoption of the Revised KLN Annual Caps and the Revised SF Annual Caps.

The Board (including the INEDs whose views are set forth in the "Letter from the Independent Board Committee" in this circular, after considering the advice of the Independent Financial Adviser, and excluding (i) each of Mr WANG Wei, Mr HO Chit and Ms OOI Bee Ti who has abstained from voting on the relevant resolutions approving the revision of annual caps under the 2024 KLN Logistics Services Framework Agreement and the 2024 SF Logistics Services Framework Agreement and the transactions contemplated under such agreements, as well as the adoption of the Revised KLN Annual Caps and the Revised SF Annual Caps) is of the view that the revision of the annual caps under the 2024 KLN Logistics Services Framework Agreement and the 2024 SF Logistics Services Framework Agreement and the transactions contemplated under such agreements, as well as the adoption of the Revised KLN Annual Caps and the Revised SF Annual Caps are in the ordinary and usual course of business of the Group, on normal commercial terms which are fair and reasonable, will not have material adverse impact on the Company's financial position or operation results nor will it affect the independence of the Company, and in the interests of the Company and the Shareholders as a whole, and that the Revised KLN Annual Caps and the Revised SF Annual Caps are fair and reasonable. Accordingly, the Directors recommend the Independent Shareholders to vote in favour of all resolutions to be proposed at the SGM.

12. ADDITIONAL INFORMATION

Your attention is also drawn to the additional information set out in the appendix to this circular.

Yours faithfully,

For and on behalf of

KLN Logistics Group Limited

WANG Wei

Chairman

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

The following is the text of the letter from the Independent Board Committee to the Independent Shareholders in respect of the revision of annual caps under the 2024 KLN Logistics Services Framework Agreement and the 2024 SF Logistics Services Framework Agreement and the transactions contemplated under such agreements (including the Revised KLN Annual Caps and the Revised SF Annual Caps) for inclusion in this circular.

KLN Logistics Group Limited

(Incorporated in the British Virgin Islands and continued into Bermuda as an exempted company with limited liability)

Stock Code 636

6 May 2025

To the Independent Shareholders

Dear Sir or Madam

CONTINUING CONNECTED TRANSACTIONS
REVISION OF ANNUAL CAPS UNDER

(1) THE 2024 KLN LOGISTICS SERVICES FRAMEWORK AGREEMENT; AND
(2) THE 2024 SF LOGISTICS SERVICES FRAMEWORK AGREEMENT

We refer to the circular issued by the Company to its Shareholders dated 6 May 2025 (the "Circular") of which this letter forms part. Terms defined in the Circular shall have the same meanings in this letter unless the context otherwise requires.

We have been appointed by the Board to form an independent board committee to consider and advise you as to whether the revision of the annual caps under the 2024 KLN Logistics Services Framework Agreement and the 2024 SF Logistics Services Framework Agreement and the transactions contemplated under such agreements, as well as the adoption of the Revised KLN Annual Caps and the Revised SF Annual Caps (i) are fair and reasonable, and on normal commercial terms, and (ii) are 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 as to voting. Ignite Capital has been appointed to act as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

We wish to draw your attention to the letter from the Board as set out on pages 8 to 21 of the Circular, and a letter of advice from the Independent Financial Adviser as set out on pages 24 to 41 of the Circular.

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Having considered the revision of the annual caps under the 2024 KLN Logistics Services Framework Agreement and the 2024 SF Logistics Services Framework Agreement and the transactions contemplated under such agreements, as well as the Revised KLN Annual Caps and the Revised SF Annual Caps, the advice and recommendation from the Independent Financial Adviser and the relevant information contained in the letter from the Board, we are of the opinion that the revision of the annual caps under the 2024 KLN Logistics Services Framework Agreement and the 2024 SF Logistics Services Framework Agreement and the transactions contemplated under such agreements, as well as the adoption of the Revised KLN Annual Caps and the Revised SF Annual Caps (i) are fair and reasonable, and on normal commercial terms, and (ii) are in the ordinary and usual course of business of the Group and in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend you to vote in favour of all the resolutions to be proposed at the SGM.

Yours faithfully,

For and on behalf of the Independent Board Committee

CHEUNG Wai Man

LAI Sau Cheong Simon

TAN Chuen Yan Paul

WONG Yu Pok Marina

Independent non-executive Directors

23 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the full text of the letter of advice from Ignite Capital to the Independent Board Committee and the Independent Shareholders in relation to the revision of annual caps under the 2024 KLN Logistics Services Framework Agreement and the 2024 SF Logistics Services Framework Agreement, which has been prepared for the purpose of inclusion in this circular.

Unit A, 15th Floor, CMA Building
64-65 Connaught Road Central
Central, Hong Kong

6 May 2025

To: The Independent Board Committee and the Independent Shareholders of KLN Logistics Group Limited

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS

REVISION OF ANNUAL CAPS UNDER

(1) THE 2024 KLN LOGISTICS SERVICES FRAMEWORK AGREEMENT; AND
(2) THE 2024 SF LOGISTICS SERVICES FRAMEWORK AGREEMENT

INTRODUCTION

We refer to our appointment by the Company to advise the Independent Board Committee and the Independent Shareholders in respect of the revision of annual caps under the 2024 KLN Logistics Services Framework Agreement and the 2024 SF Logistics Services Framework Agreement (the "Revision of Annual Caps"), details of which are set out in the letter from the Board (the "Letter from the Board") contained in the circular of the Company dated 6 May 2025 (the "Circular"), of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as those defined in the Circular unless the context requires otherwise.

On 31 July 2024 (after trading hours), the Company and SFTS entered into the 2024 KLN Logistics Services Framework Agreement and the 2024 SF Logistics Services Framework Agreement. As stated in the Letter from the Board, based on the Group's historical transaction amounts in the second half of 2024, the unaudited management accounts of the Company and operational data for the two months ended 28 February 2025, it has come to the attention of the Board that the actual transaction amounts contemplated under the 2024 KLN Logistics Services Framework Agreement and the 2024 SF Logistics Services Framework Agreement may exceed the Existing KLN Annual Caps and Existing SF Annual Caps, respectively.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In view of the expected growth in demand from the Group and SFTS Group (as applicable) of the relevant services and the actual transaction amounts incurred or made to date under the 2024 KLN Logistics Services Framework Agreement and the 2024 SF Logistics Services Framework Agreement, the Board anticipates that the Existing KLN Annual Caps and Existing SF Annual Caps for the financial years ending 31 December 2025, 2026 and 2027 will not be sufficient to meet the expected transaction amounts under the respective agreements. The Revised KLN Annual Caps and the Revised SF Annual Caps would enable the Group and SFTS Group to continue and expand their cooperation and utilisation of their respective resources, services and strengths, thereby bring efficiencies of scale to their business operations. Accordingly, the Board proposes and considers it beneficial for the Company to increase the annual caps to the Revised Annual Caps.

SFTS is a wholly-owned subsidiary of SF Holding, which is a controlling shareholder of the Company. SFTS is therefore a connected person of the Company. As such, each of the 2024 KLN Logistics Services Framework Agreement and the 2024 SF Logistics Services Framework Agreement and the transactions contemplated under such agreements (the "Continuing Connected Transactions") constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules.

25 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

To the best knowledge, information and belief of the Directors having made all reasonable enquiries, as at the Latest Practicable Date, (i) SF Holding and its associate(s) are interested in 931,209,117 Shares, which constituted approximately 51.52% of the total number of issued Shares and (ii) the trustee of the Share Award Scheme held 5,432,733 Shares (including 131,728 unvested Shares awarded under the Share Award Scheme) (the "Trustee"). Save for SF Holding and its associate(s) who will abstain from voting on the resolutions in respect of the Revised KLN Annual Caps and the Revised SF Annual Caps to be proposed at the SGM, to the best knowledge of the Company having made all reasonable enquiries, no other Shareholder is materially interested in the Revised KLN Annual Caps and the Revised SF Annual Caps and the transactions contemplated thereunder and is required to abstain from voting at the SGM. The Trustee is required to and will abstain from voting at the SGM pursuant to Rule 17.05A of the Listing Rules.

THE INDEPENDENT BOARD COMMITTEE

The Independent Board Committee comprising Dr CHEUNG Wai Man, Mr LAI Sau Cheong Simon, Mr TAN Chuen Yan Paul and Ms WONG Yu Pok Marina, being all the INEDs, was established to consider and to advise the Independent Shareholders on the revision of the annual caps under the 2024 KLN Logistics Services Framework Agreement and the 2024 SF Logistics Services Framework Agreement and the transactions contemplated under such agreements, as well as the adoption of the Revised KLN Annual Caps and the Revised SF Annual Caps. We, Ignite Capital, have been appointed by the Company as the Independent Financial Advisor to advise the Independent Board Committee and the Independent Shareholders in the same regard.

OUR INDEPENDENCE

As at the Latest Practicable Date, we did not have any relationship with, or interest in, the Group, SF Holding, SFTS, SFTS Group, the Directors, chief executive or substantial Shareholders of the Company or other parties that could reasonably be regarded as relevant to our independence. During the two years immediately prior to this letter, we have not: (i) acted in the capacity as a financial adviser or as an independent financial adviser to the Company; (ii) provided any services to the Company; or (iii) had any relationship with the Company. Apart from normal independent financial advisory fees paid or payable (as the case may be) to us in connection with this appointment, no arrangements exist whereby we had received or will receive any fees or benefits from the Group, SF Holding, SFTS, the Directors, chief executive or substantial Shareholders of the Company or any other parties that could reasonably be regarded as relevant to our independence. Accordingly, we consider that we are independent pursuant to Rule 13.84 of the Listing Rules.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

BASIS OF OUR OPINION

In formulating our advice and recommendation to the Independent Board Committee and the Independent Shareholders, we have reviewed, amongst other things:

(i) the 2024 Circular;

(ii) the 2024 KLN Logistics Services Framework Agreement;

(iii) the 2024 SF Logistics Services Framework Agreement;

(iv) the announcement of the Company dated 28 March 2025 in relation to the results for the year ended 31 December 2024 of the Group (the "2024 Results Announcement"); and

(v) other information as set out in the Circular.

We have relied on the truth, accuracy and completeness of the statements, information, opinions and representations contained or referred to in the Circular and the information and representations made to us by the Company, the Directors and the management of the Group (collectively, the "Management"). We have assumed that all information and representations contained or referred to in the Circular and provided to us by the Management, for which they are solely and wholly responsible, are true, accurate and complete in all respects and not misleading or deceptive at the time when they were provided or made and will continue to be so up to the Latest Practicable Date. Shareholders will be notified of material changes as soon as possible, if any, to the information and representations provided and made to us after the Latest Practicable Date and up to and including the date of the SGM.

We have also assumed that all statements of belief, opinion, expectation and intention made by the Management in the Circular were reasonably made after due enquiries and careful consideration and there are no other facts not contained in the Circular, the omission of which make any such statement contained in the Circular misleading. We have no reason to suspect that any relevant information has been withheld, or to doubt the truth, accuracy and completeness of the information and facts contained in the Circular, or the reasonableness of the opinions expressed by the Management, which have been provided to us.

We consider that we have been provided with sufficient information to reach an informed view and to provide a reasonable basis for our opinion. However, we have not carried out any independent verification of the information provided by the Management, nor have we conducted any independent investigation into the business, financial conditions and affairs of the Group or its future prospects.

27 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Directors jointly and severally accept full responsibility for the accuracy of the information disclosed and confirm, having made all reasonable enquiries that to the best of their knowledge and belief, there are no other facts not contained in this letter, the omission of which would make any statement herein misleading.

This letter is issued to the Independent Board Committee and the Independent Shareholders solely in connection for their consideration of the revision of the annual caps under the 2024 KLN Logistics Services Framework Agreement and the 2024 SF Logistics Services Framework Agreement and the transactions contemplated under such agreements, as well as the adoption of the Revised KLN Annual Caps and the Revised SF Annual Caps, and except for its inclusion in the Circular, is not to be quoted or referred to, in whole or in part, nor shall this letter be used for any other purposes without our prior written consent.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion in respect of the Revision of Annual Caps, we have taken into consideration the following principal factors and reasons:

1. Information of the Parties

The Group

Table 1: Highlights of the financial results of the Group

	Audited
	FY2024	FY2023
	(HK$'000)	(HK$'000)
Revenue	58,274,404	47,407,559
Gross profit	5,647,072	4,901,156
Profit/(loss) attributable to the Shareholders	1,541,524	791,165
- Continuing operations	1,320,290	1,209,818
- Discontinued operations^{Note}	221,234	(418,653)

Source: 2024 Results Announcement
Note: For details of the discontinued operations, please refer to the annual reports of the Company and the 2024 Results Announcement.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

During FY2024, the Group recorded revenue of approximately HK$58,274.4 million, representing an increase of approximately 22.9% from approximately HK$47,407.6 million for FY2023. As disclosed in the 2024 Results Announcement, such growth in the revenue of the Group was mainly contributed by the growth in the international freight forwarding business in the key markets including the Mainland of China, the United States, Hong Kong and the rest of Asia. Gross profit of the Group increased by approximately 15.2% to approximately HK$5,647.1 million for FY2024 from approximately HK$4,901.2 million for FY2023. The Group recorded profit attributable to the Shareholders from continuing operation of approximately HK$1,320.3 million, representing a growth rate of approximately 9.1% from approximately HK$1,209.8 million in FY2023. The increase in profit attributable to the Shareholders from continuing operation was also mainly attributable to the outperformance in the international freight forwarding segment which recorded a segment profit of approximately HK$1,950.6 million in FY2024, representing a growth rate of approximately 39.3% as compared to FY2023. Such outperformance was supported by the growth in key market including the Mainland of China, the US, Hong Kong and the rest of Asia.

Table 2: Highlights of the financial positions of the Group

| | Audited
As at 31 December | |
| --- | --- | --- |
| | 2024
(HK$'000) | 2023
(HK$'000) |
| Non-current assets | 20,417,237 | 20,699,473 |
| Current assets | 22,285,248 | 21,421,442 |
| Non-current liabilities | 8,103,658 | 7,358,856 |
| Current liabilities | 15,519,696 | 14,654,800 |
| The equity attributable to the Shareholders | 16,755,754 | 17,586,380 |

Source: 2024 Results Announcement

As at 31 December 2024, the total assets of the Group amounted to approximately HK$42,702.5 million, registering a slight increase of approximately 1.4% from approximately HK$42,120.9 million as at 31 December 2023. Such increase was mainly attributable to: (i) the increase in accounts receivable, prepayments and deposits of approximately HK$2,664.2 million; (ii) the increase in amounts due from fellow subsidiaries of approximately HK$411.9 million; (iii) the decrease in assets classified as held for distribution of approximately 2,070.7 million; and (iv) the decrease in financial assets at fair value through other comprehensive income of approximately HK$161.4 million. On the other hand, the total liabilities of the Group amounted to approximately HK$23,623.3 million as at 31 December 2024, recorded a moderate increase of approximately 7.3% from approximately HK$22,013.6 million as at 31 December 2023. Such increase was mainly attributable to: (i) the increase in accounts payable, deposits received and accrued charges of approximately HK$2,412.4 million; (ii) the increase in bank loans of approximately HK$322.8 million; (iii) increase in lease liabilities of approximately HK$249.8 million; and (iv) the decrease in the liabilities associated with assets classified as held for distribution of approximately HK$1,471.6 million.

Given the movements of the total assets and total liabilities of the Group highlighted above, the equity attributable to the Shareholders decreased from approximately HK$17,586.4 million as at 31 December 2023 to approximately HK$16,755.8 million as at 31 December 2024, representing a decrease of approximately 4.7%.

29 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

SFTS

2. Industry outlook and prospects of the Group

The global economy is holding steady in 2024, although the degree of grip varies widely across countries. According to the report titled "World Economic Outlook" (the "World Economic Outlook") published by the International Monetary Fund ("IMF") in October 2024¹ and January 2025², the past few years have put the resilience of the global economy to the test. A once-in-a-century pandemic, eruption of geopolitical conflicts, and extreme weather events have disrupted supply chains, caused energy and food crises. The global economy has demonstrated resilience overall, but this masks uneven performance across regions and lingering fragilities. Since the beginning of 2024, signs have emerged that cyclical imbalances are being gradually resorbed, with economic activity in major economies better aligned with their potential. These developments may have helped bring inflation rates across countries closer together, but the momentum in global disinflation appears to have slowed in the first half of 2024. With inflation approaching central bank targets and governments striving to manage debt dynamics, the policy mix is expected to shift from monetary to fiscal tightening as monetary policy rates are brought down, closer to their natural levels. As stated in the World Economic Outlook, the annual percentage growth of the world's total gross domestic product ("GDP") was estimated to be approximately 3.3% in 2025. Growth of GDP of advanced economies and emerging and developing Asia was estimated to reach approximately 1.9% and approximately 5.0% in 2025, respectively. Among the emerging and developing Asia, the Mainland of China was estimated to record a GDP growth of approximately 4.6% in 2025. In respect of the advanced economies, United States was estimated to record a GDP of approximately 2.1% in 2025. As a result, these major economies, being the key business geographical area of the Group are expected to remain in a stable trend going forward.

According to the report titled "Global Trade Outlook and Statistics" published by the World Trade Organization ("WTO") in October 2024³, global merchandise trade turned upwards in the first half of 2024 with a 2.3% year-on-year increase, which is expected be followed by further moderate expansion in the rest of the year and in 2025. The rebound in 2024 comes on the heels of a slump in 2023 driven by high inflation and rising interest rates. WTO economists anticipated that the volume of world merchandise trade will increase by 2.7% in 2024 and 3.0% in 2025. However, it should be noted that significant downside risks remain, including regional conflicts, geopolitical tensions and policy uncertainty.

https://www.imf.org/en/Publications/WEO/Issues/2024/10/22/world-economic-outlook-october-2024
https://www.imf.org/en/Publications/WEO/Issues/2025/01/17/world-economic-outlook-update-january-2025
https://www.wto.org/english/res_e/booksp_e/stat_10oct24_e.pdf

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We note that, on 5 April 2025, the United States announced a significant update on its tariff policy (the "US Tariff Policy"), which included a 10% baseline on imports to the United States with a separate set of reciprocal tariffs on many nations worldwide, such as European Nation, China, Vietnam and etc. It is expected that the US Tariff will impose significant uncertainty on, among other things, the global supply chain, trade and inflation. On 16 April 2025, WTO published an updated "Global Trade Outlook and Statistics" report⁴, WTO stated that the outlook for global trade has deteriorated sharply due to a surge in tariffs and trade policy uncertainty. Based on measures in place as of 14 April 2025, including the suspension of "reciprocal tariffs" by the United States, the volume of world merchandise trade is now expected to decline by 0.2% in 2025 before posting a modest recovery of 2.5% in 2026. On the other hand, IMF published an updated World Economic Outlook report⁵ on 22 April 2025, which stated that the swift escalation of trade tensions and extremely high levels of policy uncertainty are expected to have a significant impact on global economic activity. IMF revised the estimated annual percentage growth of the world's GDP to approximately 2.8% in 2025, whilst the estimated GDP growth of the Mainland of China and United States in 2025 were being revised to approximately 4.0% and 1.8%, respectively.

Overall, the recently announced US Tariff Policy will impose significant uncertainty on the global trade. In the meantime, modest recovery in the global trade is expected in the longer term.

3. Reasons for and benefits for Revision of the Annual Caps

As stated in the Letter from the Board, based on the Group's historical transaction amounts in the second half of 2024, the unaudited management accounts of the Company and operational data for the two months ended 28 February 2025 (the "Historical Transaction Amounts"), it has come to the attention of the Board that the actual transaction amounts contemplated under the 2024 KLN Logistics Services Framework Agreement and the 2024 SF Logistics Services Framework Agreement may exceed the Existing KLN Annual Caps and Existing SF Annual Caps, respectively. As advised by the Management, following the strategic alliance made between the Company and SF Holding since 2021, the Group and SFTS Group have been coordinating and streamlining their operations, reconfiguring resources and refocusing on the services where the Group and SFTS Group have the respective strengths and core competences, thereby bringing efficiencies of scale to their business operations. The increase in the Historical Transaction Amounts was mainly attributable to, amongst other factors, the significant boost in inter-group business volumes in the second half of 2024 due to the enhanced business collaboration and integration between the Company and SFTS Group. For details of the enhanced business collaboration and integration between the Company and SFTS Group, please refer to the sections headed "Existing KLN Annual Cap and historical transaction amounts" and "Existing SF Annual Cap and historical transaction amounts". The Management expects the collaboration and integration between the Company and SFTS Group will continue and be more extensive.

⁴ https://www.wto.org/english/res_e/publications_e/trade_outlook25_e.htm
⁵ https://www.imf.org/en/Publications/WEO/Issues/2025/04/22/world-economic-outlook-april-2025

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

their cooperation and utilisation of their respective resources, services and strengths, thereby bring efficiencies of scale to their business operations and further enhancing the business collaboration between the Company and SFTS Group.

Having considered that (i) as discussed in the above section headed "2. Industry outlook and prospects of the Group", modest recovery in the global trade is expected in the longer term; (ii) the promising financial results of the Group for 2024 as illustrated in the above section headed "1. Information of the Parties – The Group"; (iii) the collaboration and integration between the Company and SFTS Group is expected to continue and be more extensive; (iv) the Revision of Annual Caps would enable the Group and SFTS Group to continue and expand their cooperation and utilisation of their respective resources, services and strengths; and (v) despite the recently announced US Tariff will impose significant uncertainty on the global trade, it is reasonable to the revise the Existing Annual Caps so as to enable the Group to realize the potential growth in the Continued Connected Transactions if achieved, we are of the view that the Revision of Annual Caps is in the interests of the Company and the Shareholders as a whole.

4. Principal terms of the 2024 KLN Logistics Services Framework Agreement and the 2024 SF Logistics Services Framework Agreement

As stated in the Letter from the Board, save for the Revision of Annual Caps, all the terms of the 2024 KLN Logistics Services Framework Agreement and the 2024 SF Logistics Services Framework Agreement, including the pricing policies and principal payment terms, and the internal control measures, remain unchanged. Please refer to the Letter from the Board for details of the terms of the 2024 KLN Logistics Services Framework Agreement and the 2024 SF Logistics Services Framework Agreement.

5. Proposed Revised KLN Annual Caps

Existing KLN Annual Caps and historical transaction amounts

As set out in the Letter from the Board, the table below sets out the (i) the historical actual transaction amounts paid by SFTS Group to the Group for the provision of KLN Logistics Services (the "KLN Transaction Amounts") based on the audited accounts of the Company; (ii) the historical approved annual caps under the 2022 KLN Logistics Services Framework Agreement; and (iii) the respective utilisation rate of the historical approved annual caps, for each of the three years ended 31 December 2024:

Table 3: The KLN Annual Caps and the KLN Transaction Amounts FY2022, FY2023 and FY2024

| | FY2022 | FY2023
(HK$' million) | FY2024 |
| --- | --- | --- | --- |
| Historical transaction amounts | 311.0 | 301.3 | 1,858.2 |
| Historical approved annual caps | 531.0 | 2,340.0 | 2,931.0 |
| Utilisation rates | 58.6% | 12.9% | 63.4% |

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As illustrated above, the KLN Transaction Amounts amounted to approximately HK$311.0 million, HK$301.3 million and HK$1,858.2 million for FY2022, FY2023 and FY2024, representing utilisation rates of approximately 58.6%, 12.9% and 63.4% respectively. We understand from the Management that the low utilisation rate recorded for FY2023 was mainly attributable to (i) the excess inventories, subdued purchasing power and stagnant export growth, particularly in Asia; and (ii) the Group has disposed of its companies engaging in express delivery services in the Asia Pacific and Europe to SF Holding in the third quarter of 2023. As disclosed in the Letter from the Board and based on our discussion with the Management, the rebound in utilisation rate for FY2024 was mainly attributable to the substantial increase in the KLN Transaction Amounts in the second half of FY2024, which was primarily due to the overall growth of the freight market, as well as the significant increase in inter-group business volumes as a result of the enhanced business integration between the Company and SFTS Group. We understand that such enhanced business integration between the Company and SFTS (the "KLN Enhanced Business Integration") includes, among other areas, (i) provision of the last mile delivery services for outbound cargos from Mainland of China to the United States for SFTS Group; (ii) volume of the ground handling management services provided by the Group to SFTS Group expanded significantly in the second half of 2024, which ascribed to, among other factors, soaring service demand in the newly cooperated Ezhou Huahu Airport and in the Asian countries (such as India); and (iii) provision of freight forwarding and logistics services to certain of the customers of SFTS Group in Mainland of China. In addition, continuous expansion of SFTS Group's businesses in the second half of 2024 also contributed to the increase in demand for KLN Logistics Services, thereby raising the transaction volume, reflecting the successful synergy between the Company and SFTS Group in capturing market opportunities and meeting increased logistical needs. According to the interim report for the six months ended 30 June 2024 and annual report for the year ended 31 December 2024 published by SF Holding, in the second half of 2024, SF Holding achieved a revenue growth of approximately 11.6% as compared to the first half of 2024.

As disclosed in the Letter from the Board, despite the moderate utilisation rate of approximately 63.4% for FY2024, the aggregate fees to be received by the Group for the year ending 31 December 2025 with respect to the KLN Logistics Services are projected to be approximately HK$2,395.7 million (the "KLN Projection"), which represents an utilization rate of approximately 122.2% of the Existing KLN Annual Cap for FY2025. As advised by the Management, the KLN Projection was calculated based on (i) the KLN Transaction Amounts for the two months ended 28 February 2025; and (ii) estimation of the KLN Transaction Amounts for the ten months ending 31 December 2025 deriving from the KLN Transaction Amounts for the second half of FY2024 on a pro-rata basis and an annual incremental rate of approximately 10% (the "Annual Incremental Rate"). The Board foresees that the actual transaction amounts with respect to the KLN Logistics Services for the two years ending 31 December 2027 will continue to increase due to increasing trend in the transaction volume and demand from SFTS Group for KLN Logistics Services over time.

33 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Revised KLN Annual Caps

The table below sets out the Revised KLN Annual Caps:

Table 4: The Revised KLN Annual Caps

| | FY2025 | FY2026
(HK$' million) | FY2027 |
| --- | --- | --- | --- |
| Revised KLN Annual Caps | 2,718.0 | 3,288.7 | 3,979.4 |

The Revised KLN Annual Caps have been determined with reference to (i) the historical transaction amounts incurred by the parties, including in the second half of 2024 and the transaction amounts for the two months ended 28 February 2025; (ii) prevailing market rate charged by independent third parties for providing similar services; and (iii) inflation and expected growth of SFTS Group's demand for the KLN Logistics Services.

In assessing the fairness and reasonableness of the Revised KLN Annual Caps, we have discussed with the Management on the basis and underlying assumptions for the purpose of setting the Revised KLN Annual Caps. We have also obtained from the Management and reviewed the computation worksheets for the Revised KLN Annual Caps including its relevant breakdown (the "KLN Caps Computation"), set out below is a summary of breakdown based on the key components of the Revised KLN Annual Caps:

Table 5: The components of the Revised KLN Annual Caps for FY2025, FY2026 and FY2027

| | FY2025 | FY2026
(HK$' million) | FY2027 |
| --- | --- | --- | --- |
| Amounts receivable by the Group from SFTS Group | | | |
| International freight forwarding services income – the Mainland outbound | 250.2 | 302.8 | 366.4 |
| International freight forwarding services income – the Mainland inbound | 252.7 | 305.7 | 369.9 |
| Ground handling management services income | 147.4 | 178.3 | 215.8 |
| Express delivery services income | 1,913.8 | 2,315.7 | 2,801.9 |
| Miscellaneous logistics services income | 153.9 | 186.2 | 225.4 |
| Total | 2,718.0 | 3,288.7 | 3,979.4 |

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Based on our review on the KLN Caps Computation, we noted that each of the key components of the Revised KLN Annual Caps for FY2025 were derived by (i) annualizing the corresponding KLN Transaction Amounts of each of the key components for the second half of FY2024; (ii) the Annual Incremental Rate; and (iii) an annual buffer rate of approximately 10% (the "Annual Buffer Rate"). The Annual Incremental Rate and the Annual Buffer Rate would then be applied on the Revised KLN Annual Caps for FY2025 (i.e. approximately HK$2,718.0 million) and FY2026 (i.e. approximately HK$3,288.7 million), respectively, when setting the annual caps for FY2026 and FY2027 to anticipate any unexpected growth should they arise in such services between the Group and SFTS Group for such years.

We were advised by the Management, when formulating the Annual Increment Rate, they have considered factors such as (i) the anticipated increasing trend in the transaction volume and expected growth in demand for KLN Logistics Services for the three years ending 31 December 2027, in view of the increase in the KLN Transaction Amounts for the second half of FY2024 of over 50% as compared to the first half of FY2024, which was mainly attributable to the KLN Enhanced Business Integration; (ii) the collaboration and integration between the Company and SFTS Group, including the KLN Enhanced Business Integration, is expected to continue and be more extensive in the three years ending 31 December 2027; (iii) the freight forwarding services cost, air freight volume and express delivery services are expected to grow by approximately 10% per annum in the three years ending 31 December 2027 after considering the historical growth trend for FY2024; and (iv) growth in the revenue of the SF Holding of approximately 11.6% in the second half of FY2024 as compared to the first half of FY2024. It is further understood that the Annual Buffer Rate was set to cope with any unforeseeable circumstances such as any additional demand for related services, currency fluctuations and any potential increase in market price of the relevant services and other unforeseeable circumstances. Based on the above, we are of the view that the Annual Incremental Rate and the Annual Buffer Rate is fair and reasonable and is in the interest of the Company and the Shareholders as a whole.

As discussed under the section headed "2. Industry outlook and prospects of the Group", although the recently announced US Tariff Policy will impose significant uncertainty on the global trade, modest recovery in the global trade is expected in the longer term. Having considered the above, in particular the substantial growth in the KLN Transaction Amounts recorded in the second half of FY2024, we are of the view that it is in the interests of the Group to set a reasonable level of proposed annual caps for the 2024 KLN Logistics Services Framework Agreement so as to accommodate potential growth in the provision of the relevant services by the Group and the transactions contemplated thereunder.

In light of the above, we are of the view that the Revised KLN Annual Caps are fair and reasonable so far as the Independent Shareholders are concerned.

Nevertheless, Independent Shareholders should note that the annual caps relate to future events and was determined by the Management based on assumption including the current estimate of the demand of the Continuing Connected Transactions. It does not represent a forecast of turnover to be generated from the transactions contemplated under the 2024 KLN Logistics Services Framework Agreement. Consequently, we express no opinion as to how closely the actual transactions amounts in comparison to the annual caps.

35 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

6. Proposed Revised SF Annual Caps

Existing SF Annual Caps and historical transaction amounts

As set out in the Letter from the Board, the table below sets out (i) the historical actual transaction amounts paid by the Group to SFTS Group for the provision of SF Logistics Services (the "SF Transaction Amounts") based on the audited accounts of the Company; (ii) the historical approved annual caps under the 2022 SF Logistics Services Framework Agreement; and (iii) the respective utilisation rate of the historical approved annual caps, for each of the three years ended 31 December 2024:

Table 6: The Existing Annual Caps and the SF Transaction amounts for FY2022, FY2023, and FY2024

	Year ended 31 December
	2022	2023	2024
	(HK$' million)
Historical transaction amounts	797.0	911.7	1,201.6
Historical approved annual caps	1,068.0	4,189.0	5,844.0
Utilisation rates	74.6%	21.8%	20.6%

As illustrated above, the SF Transaction Amounts amounted to approximately HK$797.0 million, HK$911.7 million and HK$1,201.6 million for FY2022, FY2023 and FY2024, representing utilisation rates of approximately 74.6%, 21.8% and 20.6% respectively. We understand from the Management that the low utilisation rate recorded for FY2023 and FY2024 was mainly attributable to the business integration between the Group and SFTS Group was still in progress and drop in the overall freight volume and rates during the post-pandemic period. Despite the low utilisation rate in FY2024, as stated in the Letter from the Board, the SF Transaction Amounts increased substantially in the second half of 2024, which was driven by several factors, including the increase in the number of flights and routes operated by SF Airlines Company Limited, as well as the increase in the prevailing market freight rates. These factors, collectively contributed to a significant increase in transaction volume within the freight forwarding sector. Additionally, there was a notable boost in the inter-group business volumes during the second half of 2024 as a result of the enhanced business collaboration between the Company and SFTS Group, particularly in the Mainland of China. As advised by the Management, the Company is increasingly leveraging on SFTS Group's well-established infrastructure network in the Mainland of China, which has significantly boosted the transaction volumes of the express delivery services and integrated logistics services provided by SFTS Group.

As disclosed in the Letter from the Board, the aggregate fees to be paid by the Group for the year ending 31 December 2025 with respect to the SF Logistics Services are projected to be approximately HK$1,746.5 million (the "SF Projection"), which represents a utilisation rate of approximately 220.1% of the Existing SF Annual Cap for FY2025. As advised by the Management, the SF Projection was calculated based on (i) the SF Transaction Amounts for the two months ended 28 February 2025; and (ii) estimation of the SF Transaction Amounts for the ten months ending 31 December 2025 deriving from the SF Transaction Amounts for the second half of FY2024 on a pro-rata basis and the Annual Incremental Rate. In light of the increasing trend in the transaction volume and the expected growth in demand from the Group for SF Logistics Services over time, the Board foresees that the actual transaction amounts with respect to the SF Logistics Services for the two years ending 31 December 2027 will continue to increase and the Existing SF Annual Caps will not be sufficient to meet the expected transaction amounts under the 2024 SF Logistics Services Framework Agreement.

36 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Revised SF Annual Caps

The table below sets out the Revised SF Annual Caps:

Table 7: The Revised SF Annual Caps

| | FY2025 | FY2026
(HK$' million) | FY2027 |
| --- | --- | --- | --- |
| Revised SF Annual Caps | 1,981.5 | 2,397.6 | 2,901.1 |

The Revised SF Annual Caps have been determined with reference to (i) the historical transaction amounts incurred by the parties, including the transaction amounts for the two months ended 28 February 2025; (ii) prevailing market rates and forecasted rates that may be charged by independent third parties for similar services; (iii) maximum available cargo/parcel/storage capacity; (iv) (in relation to sale of cargo space) existing flight routes and schedules; and (v) inflation and expected growth of the Group's demand for the SF Logistics Services.

In assessing the fairness and reasonableness of the Revised SF Annual Caps, we have discussed with the Management on the basis and underlying assumptions for the purpose of setting the Revised SF Annual Caps. We have also obtained and reviewed from the Management the computation worksheets for the Revised SF Annual Caps including its relevant breakdown (the "SF Caps Computation"), set out below is a summary of breakdown based on the key components of the Revised SF Annual Caps:

Table 8: The components of the Proposed SF Annual Caps for FY2025, FY2026 and FY2027

| | FY2025 | FY2026
(HK$' million) | FY2027 |
| --- | --- | --- | --- |
| Amounts payable by the Group to SFTS Group | | | |
| Scheduled flight services cost – the Mainland outbound | 818.0 | 989.7 | 1,197.5 |
| Scheduled flight services cost – the Mainland inbound | 58.3 | 70.6 | 85.4 |
| Charter flight services cost | 359.1 | 434.5 | 525.8 |
| Express delivery services cost | 385.3 | 466.2 | 564.1 |
| Miscellaneous logistics services cost | 360.8 | 436.6 | 528.3 |
| Total | 1,981.5 | 2,397.6 | 2,901.1 |

Based on our review on the SF Caps Computation, we noted that each of the key components of the Revised SF Annual Caps for FY2025 were derived by (i) annualizing the corresponding SF Transaction Amounts of each of the key components for the second half of FY2024; (ii) the Annual Incremental Rate; and (iii) the Annual Buffer Rate. The Annual Incremental Rate and the Annual Buffer Rate would then be applied on the Revised SF Annual Caps for FY2025 (i.e. approximately HK$1,981.5 million) and FY2026 (i.e. approximately HK$2,397.6 million), respectively, when setting the annual caps for FY2026 and FY2027 to anticipate any unexpected growth should they arise in such services between the Group and SFTS Group for such years.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We were advised by the Management, when formulating the Annual Increment, they have considered factors such as (i) the anticipated increasing trend in the transaction volume and expected growth in demand for SF Logistics Services for the three years ending 31 December 2027, in view of the increase in the SF Transaction Amounts for the second half of FY2024 of over 100% as compared to the first half of FY2024; (ii) the collaboration and integration between the Company and SFTS Group is expected to continue and be more extensive in the three years ending 31 December 2027, including, among other things, (a) the potential increase in the procurement of freight services provided by SFTS Group as SF Airline Company Limited has been operating increasing number of flights and routes; and (b) broadening the usage of the well-established express delivery services and integrated logistics services provided by SFTS Group in the Mainland of China; (iii) flight service and express delivery service costs are expected to grow by approximately 10% per annum in the three years ending December 2027 after considering the historical growth trend for FY2023 and FY2024; and (iv) growth in the revenue of the Group of approximately 23% for FY2024. It is further understood that the Annual Buffer Rate was set to cope with any unforeseeable circumstances such as any additional demand for related services, currency fluctuations and any potential increase in market price of the relevant services and other unforeseeable circumstances. Based on the above, we are of the view that the Annual Incremental Rate and the Annual Buffer Rate is fair and reasonable and is in the interest of the Company and the Shareholders as a whole.

As discussed under the section headed "2. Industry outlook and prospects of the Group", although the recently announced US Tariff Policy will impose significant uncertainty on the global trade, modest recovery in the global trade is expected in the longer term. Having considered the above, in particular the substantial growth in the SF Transaction Amounts recorded in the second half of FY2024, we are of the view that it is in the interests of the Group to set a reasonable level of proposed annual caps for the 2024 SF Logistics Services Framework Agreement so as to accommodate the increasing demand for the procurement of the relevant services by the Group, which are crucial to the business development and expansion of the Group and the strategic collaboration with SFTS Group.

In light of the above, we are of the view that the Revised SF Annual Caps are fair and reasonable so far as the Independent Shareholders are concerned.

7. Internal control procedures

As set out in the Letter from the Board, the Company has implemented internal control procedures for monitoring, reporting and ensuring that the Group conducts the transactions entered or to be entered into under the 2024 KLN Logistics Services Framework Agreement and the 2024 SF Logistics Services Framework Agreement (the "Continuing Connected Transactions") in accordance with the pricing policy and guidelines stated above, and in compliance with the Listing Rules.

Prior to agreeing with SFTS Group on:

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Regarding the effectiveness of the aforementioned internal control procedures to safeguard the Continuing Connected Transactions, we noted that before entering into of the Continuing Connected Transactions, the Group will obtain the quotations from at least two independent third party suppliers/customers in respect of similar services, we have obtained and reviewed two sets of the correspondence email record for each Continuing Connected Transactions undertaken during the period of April 2024 to March 2025 (the "Review Period").

39 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

2024 KLN Logistics Services Framework Agreement

We have obtained and reviewed two sets of the correspondence record dated 28 June 2024 and 25 February 2025 regarding the quotations provided to the independent third-party customers and SFTS Group in respect of the international freight forwarding services and ground handling management services which was updated on a monthly or quarterly basis by the Company. The samples under review were selected on a random basis which covered the international freight forwarding services and ground handling management services conducted between the Group and SFTS Group during the Review Period and the samples conducted between the Group and the independent third party customers were in close proximity in time of those conducted between the Group and SFTS Group for comparison purpose, we consider the samples are adequate and representative. According to the samples collected, we noted that each agreement we reviewed when appropriate, by the responsible relevant personnel and finance team of the Company before the individual agreement was entered into. During the course of our review, we noted that (i) the charges for international freight forwarding services and ground handling management services were no less favourable to the Group than those offered by the Group to independent third-party customers.; and; (ii) in line with the Group's pricing policy as set out in the section headed "2. 2024 KLN Logistics Services Framework Agreement" as set out in the Letter from the Board. In view of the above, we noted that the terms offered by the Group to SFTS Group are no more favourable than those made available by the Group to the independent third-party customers.

2024 SF Logistics Services Framework Agreement

We have obtained and reviewed two sets of the correspondence record dated 4 September 2024 and 25 March 2025 regarding the quotations provided to the independent third-party carriers in respect of the cargo freight tariffs and the integrated logistics services. The samples under review were selected on a random basis which covered the scheduled flight services cost (both Mainland outbound and inbound) and the integrated logistics services provided by SFTS Group during the Review Period and the samples conducted between the Group and independent third-party suppliers were in close proximity in time of those conducted between the Group and SFTS Group for comparison purpose, we consider the samples are adequate and representative. According to the samples collected, we noted that each agreement we reviewed when appropriate, by the responsible relevant personnel and finance team of the Company before the individual agreement was entered into. During the course of our review, we noted that (i) the cargo freight tariffs and the integrated logistics rates charged were no less favourable to the Group than those offered to the Group by independent third-party suppliers; and (ii) in line with the Group's pricing policy as set out in the section headed "3. 2024 SF Logistics Services Framework Agreement" as set out in the Letter from the Board. In view of the above, we noted that the terms offered to the Group by SFTS Group are no less favourable than those made available to the Group by the independent third party carriers or service providers.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

OPINION AND RECOMMENDATION

Having considered the principal factors and reasons as discussed above, we are of the view that the Revision of Annual Caps, as well as the adoption of the Revised KLN Annual Caps and the Revised SF Annual Caps, is on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned and is in the ordinary and usual course of business of the Group and in the interests of the Company and the Shareholders as a whole. Accordingly, we advise the Independent Shareholders, and recommend the Independent Board Committee to advise the Independent Shareholders to vote in favour of the ordinary resolution in this regard.

Yours faithfully,

For and on behalf of

Ignite Capital (Asia Pacific) Limited

Li Lan

Tan Ming Kit

Managing Director

Director

Mr. Li Lan is a Managing Director of Ignite Capital and is licensed under the SFO as a Responsible Officer to conduct Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities. Mr. Li has over 18 years of corporate finance experience in Hong Kong and has participated in and completed various financial advisory and independent financial advisory transactions.

Mr. Tin Ming Kit is a Director of Ignite Capital and is licensed under the SFO as a licensed person to conduct Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities. Mr. Tin has over 18 years of investment banking and corporate finance experience in Hong Kong and has participated in and completed various initial public offerings, corporate financial advisory and independent financial advisory transactions.

41 -

APPENDIX

GENERAL INFORMATION

1. 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.

2. DISCLOSURE OF INTERESTS

(a) Directors' and chief executive's interests and short positions in the Shares, underlying Shares and debentures of the Company and its associated corporations

As at the Latest Practicable Date, the interests and short positions of the Directors and the chief executive of the Company in the Shares, underlying Shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required (a) 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 they were taken or deemed to have under such provisions of the SFO); or (b) pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (c) to be notified to the Company and the Stock Exchange pursuant to the Model Code, were as follows:

(I) The Company

Directors	Shares in the Company
	Personal interests (held as beneficial owner)	Family interests (interests of spouse and child under 18)	Corporate interests (interests of controlled corporations)	Other interests	Total interests	Approximate percentage of issued share capital(1)
WANG Wei(2)	-	-	931,209,117	-	931,209,117	51.52%
KUOK Khoon Hua(3)	600,428	-	-	1,132,479	1,732,907	0.10%
CHEUNG Ping Chuen Vicky(4)	3,983,178	-	-	-	3,983,178	0.22%
CHENG Chi Wai(5)	1,167,303	-	-	-	1,167,303	0.06%
WONG Yu Pok Marina(6)	20,796	-	-	-	20,796	< 0.01%

Notes:
(1) Based on 1,807,429,342 Shares in issue as at the Latest Practicable Date.
(2) Mr Wang is interested in 931,209,117 Shares held through his controlled corporations.
(3) Mr Kuok is interested in (i) 600,428 Shares as beneficial owner; and (ii) 1,132,479 Shares held through discretionary trusts of which Mr Kuok is a discretionary beneficiary.

APPENDIX

GENERAL INFORMATION

(4) Mr Cheung is interested in (i) 3,950,171 Shares as beneficial owner; and (ii) award granted under the Share Award Scheme conferring the conditional right upon vesting in the form of 33,007 Shares.

(5) Mr Cheng is interested in (i) 1,136,182 Shares as beneficial owner; and (ii) award granted under the Share Award Scheme conferring the conditional right upon vesting in the form of 31,121 Shares.

(6) Ms Wong is interested in 20,796 Shares as beneficial owner.

(II) Associated Corporations

Shenzhen Mingde Holding Development Co., Ltd.

Director	Registered capital of Shenzhen Mingde
	Personal interests (held as beneficial owner)	Family interests (interests of spouse and child under 18)	Corporate interests (interests of controlled corporations)	Other interests	Total interests	Approximate percentage of registered capital(1)
WANG Wei(2)	RMB113,286,600	–	–	–	RMB113,286,600	99.90%

Notes:

(1) Based on a total registered capital of Shenzhen Mingde of RMB113,400,000 as at the Latest Practicable Date.

(2) Mr Wang is interested in registered capital of Shenzhen Mingde in the amount of RMB113,286,600 as beneficial owner.

S.F. Holding Co., Ltd.

Directors	Type of shares	Ordinary shares in SF Holding
		Personal interests (held as beneficial owner)	Family interests (interests of spouse and child under 18)	Corporate interests (interests of controlled corporations)	Other interests	Total interests	Approximate percentage of issued share capital(1)
HO Chit(2)	A Shares	488,000	–	–	–	488,000	0.01%
OOI Bee Ti(3)	A Shares	275,400	–	–	–	275,400	0.01%

Notes:

(1) Based on 4,817,646,658 ordinary shares (A Shares) in SF Holding in issue as at the Latest Practicable Date.

(2) Mr Ho is interested in (i) 122,000 ordinary shares (A Shares) in SF Holding as beneficial owner; and (ii) options granted under the 2022 stock option incentive plan of SF Holding to subscribe for 366,000 ordinary shares (A Shares) in SF Holding.

(3) Ms Ooi is interested in (i) 71,400 ordinary shares (A Shares) in SF Holding as beneficial owner; and (ii) options granted under the 2022 stock option incentive plan of SF Holding to subscribe for 204,000 ordinary shares (A Shares) in SF Holding.

APPENDIX

GENERAL INFORMATION

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or the chief executive of the Company had registered an interest or a short position in the Shares, underlying Shares or debentures of the Company or any of its associated corporations which were required (a) 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 they were taken or deemed to have under such provisions of the SFO); or (b) pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (c) to be notified to the Company and the Stock Exchange pursuant to the Model Code.

(b) Substantial shareholders who have an interest and/or short position which is discloseable under Divisions 2 and 3 of Part XV of the SFO

So far as it is known to the Directors and the chief executive of the Company, as at the Latest Practicable Date, the following persons (other than a Director or the chief executive of the Company) had, or were deemed or taken to have, an interest or a short position in the Shares and underlying Shares, which were required to be notified to the Company and the Stock Exchange pursuant to the provisions of Divisions 2 and 3 of Part XV of the SFO, as recorded in the register required to be kept by the Company pursuant to Section 336 of the SFO:

Name of Shareholder	Capacity/nature of interest	Number of Shares	Approximate percentage of shareholding in the total issued share capital(1)
WANG Wei	Interest of controlled corporations	931,209,117(7)	51.52%
Shenzhen Mingde Holding Development Co., Ltd.(2)	Interest of controlled corporations	931,209,117(7)	51.52%
S.F. Holding Co., Ltd.(3)	Interest of controlled corporations	931,209,117(7)	51.52%
Kerry Group Limited(4)	Interest of controlled corporations	595,928,608(8)	32.97%
Kerry Holdings Limited(5)	Interest of controlled corporations	572,100,979(8)	31.65%
Kerry Properties Limited(6)	Beneficial owner	376,702,721(8)	20.84%

Notes:
(1) Based on 1,807,429,342 Shares in issue as at the Latest Practicable Date.
(2) Mr WANG Wei is the executive director of Shenzhen Mingde.
(3) Mr WANG Wei is an executive director, the chairman of the board of directors and the general manager of SF Holding. Mr HO Chit is an executive director, a deputy general manager and the chief financial officer of SF Holding. Ms OOI Bee Ti is the head of treasury center of SF Holding.
(4) Mr KUOK Khoon Hua is a director of KGL. Ms CHEN Keren is the group co-general counsel, the company secretary and the director of corporate services of KGL.
(5) Mr KUOK Khoon Hua is the chairman and a director of KHL.

APPENDIX

GENERAL INFORMATION

(6) Mr KUOK Khoon Hua is the chairman, the chief executive officer and an executive director of KPL.

(7) Flourish Harmony is interested in 931,209,117 Shares as beneficial owner. Flourish Harmony is an indirect wholly-owned by SF Holding. SF Holding is a subsidiary of Shenzhen Mingde which is in turn controlled by Mr WANG Wei. Accordingly, SF Holding, Shenzhen Mingde and Mr WANG Wei are deemed to be interested in the interest held by Flourish Harmony in the Company pursuant to the disclosure requirements under the SFO.

(8) KPL is a subsidiary of KHL. KHL is a wholly-owned subsidiary of KGL. Accordingly, KHL is deemed to be interested in the interest held by KPL in the Company and KGL is deemed to be interested in the interest held by each of KHL and KPL in the Company pursuant to the disclosure requirements under the SFO.

Save as disclosed above, as at the Latest Practicable Date, the Directors and the chief executive of the Company were not aware of any person who had an interest or a short position in the Shares and underlying Shares which would fall to be disclosed under the provisions of Divisions 2 and 3 of Part XV of the SFO.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors was a director or an employee of a company which had an interest or a short position in the Shares and underlying Shares which would fall to be disclosed under the provisions of Divisions 2 and 3 of Part XV of the SFO.

3. DIRECTORS' SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had entered into or proposed to enter into any service contract with any member of the Group (excluding contracts expiring or determinable by the employer within one year without payment of compensation (other than statutory compensation)).

4. COMPETING INTERESTS

Mr WANG Wei, the chairman of the Board and a non-executive Director, is an executive director, the chairman of the board of directors, the general manager and the controlling shareholder of SF Holding. Mr HO Chit, an executive Director, is an executive director, a deputy general manager and the chief financial officer of SF Holding. Ms OOI Bee Ti, a non-executive Director, is the head of treasury center of SF Holding. SF Holding and its subsidiaries are primarily engaged in the provision of integrated logistics services.

Mr KUOK Khoon Hua, the vice chairman of the Board and a non-executive Director, is the chairman and a director of KHL as well as a director of KGL. Ms CHEN Keren, a non-executive Director, is the group co-general counsel, the company secretary and the director of corporate services of KGL. KGL wholly owns KHL which, in turn, is the controlling shareholder of Kerry TJ. Kerry TJ is primarily engaged in the provision of less-than-truckload transport, warehousing, refrigerated delivery, express, and pharmaceutical logistics services in Taiwan.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or their respective close associates was interested in any business, apart from the Group's business, that competes or is likely to compete, either directly or indirectly, with the Group's business.

APPENDIX

GENERAL INFORMATION

5. DIRECTORS' INTERESTS IN CONTRACTS AND ASSETS

As at the Latest Practicable Date, save as disclosed in the sections headed "Events After The Year Ended 31 December 2024", "Significant Acquisition/Disposal and Discloseable and Connected Transactions" and "Continuing Connected Transactions" in the Company's annual report for the year ended 31 December 2024 on pages 76 to 77, 83 to 93, the 2024 Announcement, the 2024 Circular, the announcement of the Company dated 28 March 2025 and this circular, in relation to, among other things, (i) the framework agreement dated 31 July 2024 entered into between the Company and SFTS to set out a framework for the provision of the sales and promotion services of the air cargo business of SFTS and its subsidiaries by the Group; (ii) the 2024 KLN Logistics Services Framework Agreement; (iii) the 2024 SF Logistics Services Framework Agreement; (iv) the framework services agreement dated 31 July 2024 entered into between the Company and KHL to set out a framework for, among other things, (a) the provision of the logistics and freight services by the Group to KHL and its certain subsidiaries; and (b) the provision of the logistics and freight services, and lease of certain properties in Hong Kong including but not limited to office premises, staff quarter and warehouses, by KHL and its certain subsidiaries to the Group; and (v) the revision of annual caps, the Company's announcement dated 28 August 2024 in relation to the seven warehouses management agreements each dated 28 August 2024 entered into between KLN Warehouse (Hong Kong) Limited (formerly Kerry Warehouse (Hong Kong) Limited) (a wholly-owned subsidiary of the Company) and the respective warehouses owners (each of which is an indirect wholly-owned subsidiary of KHL), the Company's announcement dated 10 December 2024 and circular dated 6 January 2025 in relation to the purchase contract dated 10 December 2024 entered into between the Company (as the issuer) and SF Holding HK (as the seller) for the repurchase of perpetual convertible securities, none of the Directors or entities connected with the Directors was materially interested in any contract or arrangement entered into by any member of the Group subsisting at the Latest Practicable Date and which is significant in relation to the Group's business.

As at the Latest Practicable Date, save as disclosed in the announcement of the Company dated 28 March 2025 and this circular, none of the Directors had any interest, directly or indirectly, in any assets which had been, since 31 December 2024 (being the date to which the latest published audited consolidated financial statements of the Group were made up), acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group.

6. LITIGATION

So far as the Company is aware, as at the Latest Practicable Date, no member of the Group was engaged in any litigation or arbitration of material importance and there is no litigation or claim of material importance known to the Directors pending or threatened by or against any member of the Group.

APPENDIX

GENERAL INFORMATION

7. EXPERT AND CONSENT

The following is the qualification of the expert who has given opinions contained in and referred to in this circular:

Name	Qualification
Ignite Capital (Asia Pacific) Limited	A corporation licensed to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO

The Independent Financial Adviser has given and has not withdrawn its consent to the issue of this circular with the inclusion of its letter and reference to its name in the form and context in which they respectively appear.

As at the Latest Practicable Date, the Independent Financial Adviser 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.

As at the Latest Practicable Date, the Independent Financial Adviser had no interest, directly or indirectly, in any assets which had been, since 31 December 2024 (being the date to which the latest published audited consolidated financial statements of the Group were made up), acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group.

The letter from the Independent Financial Adviser is set out on pages 24 to 41 of this circular and is given for incorporation in this circular.

8. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 December 2024, being the date to which the latest published audited consolidated financial statements of the Group were made up.

9. MISCELLANEOUS

(a) The Company's registered office is at Victoria Place, 5th Floor, 31 Victoria Street, Hamilton HM 10, Bermuda. The Company's principal place of business in Hong Kong is at 16/F, Kerry Cargo Centre, 55 Wing Kei Road, Kwai Chung, New Territories, Hong Kong.

(b) The Company's company secretary is Ms LEE Pui Nee. Ms Lee is a Chartered Secretary, a Chartered Governance Professional, an Associate of The Chartered Governance Institute and an Associate of The Hong Kong Chartered Governance Institute.

APPENDIX

GENERAL INFORMATION

(c) The Company's Hong Kong branch share registrar and transfer office is Tricor Investor Services Limited, whose business address is at 17/F, Far East Finance Centre, 16 Harcourt Road, Hong Kong.

(d) The English texts of this circular and the accompanying proxy form shall prevail over the Chinese texts.

10. DOCUMENTS ON DISPLAY

Copies of the following documents will be published on the Company's website at (www.kln.com) and the Stock Exchange's website at (www.hkexnews.hk) from the date of this circular and up to and including the date which is 14 days from the date of this circular:

(a) the 2024 KLN Logistics Services Framework Agreement;

(b) the 2024 SF Logistics Services Framework Agreement;

(c) the letter from the Independent Board Committee to the Independent Shareholders, the text of which is set out in pages 22 and 23 of this circular;

(d) the letter from the Independent Financial Adviser dated 6 May 2025, the text of which is set out in pages 24 to 41 of this circular; and

(e) the written consent from the Independent Financial Adviser dated 6 May 2025 referred to in the paragraph headed "7. Expert and Consent" in this appendix.

48 -

NOTICE OF SGM

KLN Logistics Group Limited

(Incorporated in the British Virgin Islands and continued into Bermuda as an exempted company with limited liability)

Stock Code 636

NOTICE IS HEREBY GIVEN THAT the special general meeting (the "SGM") of KLN Logistics Group Limited (the "Company") will be held as a hybrid meeting at Kowloon Room, Mezzanine Floor, Kowloon Shangri-La, 64 Mody Road, Tsimshatsui East, Kowloon, Hong Kong (the "Principal Meeting Place") with online access via the eVoting Portal on Monday, 26 May 2025 at 2:45 p.m. (or as soon thereafter as the annual general meeting of the Company to be held at the same place and on the same date at 2:30 p.m. shall have been concluded or adjourned) (or any adjournment thereof) for the purpose of considering and, if thought fit, passing the following resolutions as ordinary resolutions with or without amendments. Unless otherwise defined, capitalised terms used in this notice shall have the same meanings as defined in the circular of the Company dated 6 May 2025 of which this notice forms part.

ORDINARY RESOLUTIONS

"THAT:

(a) the revision of annual cap under the 2024 KLN Logistics Services Framework Agreement and the transactions contemplated under such agreement be and are hereby confirmed, approved and ratified;

(b) the Revised KLN Annual Caps be and are hereby approved; and

(c) any one Director (or one Director and the Company's company secretary or any two Directors, in the case of execution of documents under seal) be and is/are hereby authorised for and on behalf of the Company to execute all such documents, instruments and agreements and to do all such acts or things which he/she/they consider necessary, desirable or expedient for the purpose of, or in connection with the implementation of and giving effect to, the Revised KLN Annual Caps and all transactions contemplated under the 2024 KLN Logistics Services Framework Agreement."

49 -

NOTICE OF SGM

"THAT:

(a) the revision of annual cap under the 2024 SF Logistics Services Framework Agreement and the transactions contemplated under such agreement be and are hereby confirmed, approved and ratified;

(b) the Revised SF Annual Caps be and are hereby approved; and

(c) any one Director (or one Director and the Company's company secretary or any two Directors, in the case of execution of documents under seal) be and is/are hereby authorised for and on behalf of the Company to execute all such documents, instruments and agreements and to do all such acts or things which he/she/they consider necessary, desirable or expedient for the purpose of, or in connection with the implementation of and giving effect to, the Revised SF Annual Caps and all transactions contemplated under the 2024 SF Logistics Services Framework Agreement."

By Order of the Board

KLN Logistics Group Limited

LEE Pui Nee

Company Secretary

Hong Kong, 6 May 2025

Corporate Headquarters and

Principal Place of Business in Hong Kong:

16/F, Kerry Cargo Centre

55 Wing Kei Road

Kwai Chung

New Territories

Hong Kong

50 -

NOTICE OF SGM

Notes:

The SGM will be a hybrid meeting. All registered Shareholders have the option of attending, participating and voting at the SGM physically at the Principal Meeting Place or electronically via the eVoting Portal. Shareholders attending and participating in the SGM electronically will also be counted towards the quorum and they will be able to cast their votes and submit questions through the eVoting Portal.
Registered Shareholders are requested to provide a valid email address of himself/herself or his/her proxy (except for the appointment of the chairman of the SGM) for the proxy to receive the log-in username and password to participate online in the eVoting Portal where applicable.
All registered Shareholders will be able to join the SGM via the eVoting Portal. The eVoting Portal can be accessed from any location with access to the internet via any smartphone, tablet device or computer. All non-registered Shareholders may consult directly with their banks, brokers, custodians or Hong Kong Securities Clearing Company Limited (as the case may be) for necessary arrangement to attend and vote via the eVoting Portal at the SGM if they wish.
Every member entitled to attend and vote at the SGM (or at any adjournment thereof) is entitled to appoint up to two individuals as his/her proxies. A proxy need not be a member of the Company. The number of proxies appointed by a clearing house (or its nominee) is not subject to the aforesaid limitation.
Where there are joint holders of any share, only ONE PAIR of log-in username and password for the eVoting Portal will be provided to the joint holders. Any one of such joint holders may attend or vote in respect of such share(s) as if he/she was solely entitled thereto.
To be valid, a form of proxy, together with the power of attorney or other authority (if any) under which it is signed (or a notarially certified copy of that power or authority), must be deposited at the Company's Hong Kong branch share registrar and transfer office, Tricor Investor Services Limited, at 17/F, Far East Finance Centre, 16 Harcourt Road, Hong Kong, or submitted via the designated URL (https://evoting.vistra.com/#/303) by using the log-in username and password provided on the notification letter sent by the Company, not less than 48 hours before the time appointed for the holding of the SGM, i.e. by no later than 2:45 p.m. on Saturday, 24 May 2025. Completion and return of the form of proxy will not preclude a member from attending the SGM and voting physically at the Principal Meeting Place or electronically via the eVoting Portal if he/she so wishes.
The registers of members of the Company (the "Registers of Members") will be closed from Wednesday, 21 May 2025 to Monday, 26 May 2025, during which period no transfer of shares will be effected. In order to be entitled to attend and vote at the SGM, all transfers accompanied by the relevant share certificates must be lodged for registration with Tricor Investor Services Limited at the above address before 4:30 p.m. on Tuesday, 20 May 2025.
All the resolutions set out in this notice shall be decided by poll.
If Typhoon Signal No. 8 or above is expected to be hoisted or a Black Rainstorm Warning Signal is expected to be in force or Extreme Conditions are announced any time after 9:00 a.m. on the date of the SGM, then the SGM will be postponed and the Shareholders will be informed of the date, time and venue of the rescheduled meeting by a supplementary notice posted on the Company's website at (www.kln.com) and The Stock Exchange of Hong Kong Limited's website at (www.hkexnews.hk).
The SGM will be held as scheduled when an Amber or Red Rainstorm Warning Signal is in force.
51 -

AI assistant

KLN Logistics Group Limited — Proxy Solicitation & Information Statement 2025

49356_rns_2025-05-02_ed3c5e2e-da12-4339-a7e2-50efc8f3dc2f.pdf

DEFINITIONS

ATTENDANCE AT THE SGM

HOW TO ATTEND AND VOTE VIA THE EVOTING PORTAL

KLN Logistics Group Limited

CONTINUING CONNECTED TRANSACTIONS

REVISION OF ANNUAL CAPS UNDER

1. INTRODUCTION

2. 2024 KLN LOGISTICS SERVICES FRAMEWORK AGREEMENT

Condition Precedent

Pricing policy

Payment terms

Historical transaction amounts

The Existing KLN Annual Caps and the Revised KLN Annual Caps

3. 2024 SF LOGISTICS SERVICES FRAMEWORK AGREEMENT

Date

Parties

Term

Subject Matter

Condition Precedent

Pricing policy

Payment terms

Historical transaction amounts

The Existing SF Annual Caps and the Revised SF Annual Caps

4. LISTING RULES IMPLICATIONS

5. REASONS FOR AND BENEFITS OF REVISION OF THE EXISTING KLN ANNUAL CAPS AND THE EXISTING SF ANNUAL CAPS

6. INFORMATION ON THE PARTIES

Information about the Group

Information about SFTS and SF Holding

7. INTERNAL CONTROL MEASURES

8. VOTING BY POLL

9. SGM

10. INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER

11. RECOMMENDATION

12. ADDITIONAL INFORMATION

CONTINUING CONNECTED TRANSACTIONS

REVISION OF ANNUAL CAPS UNDER

INTRODUCTION

THE INDEPENDENT BOARD COMMITTEE

OUR INDEPENDENCE

BASIS OF OUR OPINION

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Information of the Parties

The Group

SFTS

2. Industry outlook and prospects of the Group

3. Reasons for and benefits for Revision of the Annual Caps

4. Principal terms of the 2024 KLN Logistics Services Framework Agreement and the 2024 SF Logistics Services Framework Agreement

5. Proposed Revised KLN Annual Caps

Existing KLN Annual Caps and historical transaction amounts

The Revised KLN Annual Caps

6. Proposed Revised SF Annual Caps

Existing SF Annual Caps and historical transaction amounts

The Revised SF Annual Caps

7. Internal control procedures

2024 KLN Logistics Services Framework Agreement

2024 SF Logistics Services Framework Agreement

OPINION AND RECOMMENDATION

1. RESPONSIBILITY STATEMENT

2. DISCLOSURE OF INTERESTS

(II) Associated Corporations

3. DIRECTORS' SERVICE CONTRACTS

4. COMPETING INTERESTS

5. DIRECTORS' INTERESTS IN CONTRACTS AND ASSETS

6. LITIGATION

7. EXPERT AND CONSENT

8. MATERIAL ADVERSE CHANGE

9. MISCELLANEOUS

10. DOCUMENTS ON DISPLAY

KLN Logistics Group Limited

ORDINARY RESOLUTIONS

Notes:

More from KLN Logistics Group Limited

KLN Logistics Group Limited Proxy Solicitation & Information Statement 2025